THE ECONOMY; A CRITICAL SUMMARY.
Ted Trainer.
What should be the purpose of an economy?
Surely we would agree that the purpose of an economy should be to organise production, distribution and development, in order to provide people with the things they need for a satisfactory quality of life … with a minimum of work, resource use, waste, environmental impact, stress, etc. We would make sure that the benefits of the system were distributed satisfactorily. We probably would not say they should be distributed perfectly equally but we would probably want everyone to be able to work if they wanted to and were able, and to receive enough of the goods and services produced to have a satisfactory life.
In other words we would tackle the problem in a cooperative and collective way, with control in the hands of society as a whole, so that we could all discuss an decide on what seemed to be the best arrangements. (Of course we might decide that it was best to have many things produced by private firms and distributed via markets.)
But the economic system we have is nothing like this.What we do is
a) allow a few very rich people to own almost all of the productive capacity
in our society, the factories and farms and corporations. (Most of the world's
corporations are now owned by about 2% of the world's people.),
b) allow the owners of the productive capacity to decide what is to be produced
simply in terms of what will maximise their profits.
We do not say "What do we need, what should be produced...so let us organise
our productive capacity to produce it." There is a vast difference between
organising production to meet needs and organising it to make profits. When
you let profit determine what is produced many needs remain ignored, especially
the most urgent needs which are experienced by the poorest people. This is because
the best profits are never made by producing what poor people need (or what
the environment needs, or what is necessary for social cohesion.) You always
make the best profits producing what middle and high income earners want and
are willing to pay for.
The market
In other words we have an economy which allows the market to be the major determinant
of what is produced, and who gets it. People are free to decide whether to produce
or buy, and at what prices. This is claimed to be the most efficient way; the
market is supposed to make the best economic allocations.
But the market actually makes the most appallingly bad allocations and investment
decisions!! The market does some things well and in a satisfactory economy there
could be a large role for it. But if it is the major determinant it will never
allocate a fair share of scarce resources to those in most need, it will never
protect the environment, and it will never do what is best for social cohesion.
In markets things go to those who can pay most for them. As a result the rich
get most of the valuable resources and goods. For example one third of the world's
grain production is fed to animals in rich countries every year, while 1200
million people are hungry. Why? Simply because that is the most profitable thing
to do with the grain.
Even more importantly the development that results from market forces is inappropriate;
investment will not go into what is most needed by poor majorities, or by the
environment. It is always much more profitable to develop and produce to meet
the demand of richer people in rich countries.
These fundamental faults cannot be overcome without a great deal of regulation.
A sensible economy would have to be under social control; i.e., the society
as a whole would have to be able to decide how production and distribution and
development were to be carried out. The best way to do this is of course problematic.
Few of us would now want it done by a big centralised state. However it could
be done in ways that were quite democratic and participatory. Such an economy
might have a large role for private firms and for markets, so long as these
were carefully regulated.
The existence of many distressing problems is directly due to the fact that
we allow the economy to be determined by what those who own capital want. For
example unemployment and poverty could be easily eliminated if society was in
a position to allocate the necessary work among all who want work, or to give
everyone a basic minimum income. But in this economy whether or not people get
work depends on whether or not it suits corporations to employ them.
Most important is the way this economy enables and legitimises the strong taking
things from the weak. Richer people take scarce resources poor people need,
including resources they once had such as land and forests, simply by being
able to pay more for them. Corporations can take the sales or markets little
firms had, just because they can produce more cheaply and therefore whole industries
and regions can be devastated when some foreign corporation comes in and undercuts
their production costs…that is alright in this economy. Again it is an
economy that enables the richest and most powerful to do what they want, rather
than one which ensures that all can work and produce and earn a reasonable living.
Growth.
To conventional economists growth is unquestionably good
and it is the supreme goal. There is never enough producing, selling, investing,
trading and consuming going on!. Their supreme goal is to keep the GDP growing
for ever!
But continual economic growth is absurd. We are depleting world resources and
destroying the environment because we are producing far too much already. A
sustainable economy must be a zero growth economy, in which per capita levels
of resource use must be far lower than they are in rich countries today. (See
The Limits to Growth Analysis.)
Growth is crucial for a capitalist economy. Those with capital want to invest
it to maxismise their profits. At the end of the year they have more capital
than at the start, and then they want to invest all this in order to make as
much money as they can. This can't happen unless there is constant increase
in the amount of producing going on. Capitalism's biggest problem is that there
will be insufficient investment outlets for all the capital that is constantly
accumulating. This is the major force pushing for globalisation; i.e., the breaking
down of all the protective and regulatory barriers that previously kept corporations
out of many fields.
We work at least two times too hard! If we designed a sensible economy we would
do far less producing, resource consuming and work. Yet we have an economy in
which the top goal is to constantly increase the amount of producing going on.
Trickle down.
The assumption is that if there is growth then the increased wealth will in
time "trickle down" to enrich all. The best way to solve problems
like poverty and unemployment is claimed to be simply to encourage more economic
activity, as distinct from taking deliberate action to redistribute wealth and
jobs.
However there is usually very little trickle down, and often just the reverse.
This is most obvious in the Third World where there is often rapid growth and
accumulation of wealth, but the poorest one third of the world’s people
are actually getting poorer. (U.N. 1996.)
Tickle down is an extremely inefficient way of meetings needs. We urgently need
more cheap housing and more hospitals, but our economy allows those with capital
to devote it to whatever will maximise their profits. The government then collects
a small fraction of these as tax to devote to important tasks, when all of it
could have gone into meeting urgent needs.
It is not just that this economy fails to devote resource to doing what poorer
people need; it draws away from them the resource they once had. This is most
obvious in the Third World where the land and forests and fisheries that native
people and peasant once had end up being devoted to producing for export. Their
government facilitates this (e.g., enabling more export cropping) because it
is the best way to "get the economy going".
Inequality.
Inequality is extreme and becoming worse. One fifth of the
world's people are getting 86% of in come while the poorest one-fifth are getting
only 1.3% of it. About 500 individuals have as much wealth as the annual income
of the other 6+ billion people on earth.
This economy causes extreme inequality. Increasingly it does not need all people
or regions, so many are dumped into squalor. For example foreign investors invest
very little in Africa. Few Australian workers over 50 will get another job if
they become unemployed. Modern agribusiness does not need country towns. This
economy focuses resources and opportunities and sales on those with more money
to spend or more valuable things to sell, i.e., it attends mostly to the rich,
and further enriches them.
Globalisation.
Conventional economists are happy to see the emergence of one global economy and the passing of the era in which national economies were largely independent and in control of their own affairs. Now the fate of any country or town depends on whether it can survive in competition with all others in the world, finding something it can export more cheaply than any other. Because the supreme and sacred principle is that there must be no interference with the freedom of trade, it is increasingly difficult to block the import of dangerous etc goods, the few most powerful corporations can come in and take over a country’s firms, markets and resources, and a country is not able to organise its own productive capacity to meet its people’s needs. Corporations are free to put that capacity into producing for the global market.
Alternative economists see the top priority as developing small scale local economies which enable people to provide for themselves most of the things they need, using local resources and labour. This frees a country from having to export fiercely in order to have the money to import everything it needs. Above all it enables a country to take control over its own fate.
Labour.
Conventional economists treat labour as just another commodity or factor of production, that can be used or ignored in order to maximise profits. However critical economists insist that labour should not be treated as just another input into production. Labour is people. It is alright to leave a brick idle or to scrap it. It is not alright to leave a person unemployed and without a reasonable income. Often we should plan to keep people in jobs even though this would be very inefficient in convenional terms. In the present economy whether or not people have jobs is determined by whether the few with capital want more labour in their factories. It is wrong to let profit maximisation determine whether people are unemployed.
Unemployment is avoidable, unnecessary and morally intolerable. We could easily develop an economy in which it did not occur. If only a limited amount of work is necessary to produce simple but comfortable lifestyles then we should just share that work between all who need work.
In this economy there is constant effort to create jobs, and all must constantly strive to find work to do. This is ridiculous; there is already far more work and producing taking place than is desirable. We should be trying to move to an economy in which we have dramatically cut production, work and employment. Similarly it is wrong that we must all constantly search desperately for something we can sell, when this is dfficult because technology makes it easier all the time for a few factories to produce what people want to buy.
Putting economics in its place.
In present society economics is supremely important; the overriding concern is producing and consuming and increasing these. In a good society these would not be very important issues. We would arrange to supply what all need for a good life with a minimum of work and production, and then give most attention to much more important things, like cultural activities, learning, enjoying ourselves, arts and crafts, solving social problems etc. Economic criteria would take second place to moral, social and ecological considerations, e.g., often we would not do what was most economically efficient or profitable because it is much more important to do what is good for people or the environment.
"There is no alternative."
It is widely assumed that there is no satisfactory alternative to a capitalist economy. The only alternative most people can think of is big-state, centralised and authoritarian socialism or communism. But socialism as we have known it has also been for affluence and growth. The Simpler Way is for a new economy that is mostly made up of small, localised, largely self-sufficient, coopertive economies, in which the market is relatively insignificant, there is a large cashless sector, involving working bees, free goods, giving and mutual aid. (See The Alternative Sustainable Society.)
Economic Theory.
Conventional economic theory is extremely narrow, warped
and misleading. It is not about economics-in-general (for instance it only deals
with things that have a monetary value, so it does not take into account housework
or mutual assistance, and it cannot be applied to aboriginal societies). It
is basically only about a capitalist economy, and it provides powerful ideological
support for such an economy. It gets people to take for granted an economy in
which capital is owned by a few, who produce not what is needed but only what
will make most profit, corporations are given great freedom to do what they
want while devastating the lives of billions of people and the environment,
and in which the top priority is endlessly increasing sales when this is totally
incompatible with sustainability.
Economic theory rationalises and legitimises an economic system that is massively
unjust, that causes tens of thousands of avoidable deaths every day, that is
destroying social structure and cohesion, and is lowering the quality of life
in even the richest societies, while now rapidly increasing the wealth of the
obscenely rich. Conventional theory, and the economics profession, help to get
all this accepted without protest, for example by insisting that the free market
works best for all, by never questioning private ownership of capital, by asserting
growth to be the supreme value, etc.
It is important to recognise economic theory and the current
economic system as a vast swindle, as a theory and a system which delivers most
of the world’s wealth to the rich, including the professional classes who
work for capital, while it deprives the majority and especially billions of
poor people of a just share. Even 30% of the people who live in rich countries
are now more less excluded. In the Third World about 3 billion people are very
poor. Yet most of the world’s capital is in the hands of no more than 3%
of ,the world’s people. These gross and worsening inequalities and impacts
are direct consequences of the economic system we have.
United Nations, (1996), Human Development Report, New York.
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For a 1 page statement, see The Economy; A Critical Summary.
For a more detailed (20 page) critical discussion of the economy
see
Our Economic System; Why It Must
Be Scrapped.
See also Collected Documents; ECONOMICS and Collected Documents; GLOBALISATION.
Also relevant/overlapping, entries on Third World Development;
Third World Development (Long)
For more detailed critical account of these themes see
Our Economic System; Why It Must Be Scrapped, which included ideas on the
form that a satisfactory economy must take.
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The Simpler Way: Analyses of global problems (environment, limits to growth, Third World...)
and the sustainable alternative society (...simpler lifestyles, self-sufficient and cooperative
communities, and a new economy.) Organised by Ted Trainer. http://www.arts.unsw.edu.au/tsw/