Friday, March 23, 2012

Needed: A Vision

Recently, Jerry Epstein, an economist with The Center for Popular Economics
was interviewed by Truthout. Below are two excerpts from that interview, with my comments:

Epstein ... the growth paradigm is no longer viable in industrialized economies because of environmental constraints and because it no longer produces jobs. 

I assume he's referring to the current neoclassical economic growth paradigm, overlaid with neoliberalism. This approach to economics was popularized by Milton Friedman and The Chicago School. It was first applied in Chile under the autocratic regime of Pinochet, with questionable success. Here in the US it gained prominence in the 1980s with Reaganomics, and has been making advances ever since. Neoliberalism advocates economic liberalization, privatization, open markets and free trade. It's objective is to transfer the control of the economy to the private sector and eliminate the public sector except for Defense. The financial crisis of 2008 gave neoliberalism the opportunity to advance on steroids. It's been adopted globally, including the Eurozone, which is now in crisis.  It has been successful (until the crisis of 2008) in growing the GDP which is identified as economic progress. Epstein labels this growth paradigm no longer valid for two reasons -- good ones, but there are many others, among them:
      1. Surplus and the falling rate of profit   Neoclassical economics (Capitalism) is incredibly efficient in producing goods and extracting rents. The surplus created by this growth is greater than current global demand can absorb. Or stated another way, we have an over-supply of goods given our national and global income distribution. When the rate of profit started falling in the industialized economy other sources of profit had to be found. This led to the primacy of Finance Capital -- the financialization of our economy (money making money and a paper debt economy). Think of General Motors' finance unit generating higher profits than its manufacturing division. In 1973-85 the financial sector's share of corporate profits was 16%, while this decade it reached 41%. Finance Capital's sole focus is on profits to the exclusion of any other consideration. (i.e. societal or environmental impacts)  With falling profit rates, industry fled to cheaper labor markets to maintain high profit margins. They were aided by Trade Agreements written for politicians by industry lobbyists. The result has been job losses in the industrialized world and labor exploitation in the emerging world. And thus, we end up with high unemployment and low wages for the jobs that can't be exported.
2. The Private Market as the best allocator of resources. A precept of neoliberalism is the Efficient Market Theory - privatize everything (except Defense) and starve the Beast (the government). This approach has been hugely successful if the objective was to grow the GDP and concentrate wealth in as few hands as possible. But, if the objective is to allocate resources for the benefit of society as a whole, then it has been an abject failure. Profits are privatized while costs are socialized. (bank bailouts with tax dollars vs millions of people loosing their homes to foreclosure; environmental costs shifted to taxpayers, etc.) This trajectory is unsustainable as evidenced by -- financial crises (of increasing frequency & intensity), global social unrest, and severe environmental impacts such as Fukushima, BP oil spill, Bhopal, global warming and so on.  

Epstein   What's the economy for, anyway? We need to rethink: what are our needs and how do we meet those needs?

An excellent question. Unfortunately, I believe that neoliberalism with its Free Market ideology, has achieved the status oa religion. This belief, despite all the current crises, seems unshakable. It has given us the greatest income disparity in the US since the 1920s. And not only in the US, but globally, we have an international super super rich elite to whom country allegiance is secondary to profits. (Halliburton doing business in Iran despite US sanctions) On the other hand, companies readily call on the US and its military when their foreign profits are threatened. 

Do the financial elite really want to live in a world where 99% of it's people live with financial, food, health, and shelter insecurity? Thus far the answer seems to be yes, as long as their profits are not threatened. Occupy, despite being peaceful for the most part, was understood as a threat, which explains the ferocity of the response. (thousands arrested and encampments destroyed) 

How about the rest of us, the 99%. Will we continue to accept a life of increasing poverty and insecurity? The free market ideology and the cult of individual responsibility is so inculcated in the US that most people do not perceive it as an ideological choice, and seem incapable of contemplating alternatives. Recently I spoke to a man losing his house to foreclosure. I explained how the game was rigged, fraudulent mortgages, robosigning, securitization etc. He listened and finally said "I should never have bought this house." He is a private contractor and prior to the crash had an income that qualified him for the purchase of that house. Yet, he left filled with regrets and a belief that his family's downfall was his fault.

The crisis of 2008 spawned Occupy, but it also gave Finance Capital the opportunity to consolidate its power. Instead of being prosecuted and jailed the Big Banks are bigger, the bonuses are larger and the CEO's are presidential advisers. As Congresswoman Marcy Kaptur says in Capitalism a Love Story, "there has been a financial coup d'etat and Wall Street - rather than Congress - is in charge."

An ideology this embedded and pervasive will be extremely difficult to alter.
Power this concentrated and tentacled is unimaginably impossible to dislodge.

Occupy has been a start. But there is a very long road ahead. As I see it the following questions have to be asked and answered:

1.   Epstein's question: What's the economy for, anyway? What is needed is an alternative vision of how society can be organized for the benefit of all people and for the preservation of our planet's ability to sustain all life. This vision has to be succinct and easy to grasp. It has to have the power to capture peoples' imagination, so that it can displace the current ideology. The ideology of today is an illusion, but it has captured the population, even to the extent that people vote against their economic interest.  The right, starting with Goldwaters' defeat, has been developing and supporting think tanks which have promoted it's agenda very successfully. This is what we have to counter. It is not an easy task, it will take time, maybe decades.

2.  How is this alternative economic systen and the corresponding vision to be developed? Occupy, think tanks, blogs, universities. Occupy action was very effective this fall. It raised many peoples awareness of important issues. We are the 99% was a stroke of genius. Continued targeted action (against foreclosures, banks, SEC etc) is useful, but without a clear focus and a vision there's a danger Occupy's energy will dissipate or it may lose its commitment to non-violence.  I believe there is a need for groups of thinkers and intellectuals to focus on the development of alternative economic systems and formulate a path forward. To be effective, they cannot work in ivory tower isolation but must interact with others, both nationally and internationally. And, they must not exclude input from "the man in the street", who can be very effective in providing a bout of reality. 

3. "Know thy Enemy". The ideology of Neoliberalism and Finance Capital are embedded globally and institutionally from a congressman's aide to an administrator at the WTO, to your neighbor. Before change can happen one must fully understand the workings of our current global reality.


  1. Yes, we must indeed rethink our notions of what an economy is for. Most of all is to truly understand the difference between private consumption (my car, for example) and public goods (a public transportation system in which the car is only a small part). What it would take for people to do this re-imagining, that is, to see their individual needs as part of a larger social whole, is indeed the $64 question. One would not wish for another crisis, or a general economic collapse. Such things, as the history of the last century shows, can go either way; and in the absence of a movement allowing people to push back against prevailing market ideologies in this way, the future is not very bright. Perhaps recalling Gramsci's famous dictum is the best we can do for now: “optimism of the will, pessimism of the intelligence". And keep slogging along.

  2. nice to see Gramsci is still remembered!