economics


After recently witnessing yet again the devastation caused by neo-classical economic ideologues in the USA and by the European Union, I can’t help wondering:

Why would anyone think that the economic model touted so vigorously by ideologues in the USA and elsewhere is beneficial?

Why would anyone even consider joining the EU? Ukraine is a case in point here, with second class affiliate membership dangled out, alongside the usual threats and vague promises. Already the vicious economic measures the EU’s grey managers like to use are in evidence, but the government is standing firm in its refusal. That makes Ukraine join Belarus in aligning itself with Russia. Anyone who imagines the EU is a good deal is deluded.

‘What is this? Brown water?’ He said with a look of disgust after sipping from his cup.

‘Isn’t it supposed to be coffee?’ I said.

‘Americans make such bad coffee it barely deserves to be called coffee at all,’ he said. ‘I once spilled a cup on my lap. After it dried, there was nothing, no stain. Coffee is supposed to leave a decent, black stain’.

We were on a long haul train journey across the USA (Amtrak is one of the great hidden gems here), having breakfast somewhere between Colorado and New Mexico. Our meal companions were a couple of young Chinese men who had been sent to Kansas from Tokyo for a year by their employer. Apart from getting used to the culture shock of such a move and the absence of public transport, they found they had to come to terms with the dreadful coffee.

It is difficult not to agree. Only in the USA can Starbucks seem like good coffee. Elsewhere it might universally be regarded as dreadful coffee, but in the USA it seems like a good drink. Less watery, with a trace of taste, and an effort at socially responsible business practices – Starbucks at least tries. Or I should say it used to try. Now they have succumbed to the status quo. Gone are the individually ground cups of coffee; gone are the bang, twist, hiss and gurgle of a something that might resemble coffee. Instead, they now have computerised machines that require a mere press of a button. A trickle of brown water flows into a cup and that is it.

Watery, tasteless, lukewarm. Making such bad coffee is not laziness. It requires dedicated attention over many years to come up with that formula.

Is coffee in the USA a metaphor for the failure of neoliberal economic policies that have been pursued here with such energy? Possibly. Travel by train through the back yard of the country. Stop a while in a trailerized town, witness the sea of poverty all around, and realize that the propaganda of the American dream applies only to a privileged few. Islands of privilege in a sea of poverty. The economic ‘benefits’ are for the majority barely that at all: watered down, tasteless, lukewarm. You are better off without it.

Yet what astounds me is the way such an economic approach can in any way be touted as the model for others. How can this approach to economic life be regarded as anything but a failure? Why would anyone in the right mind think that it should be copied anywhere else?

The powers that be like to tell us that an economic crisis affects everyone. In the same way that bankers, business leaders, and politicians suffer in an economic crash, so do the little people such as workers, farmers, and so on. We’re all in it together. That means it is in everyone’s interest that the system recover, so that all may benefit.

Crisis for whom? For some a crisis makes little difference. Let me illustrate by repeating the story of a phone conversation that took place on 11 September 2001. Three people – in Minneapolis, New York, and Washington – were discussing the logistics of getting some basic equipment to the farmers of Haiti. These were not tractors or combine harvesters, but hammers, saws, hoes, a bucket or two.

In the midst of their discussion, the one in New York said: ‘Wait a minute, something seems to have happened to the Twin Towers of the World Trade Center’.

The one in Washington said, ‘I’ve just been told that a plane has crashed into the Pentagon’.

The one in Minneapolis said, ‘Should we stop our phone call and see what is happening?’

After a moment’s deliberation, they decided to continue planning for the supply some basic tools for the Haitian farmers. Why? It made no difference to their subsistence existence whether the symbols of global capitalism had been destroyed or not. Their economic situation would not be affected; their lives would barely register any change. They still needed a few tools to enable to carry on a way of life that had remained resilient and stable for millennia. It was certainly not a crisis for them.

Following on from my earlier post on social democracy as the natural partner of the free market, I read with interest Guy Rundle’s recent piece in the Arena magazine (also found here). Interesting argument: Kevin Rudd had an emancipatory vision of Australia that owed much to his experience in Sweden and China (as if the two are similar) that was simply to big for the Australian Labor Party, if not the country. While in government, the party might have enacted pieces of that vision, but they couldn’t communicate the vision that lay behind it. These include the National Disability Insurance Scheme, the National Broadband Network, and the education reform. The catch is that Tony Abbott basically agreed to all these main points in order to become prime minister, thereby being dragged leftward and betraying everything that had inspired him to enter politics.

As usual, Rundle makes you think. But the argument begins to become unstuck when he suggests Rudd was more like Lenin and Mao than any traditional Labor leader. This makes the basic mistake of assuming that communism and social democracy in our day are of the same ilk. As a colleague from Nanjing asked me recently, ‘why do western commentators make the mistake of equating social democracy and communism?’ But Rundle’s argument really falls to pieces when he closes by adopting the old line that Labor had betrayed its vision by yoking its reforms to ‘unargued economic growth’. That is, the supposed vision of emancipation and a better society was tied in with an alienating and impersonal vision.

Gonski [the education reform] was oriented to human flourishing, but also to integrating education into productivity. The NDIS [National Disability Insurance Scheme] was designed to alleviate the horror of many disabled people’s lives, but also to provide passages back to work. The NBN [National Broadband Network], it was hoped, would open huge new possibilities for difference and new ideas, but would also yoke Australia more tightly into an online world dominated by capital, and, as we now know, monitored by the NSA. Thus, at its heart, there was much that was contradictory with the ALP’s originating social vision (p. 19).

This simply misses the point that social democracy has always geared its reforms to the flourishing of capitalism. Under their guidance, education reforms ensure greater job participation; welfare like the disability scheme is designed make people producers and consumers for longer; technological advance provides yet another angle for market expansion and integration. These are not anomalies but very much part of the social democratic vision.

A new post on Arminianism and Calvinism (challenging Weber’s dodgy thesis) is up at the Political Theology blog. If you accept Weber’s premises (which I do not), then it was Arminianism, not Calvinism, that provided the enabling ethic of capitalism. Already a debate is on, with none less than the manager of the blog, Brad Littlejohn.

That spinner of tales, Adam Smith, provides the answer:

It is not the multitude of alehouses, to give the most suspicious example, that occasions a general disposition to drunkenness among the common people; but that disposition arising from other causes necessarily gives employment to a multitude of ale-houses (Wealth of Nations, II.v.7).

The same argument is used by gun lobbies: don’t blame it on the guns, for the real problem is the occasional nutter who uses one. More guns, then, since people want them. And more ale-houses, since they meet a certain demand. If someone becomes an alcoholic or murderer as a result, well, that’s their problem.

Gotta love Adam Smith, writing as he does from a ruling class perspective.

So he writes of the working class man:

The torpor of his mind renders him, not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. (Wealth of Nations V.i.f.50)

By contrast, the cultured refinement of the ruling class intellectual (like Smith himself) is a terrible burden:

The contemplation of so great a variety of objects necessarily exercises their minds in endless comparisons and combinations,and renders their understandings, in an extraordinary degree, both acute and comprehensive. Unless those few, however, happen to be placed in some very particular situations, their great abilities, though honourable to themselves, may contribute very little to the good government or happiness of their society. Notwithstanding the great abilities of those few, all the nobler parts of the human character may be, in a great measure, obliterated and extinguished in the great body of the people. (V.i.f.51)

This one is certainly not celebrated or even mentioned when the disciples of Adam Smith wax forth: he was deeply suspicious of paper money, speaking of being ‘suspended upon the Daedalian wings of paper money’ (Wealth of Nations, II.2.86).

And he has little time for creative and unproductive activities, such as churchmen and buffoons:

In the same class must be ranked, some both of the gravest and most important, and some of the most frivolous professions: churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera dancers, &c. s The labour of the meanest of these has a certain value, regulated by the very same principles which regulate that of every other sort of labour; and that of the noblest and most useful, produces nothing which could afterwards purchase or procure an equal quantity of labour. Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production (II.3.2).

One of many parables by that great story-teller, Adam Smith. It’s point is that difficulty, filth, and dishonour result in higher pay. So we read of the journeyman tailor, smith, and collier, only to come across the closing lines of the parable:

Honour makes a great part of the reward of all honourable professions. In point of pecuniary gain, all things considered, they are generally under-recompensed, as I shall endeavour to show by and by. Disgrace has the contrary effect. The trade of a butcher is a brutal and an odious business; but it is in most places more profitable than the greater part of common trades. The most detestable of all employments, that of public executioner, is in proportion to the quantity of work done, better paid than any common trade whatever.

Picture for a moment kids talking about what they want to be when they grow up: doctor, airline pilot, teacher, vet … no, I want to be an executioner.

These are from his Principles of Political Economy (1821). Needless to say, he’s not in favour of republics or democracy, and rather likes the aristocracy:

And when we consider how very difficult it is, under any circumstances, to establish a well-constituted republic, and how dreadfully the chances are against its continuance, as the experience of all history shews; it is not too much to say, that no well-grounded hope could be entertained of the permanent prevalence of such a form of government (p. 336).

The immediate spur here is the French Revolution, but who is to protect us from such evils?

It is an historical truth which cannot for a moment be disputed, that the first formation, and subsequent preservation and improvement, of our present constitution, and of the liberties and privileges which have so long distinguished Englishmen, are mainly due to a landed aristocracy. And we are certainly not yet warranted by any experience to conclude that without an aristocracy, which cannot certainly be supported in an effective state but by the law of primogeniture, the constitution and liberties so established can in future be maintained (p. 338).

Without such noble gentlemen, the dangers of despotism and democracy are all too real:

Although it be true that a better distribution of landed property might exist than that which actually prevails in this country at present, and although it be also true, that to make it better, the distribution should be more equal; yet it may by no means be wise to abolish the law of primogeniture, which would likely lead to a subdivision of land greater than would probably be favourable even to the wealth of the country; and greater certainly than would be consistent with those higher interests, which relate to the protection of a people equally from the tyranny of despotic rulers, and the fury of a despotic mob (p. 339).

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