THE ECONOMIC SYSTEM: A RADICAL CRITIQUE.
This is a 50+ page radically critical analysis making clear why we cannot develop a satisfactory and sustainable society unless we eventually change to a very different economic system. (See The New Economy.)
Our economic system is the basic cause of most of the serious problems evident in the world, especially the damage to the environment, the poverty and deprivation of the Third World, armed conflict and the social breakdown in the richest countries. The central faults in the system are:--
a) making production for profit within a free market the basic social mechanism, thereby producing grossly unjust and inappropriate development and distributions, and
b) making limitlessly affluent living standards and economic growth the goals, and thereby ensuring that our society is grossly ecologically unsustainable.
This economy must have growth.
The Limits to Growth Analysis of our global situation.
It is a “growth and trickle down” rationale.
The volume of wasteful and unnecessary production is enormous
Growth here often causes loss there.
Growth creates or intensifies all the big global problems.
The environment problem
As the economy grows the quality of life falls!
2. PRODUCTION FOR PROFIT
WITHIN A COMPETITIVE MARKET.
This economy fails to do what is needed, just or ecologically sustainable.
Profit ignores need.
The marvellous free market
“The market makes the most efficient allocations.”
The freedom of enterprise
“Move over pal – Find something else to sell."
What regulates? The market, or needs and rights.
Endless, mindless, un-winnable competition.
Public vs private ownership of firms
Payment for work.
Deprivation and social breakdown FIX
Origins, nature and effects.
The grab by the corporate super-rich.
Third World “development”
The morality of the market is unacceptable.
3. MONEY, CAPITAL, INTERST, DEBT.
The money creation and banking system.
4. ECONOMIC THEORY.
The distortion; the warped understand that results.
Some of the essential definitions built into conventional economics are
Taking the GDP as the important measure.
Acceptance of the market as the basic mechanism.
The human nature assumptions within the theory.
It is not a general theory of economics; it is only about a capitalist
Economic theory as part of capitalist ideology.
We should therefore study POLITICAL ECONOMY, not economics.
We should be very angry.
This economy must have growth.
The most serious fault built into our economy is not to do with its reliance on market forces, nor indeed the fact that it is a capitalist economy. It is the commitment to growth, i.e., to having the volume of production and consumption increase steadily all the time. The taken-for-granted assumption is that economic growth is the key to improving everything, because it means that the “wealth” produced increases all the time, and this is taken to mean that “living standards” are rising.
When conventional economists talk about growth as increasing “wealth” they gloss over the fact that much of the increased output is luxurious and wasteful production for richer people. For example most housing produced is far more expensive than is necessary and much of it is outrageously luxurious, while cheap housing for the many low income people is not produced at all. There is little merit in increasing the production of “wealth” that mostly benefits people on reasonable or high incomes. As has been explained, it is an economy in which there is rapidly increasing income and wealth for richer people while the needs of most people on earth are ignored and their resources and labour are used to further enrich the rich. There is also much evidence that the quality of life deteriorates as the economy grows. What is the point of increasing the wealth produced if this makes little or no difference to those in most need, and if the more wealth/GDP there is the worse the quality of life becomes?! (See below.)
However there is a far more important criticism of the commitment to growth. This is the “limits to growth” analysis regarding sustainability.
The Limits to Growth Analysis of our global situation.
Our present volumes of global production, consumption, resource use and environmental impact are far beyond sustainable levels, and beyond those that could be extended to all the world’s people. Following is brief reference to some of the evidence and argument supporting the limits analysis. (For a detailed account, The Limits to growth.)
Š If we add together all the potentially recoverable resources (not just known reserves) of the fossil fuels plus uranium (via burner reactors) and ask how long would they last if all the 9 billion people expected to be living on earth by 2070 were each to have the present rich world per capita energy consumption, the answer is only about 17 years. (Trainer, 1995a, 1998b.)
Š It takes 7 – 8 ha of productive land to provide one person in a rich country with their food, water, settlement area and energy. But the amount of such land available in the world per capita is only 1.2 ha, and by the time population stabilises at 9+ billion it will be .8 ha. We are using about ten times our fair share.
Š It is very likely that petroleum supply will peak between 2005 and 2020, and will have fallen by about 50% by 2035, meaning that there would then be only 1/15 of the supply needed to give all people living then our present rich world per capita consumption of petroleum. (See The Petroleum Situation.) A major and insoluble liquid fuel crisis would seem to be inevitable within 20 years.
Š If we are to stop the carbon concentration in the atmosphere rising above 400 ppm, probably a level too high for safety, we must cut carbon release to around 1 billion tonnes p.a. If we shared that amount of fossil fuel among 9 billion we would all get .11 tonne, and this would mean a global per capita consumption of fossil fuels around 2% of the present Australian average.
Most people assume that technical advance, especially the development of renewable resources, will enable us to shift from fossil fuels and continue to have affluent lifestyles and economic growth. There are very strong reasons for concluding that this is a serious mistake, and that at best renewables might only provide a small fraction of the per capita liquid fuel presently consumed in rich countries. (See Renewable Energy Can’t Save Consumer Society.)
These and other lines of argument show that there is no possibility of all people rising to the levels of production and consumption we have in rich countries. We should be reducing resource use and environmental impact to a small fraction of their present levels. This cannot be done in the present economy, because such an economy cannot tolerate any reduction in business turnover or sales.
Now add the absurdity of the commitment to growth. We are already producing and consuming far too much yet our economy is obsessed with constant and endless increases! Most people do not understand how much greater the levels of output will become if we continue with economic growth. If an economy grows at 3% p.a. then in 70 years time its total output will be 8 times as great every year as at the start. Economists and politicians want at least 3% p. a. growth.
The absurdly impossible implications of the growth commitment are easily shown. If a) we in rich countries do have 3% p. a. growth to 2070, and b) if the world’s population is 9 billion by then as is expected, and c) by then all people have risen to the “living standard” we would have in Australia, then the total volume of world economic output would be 60 times as great as it is today! Yet the present levels of production and consumption are unsustainable.
Clearly these “limits to growth” arguments force us to accept some extremely radical conclusions. This economy is grossly unsustainable. It has far overshot sustainable levels of production and consumption. We must not only shift to a zero growth or steady-state economy, we must dramatically reduce production, consumption, “living standards” and the GDP.
However most people in our society including most politicians and economic leaders steadfastly refuse to even think about these limits arguments. Of course nothing is more important to those who own capital than that there should be constant increase in the GDP, a measure which simply reflects the volume of sales or business activity. It is most important to them that our society’s top priority should be to keep production and consumption and therefore the business turnover of their factories all as high as possible and increasing every year.
No line of criticism of this economy has more radical implications for change and for the form a satisfactory society must take than this limits analysis. It means that a sustainable society must have far lower ”living standards”, mostly highly self-sufficient local economies, little trade or transport, high levels of local self-government and participation, and no growth at all (See The Alternative Society; The Simpler Way.)
It is a “growth and trickle down” rationale.
The justification conventional economists give for an economy in which those with most capital and consumers are free to do whatever will most enrich themselves, is that “...in time the benefits of growth will trickle down to all”. In effect they say, “Don’t worry about the fact that the rich get most of the increased wealth, or that the new factories mostly produce luxuries, because more ordinary people will get jobs in those factories, and then they will spend their new wages on generating demand for more goods, which will create more jobs…and in time the increased wealth will trickle down to enrich all.”
Although at times there can be significant trickle down, in general only a very small proportion of the increased “wealth” ever trickles down. This has been most depressingly clear in the Third World where despite a great deal of “development” in recent decades, the conditions the poorest people live in have not improved much and there is evidence that the poorest millions are getting poorer. (For instance, UN, 1996.) Compare what trickles down to a person in Bangladesh paid 15c an hour making shirts to export, with the benefit they would get if they were all devoting their time and energy to producing necessities in their own local cooperative firms and farms.
Look at the bad distribution of income in the world in 1950, when rich world per capita income was 20 times that of the poorest one-fifth of people, and then note how much worse it is now, when the ratio is over 80 to 1. Even if there was significant trickle down it is not acceptable that millions in great need are expected to wait many decades before their living standards become tolerable, while those who were rich in the first place see their incomes race to far higher levels.
It is often claimed that conventional development has lifted many Chinese out of poverty, without any consideration of the many outside Chine who have been pushed further into poverty because the markets they once had have been taken by China, transfering their jobs to poor Chinese.
The amount and rate of trickle down in the global economy is not clear but the situation is highly unsatisfactory. Almost no progress is being made on the reduction of hunger, and most African countries have become poorer in recent decades.
Even in the richest countries the amount of trickle down is quite problematic. Average incomes have increased greatly, but so have costs. One generation ago an ordinary Australian family could live adequately and build a house on one income, but they can’t now. Large numbers can never afford a house. In the US over the two decades to about 1995 the wage taken home by 80% of the workforce actually fell by about 20%, and the average work time per year increased by about 30 days -- despite large increases in the GDP. In that period the rich have taken almost all the gains. (See Inequality.)
The volume of wasteful and unnecessary production is enormous (but essential).
Our economy involves an enormous amount of production that is unnecessary and wasteful. Consider for example, items we do not need much or at all (e.g., cosmetics, sports cars), things that are more elaborate than is necessary (e.g., cars, houses, clothes), items not made to last, or made to be used and thrown away, all the packaging that could be avoided, the effort that goes into advertising, the wasteful competition between firms trying to take sales from each other, and the “defensive expenditure” now required to fix problems caused by other production or by social breakdown, e.g., paint needed to protect things corroded by air pollution.
Advocates of The Simpler Way argue that if we lived more simply in highly self-sufficient local economies we might cut our per capita resource consumption by 90% and we might only need to go to work one or 1 or 2 days a week. In other words at present people probably work three times too hard!
However in this economy we must waste! Without waste the economy would collapse. We must go on producing vast quantities of unnecessary stuff, and we must produce even more next year than this year. If we decided to stop producing even a few of the things we do not need there would be a jump in unemployment and bankruptcies. The economy would plunge into depression.
Advertising and marketing.
Little needs to be said here about the fact that most of the $550 billion p.a. now spent on "marketing" is an appalling waste of resources that could be applied to useful purposes. In a sane society NO effort would be made to persuade anyone to purchase anything. Some few resources could be put into making available good information on products available, via computers, so that anyone could look up what models to choose from if they want to buy something, and some effort might be made within "news" services to announce new products. Much advertising is wasteful competition between corporations to take sales from others, in a zero-sum game; e.g., tourism and soft drink sales.
Growth here often causes loss there.
Economists and politicians are always boasting about the increase in investment, business and GDP that will come from some new development, such as a new shopping mall. But remember that in this economy more successful firms are always driving many others into bankruptcy. The shops in the new mall will eliminate many little firms, and all the investment that went into them will be wasted. Add the legal and social costs of their termination. An estimate of the net increase in social welfare would subtract these costs from whatever increase in wealth the new mall brought about. However the GDP represents the addition of both the benefit and the cost components in this cost figure! It adds up all expenditure, including that which we are forced to pay out to cope with losses of productive capacity (many little shops) and of welfare payments to people who lost their jobs.
A great deal of investment goes into fierce zero-sum competition between suppliers trying to take more of the existing market than their rivals. This is clear with respect to soft drink sales, and tourism. When a town spends heavily on advertising and attracts more tourists, the economists and politicians think there has been economic benefit. All that has happened is that people who would have visited another place come to this one instead, meaning that the increased spending in the town is now not taking placed where it would have. Obviously the more fierce such competition is the worse the net national benefit is, because the more resources and time and energy that are being wasted on trying to take business away from others.
Again the growth in China and India is admired, without recognising that much of it is only the transfer of business to those cheap labour areas from others where people have no lost their jobs.
Growth creates or intensifies all global problems.
All the alarming global problems are a direct consequence of the pursuit of affluence and growth (although there are other causal factors as well.)
Š The environment problem is caused by the fact that too much producing and consuming is going on. We are taking too many resources from nature and dumping too much waste back into it.
Š Rapid extinction of species is occurring.
Š This is because habitats are being destroyed.
Š One species is taking about 40% of he biological
growth that occurs on land…humans.
Š If 9+ billion people live as people in Australia do
…how much habitat left for nature then?
Š The Third World poverty problem is primarily due to the fact that the rich countries are taking most of the resources available, many from the Third World, and imposing systems which gear Third World productive capacity to the supermarkets of the rich countries. The third world can never develop to be as affluent as the rich countries are now.
Š Resources are scarce now. There are nowhere enough minerals, fish, land, timber or energy to give all people rich world living standards”. Yet our top priority is to raise our “living standards” all the time and without limit. If all compete fiercely for this goal the only possible outcome will be more and more intense struggles for dwindling resources.
Š This means there will inevitably be more armed conflict in the world. Consider the rise of China and India, fiercely determined to get more oil etc., which the US must strenuously resist if it is to retain the rich world grip on resources.
The environment problem; Cannot be solved in this economy.
The environment problem is basically due to the fact that there is far too much producing and consuming going on. For instance the rich world per capita footprint is over 7 ha per person, which is almost 10 times the amount of productive land that will be available per capita in the world after 2050. We are taking resources from the environment and dumping wastes back in at rates that cannot be sustained. For example to provide for one American takes the equivalent of 12 tonnes of coal p. a. and requires around 13 ha of productive land, and 80 tonnes of raw material have to be processed for him every year. It is totally impossible for these rates to be kept up for long, or to be extended to all the world’s people. (See above on other elements in The Limits to Growth analysis of our unsustainable situation.)
Remember that if we add the commitment to growth to the presently unsustainable levels, aggregate demands on the environment will multiply many times within coming decades. It is totally implausible that technical advance or tighter environmental law etc. could enable the present rich world “living standard” to continue while these resource and ecological impacts can be reduced to sustainable levels. Thus most of what is being said under the heading of “sustainable economics” and “sustainable development” is nonsense. It is only about continuing to produce as much as possible while looking for somewhat less damaging ways of doing it, and it fails to grasp the head-on contradiction between "Environmentally Sustainable Development" and the pursuit of affluence and growth.
Unfortunately just about all governments and indeed all environmental agencies and campaigns refuse to even think about these points. They focus only on saving threatened bits of the environment, or urging people to shift to somewhat less wasteful or polluting ways. This can have no significant effect on the global problem. If you live in as green a way as possible while still being part of a consumer-capitalist society your footprint will be only a little less than the average. You will still have to buy goods from transnational corporations and travel and use sewers and packaging, and still have to work in a growth economy. But as the limits analysis above makes clear, we are far beyond sustainable levels of resource use and ecological impact, perhaps by a factor of 10, and there is no possibility of solving the environment problem without dramatic reduction in the total volume of producing and consuming going on. Yet we have an economy which must increase production and consumption all the time. Almost no green agencies or parties will face up to this. Almost none say that the growth economy must be abandoned, let alone make it their top policy principle.
"The American way of life is not negotiable."
President George W. Bush.
As the economy grows the quality of life falls!
The final absurdity is that growth is not raising the quality of life in rich countries. Genuine Progress Indicators are now being developed to measure many factors relevant to the quality of life, including happiness, the costs of growth and ecological damage. These studies show that in the rich countries increasing the GDP does not increase the quality of life, and indeed that this has probably been falling in recent years. (Eckersley, 1997, Layard, 2005.) In the US one of these indices shows a 40% fall in the 20 years after 1970. (Daly and Cobb, 1989.)
In terms of public wealth we are now clearly getting poorer. The quality of hospital care, university education, aged care and welfare provision is being depleted as governments squeeze spending and sell public assets to private corporations.
This economy more or less trashes the lives of large numbers of people. Many at the bottom such as the homeless, disabled and Aborigines are identified now as the “excluded” classes. Above them are large numbers of “working poor”, people who live under the poverty line or just above even though working full time. Even the middle classes are now overworked and stressed. Depression is about the most common illness. (Yes they typically make their own situation worse by over-consuming, e.g., buying houses that are too elaborate.) As a result there is a huge social cost, from anxiety and worry to drugs and suicide, violence and mental illness. All this is a direct result of the fact that this is an economy that allows those who are richest to take far more than their fair share, and does not allow us to organise available productive resources so that all can contribute to providing well for all, in comfort and security.
2. PRODUCTION FOR PROFIT
WITHIN A COMPETITIVE MARKET.
This economy fails to do what is needed, just or ecologically sustainable.
Our economy is extremely productive. It churns out enormous quantities of goods, many of them luxuries. But at the same time there is huge unsatisfied need. In Australia thousands of people want basic housing. We need more and better hospitals. Millions of Australians live under or just above the poverty line, going without things most people regard as basic. One billion people in the world are extremely poor. Huge environmental problems are not being attended to. Why are these needs not met?
The answer is, because it is not an economy in which we ask what needs producing and then organise our productive capacity to meet the need. It is an economy in which,
Š most of the productive machinery (capital) is owned by a very few people,
Š who decide what to produce by asking what will make most money for themselves,
Š and they can always make most money producing relatively luxurious or more expensive things to sell to people who have higher incomes than they could by producing the cheapest possible necessities for the most needy people, or by producing what is best for society and the environment.
Profit ignores need.
What drives our economy is the determination to accumulate capital, i.e., the intention of those with capital to invest in whatever will make most profit, in order to have even more capital next year to again invest where it will make as much money as possible, in a never-ending spiral.
In other words, the most fundamental fault in our economy is that it is a system of production for profit and such a system ignores need. If you give people with capital the freedom to produce only what is most profitable to themselves you will inevitably end up with neglect of the needs of many poorer people and of the environment, and with increasingly bad distributions. A few will get richer and as time goes by there will be increasing polarisation and an increasing mass of people will be deprived by the market system. This is glaringly obvious in the world as a whole where 86% of world income now goes to the rich 20% of people and the poorest 20% are receiving only 1.3% of world income. A few decades ago the ratio was much smaller.
There are only two basic ways to determine what should be produced and how it should be distributed. Either you decide via rational discussion of needs and rights, or you leave it all to the market. The former option can involve you in difficult problems of planning and politics (although in The New Economy these will be much reduced). The latter option will inevitably result in serious injustice; the needs and rights of the poor are ignored.
The marvellous free market
Thus the core problems in our economy derive from the fact that it is a free enterprise market system. Participants are free to produce, purchase and work as they as individuals wish. This can sound desirable and there is no doubt that it is an immensely powerful productive mechanism. However there is too much freedom for the strongest and richest. Unless an economy is under considerable social control it will mostly serve the rich and powerful and the poor will be ignored and deprived of a fair share.
It is easy to show that most of the waste, human suffering and ecological destruction in the world is due to the working of market forces. In a market system what is produced and who gets it at what price is determined by who is prepared to pay most. The result is that in a market system scarce things always go to those who can pay more. In other words those who own resources will sell them for the highest price they can get, and richer people can pay higher prices. Poor people have little or no “effective demand”. Need or justice is totally irrelevant and will not influence the outcome. In a market system it does not matter how desperately something is needed, it will go to whoever can pay most for it.
This is why one-third of the world’s grain production, more than 500 million tonnes is fed every year to animals in rich countries, while every year around 850 million people are hungry. It is why the rich countries take 3/4 of the world’s resource output and consume resources at a per capita rate that is 15-20 times that of the poorest half of the world’s people.
Even worse is the fact that market forces ensure that the wrong things are developed. For example in the Third World where there is obviously an urgent need for development of farms and factories to produce for the majority of people who are very poor, very little development of this kind occurs while almost all the investment goes into developing farms and factories to export to rich countries. Why? Simply because these are the purposes that will yield most return on investment. Investors will never maximise their profits developing industries to produce what is most needed, because the most urgent needs are felt by poor people and it is always much more profitable to produce what relatively rich people want. (For more detailed discussion of the way these two mechanisms cause Third World underdevelopment and poverty see, Third World Development.)
This is the mechanism that has developed the world into the forms and structures that serve the interests of the rich countries and especially their corporate elites. Most of the productive capacity in the Third World now produces things that benefit only the transnational corporations, the few richer people in the Third World, and people who buy coffee in rich world supermarkets -- because producing to satisfy their demand is the most profitable aim for those with capital to invest.
“The market makes the most efficient allocations.”
Conventional economists claim that the market makes the most “efficient” allocations of resources and investment. This is absurdly wrong. It is only true if we define “efficient” in terms of measuring the monetary return on investment. If on the other hand we are concerned with using resources and capital to meet needs most effectively, or to do what is morally right, or to develop what is sensible or best for the environment, then market forces are not only appallingly inefficient, they will almost always result in precisely the wrong outcome! Resource producers never sell vital resources to those in most need. Foreign investors never develop industries to supply what most poor people need. Market forces never result in just outcomes or those most likely to preserve the environment.
Conventional economists, and people in general think the market system is effective is because it has had such beneficial effects…for them; i.e., for people in rich countries. Markets benefit the rich; they allow the rich to get most of the available wealth. There are three big groups who have no say in the market; the poor who cannot offer to pay for things, all future generations, and all the other approximately 30 million species on earth. Ask the approximately 2 billion people in the poorest countries how well it works for them.
Conventional economists, and most people in general, think the market system is effective, but this is because it has had such desirable consequences…for most people in rich countries. What they overlook is the fact that they are rich. They are among the few in the world who win and take when markets determine production, distribution and development. The market system does work well – for them. They have “effective demand”, i.e., the money to buy things. There are three large groups who have no power to bid in the market and therefore will get nothing from it – the poor majority of people on the planet, all future generations, and all other species.. Before you claim that the market works well ask those groups how well it works for them.
“The freedom of enterprise”
Conventional economists claim as a merit of this economy the fact that it gives people a great deal of freedom to buy and sell and invest as they wish. But the foregoing examples show that in our economy there is far too much freedom of enterprise and freedom for market forces to determine what happens. Corporations and richer people have far too much freedom to do and to get what they want. Third World plantation owners are free to plant coffee for export rather than food for local people. Transnational corporations are free to invest in luxury production and to avoid investing in what most needs producing. Richer people are free to take most of the scarce resources and goods on sale by being able to pay more for them.
In principle it is desirable to ensure that people have considerable freedom to do what they want, but obviously in a good society there must be many restrictions placed on individual freedom. There are many things that it makes sense for us not to allow each other to do if we want an orderly, sensible, just and sustainable society. For example it is not a good idea to allow people the freedom to drive on whatever side of the road they choose to. This would reduce the freedom from danger that we all want. When those who own most of the Third World land have the freedom to produce what they like this undermines the freedom of most people to have sufficient food.
The basic question should always be, “What arrangements will maximise the overall social benefit?” In general these will restrict some freedoms, especially those of the few who are most rich and powerful and therefore most able to take much more than their fair share and thus to deprive others. Yet conventional economists proceed as if the fewer restrictions on economic activity the better, and we are in an era of globalisation when the giant corporations and banks are trying to reduce the remaining capacity governments have to regulate their activities. When they call for more “freedom of trade” they mean they want more freedom for corporations to go where they like and do what the like without regulation, and thereby more freedom to take all the resources and markets available.
The dominant “neo-liberal” assumption that a society functions best when all are free and encouraged to maximise their own individual advantage in competition with all others, is patently ridiculous. That is a recipe for vicious grabbing, winner take all, increasing inequality and the eventual destruction of society and its ecosystems. You cannot have a good society unless you make sure that the strongest few don’t take everything and unless you make sure that what is done is what is best for others, for society as a whole and for the environment. This often means individuals and corporations must not be allowed to do whatever will maximise their own benefit.
Put simply, the trouble with free competition on "a level playing field" is that the strongest win and take more than their fair share. If we want a world in which all people and regions have a fair share, and in which they can develop what is best for them, and in which the environment is protected, then there must be regulation to make sure these goals are not thwarted by those who are strongest or richest.
These have been arguments against the acceptability of a free enterprise or capitalist economy. It does not follow that the alternative has to be a “communist” or “socialist” economy in which all productive property is owned by a state totally control ing the economy. The alternative argued for in The New Economy is quite different. In a satisfactory economy there might still be considerable scope for markets, private firms and freedom of enterprise, but there must be much social control, planning and regulation. It will be stressed that this could be done in mostly small local economies through open and participatory processes in which all people share equally in making the decisions.
“Move over pal – Find something else to sell.
One of the worst faults in the economy is the fact that everyone strives to take over as much of the productive activity as they can, without any limit. People with little firms try to grow, to get more sales, taking sales from competitors if they can. Gigantic corporations put out of business huge numbers of firms all the time, by selling more cheaply and taking the sales and customers the others used to have. These people then have to search hard for something else to sell. (Most people only have their labour to sell.) In recent years most of the foreign investment in the Third World has not set up any new operations, it has just taken over existing firms.
As a result there is constant high pressure from all to produce and sell more stuff, even though the total amount of work done and stuff produced and sold is far greater than would be necessary to provide well for all, and is having alarming environmnental and resource impacts.
The conventional economist says this situation pushes everyone to work hard, innovate and produce goods that are cheaper for us to buy. It is true that the most energetic and efficient producer can offer goods more cheaply than the little people he drives out of business, but that should not be the only consideration determining what happens. What about the social consequences? What about the possibility that it is not as important to have cheaper goods as it is to have all people happily in jobs and enterprises, to have a more equal society, and to head off the long term loss of social cohesion we are witnessing? What about the possibility of avoiding all that hard work, stress, anxiety and unnecessary competition? And what about the possibility that this system pushes us all to produce far more than is ecologically sustainable?
Where have all that production, wealth and income many little people used to have gone? To the owners of the successful firms of course. Once, many little shopkeepers in the town used to share the sales opportunities and the income that could be made there – but then the big supermarket chain came in and took those markets and sales from them. This mechanism is one of the main forces at work constantly making incomes more unequal, because the few are most able to win in the struggle to take sales, so they then take over more and more of the business to be done and the money to be earned. Inequality is increasing all the time because the few rich and most able to take business away from others are doing this all the time. The rest are then forded to scramble to find something else to start selling. This is very difficult, so it is no surprise that many turn to illegal ways of getting an income, or that many individuals and corporations do morally bad things to get more sales. However if we simply shared the producing among all the people who want work and incomes, all could have a satisfactory livelihood without this constant pressure to increase the volume produced, and without fuelling growth of inequality and GDP.
Our increasing capacity to produce should result in less work for all to do, but this is not what happens in this economy. A few firms take over more and more of the producing and selling and everyone else has to constantly look for something else to sell.
In a sane economy we would make sure that there were strict limits on how much one person could take or get. We would have rules which stopped the few who are most smart, competent, powerful, rich or energetic from taking more than they need, and thereby taking scarce things others need and forcing many others to get by on less than their fair share. We would somehow share the work and goods, to make sure all were provided for.
Especially important, we would make sure that all people had a livelihood, a way of earning a reasonable income and getting satisfaction and self-respect from being able to work and contribute. What we have at present is a winner-take-all society. A few are allowed to get very rich by taking what others once had (taking by winning in competition within the rules of this economy.)
So in a satisfactory economy we would have rules which prevented some from becoming very rich by destroying the livelihoods of others. “But what if someone develops a much better way of doing something, that will benefit all if he is free to market it and get the reward?” How often would that benefit outweigh the loss of livelihoods that would result if he was free to drive many existing firms out of business? In a good society we would grapple with problems like this, working out how best to provide for all, encouraging innovation but never leaving anyone without a livelihood. (In a very good society the innovator would be happy to give his new idea to society without expecting to become very rich from it, i.e., in a society where he knew he and all others could always live well without having to struggle to be one of the few winners.)
Of course in a capitalist society the notion of this amount of social control over both the economy and how rich some individuals could become would be strenuously rejected, both by the few who benefit most by the system and by people in general. They all fiercely insist on a system in which a few are free to get very rich taking more than they need, they all try to be one of the winners, and they all cheer the winner who becomes a tycoon, with no concern for the many who lose their livelihoods and the many who can’t keep up. (See also a discussion of the core faults in “Liberalism”.)
What regulates -- the market, or needs and rights.
When you allow the market to be the determinant of what is produced and who gets it you are rejecting the other way of doing these things. The other way to determine what is done is by reference to the needs and rights of people. The present economy thus ignores the needs that millions have for food, because it operates according to market principles. This is not the way we run a household economy. Old people and children get a share of the food because we recognise that they have a need for and a right to food, not because they can pay more for it than someone else. A satisfactory economy would attend to needs and rights, not market power.
Endless, mindless, un-winnable competition.
This economy forces us all into constantly competing against each other for scarce jobs, markets and export sales opportunities. It makes corporations waste huge amounts competing against each other for the same limited sales opportunities, e.g., soft drink advertising. Even though we already do far more working and producing than would be necessary in a sane economy, we all have to struggle all the time to be more productive, efficient and competitive, with no point in sight where we can ease up because we have developed a sufficiently productive economy.
As has been noted everyone has to struggle to find something to work at, something to produce and sell. This is difficult because too many people are already out there producing and selling whatever you might think of trying to sell, and this economy can’t give places to all who want jobs. (The number of jobs available is always a small fraction of the number who want work.) People study for years to get better qualifications in the hope that this will enable them to get the job before someone else. Large numbers of small businesses go bankrupt all the time, because there is not enough room for them in the market. Technical advance has made it possible to produce far more than is needed without having everyone working, yet in this economy most of us must look for full time work producing or selling something or we can’t get the things we need. Consequently many of us are constantly struggling, stressed and insecure, and worried about whether we can keep our jobs. If on the other hand we had a sensible and cooperative economy we could easily organise to produce everything everyone needs without much work, desperate competition, or having to worry about security.
Why do people go on working frantically at things that are not important or desirable, such as making weapons, digging up gold, making cigarettes, advertising junk food, selling drugs, running gambling casinos…? Why would anyone do these things…if they could find something worthwhile to do? But in this economy they can’t get such jobs. In a sensible economy we would a) think out what needs doing, b) share out the necessary work, and c) share out what we produced. If we got this done by Wednesday afternoon we would just shut the factories until Monday.
Similarly, nations are increasingly dependent on competing against each other to export, mostly into markets that are already glutted. Huge efforts are made to find things to export, and to beat others to markets. A country’s entire economic situation can collapse if it does not constantly strive to produce and export more cheaply than everyone else. Meanwhile the rich countries can buy commodities at the low prices that result from the fierce competition between poor nations to win export markets for their limited range of crops or minerals.
It is absurd to organise the world and the fate of all people in terms of competing to sell. Not all can win in a competition. Only the strongest win and then take more than their fair share and many miss out altogether. In a sane world nations would produce mostly to meet their own needs, at a relaxed pace, and would export only a few things in order to be able to import a few necessities they could not produce.
But in fact the economy is highly regulated…in the interests of the corporations!
The main point of the foregoing criticism of the market system is that to the extent to which market forces are allowed to operate then inequality, injustice, social and ecological damage will result. This explains much about the global situation. But we have to add the fact that in many of the important areas of the economy outcomes are not left to market forces, but decisions which suit particular interest groups are made by government, most often the interests of the corporate sector. This has been especially glaring in the US under G. W. Bush where astounding tax benefits have been given to the very rich, massive contracts awarded without competition to favoured corporations (in Iraq), vindictive labour and welfare laws have been put through, and the vast arms sector receives ever increasing contracts. Similarly in Australia the 2006 labour legislation greatly benefits business at the expense of labour, the screws are constantly tightened on “welfare”, new media laws favour big corporations…
Nowhere is this regulatory action more glaring and damaging than at the level of the World Trade Organisation, IMF and World Bank. Globalisation can be seen as the introduction of new rules regulating the way trade, debt, foreign Investment etc must be handled, and these rules massively suit the corporate sector (e.g., by stipulating that indebted countries must leave everything to the “free market”…while rich countries refuse to do so in those huge areas where this suits them; e.g., agricultural subsidies.)
So two apparently contradictory things are happening. The neo-liberal ideology insists on free market policies, and eliminating government assistance and intervention, regulation etc…in those areas where the rich benefit from such policies, while at the same time governments often pass laws which settle big economic issues quite outside the market sphere, in the interests of the rich.
As neo-liberal doctrine has become more dominant since the 1970s it has increasingly been taken for granted that governments should not run enterprises and that they are more efficiently run by private firms. Consequently there has been a huge transfer of operations such as railways and power supply to private corporations.
The assumption that private firms run things more “efficiently” than governments is a myth. The evidence from studies of firms that have been privatised does not clearly show that they then perform better, nor that the total social benefit has increased. (See The Economy: Documents, especially Hodge, . It seems clear that some kinds of enterprises are best left to private firms but governments can run many things quite well.)
More importantly, “efficiency” is not the only factor that matters. Governments should retain control of many industries in order to achieve social goals, such as making sure all have access to satisfactory services like water supply health and pharmaceutical goods, keeping prices down by competing with private firms, locating plant in needy areas, and in general making are that important things are done. If governments give up their role in running firms they give away their capacity to influence the development of society. In the Third World neo-liberal doctrine, especially via the Structural Adjustment Policies, force governments to give up much of their power to make development decisions, by insisting that governments should not own firms and that all development should be left to market forces. This means leaving corporations free to decide what will be developed, according to what maximises their profits.
Governments can keep, or set up, firms in areas where jobs are needed or where the services are needed, whereas corporations will dump those areas as soon as they can make more profit somewhere else. One of the big Australian banks recently closed its branch in a country town, because it was only making 17% profit! The fact that the town might need a bank was of course irrelevant but if the government had owned that bank it could have been kept open at no cost to society. Note how this reveals the absurdity of conventional economic theory which asserts that allowing profit maximisation to determine everything results in what is best. A similar illustration comes from drug R and D where the problems affecting most people on earth are ignored while drug companies focus on new hair-restorers and cough syrups to market in rich countries. Malaria is one of the most deadly diseases in the Third World, but drug companies don't research possible drugs, because no one suffers from it in rich countries. Only about 1% of new drugs are relevant to Third World illnesses. (See)
Unemployment reveals some of the worst irrationalities and injustices in this economy.
In this economy it would only be possible to solve the unemployment problem if there was a huge increase in the amount consumed and therefore in the amount produced and in the jobs required for that. But we do not need anywhere near as much produced as there is now, and present levels of production and consumption are quite unsustainable in view of the resource and ecological limits of the planet. If we only produced as much as was sensible, with modern technology the unemployment rate might be well over 80%! In a satisfactory economy we would organise to share the rather small amount of necessary work among all who wanted work.
In this economy labour is treated as just another “factor of production”, like bricks or land, to be used in production according to what will maximise the return on investment. But labour should not be treated as just another commodity. 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. It is not alright to let market forces determine whether a person is dumped into unemployment. The fault here is in excluding from economic decisions all but money costs and benefits when these should be given much less attention than considerations of justice, morality and the welfare of people and ecosystems. The misery of unemployment, the damage it causes to morale and self-concept, are serious costs, which economists and people with capital completely ignore. Often we should keep people in jobs even though this might be quite inefficient or costly in monetary terms.
It is easy to organise an economy without there being any unemployment. There is none in the economy of the Kibbutz settlements, or in a tribal society or a monastery. In those economies people simply arrange to share the work that needs doing among the people who want work. Only backward and uncivilised societies allow unemployment.
Unemployment also shows how it is an economy that suits the owners of capital much more than it suits workers. It is great for the people who own factories that they can hire workers when that’s profitable and dump them into misery and deprivation when they wish. Also note the powerful ideological forces at work here. Unemployment is very bad for people. It has bad effects on health and families. But it is not seen as such a bad thing that we should get rid of it. We could easily have a system whereby the government employed all who could not get work in normal firms to work on producing things they need and on important national needs, such as environmental protection. They could be paid partly by the present unemployment benefits but also from increased taxes on the rest of us if necessary. In a good society we would be quite happy to pay more tax if this was necessary to eliminate unemployment.
During the Great Depression millions of people suffered idleness for a decade, yet the "leaders" of society would not take any steps to organise these people to put their labour and skills into producing for themselves many of the basic things they need. They could have very easily and at almost no dollar cost have been helped to develop gardens and small cooperatives to build houses, furniture etc, and provide entertainment and services for each other. This was not done simply because it would have been contrary to capitalist ideology; it would have been seen as "socialism". Conventional economists would have said it was voodoo economics. It would have been very much against the interests of the rich for the working class to have found that it could provide for itself in these ways that contradict the market and the need for capital.
At one point the NSW Premier Lang refused to pay interest on the public debt to British banks, arguing that the money should be used instead to benefit the people in great deprivation. This provoked a serious conflict. The Australian Federal government fought against him. During the Irish Potato famine conventional economists argued against assistance to the starving peasants because this would interfere with the normal working of the economy…at a time when Ireland was exporting food. These are powerful illustrations of the toll in human misery caused by the domination of conventional economic doctrine…which, surprise surprise, typically recommends what suits the owners of capital.
It suits the owners of capital if labour is treated as a commodity that can be bought and sold in a labour market, like bricks, just left idle if no one wants to buy any of it. But many important things should not be treated as a commodity that can be bought and sold, like children, friendship, the judgments of lawyers, loyalty, good health care, prison sentences, fire protection, clean air, safe water, public parks… Again the power of capitalist ideology is apparent; almost everyone, including the unemployed workers, accept without question or discontent that whether or not people can have a livelihood and an income and thereby escape the misery and wreckage of unemployment should depend on wether employers can make more money giving people more jobs. The fault here is not greedy, nasty employers; it is an economic system that treats labour as a commodity to be traded in a market.
Similarly appalling is the fact that billions of people in the Third World suffer high unemployment rates and life-threatening poverty because it does not suit the owners of capital to invest in producing anything…when those people have all around them abundant productive resources and labour that could be being applied to producing to meet their urgent needs. (See Alternative development.) But because "development" theory and practice are only thought of in terms of a capitalist economy these governments steadfastly refuse to organise this…and rich countries and their agencies would eliminate it was attempted (…e.g., the conditions on Structural Adjustment Packages require reversing of any such measures and increasing the freedom of markets; i.e., access for corporations.)
It is also worth pointing out here that the real unemployment rate is usually about twice the official rate. If you want full time work but were only able to find one hour’s work in the week that the survey was taken, they put you down as employed! Studies of the numbers who want work but have given up looking etc. find that by any acceptable definition unemployment is twice as high as the government says. Consider how many social needs could be met if the workforce was usually 10 - 15% larger.
Surprisingly little thought is given to the topic of work. For instance how can it be that the real income per person has more than doubled over the last few decades, which would have enabled us to have the good living standards of 1970 on something like a 20 hour work week, yet the hours of work have increased, the pressure has increased, (e.g., unpaid overtime), and security in work has deteriorated. We could have idyllic lives with a small fraction of the work that now takes place.
From the perspective of The Simpler Way, in consumer society we work about three times too hard. In a sensible economy producing would be enjoyable, the distinction between work and leisure would disappear, much leisure activity would be productive (e.g., gardening, crafts), people would happily choose to go to "work" on weekends and holidays.
There are powerful ideological forces at work here. It is not in the interests of the capitalist class for people to choose more leisure time rather than more income and more consuming. Factory owners want as much producing and consuming going on as is possible. Also consider the neurotic obsession people have with work; even the many who do not like it believe it is morally virtuous to work hard. We should be much more lazy than we are. Tribal people had more sense than to work so much. Kalahari bushmen work only about 20 hours a week. Medieval people had more holidays than we do.
Work has been destroyed by consumer-capitalist society. It has been made into unpleasant grind, a mere means to an end. For most people it damages the spirit, even when tolerable, because it confines a person to one narrow activity for half their waking time. In The Simpler Way we could work most of the time at many different activities at a relaxed pace, without bosses, which would be much better for our personal development. (See The New Economic System.)
Payment for work?
Conventional economists are happy to have the price of work set by the market, meaning that those who produce more dollar value in an hour receive more money. This can seem reasonable, but it isn't because people differ greatly in how much they able to produce in an hour's work. If two people did a ditch conscientiously for an hour, is it right for the one unlucky to be smaller and weaker to get less payment for the same effort put in? Obviously it suits the employer to pay by results, but if we approached the question of payment in terms of needs and rights we would think differently about what's appropriate. The essence of the market system is that it ignores questions of needs and rights and allows profit maximisation to settle things.
In a good family all contribute according to their ability, with children and aged people doing less, but all are “paid” according to their needs; i.e., they get what they need regardless of what they produced. Why don’t we organise the wider economy according to this principle? Thew New Economy deals with the fact that some people have put effort into learning skills which meake them more productive.)
This economy has a powerful tendency to create and increase inequality. The market heaps goods, income, wealth and opportunities on those who are richer in the first place, and if much effort is not made the poor majority will be cut out and dumped. Especially between 1945 and 1970 governments made an effort to counter this tendency, but in recent decades the surge of neo-liberalism has pushed back the provisions which restrained the growth of inequality. Fifty years ago reducing inequality was an important goal of governments but it is not now, and we are seeing rapid polarisation, i.e., enrichment of the few while the poor stagnate at best. (See globalisation below.)
Inequality in the world, and in Australia, is great and rapidly getting worse. Consider the following.
Š One-fifth of the world’s people get 86% of world income, while the poorest one-fifth get only 1.3%.
Š The average dollar income for half the world’s people is about $2 a day. For one billion it is $1 a day.
Š In 1991 there were 274 billionaires; by 1996 there were 447. Their assets equal the annual income of the poorest 3 billion people on earth. (Korten, 1999.)
Š Almost all of the world’s productive capital, i.e., its corporations and banks, are owned by about 2% of the world’s people.
Š 1% of Americans hold 33% of American wealth. (North,2001, p. 83.) They have doubled their wealth since the 1970s. (Wolff, 1999.) However the wealth of the median American household fell 10% between 1989 and 1997. (Dyer, 1997.) The poorest 80% of Americans have only 14% of wealth.
Š Between 1971 and 1997 the income of the poorest 20% of American families fell 1%, while that of the richest 5% rose 157%.
Š About 28 million Americans work but are paid the minimum wage of $5.15/hr, less than the poverty level income. More than 40 million Americans cannot afford health insurance.
(See Inequality documents for detail of this kind.)
These appalling figures are an inevitable consequence of an economy which allows a few to own resources and productive capacity and to put them into whatever purposes are most likely to increase their own wealth, and to take the wealth others once had (e.g., the firms, forests, fisheries) by beating them in the competition for sales. In the neo-liberal era of the past 25 years governments have greatly increased the freedom for the rich to take more wealth and to drive welfare and labour conditions down.
Most people think that great inequality is quite acceptable because there is “equality of opportunity”, i.e., if all have the opportunity to get ahead, to do well at school, start a business, and become rich. So there is an important distinction between equality of opportunity and equality of outcomes in society. You could have a society in which a very few were very rich and most were very poor, but all had an equal chance of getting into the rich group. In a good society we would not be content just to have given every one an equal chance to become rich or impoverished. We would want there not to be serious inequality of outcomes and we would not want anyone to be deprived of basic necessities. Again this can’t be achieved unless steps are taken contrary to market forces to prevent serious inequality from emerging. When people are free to (forced to) compete in a market, extreme inequality will in time result because some will become the winners and take most of the wealth.
So in the US, the richest of all countries tens of millions of people are seriously deprived of necessities, when far more wealth exists than would give everyone an idyllic lifestyle. Again 80% get only 14% of the wealth. Millions of people suffer poverty, squalor, stress and savage social breakdown, which could easily be avoided if we had an economy geared to meeting need. Reflect on the power of ideological forces at work here, ensuring that there is almost no discontent with this situation! No one seems to think the situation is appallingly unjust, wasteful, destructive of human life, and ridiculous in the extreme and in urgent need of radical change.
Why do we still have to work so hard?
Over the past three decades the real average GDP per capita in rich countries has more than doubled meaning that we could have 1970s “living standards” on an average work week of about 17 hours. Yet hours of work are increasing, overtime is increasingly unpaid, work conditions are deteriorating and jobs are more insecure than ever. How can this be? Why is it that despite such an enormous increase in average wealth, everyone is having to work harder, try harder to find something to sell, worry more about their future, and to endure less security? Clearly the wealth produced is much greater than it was previously, so why don’t we have more of it, or more time to take things easier? How come that no matter how much wealth the economy produces, people still have to struggle harder to produce and sell something?
The answer is, mainly because the super rich are taking the wealth. Yes part of the answer is that people have chosen to spending much more (e.g., on more expensive houses), i.e., to take the increased ”wealth” as more possessions rather than as more leisure. But most of the answer is that we have an economy that enables the rich to take most of any increase in wealth while it forces the rest to strive ever harder to earn a sufficient income. Just consider again the basic trends in Ameriocan inequality… over 30 years the average income of the American super rich 1% increased 157%, while the average for at least 40 million fell.
It is a class war – and we lost!
To repeat the obvious, the US has far more productive capacity than is needed to give all its people a very satisfactory life, but clearly that is not what the economic system is organised to do. It heaps most of the wealth produced on the rich. About 5% of people have 54% of the wealth while 40% have almost none of it. As the documents on globalisation and inequality demonstrate this economy works mostly for the corporate super rich 1%, and to a lesser extent for another 10 – 15% of very rich people. 1% of Americans have 33% of wealth and 54% of all the shares and bonds. Obviously American society is viciously divided into super rich, very rich, well off – and the other 80%. Yet no one now talks in terms of class divisions or class conflict.
The rich also own all the media – and they “own” the government. They buy it with their campaign contributions. It costs more than $100 million for a Presidential candidate to win an election, so he is then heavily indebted to the corporations who donated all this money to his campaign fund.
Similarly 30 years of globalisation has remade the world economy to give the corporate super rich access to vast resources and markets that were previously protected from them. This has been the most massive transfer of wealth in human history, mostly from the billions of very poor Third World people who now have less access to the land, forests, fisheries and markets they once had.
Nothing is likely to change until people in general come to see their situation in class terms, and to see that the economic systems controlled by and works for the very rich, the upper middle class and the super rich, but not for most people even in rich countries, let alone some four billion people in the rest of the world.
Conclusions on the market principle.
In the transition phase to a sustainable and just society we will probably retain many elements of the market system, but as time goes by we will probably slowly phase these out, because we will develop much more satisfactory ways of running economies. The situation we will be in, especially the intense scarcity and mutual dependence) will give strong incentive for this. (See The New Economy.)
A satisfactory economy must be under firm social control; society must somehow be able to decide what is to be done and not done, and make sure goals are achieved. Markets cannot do this; they cannot attened to need and they will always attend only to the “effective demand” of those withy money to spend.
Obviously there are enormous difficulties and problems in the idea of a regulated and planned economy and some of the attempts that have been made in the past have been quite unsatisfactory, notably the big, centralised, authoritarian bureaucracies of the Soviet Union. But there are other possibilities, especially those where the decision-making is open and participatory. In the discussion of The New Economy it will be argued that in addition we will have conditions which greatly increase our chances of running a socially planned and regulated economy (notably the fact that economies will be quite small, localised, and without interest or growth.)
Obviously there is very little concern about inequality in this society, much less than there was two decades ago. Reducing it is not a significant goal of government. In fact governments now take a mean and punitive attitude to people who are unemployed and disabled or otherwise “on welfare”. This seems to be another consequence of the rise of the middle class, with its obsession with getting wealth and property, travel, consuming and self-indulgence. Post war affluence has created this powerful political force. It can afford private health care and schooling, so it does not want its taxes spend on public hospitals etc for the rest…who could have succeeded had they had the talent and worked hard… Governments respond to these demands and ignore the glaring needs of the poor majorities (again 80% of Americans have only 14% of the wealth). Globalisation has accelerated all this; it has been about the freedom for capital to move factories to low wage regions, gutting manufacturing in rich countries ( and now service industries), and it has increased the returns to those with capital, which now includes many middle class technocrats, managers, lawyers and professionals.
The social damage the economy causes.
There are direct connections between the generation of inequality by this economic system and the breakdown of society. Social problems are increasing as more people are being stressed, dumped and deprived by this economy.
Around 40 million Americans have no wealth or medical insurance. About l30 million work but are paid less than the poverty level income. It should surprise no one that the nation is wracked by squalor, festering city slums, crime, violence and an intractable drug problem.
What are the causes of this social breakdown? Firstly, in this society market forces and growth are the supreme concerns so governments are reducing their activity and spending on socially beneficial purposes and therefore their welfare programs and assistance to communities, especially to those in most need. Governments want to cut taxes on business to have “competitive” tax systems that will attract foreign investment. The corporations and banks and their credit rating agencies like countries where governments do not spend much on public goods (which would require higher taxes). The Australian government in 2005-6 had a surplus of more than $11 billion but would not spend it on urgent public needs.
Secondly, it is an economy which does not need all people and it therefore dumps many into unemployment, poverty, lack of purpose, drug addiction and homelessness, i.e., into conditions which can only generate extremely negative and destructive social consequences. It is not surprising that indices of breakdown, such as suicide and drug abuse, have increased in recent decades.
The competitive pace is cranked up all the time. People are working longer hours, with less security at work or in old age or on the streets, because the conditions of work are increasingly made to favour business. Firms are downsized all the time, making the remaining workers do more, and comply out of fear of losing their jobs. It is not surprising that depression and stress are now almost the most common causes of illness in the richest societies.
Our society is becoming more mean and selfish. For example people who can’t find work are not only given miserly assistance, they are increasingly denigrated, penalised, accused of being lazy and harassed. Many would now agree that it is a more mean, selfish, competitive and callous society than it was 50 years ago.
Of even more concern is the mentality that comes with the increasing focus on market relations. The more emphasis that is put on “getting the economy going” , individuals competing to succeed, and on market relations, the more damage that occurs to social relations; e.g., to community, social cohesion, trust, concern for others and concern for the public good. In pre-industrial times we produced and received many goods and services outside the cash economy, i.e., informally from within family and community. People gave things to each other, helped, did things for friends and family and neighbours. In consumer society we must increasingly relate to each other as isolated individual competitors in a hostile market place, exchanging things only for cash.
When you go into a market to buy the situation does not encourage you to think about what would be good for the other person or society as a whole. Your attention focuses only on what will maximise your own advantage, and you must be suspicious of the other. Because we live very privately we are given relatively few goods and services freely by friends, neighbours or the local community. We are therefore less likely to feel gratitude and debt, or bonds of affection to others in our locality or to our town for what these give us -- because we buy and pay for most of the things we get. The more society is commercialised the more the goods, services and experiences we get become mere commodities. Whereas an exchange of gifts or voluntary help builds bonds of trust, gratitude, and friendship between people, the purchase of commodities does not. Living in society increasingly involves purchasing what we want, as a competitive, self-interested individual. Tribal societies involve much more shared experience, e.g. cooperating in food production, ceremonies or community life, and individuals do not get used to pursuing what they want as an isolated competitor in a market.
There are therefore subtle but powerful forces at work in this economy which weaken and drive out social concerns, concern for the other and for the good of all. Market relations damage social relations, yet governments and economists are eager to increase the scope for market forces to determine what happens in society. So one of the worst things about the neo-liberal mentality is that it is eliminating community, mutuality, altruism, collectivism, and concern for the common good. (See the critical comment on Values and Culture, and on Liberalism.)
Origins, nature and effects.
Since the 1970s we have accelerated towards a single integrated and open global economy based on the principle of increasing the “freedom of enterprise”. This means deregulating (reducing government control of the economy), “freeing” trade and investment (allowing more to be determined by market forces), and privatising (selling government businesses to private corporations.)
Globalisation is happening mainly because corporations and banks want to get rid of the barriers which have previously hindered their access to more business opportunities. Globalisation involves removing the government regulation which protected local firms, forests, labour, resources and markets for use by local people and prevented foreign corporations from taking them. The corporations are therefore increasingly able to enter markets previously out of bounds, to move to where the wages and conditions are lowest, to drive local producers out of business by undercutting their prices and therefore to take their trade, to take over local firms, to divert local land and resources from producing for local people and to put these into producing for export.
A satisfactory society is not possible unless there is a great deal of control and regulation. Governments should try to make sure that what is done is good for people and the environment. This will sometimes mean saying to corporations, please invest in that area or industry or not at all, you can’t invest in that field, you can come in if you meet these conditions, etc. Obviously governments must be able to protect and assist their own people, even though this might mean interfering with the wishes of investors.
But under the new “free trade” rules governments have less and less power to block or control what corporations want to do. Governments are legally prevented ( e.g., by the trade agreements they have had to sign to be able to export to rich countries) from protecting their people against what the corporations want to do. Some governments have been fined hundreds of millions of dollars for trying to restrict what corporations are doing, e.g., to ban a corporation’s products from sale. Any such attempt will be judged by the World Trade Organisation as “interfering with the freedom of trade”. It will even be difficult to stop a corporation from coming in and processing our forests or minerals or water resources to sell overseas, even if we want to preserve these…because that would be to “interfere with the freedom of trade”.
In addition, because the neo-liberal ideology insists that it is wrong for governments to run any businesses, vital services such as water supply, electricity, health, education, prisons and welfare must be sold off (at bargain basement prices) to transnational corporations. Because the corporation’s only interest is to maximise its profits it is not surprising that when water supply was privatised in Bolivia the corporations raised the price to levels poor people could not afford, and ceased supplying the poorest regions. The majority of people often protest strongly at these actions, but governments push them through anyway.
Thus what happens in a country increasingly depends on what it suits the transnational corporations to do there. If the corporations can buy commodities more cheaply somewhere else then the country can’t export and therefore can’t pay for imports of necessities.
One very important consequence of this more open and unregulated global economy is that governments have little control over financial flows. Vast amounts of investment capital can now suddenly rush into a country, or out, chasing speculative opportunities, causing very destructive booms and crashes. About 97% of the transfers of money around the world are not to pay for products or trade, they are just to speculate or gamble, e.g., on currency rate changes. Thus in the 1997 - 8 Asian “meltdown” millions of people who had jobs and could feed themselves one day were plunged into poverty the next day because financial markets suddenly decided to sell a country’s currency or withdraw investments. In some cases food prices suddenly multiplied by four. Had appropriate development been taking place these disruptions would not have been possible. People would have developed the capacity to provide for themselves irrespective of what happened within the predatory global market system. Neo-liberal doctrine upholds this freedom for banks to destroy whole economies in the pursuit of maximum profit.
Globalisation is disastrous for most of the world's people, including now people in rich countries. (See Globalisation; Collected Documents, Effects.) Resources and development will flow more readily than ever to those few places where it is most profitable to the corporations to locate them, and the rest will be ignored. All regions and most people will be more open to the penetration of the corporations and more vulnerable to market forces. Corporations will take over the markets and land and resources people once had, simply by being able to undercut existing prices or pay more. Governments will compete against each other to attract corporations (because this is the only way they know to get their economies going) by offering more lucrative conditions, in “a race to the bottom”.
The world is increasingly governed by a few supra-national agencies such as the World Bank, the World Trade Organisation and the International Monetary Fund. For example the rules of the WTO enable three unidentified bureaucrats meeting in secret to judge on trade disputes and punish governments that “interfere with the freedom of trade”. They can stop a national government from imposing a ban on imports produced in environmentally damaging ways or containing toxic chemicals. In the famous tuna case, one country was not able to ban the importation of tuna caught in drift nets which kill dolphins, on the grounds that this would be to interfere with the freedom of trade. The rules of world trade have been extremely favourable to the corporations while contradicting the interests of most people. Their goal now is to extend the kinds of freedoms they have in the trade area to cover foreign investment, the provision of services by governments, and the purchasing of governments; i.e., to eliminate government control of these.
The Grab by the Corporate Super-Rich.
There is now a large literature making these criticisms regarding neo-liberalism and globalisation. Unfortunately most people who are dismayed about globalisation see it as having failed or as being irrational, because it is not solving our problems. (For evidence that it does not achieve conventional economic goals see.)This is a fundamental mistake. It is to assume that the World Bank and the IMF are run by fools who can’t see that their Structural Adjustment Packages and the privatisations deregulation and enforcement of market solutions do not work. This is quite wrong; these policies do not fail, they work like a dream. But they were not intended to work for the poor, or for you.
What is going on is a very successful drive by the corporations and banks and their few highly paid lawyers and managers to take even more of the world's wealth and resources. Since 1970 they have been stunningly successful in increasing their wealth and pushing the working class and Third World people back. They have done it without using (much) military force. They have done it mostly by changing the rules by which the global economy functions, to give greater freedom for trade and investment, meaning that the corporations have greater access to resources, markets and labour. Again the regulation which should control corporate activities is being eliminated because it is construed as “interference with the freedom of trade”. They know that when all are "free" to compete without regulation most of the winnings go to the few biggest and richest players.
Do you think that the highly intelligent, highly paid people who work for the World Bank do not understand that globalisation and the neo-liberal agenda are delivering the world to the corporate rich, do not grasp that the SAPs inflicted on the poor nations reduce the amount of their resources going to the ordinary people while enabling foreign corporations to get more of them?
The situation has to be understood in terms of the greed and ruthless power of the richest. They want more of the world’s wealth, they want to get into the forests and mines and soils of the Third World, they want to be able to invest and buy and sell without interference from government, and they do not want their use of Third World resources to be determined by anything other than market forces, i.e., by any set of rules other than one which allows them to get the resources. Agencies such as the World Bank have been astoundingly successful in enabling the corporations to get what they want, by establishing new rules by which the global economy works. These have catastrophic consequences for human and ecological welfare, yet all governments more or less enthusiastically promote them.
Why do governments go along, doing everything possible to facilitate globalisation, thereby serving the corporations and banks while betraying their own people? Governments have no choice. They must cut corporate taxes (meaning less money to spend on hospitals), entice corporations in, be seen by the credit rating agencies as a good country for investment to come to, reduce costs of production for exporters…or their country will not be competitive in the global market place. No government now can “defy the global capital markets”. All must do what the corporations and banks want, or be trashed (i.e., abandoned by investors and unable to compete in trade.)
So the massively unjust global economy must be seen not as a result of unfortunate and unintended mistakes, but as the result of a deliberate and stunningly successful drive by the corporate rich for new rules which increase their freedom to accumulate wealth at the expense of everyone else.
Third World “development”
The major faults in our economy are most glaringly obvious when we consider Third World development. (For a detailed discussion, see Third World Development.) Conventional economists define development for the Third World essentially as increasing the amount of production for sale, the GDP, i.e., as economic growth. (They often claim their concern is wider.) “The more investment, production and trade, the more wealth is being generated and thus the higher the living standards will be.” The conventional economist wants to bring (force) tribal and peasant economies (dismissed as “subsistence”) into the global market system, so they can start buying products and selling their labour and resources, and getting jobs in the cash economy. “Development requires investment and you can’t invest without capital, which means that loans and foreign investment are crucial. At first development might do more for the rich than for the poor but in time there will be trickle down benefits for all.”
However as has been explained, when development is defined as “getting the economy going” or increasing business turnover and the GDP, the result is little more than development in the interests of the rich, development of the wrong things. The industries developed are mostly those that will make most profit for the few with capital to invest, including the local rich but especially the transnational corporations and banks. In the competitive global economy the best way for poor countries to earn income is to sell natural resources such as timber of fish, or put good land into export crops, (competing against all the others and thereby lowering the price rich countries have to pay.) Even worse, conventional development puts the productive capacity which the people could have used to produce for themselves many things they need, into producing things which enrich the already rich (including exports to rich world supermarkets.)
Thus most Third World land, resources, labour and capital are now applied to the production of wealth for a few people far away. Women in Bangladesh being paid 15c an hour making shirts for export would be far better off if they were able to put all their time into their own cooperative farms etc. producing to meet their own basic needs. But conventional development theory and practice prevent that. For example the conditions of the Structural Adjustment Packages make governments facilitate only capitalist development and make them cut out subsidies for the poor or assistance for self-sufficiency. (See Structural Adjustment Packages)
For this reason the development produced by conventional economic theory and practice should be seen as a form of takeover or plunder. (Goldsmith, 1997, Chossudowsky, 1997, Trainer, 1989.) It takes from the majority of people the land and forests they once had and puts these into production benefiting the rich. If you allow development to be led by what will make most money and what will add most to the GNP then inevitably you will facilitate inappropriate development. You will for example move land out of subsistence food production (which adds nothing to the GDP) and into export crops.
Appropriate development, i.e., development that serves the interests of people in general and of the environment, is impossible in the present global economy. It could only take place if the profit motive and market forces were prevented from determining development (these might still have a role, see below). Appropriate development could only take place if affluent living standards and economic growth were not taken as the goals of development. Above all appropriate development for the Third World is not possible unless the rich countries take a far lower share of the world’s wealth and therefore cease taking most of the Third Worlds wealth … their oil, minerals, timber, fish, plantation produce. Yes these are “paid” for – that is the way we take them --but the payment is of negligible benefit to most people.
In other words, a glance at the Third World shows that the global economy is massively unjust. It greatly enriches the richest one-fifth and seriously deprives the majority. Our living standards in rich countries could not be anywhere near as high as they are if the global economy was fair. We get coffee from land that should be producing food for local people. We get most of the oil that comes from poor countries at little or no benefit to their people. You get the cheap products Chinese factory workers are paid 30 cents an hour to make. Again it is not possible for all to live as we do in rich countries. There are nowhere near enough resources for that. We could not do it if we were not taking most of the world’s wealth. The main way we get them is through the normal working of the market economy, which always allocates most resources to the rich who can pay most, and only develops that industries that will produce for them.
As Ghandi said long ago,
“The rich must live more simply
the poor may simply live.”
It is no accident that the global economy works mostly in the interests of the rich countries and especially the interests of their corporate classes. The rich countries put a great deal of effort into keeping in place the rules, the policies, and the regimes that will ensure that Third World economies deliver most of their wealth to the rich countries. This effort includes advice, the conditions put on aid, loans, foreign investment and trade deals, giving arms and training for the purposes of putting down dissent, supporting dictatorial and repressive regimes, and outright military invasion. (See the summary, Our Empire, and for detail, Imperialism; Documents.)
Your living standards could not be as high as they are if this empire did not exist, and if the associated repression and military activity to support compliant regimes was not occurring. You would not get so much coffee and oil, or so cheaply, if many people were not forced to produce these things for corporations who stock your supermarkets.
The morality of the market is unacceptable.
Even if we were able to prevent market forces from generating unjust outcomes, the fundamental motivation within markets is not acceptable. Markets require and reinforce undesirable attitudes, values and practices. In markets prices are always set as high as possible, which means that the driving principle is to maximise; i.e., it is greed. Price is not set by reference to the cost of production, or the capacity of the seller to make a sufficient income, or by what people can pay, etc. Markets are always about suppliers trying to get as rich as possible, and buyers trying to pay as little as possible. The seller does not ask himself what is enough; he asks what is the most he can get. In Medieval and ancient economies there was often the idea of a "just price", but we have no such idea now.
In addition the situation is predatory; you must be careful because the other person is likely to cheat you. If someone is forced to sell you pounce on a "bargain ". "Fire sales" are acceptable. These are not the ways we will want people to behave in the satisfactory society we will have some day.
The conventional economist thinks that if supply falls price "naturally" rises. This is not so. If you are running out of weet-bix at home the price does not rise. You decide who should have what's left in terms of what's best for everyone. Price only rises in situations where sellers find they are able to demand more and therefore choose to raise their prices even when they have no need to. That's not nice. In a good society we would have institutions and systems which both required and reinforced nice behaviour, i.e., behaviour intended to help others and to advance the public good.
3. MONEY, CAPITAL, INTERST, DEBT.
Basic to our economy is the practice of charging interest on money that is lent. There are a number of reasons why this practice is wrong and cannot be part of a satisfactory economy.
Firstly this is a morally unacceptable practice. Several hundred years ago it was not permitted because it was seen as highly immoral. How is it that if you borrow a surfboard from a friend who doesn't need it you are only expected to give one back, but if you borrow $100,000 from a bank to build a house you will have to pay back this sum, plus another $100,000 or more in interest.
It is not right that some people can get an income, and in general a very high income, just because they are rich and have money to lend, when most people have to work hard to get money and many can’t even get a job. That is not an acceptable way for a society to organise things. It is clearly unfair that some can get wealth this way while others, most people, can’t.
Because of the cost of interest we pay a lot more for things than we otherwise would, possibly on average 40% when compounding is taken into account. (Kennedy, 1988.) In other words a significant amount of what you pay for your car or bread goes to pay the interest on the money its producer had to borrow for capital works. There is a cost of this kind on everything you buy. This transfers large amounts of wealth to the richest few who are the ones with money to lend.
Most of the rich few with capital to lend have not “earned” it. Most wealth is inherited. Even those who have made their money through hard work or initiative or risk should not then be able to get more money just because they have accumulated a lot of money. Money is stuff with which one can buy things that have been produced by work. One should only be able to get the money with which one can get such goods by working too, i.e., making a contribution to the production of things people can use. But rich people can get (lots of) goods without having to do any work to produce anything. This is obviously wrong.
Interest represents a huge continual flow of wealth from poor to rich, because the rich are the one’s who do the lending and the poor are the one’s who do most of the borrowing and paying back with interest. Rich people do borrow from each other, e.g., to invest in new factories, but they don’t borrow much from poor people and therefore don’t transfer much interest to them. But poor people have huge mortgage and credit card etc. debt, and the high interest charges on these go to the few who have much capital to lend.
It is important to recognise how very few people have most of the world’s wealth. (See Inequality.) The distribution of capital is even more narrow than for wealth. In the US in the 1980s a mere .5% of people owned half the capital (Brower, 1988), (…and the distribution is worse now as globalisation rapidly enriches the super rich.) So vast amounts of money are continually paid in interest to the very few who have most of the wealth in the first place.
The conventional view is that interest (and profit) are the rewards to those with capital for risking their capital investing to set up businesses and create jobs. Yes, people who invest capital do take a risk … but what is the risk they are taking? They are risking losing their capital and then having to work for an income like the rest of us!
What about the fact that retired people need an income from interest to pay for their aged care etc? ln this economy that’s the way retirement is organised, but there are other ways we could provide for older people, and these could be much more secure and fair ways. Society should guarantee a comfortable old age to everyone, with no need to depend on an income from risky investments, and no chance that their savings or superannuation could be lost through mismanagement or fraud. In the US now pension systems are being seriously undermined, eliminated or lost as corporations and the government take less responsibility for retirement. Savings are being moved out of secure arrangements into investments that individuals have to take responsibility for, and which finance sharks can plunder.
In this society being able to get interest on money is taken for granted and is never thought of as problematic. This is another example of the way the dominant ideas tend to be those that suit the rich. Interest is thought of as legitimate, even by those who are most disadvantaged by the practice.
The moral significance of debt and interest is glaringly evident when we look at the Third World. Many countries have debts they can never pay off, for reasons that are obviously not the fault of their people. They are trapped in un-repayable debt. Yet over time the interest they pay on their debt adds to much more than the debt. In some recent years annual total Third World debt repayments have been 9 times as much as total aid to the Third World. Often the rate at which they can pay the debt off is less than the rate at which the debt increases when the interest payments are added. This is called “debt slavery”. The rich countries have used this situation to keep poor countries to the policies that suit the rich, i.e., they give more aid only if poor countries agree to pursue policies which keep their economies open to the operations of our transnational corporations on the terms that suit us. (See IMF, World Bank, and World Trade Organisation, and especially the way Structural Adjustment Packages are used to force acceptance of policies that suit the rich countries.)
If all Third World countries are impossibly indebted, and rich countries also have big debts, and the richest country, the US, has so much debt that we should all worry, then to what country is all the debt owed? The point is that all this debt is not owed to any country, it is owed to the few people here and there in the world who have great amounts of capital to lend, especially those who own and run banks.
The important point here is that we could have a different system that did not involve interest and therefore inwhich no one received an income just because they had money. Banks might take our savings for safety but pay no interest. Loans would have to be repaid plus only a small fee to cover administration costs. (The boards of our town banks would decide who is to get the loans in terms of social benefit, not profit to banks.)
Finally there is an over-riding reason why we must not have an economy in which interest can be gained. This is the fact that any economy in which interest is paid must be a growth economy. If money is lent but more must be paid back than was lent, this is not possible unless the borrower generates, produces, wealth that is greater than the amount lent. A sustainable society cannot have a growth economy.
Anyway, how can it be that there is such an increasing debt problem, when we are supposed to be getting richer all the time. The explanation is to do with one of the most serious faults in our economy, the way money is created. (Below.)
The interest system is the cause of the enormous problem of debt that burdens and distorts this society heavily, and could actually destroy it overnight through collapse of the financial system.
Firstly there is the vast amount of worry and unnecessary work and devastation to do with personal and small business debt. This has a huge toll in terms of depression, wasted resources, worry, ill health, family breakdown and suicide.
Then there is the realm of national debt. The total debt in rich countries, let alone poor countries, is now huge and has been rising very rapidly. In the world as a whole debt has been increasing at three times the rate at which the capacity to pay it off has been increasing; i.e., the economic growth rate. (Clairmont, 1996, p. 29.) America's total debt has grown on average at 5.8% p.a. for 200 years, much faster than total economic output. Total output multiplied 22 times in that period, but total debt multiplied by 187 times. In America between 1970 and 1990 only 40% of the money the US Federal government borrowed went to pay for anything useful; the rest went to pay off debt to private banks. Thus the average American family had to pay $4000 p.a. in taxes to those who had lent money to the government...when the government need not have borrowed from private banks and could have avoided all these interest repayments. (Hixon, 1992. See below.) Growing much faster than debt are the interest payments due. For example in the US in the early 1990s the interest that had to be repaid on debt each year was almost equal to 20% of the GDP. (Tanzer, 1992.) This means that Americans were working one day a week just to pay the interest on debt...to rich people who do not need to work at all!
The volume of US debt and its rate of increase is one of the most worrying aspects of the global situation. The US is by far the most indebted country and many fear that this will soon collapse the entire world financial system.
Why is there so much debt? The explanation is to do with the way money is created.
The money creation and banking system.
One of the most objectionable yet least challenged aspects of the present economic system is that banks are allowed to create the new money that needs to be put into circulation all the time. As an economy grows the amount of money needed to enable the increased amount of purchasing must increase. (If there was only as much money today in people’s pockets as there was in say 1900 people would not have enough things like notes and coin to pay for all the items that are bought now.) In a sensible economy governments would print and introduce into circulation the amount of notes and coin etc. to enable transactions. Obviously the new money has to be created, printed, somehow. The absurd thing about our economy however is that the private banks are allowed to do this and then allowed to own the new money; to lend it to people and get it back with interest!
(Most money takes the form of cheques and cheque accounts. Only about 5% of the money used is in the form of notes and coins. Also not all banks create money, only the Trading banks. Some do only take in and lend savings.)
To anyone hearing this for the first time, the practice is incredible. It is as if we gave a firm the right to print all our bus tickets and then to sell the bus rides they stand for, pocketing all that income. Unbelievable as it may seem, the fact is that privately owned banks are allowed to create new money out of nothing, just by granting loans, and then lend it for interest. Few people understand that this happens but there are now many people around the world working to have this situation changed. (There have been times and places when government banks did issue the money, but this is not the norm tody.)
One of the most ridiculous aspects of this situation is that governments borrow huge amounts of money from the private banks and therefore have to pay them billions of dollars from our taxes as interest payments on these loans every year, when they could borrow all the money they need from the government's own banks with having to make any interest payment at all! In the 1990s Australian taxpayers were paying more than $18 billion p.a, about $1000 per person every year to the private banks in this way, i.e., as interest payments from the government to the private banks from which they have borrowed money.
If governments created all new money and “spent it into circulation” they could stimulate desirable development, for instance by building hospitals, or establishing factories where unemployment is high. The money creation system is a major cause of the ever-increasing debt problem. This problem cannot be solved. Why? Because when a new loan is made it creates that amount of money and adds it to the amount in circulation, but it does not create the additional money that will be needed to pay back the loan plus interest. The interest can only be paid if more loans are taken out, thus accelerating the growth of total debt.
Sometimes people say, "But it would be inflationary for the government just to print more money." This misses the point that someone has to create lots of money all the time and get it into circulation as the economy grows. At present the private banks do this, so why is it alright for private banks to do it but not alright for the government to do it?
Another highly unsatisfactory aspect of the banking system is that any dollar lent to a bank can in effect be lent many times at once, yielding interest from each lending. Let's say you deposit $100 with a bank. If the bank is legally required to keep 10% of deposits to cover any sudden increase in withdrawals, then it can immediately lend out $90 to someone else. Let's say that person spends it and the recipient puts the $90 in a bank. That bank can immediately lend out $81. This process can go on until the original deposit of $100 has actually led to the lending of about 10 times as much money by the banks as a whole. In effect the deposited money has been lent 10 times, and banks get interest on each lending. Two decades ago banks had to set aside about 10% of the deposits they had received, as a safety reserve. Now this is being reduced towards zero in most countries.
The present money and credit system makes money unnecessarily scarce. You can't get money to invest unless you are prepared to pay high interest rates, so many people who could set up a small business if they could borrow a small amount are not able to borrow that money. Similarly the services of many public institutions such as schools and hospitals are severely limited because
they can't get capital to build. But if all money creation was in the hands of the government it could put the additional money required each year into circulation by spending it to build more hospitals etc.
All this means that in our economy the money in existence, except for the small proportion of notes and coins, is debt. Any unit of money only comes into existence when a bank grants a loan. The recipient can spend the loan into circulation, but that money is a debt that must be paid back to the bank. If
everyone paid off their debts there would be no money in existence, except notes and coins.
This has the absurd implication that is totally and increasingly impossible for debt ever to be paid off! If someone borrows $100 at 10% interest then at the end of the year that person is expected to pay back $110. Now lets say that in one year Australians borrow $10 billion at an average 10% interest, meaning that at the end of the year they are expected to pay back $11 billion. Where will they get the extra $1 billion? If they got it from the money previously in existence, then over time the money in circulation would be slowly depleted as some of it is taken each year to pay the interest falling due from loans, as more has to be paid back than was borrowed. The point again is that the additional money to pay the interest was not created when the loan was created.
Where does it come from? It comes from new loans. So as time goes by Australians can only pay the interest due to banks by borrowing more from the banks. So at any one point in time it is impossible to pay off all debt, and over time debt must increase.
One of the most disturbing consequences of our money system is that it enables the banks to own a large amount of the property that exists. By the 1990s in Britain the banks owned 37% of all housing! That is the value of mortgages in relation to the value of housing. In other words the banks have come to own more than one-third of all the houses simply because people who want to buy a house have to borrow the money from a bank.
What happens in the long run? The answer seems to be that there is a crash, a major depression in which many debts can't be paid and are written off, while many firms and individuals go bankrupt, at great cost to large numbers of people.
The US dollar in world trade;
The US gets an enormous amount of the world's wealth through this same process, at a higher level. The US is in effect the world’s banker. The US dollar is the unit of currency used for most trading, especially paying for oil. As trade increases there is a need for more dollars in circulation. The US meets the need by "printing" more dollars -- and then spending them to pay for imports! In this way the US gets a huge volume of the world's wealth, for nothing.
Conventional economics assumes that you can’t get things unless you first get money with which to buy them, so you must sell something to get that money. Similarly it is assumed that a poor country can’t import things unless it exports whatever it can to get money to pay for the imports, and to pay for things to put into development. Few of them can earn enough this way, so they must get capital by enticing in foreign investors, or getting loans or aid money.
These assumptions are overwhelmingly dominant. Hardly anyone in rich or poor countries questions them. But they are seriously mistaken. Of course they are precisely what the what the banks and owners of capital and rich countries want the Third World to think, because then everyone has to come to them to borrow capital to invest. But there is a totally different way to achieve basic development goals.
Appropriate development focuses on enabling local people to apply the productive capacity they have around them, the land, forests, fisheries, labour, skills and knowledge, directly to producing for themselves the basic things they need. If this is done even the poorest regions can provide themselves with most of the food, housing, clothing, education, basic health care, leisure activities etc. they need for a very satisfactory lifestyle. This will not solve all the problems; there will still be a need to purchase some imported items such as medicines, but then only a small amount of export effort would need to go into being able to pay for the crucial imports.
What appropriate development requires is not capital (or not much) but organisation of the existing productive capacity. Appropriate development is about organising people to begin applying the resources they have around them to meeting their needs directly and immediately. They have labour, skills, forests, soil etc. Appropriate development is not possible unless the myths and mistakes that conventional economic thinking reinforces are recognised and scrapped, myths such as “You must sell something in order to be able to get/buy things”, and especially “You can’t develop unless you get/borrow capital. You must become heavily dependent on the global economy. You must export so you can import.”
Think about the typical rich world neighbourhood, which urgently needs much development, and which has people watching TV for three to four hours of every day! Think about the development miracles they could be producing if that time was organised to go into building and running community gardens, workshops, services, drama clubs, etc. Now ask what is the role for capital in this? The answer is, almost none. Appropriate development just requires a different vision. With that things can be organised and built, and getting the small amount of capital required is no problem.
Of course appropriate development would be a catastrophe for the rich countries, foreign investors and conventional economists. It is directly against their interests if Third World people start believing that they can develop without having to sell things to rich countries and without having to borrow capital from them. Conventional economists never consider what this appropriate approach could achieve. In fact they instantly dismiss any notion of self-sufficiency or “subsistence” and see development only in terms of investing capital and plunging into the global economy. Again the Structural Adjustment Packages of the World Bank have been especially powerful in preventing poor countries from adopting anything like appropriate development.
4. ECONOMIC THEORY.
To a large extent the highly undesirable outcomes of our economic system are due to the dominance of conventional economic theory, which seriously misleads and distorts thinking. Following are some of the most important faults.
It is extremely narrow and limited; there are many economic phenomena it cannot deal with.
Conventional economics is basically only about production for sale; i.e., the volume of business turnover or output or GDP. This leaves out many important economic phenomena. For instance possibly one-third of all the work and production that takes place is not performed for money...because it is housework. People make breakfast and sweep up without payment in money. They give many things to each other freely, including advice, company, help and entertainment. There is also a big voluntary sector of the economy, including many people who work in charities and aged care. Conventional economic theory totally ignores all this, because what is produced is not sold. This fault means that many important costs and benefits of economic actions are not taken into account at all, costs such as the boredom of unemployment or the loss of a view. It also means that the most important benefits of productive activity are ignored, i.e., the feelings of satisfaction people get, for example from the way their workplace runs, or the peace of mind that comes with a secure job.
In many cases values other than money are the ones that should be the main determinants of what is produced and who gets it. Often something should be produced or not produced, or made available to specific people, because it is just, or morally right, or good for society or ecologically appropriate. In other words there are many other important considerations than money value that should be taken into account in economics. Many of the most disturbing problems in the world are due to the fact that the market, i.e., considerations of mere cash value and profit to individual bidders, is allowed to determine what is produced or developed or who gets things, when these decisions should be made mainly in terms of what is just, satisfying, morally right or ecologically sustainable. (Polanyi put this in terms of the need for the economy to be “embedded” in society; Dalton, 1968.)
In these large non-monetary aspects of the real or full economy the rules which hold within the merely cash sector are more or less irrelevant or invalid. Whether or not children get toast at breakfast, or you help a friend with problems, is not settled by calculating dollar costs and benefits. Many things are priceless and in many cases it is meaningless to try to talk about dollar costs or to base decisions on them. Conventional economic theory is totally incapable of dealing with these many economic phenomena. For example it is of no use in understanding the economics of Aboriginal societies where there is no money. In tribes production, distribution, consumption and development are governed by many social and moral rules. The theory is just about as useless in calculating the real cost benefit situation involved in whether to close down a factory. It can’t begin to calculate the psychological cost or the cost to the town’s morale because these cannot be measured or discussed in terms of dollars.
To repeat, if we think of economics as being about what happens in the production, distribution and exchange of goods and services, then it is obvious that a great deal of what happens has little or nothing to do with money or monetary value, i.e., that there are many other criteria, considerations or values which determine what happens and ought to be taken into account.
It is therefore a seriously impoverished, insufficient vocabulary or set of concepts for dealing with the full range of economic phenomena. There is so much you cannot even begin to discuss, let alone represent satisfactorily, if you confine yourself to only talking about the money value of things. It is as if we were trying to discus art but the only terms we could use were those describing the thickness of paint. We could not even begin to discuss so much that is important about art.
The distortion; the warped understand that results.
Even more important is the way the set of concepts or terms conventional economic theory uses distorts our thinking about and understanding of production, distribution exchange and development. Firstly because only terms to do with money value are used we are strongly inclined to think that the only things that matter in economics are money costs and benefits, and that all the other factors noted above are not important or not relevant.
The theory therefore leads us to think that things like producing to share, or to help others, or to meet social obligations, are not part of economics, or are only parts of primitive economics but not proper economics. In tribal societies people produce food primarily to satisfy social responsibilities, such as having to give the first yams to your uncle. Food gets distributed and eaten but that is not the primary goal. Similarly a tribal person will tell you that he will not buy that item of food even if it is very cheap, indeed he will not eat it under any circumstances … because it is his totem and eating it is taboo. Here is a situation in which rules governing production, consumption and distribution have nothing to do with money or personal gain or costs and benefits. Conventional economic theory cannot deal with these kinds of economic process at all, because money values are not involved and things are not done to maximise monetary gain. It leads us to regard these things as not to do with economics. Our thinking is therefore misled, distorted.
Other good examples are abundant with respect to the environment. Just because the damage that economic activity causes to the environment can’t be discussed in terms of dollar costs, conventional economists have the hide to identify these as “externalities”; i.e., as not really parts of economics at all!
Similarly offensive is the way conventional economics treats everything as a commodity for sale. Yet many things should not be treated like that, especially labour, land and money. Whether people get jobs should not depend on whether someone can make a profit buying their labour, as if it were bricks or fish. In the era of globalisation and neo-liberal triumph everything is being made into a commodity to sell, including public assets, personality, loyalty, identity, tradition, culture and things people ought to have a right to like water and health care whether they can pay for them or not.
The ex-head of the World Bank, Lawrence Summers, said it was better to locate toxic industries in the Third World, because the cost of a death there is lower than in the rich world.
That’s how conventional economics gets people to think.
“Development” shows how economics does terrible things to the human mind. It gets intelligent people to think that the best way, indeed the only way for a poor country to develop is to increase the amount of production for sale into the global economy, and to think that it is a bad idea to allow more productive capacity to go into meeting needs of poor people immediately and outside the cash economy.
Economists have a choice here. Either they can
a) define economics as only involving dollar costs and benefits, in which case they will be able to construct neat and precise equations, but their discourse will be largely irrelevant and grossly misleading,
or they can
b) accept that economics is about what happens in production, distribution, exchange and development, and that many factors other than money values have to be taken into account to understand what happens and to discuss what ought to happen, and that economics is therefore a very messy and imprecise realm, overlapping with politics, sociology and ecology.
Some of the essential definitions built into conventional economics are viciously misleading.
This is most obvious regarding the terms “living standards”, “productive”, and “efficient”. When conventional economists talks about the most “productive” and “efficient” investments all they mean are those that will maximise the financial return to the investor. But as has been explained, almost always this will not be the one that is likely to do the most needed things. Thus conventional economists will say it is a much more efficient use of capital to build one luxury mansion than fifty humble cottages for very poor people, or to grow luxury crops for export than food for hungry poor people. But in fact the market is the most appallingly inefficient way of distributing food -- it will not deliver enough to millions who are hungry.
Similarly we are all in favour of improving “living standards”, but all the conventional economist means by this term is increasing the GDP or sales per capita, a definition which is delightful for those with capital to invest. “Living standards” should be defined in terms of overall quality of life…(which is not improved by raising the GDP in rich countries.)
In these ways the theory’s vocabulary is not just very narrow, it distorts our understanding. It inclines us to see things in ways that are not valid, or to see things as acceptable when they are not. We should not see labour as a commodity, or the environment as an externality, or the production of a mansion as the most efficient use of capital for housing – but this theory, this way of discussing economics, leads you to make these mistakes.
Taking the GDP as the important measure.
The supremely important measure of economic progress is taken to be the Gross Domestic Product, i.e., the value of all the production or consumption taking place.
The first problem here is that the GDP is not a measure of wealth or welfare. It only adds together of all the spending that is taking place. Some of this represents benefits but some of it represents costs and therefore reductions in welfare. For instance if we have a social system that generates several billion dollar road accident costs each year, then obviously the amount we have to spend on this problem represents a reduction that accidents make in our welfare. Yet economists add all expenditures to the GDP and pretend that the total represents the level of our income and welfare.
The GDP is not an indicator of anything that matters much. Whether the amount of production increases or decreases is not important; what matters are things like whether welfare or happiness or the quality of life increases, or unemployment and poverty decrease. In fact the most important factors for any sensible accounting for long term economic viability and capacity to produce are ecological. Why don’t we just measure what matters and forget about the GDP? The answer of course is mainly because the owners of capital want us to accept as our top priority increasing the volume of buying and selling that is going on all the time.
Another major fault in the GDP is that it only measures throughput , i.e., production, expenditure or income, and therefore gives no indication of stocks of wealth or changes in these. The GDP of a country which makes a lot of money in one year selling off its forests might give the impression that it has become richer, but if we were to take into account the loss of this stock of timber and ecological wealth we might find that despite the cash income it has become much poorer.
The growth assumption.
The absurdity of holding the growth of GDP as a goal, let alone the supremely important goal, has been emphasised above. Conventional economic theory does not give any attention to the possibility or merits of the steady-state economy we must have in a sustainable society. It can tell us nothing about the way to run such an economy, the problems that will arise, the kinds of institutions we will need. For instance there is no discussion of the implications of an economy in which there cannot be any interest payments.
Acceptance of the market as the basic mechanism.
As has been discussed above, no aspect of conventional economic theory has more disastrous consequences than the assumptions that economics is about what happens in markets and that the best way to conduct economic affairs is via markets. The market is claimed to be the most efficient way to allocate resources and incomes and to determine production and who gets output. In fact it is only efficient at maximising returns to investors, purchasers and sellers and it is appallingly inefficient at meeting needs, ensuring justice, maintaining social cohesion or caring for the environment. More importantly, there are many other ways to organise an economy than in terms of market relations, but you would never realise this from conventional economic theory.
As has been explained, the market mechanism does some things well and might have an important place in the transition to a satisfactory society, but market forces are far more responsible than any other factor for the misery in this world. Globalisation is being legitimised in terms of the sanctity of market forces, when in fact it is causing a holocaust of impoverishment and corporate plunder. To argue for freedom for market forces is to argue for freedom for the rich and their corporations to do and take whatever they like. We cannot have a satisfactory society without far more social control and regulation than we have now (not necessarily by the state), and therefore without greatly reducing the scope for market forces. (On possible procedures, see The New Economy.)
Conventional theory also assumes that markets are self-regulating, i.e., they automatically adjust supply to demand. If things are not working well the conventional economist will say it’s because the market is not free enough to work it’s miracles. Yes, indeed markets will automatically adjust, but that does not mean the adjustment will be socially desirable. For example if the supply of petrol becomes very scarce the market will raise the price and bring supply and demand into line – but then only the rich will be able to afford petrol. That’s not an acceptable way to distribute a vital resource. This is a grossly unjust way. It is not a way that attends to needs or rights. If the poor are to get a fair deal or if the environment is not going to be sold off for profit then there must be a great deal of regulation, i.e., “interference” with and contradiction of market forces. We do not expect machinery like cars, sewer systems or a tennis club’s administration to run smoothly without any effort on our part to control what happens. A good economy is social machinery that will need a great deal of guidance and regulation if it is to work well. (Of course we must admit that we are not very good at doing this; and to date attempts have mostly involved big, clumsy, authoritarian state bureaucracies. The new economy will be small and stable, making the social control much less difficult.)
The human nature assumptions within the theory.
Conventional economic theory is firmly based on assumptions about the nature of humans which are highly challengeable or wrong. We are assumed to be self-interested individuals who enter economic relations to get as much as possible, to maximise their own advantage in competition with others. This is an acceptable statement about tendencies and behaviours that can be observed, but it is not valid as a summary description of human nature. Humans are also capable of cooperating, caring, sacrificing and nurturing others, and production and distribution and is often motivated by these more admirable tendencies. Much work is done because it is seen as meeting moral, religious or traditional obligations, not because it will lead to gain for the individual. If you put humans in a situation where their survival requires competitive self-interest, and this is what our economy does, do not be surprised that that's the way they will tend to behave. But set up situations in which people benefit materially and spiritually by helping and cooperating and giving, and humans will happily behave in those ways.
Conventional economic theory therefore is only about the ways of going about production and exchange that a particular and nasty kind of human would engage in, and the economy we have obliges us to behave in these ways. This is as silly as if we had a theory of plant growth that was only about the way plants grow when soils are salty, i.e., a theory that only deals with some of the conditions plants can experience, and then we developed an agricultural practice which tried to make plants grow only in salty soils.
Again there are ideological connections. It suits the rich and powerful if we see humans and the economic situation as "naturally" being about competition between individuals to get as much as possible…because if we all accept this we are accepting a situation that works mostly for the rich.
It is not a general theory of economics; it is only about a particular kind of economy.
Conventional economists proceed as if their economic theory states the way things happen in that realm of the natural universe we label economics, just as chemical theory gives an account of what happens in the realm of chemical substances and reactions. We are therefore led to believe that conventional economics has discovered certain laws about the economic realm, such as when supply decreases price increases. All this is seriously mistaken.
The “laws” conventional economists state only describe what happens in a particular kind of economy, the one adopted in our society, and one which works as it does because of the particular values and habits people in our society have. For example it is not true that if demand increases price increases. Sometimes in some economies and in some situations this is what happens, but it is not a general law describing what happens in economies. For instance it never happens in a good household economy or tribe. If you find that there are not enough weet-bix in your house for all to have their normal breakfast it is not the case that the price you all have to pay for breakfast increases. What happens is something that conventional economists cannot explain; i.e., you share the weet-bix without any change in their price, indeed without any thought about their price. The household economy runs according to totally different rules compared with those the conventional economist assumes, rules which include considerations of morality, justice and environmental quality. The calculations conventional economists make and their laws are in terms of a unit that household economies almost completely ignore in making distribution and production decisions, i.e., dollar values. The conventional economists units and laws refer only to the kind of economy found in countries like Australia. They do not apply to the economies of Aboriginal societies.
What’s more, it is only a theory of capitalist economics.
Conventional economic theory is basically only about an economy in which
Š Things are produced etc. for money, and only money costs and benefits are taken into account.
Š Outcomes are mostly determined by market forces and competition,
Š Some people have capital, and they are allowed to decide what to produce in terms of what will most enrich themselves.
These are the defining characteristics of a capitalist economy and there are many economies that do not have these characteristics.
It is therefore not a theory about economics in general; it is only a set of concepts that apply to a capitalist economy. “Socialist” or “communist” economies have also been capitalist economies, i.e., based on the assumption that investment of capital is essential, the difference being that the capital is not owned by private individuals. (On the huge difference between capitalist and alternative/appropriate development where capital is not important, see Appropriate Development.)
Consequently thousands of students studying economics think they are learning about what happens in the economic realm of human behaviour and experience, but in fact they are only learning about what happens in one type of economy. They are also learning that no other kind of economic system exists or is worth thinking about or is even conceivable.
Economic theory as part of capitalist ideology.
It is not just that conventional economic theory gives a limited, partial and distorted account, nor that it is only about one kind of economy. More important is the fact that it gives the view of economics that it suits the owners of capital to have the rest of us accept.
Consider again some of the key themes in conventional economics and ask ourself, who benefits most when these ideas are accepted as normal, legitimate or the only way?:
Š It deals only with the monetary costs and benefits of production for sale, enabling many costs like the boredom of work, noise, pollution and the stress of unemployment to be ignored by the producer, and therefore paid by someone else.
Š It therefore ensures that considerations of morality, justice, social and ecological effects (which should sometimes prevent profitable activity) can be ignored – because the only factors taken into account are dollar costs and benefits.
Š It takes the supreme goal of economics to be increasing sales as much as possible, for ever. It assumes that economic growth means more wealth and therefore more welfare and higher living standards. It defines GDP as “wealth” or “welfare”. So we are led to endorse any action that will increase the GDP or sales. Helping to increase business turnover seems to be the way to increase welfare (when we now know that the quality of life does not increase with GDP growth.)
Š It endorses and never challenges the right of a very few very rich people to own a society’s productive capacity, i.e., its factories, mines, resources etc.
Š It takes for granted that those with capital have the right to decide what is to be produced, and to do this solely in terms of what will maximise their profits.
Š It legitimises the market as the supremely effective and efficient way of allocating things and of determining what will be done or developed. This gives those who are rich and powerful the freedom to produce and to take what they want, by outbidding others. It means that the idea of society regulating the economy is regarded as in principle a bad idea. The most serious sin now is to “interfere with the freedom of trade.”
Š It encourages governments to sell off profitable public enterprises and assets to private corporations, because it is taken for granted that private enterprise must be more efficient.
Š It defines labour and the environment as mere commodities that can be bought and sold without concern for their welfare, or as externalities that can be ignored because they are not really relevant to economics. Again this means producers can ignore those costs.
Š It defines “productive” and “efficient” only in terms of what will maximise profit when often that is appallingly inefficient at achieving crucially important economic goals, such as eliminating hunger. This is delightful for capital owners – whatever will maximise their profits is defined as the most “efficient” and “productive” use of capital.
Š It defines “development”, “living standards” and ”progress” not in terms of improving the quality of life but in terms of raising the volume of business turnover or GDP. As a result development becomes development of whatever will maximise the profits of transnational corporations. Who is most delighted when increasing the GDP, business turnover, is taken as the supreme national goal?
Š It rejects, indeed ridicules any concept of subsistence or self-sufficiency. “Don’t ever try to produce anything to use – always producer things to sell, to get money to spend buying the things you want.” This prevents the Third World from adopting appropriate development. It is delightful for capitalists because it means that instead of people ignoring those with capital and providing for themselves people have to sell commodities and labour to firms and buy what they need from them.
Š Conventional economic theory is built on the assumption that human beings are self-interested separate individuals seeking to maximise their income in competition with each other. This is the way the owners of capital want you to think, because you will then accept struggling in the market place for what you need, and accept that it is "natural" and inevitable that some do better than you in the competition. But humans have a strong tendency to work together, cooperate and help each other and do what is best for society. The possibility of organising a society on these lines is ruled out when the other view of human nature is constantly reinforced in statements of economic theory.
Obviously all these ways of seeing economics are the ways that suit the owners of capital. Those people are delighted when we think about economics in these ways. These ideas should therefore be understood as part of capitalist ideology . They make up a world view which greatly benefits the rich when the people in general accept it. There is no better example of what Foucault identified as a “discourse”, a way of talking and thinking, a vocabulary, which gets people to see things in a way that serves the interests of the rich and powerful.
This is not to say that it is all a deliberate conspiracy. Often the dominant or taken for granted ways of thinking in a society end up being those that it suits the dominant class to have every one believe, simply because those in power tend to talk and theorise only in those ways and in time everyone hears nothing else. It is not surprising that all people come to accept these ways of thinking without question. Usually even the ruling class sincerely believes the dominant ideology. There was a time when kings as well as serfs believed kings have a divine right to rule. In our society people are exposed to nothing but neo-liberal rhetoric so it is not surprising that they come to see that representation of the economic world as normal and the only way things could be.
We should therefore study POLITICAL ECONOMY, not economics.
Any economy can be seen as a particular, selected set of rules governing production, distribution, exchange and development. There are other possible sets. There is no natural or inevitable way to organise an economy. Aborigines have elaborate rules for economic affairs but these do not involve money. Communes have rules to do with sharing and access to free goods and contributions to working bees. In our economy the rules are to do with trading for money within competitive markets.
Also in any economy some individuals and groups have more power than others to get what they want. Maybe in a tribe priests or the old people or the men have more privileges and authority enabling them to have the best parts of the animal killed. In our society the rules of the economic system give much more power to those with capital. Consider the extremely high fees charged by lawyers and specialist doctors. These exist because these groups have the power to set their fees as high as they like. They are not set by competition in a market. The rules of the economy in our society give little power to disabled or poorly educated people. And many of the biggest and most juicy prizes are monopolies given to one corporation by government, especially in telecommunications, gambling, media and many other fields.
You cannot analyse what happens in an economy satisfactorily without considering these power phenomena, especially the capacity to influence governments to set the rules and they often set them to favour one group over another. You will not understand what’s going on in an economy if you attend only to market phenomena.
So the study of economics should include the study of the differences in power of groups to get what they want, including their power to establish the rules of the system. Some have more capacity than others to get the rules to suit their interests. Therefore it is essential that the focus of study should be not economics but Political Economy, a discipline that includes far more than market phenomena and especially one which deals with the political or power factors affecting production, distribution, exchange and development.
All this is a dreadful indictment of the economics profession, especially the academics. How can it be that theories and practices that are often so patently unsatisfactory, indefensible, misleading, unjust, vicious and damaging, and have had such catastrophic consequences on the lives of almost all people on the planet, can go so unchallenged? This is quite a disturbing and puzzling phenomenon and it has depressing implications for the capacity of the human race to recognise, confront and deal with its problems.
Most economists have a vital interest in working within conventional theory and not questioning it, because most of them work for corporations, banks or governments whose interests are well served by the neo-liberal way of thinking about economics. But why do the academics teach this doctrine, without even telling their students that it is so problematic? These days universities have to attract students in order to pay their way, so schools of economics are going to teach the things that corporations and governments want students to learn, and students are going to want to learn only those ideas that will get them a good job in a corporation. The result is that large numbers graduate from economics courses without ever having been introduced to the kinds of criticisms dealt with in this discussion.
We should be very angry.
We should be extremely angry about conventional economic theory and practice. They produce and legitimise many actions and situations that are dreadfully bad. Thy are responsible for most of the chaos, deprivation, poverty, illness, waste, misery and environmental damage in the world, especially for the gross injustice generating the poverty of two to three billion people in the Third World. The theory is therefore responsible for much of the armed conflict in the world, because much of it is caused by the injustice this economy inflicts. The deaths of tens of millions every year are directly due to the fact that this economy lavishes scarce resources on a few while taking resources from the poor majority and gearing their productive capacity to the benefit of the rich, and due to the fact that economic theory makes most people think this situation is somehow inevitable or normal, or to be accepted as legitimate.
Especially important is the fact that the limits to growth analysis of our global situation discussed above shows that this economic system has put all countries on a path that is grossly ecologically unsustainable. Rich world rates of resource consumption are far higher than all could ever rise to, yet the supreme goal is to raise “living standards” and the GDP all the time.
Even if this economy were not causing extreme injustice and ecological damage it would still be causing huge social problems and damaging the quality of life. It is dumping increasing numbers into stress, insecurity, poverty and deprivation. It has hooked most people in rich countries on the consumer treadmill (e.g., they have to pay 10-20 times too much for a house.) It makes you work far too hard, and it condemns you to a much more difficult, insecure, stressful and spiritually impoverished life experience than is necessary. Virtually all our social, economic and ecological problems are getting worse, at an accelerating pace. The basic cause of all these things is an economy in which abundant productive capacity is not geared to meeting need. People should be extremely angry at the system which has these effects, and those who benefit from it, and especially those whose ideological output legitimises it.
For a discussion of the form that a satisfactory economy must take, see The New Economy.
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