Saturday, April 16, 2016

First Steps. How to Democratize the Economy.

There were two very dispiriting essays this week. The first came from Chris Hedges on Monday. The other was Monbiot's op-ed on neoliberalism in The Guardian yesterday. Both are must-reads. If you're in a rush, my precis version of them can be found here and here.

Digesting these opinions invites an exercise in layering. To Monbiot and Hedges, I added the Leap Manifesto and some of the things I've picked up in reading Phillips, Galbraith, Mirowski, Alperovitz and the gaggle of leading "steady state" economists - Daly, Prugh, Costanza, Cumberland and Norgaard.

I kept getting drawn back to social economist and historian, Gar Alperovitz, and his book "What Then Must We Do." Yes, it's a title he shamelessly filched from Tolstoy. At least it wasn't Trotsky.

Hedges article speaks of decline and the rise of "crisis cults" - pretty dystopian stuff. Monbiot's focuses on our zombie economy - the now thoroughly dead corpse we call neoliberalism - and why the Left has failed to grasp the opportunity to bury it and introduce a new mode of economics and social organization.

Could it be that the demands of today, with all these looming crises and the deterioration bequeathed to us by neoliberalism, no longer admit of universal magic wand solutions? To this question perhaps Alperovitz has at least a partial solution.

In his book, Alperovitz focuses on community-oriented responses. He draws from examples of already successful initiatives where ownership of means of production is taken from the rentier class (what Galbraith calls the "looter class") and put in the hands of workers.

One example given was a failing window factory whose employees were on the verge of losing their jobs. The absentee owner was disinterested, indifferent and just looking to cut and run. In response the workers formed a co-op to acquire the business and to help them they harnessed the support of their community - the local credit unions, local businesses, suppliers, the churches, their elected representatives. They discovered that everyone had a stake in their success and the role it played in the long term viability of their community.

The workers had better ideas how to improve the business, turn it around.  Their objectives were long term. They were out to secure their jobs and their investment. Profits were important but secondary.

They concentrated on rebuilding the company, tending to what needed repair or modernization. After the business was revitalized, profits went to clearing their debt. After a lot of work they wound up with their jobs secured, participation in company profits and security for retirement. Everybody in the community benefited from the democratization of their local economy.

If you're interested in this idea, Alperovitz and Keane Bhatt, have a helpful guide entitled "What Then Can I Do? Ten ways to democratize the economy." After getting through the Hedges and Monbiot essays this is at least a ray of hope. Check it out.


Anonymous said...

"To propose Keynesian solutions to the crises of the 21st century is to ignore three obvious problems. It is hard to mobilise people around old ideas; the flaws exposed in the 70s have not gone away; and, most importantly, they have nothing to say about our gravest predicament: the environmental crisis. Keynesianism works by stimulating consumer demand to promote economic growth. Consumer demand and economic growth are the motors of environmental destruction."

Monbiot doesn't get Keynes. There were no flaws exposed in the 1970s. The economy became sensitive to inflation because the people were making too much money. (Plus the mother of all external price shocks in 1973 and 1979.) Real median prime-age US incomes grew from $22k in 1945 to $47k by 1973. They're $35k today. This over-correction of inflation by central banks is largely responsible for the economy collapsing.

Whatever kind of economy we have, its position can be placed along a left/right spectrum. 100% left is full government control over the economy. 100% right is no government involvement in the economy. In the center is the Keynesian mixed-market system. How green or brown any of these economies are is entirely dependent on the kind of regulations that are put in place.

We can consume responsibly if everything we consume is based on renewable energy and recyclable materials.

We can make all energy consumption green if we subsidize green energy production and make it cheaper than dirty energy with progressive taxation. Promote consumption of informational products and services and reduce high-energy transportation.

A responsible growing economy with proper distribution of incomes and wealth (held privately and publicly,) which includes public benefits like healthcare and education, results in human development. A growing economy means the people eventually become so wealthy that machines will do almost all of the work freeing people from the burden of having to earn a living.

This is the kind of stuff Keynes talked about when he predicted we'd have a 14-hour work week by now. What happened? Milton Friedman and the neoliberal revolution. It did nothing more than bring back failed 19th-century classical ideology.

Steady-state economics is another form of communism. It requires full government control over the economy. This requires purging all market economy dissidents. The cause will be the first causality of the revolution.

Bernie Sanders gets Keynes. His New Deal is based on Keynes and it's about acting responsibly. Don't need to invent a new economic system to do that.

The Mound of Sound said...

Isn't that the great thing about economic theory? Everybody has their own, you included.

You have your own fanciful notions such as the magic wand of recycling and a curious take on the steady state theory that suggests you do need to read a good deal more.

As for the fatal flaws in Keynesian theory you should take a look at Galbraith's exploration of that question.

Anonymous said...

In order for there to be a steady state economy — i.e., no economic growth — no businesses can run a profit, no investor can receive a return on their investment, no saver can get paid interest. And these are just the costs of private sector human development. On top of that, the government would have to eliminate human development. Or make money illegal. Because all new human development that can be measured in prices (like building bridges, roads, hospitals, etc.) manifests itself in economic growth.

This is obviously not something that can be implemented in a 4 year election term.

Whatever the goals of the state state hypothesis, they can be better implemented using progressive taxation and regulation.

Haven't gotten around to Galbraith yet. But I do know some right-wing economists are opposed to growth. This based on Orwell. In the book, the government wages constant war, including bombing its own citizens, to expend economic growth that would inevitably lead to rising living standards and an emerging desire among the public to overthrow their tyrannical overlords. "War is peace."

Those of the animal bent, prefer to enshrine the bully hierarchy we have now in absurd levels of inequality. They know that growth/development will tend to equality. This is Keynes' vision, which is literally utopian. Not overnight. But each new generation has it better than the previous. This is what the economy was like before Friedman's post-modern decay.

BTW, classical economic ideology culminated in two economic collapses: first back in the 1930s; second one presently. Funny how people say classical economic ideology is not the problem. Economic growth is the problem, even though the economy has been growing for centuries. It's nonsense.

The Mound of Sound said...

I don't want to get into a pissing contest over your theories. You have proved my point that you need to spend some time reading the works of Daly, Prugh and Constanza et al with your remark about no profits or returns on investment. You're simply talking through your hat.

Sorry, I never understood Orwell to be an economist. A novelist, an essayist, a journalist absolutely but an economist? I don't think so.

As for your notion of never ending growth, I don't worship at Our Lady of Perpetual, Exponential Growth. Sorry but I live on a finite planet that is already exhibiting scary symptoms of massive over-consumption. Do you realize that many of them are visible to the naked eye from the international space station?

To suggest that we can have it all by recycling, what model for recycling are you suggesting? I'm a true believer. I recycle diligently - everything I can. Yet it's a very inefficient and ineffective process at both the individual level and the processor level. I'd love to believe that we can recycle our way to endless prosperity and comfort but I can't get that far away from reality. Unfortunately in your house of cards, once the recycling card collapses so does the rest of your fantasy.

theo said...

It’s interesting. Economic theories or otherwise, nothing matters. The system, in the western economies, has been completely compromised. Short of bloody, violent upheaval, it’s not going to change. :(

We are, ultimately, staring at that regrettable scenario in the face. It will be the climate induced situations that will eventually precipitate it because, we. are. too. fucking. stupid.

Anonymous said...

"I don't worship at Our Lady of Perpetual, Exponential Growth. Sorry but I live on a finite planet that is already exhibiting scary symptoms of massive over-consumption."

Nature has been growing/developing for 3.5 billion years. A single self-replicating molecule exploded into all forms of life on the planet today. Followed an exponential growth curve. Civilization is a part of Nature. It can transcend our solar system when the habitable zone shifts. It can possibly transcend our visible universe, which will also one day go to entropy.

We can solve all these problems we created for ourselves with our many irresponsible behaviors. We will solve these problems.

Anonymous said...

BTW, Orwell knew enough about economics, history and human nature to come up with that idea. Like the book itself, probably more observation than imagination. (The duality of human nature: the rational and the 'boot stamping on a human face, forever.' Could actually be the difference between a well-developed 'anterior cingulate cortex' and an over-sized amygdala. Not that I know much about anatomy.)

Anonymous said...

the naked truth

Watch ‘Dirty Little Secrets,’ the Panama Papers Documentary

Does this work with Canadian Credit Unions?

The Mound of Sound said...

"Dirty Little Secrets" - I think I posted a link to that yesterday:

It's a fine documentary but, on thinking about it, I wonder why CBC didn't manage something as good, if not better, given that they too had access to the documents? By contrast, CBC and TorStar almost seem to have soft-pedalled the story.

Anonymous said...

Anyong said...actually I have read it. And like you I thought the same thing. My question from the above was a bit lop sided on purpose. Often my Anyong can't be posted.