Written By:
Marty G - Date published:
12:30 pm, November 15th, 2010 - 48 comments
Categories: Economy, Environment, Social issues -
Tags:
We’ve seen that the current economic system isn’t working, even to achieve its own goals, let alone better ones. Now, it’s time to come up with real solutions. This first post in the series is about the framework for those solutions. I don’t have all the answers and, as always, welcome your ideas:
It’s obvious that the current economic system is broken. It delivers enormous wealth to a tiny elite whose privilege is maintained by the economic and legal systems, and comes at the cost of unsustainable environmental damage that will come back to hurt us all. So, what do we put in its place?
It seems to me that the first question we need to ask is what do we want an economy to do?
‘Grow’?
That’s essentially all the current systems demands – that the economy grow. That is seen as an end in itself.
I would suggest that we want an economy that does much more, and that involves reassessing what the economy is.
Currently, we almost worship the economy. It’s referred to as if it has an existence separate from us, rather than being a purely artificial concept that exists only in our heads. A lot like a modern-day God. It even have its own priesthood with one dominant sect.
I think we need to see the economy as one branch of human endeavor that exists within society. It is something that we choose to do, as a society, to provide us, as a society, with benefits. And we need to recognise that our society exists because of and within a biological system, the global environment.
Our society is hurt when the environment is degraded. Therefore, we have a starting point:
the economy must serve the interests of society within the constraints necessary to protect the environment that supports us.
That’s a pretty obvious statement, I know, but it is the reverse of how we live right now.
Growth doesn’t feature directly, only if it accomplishes the goals of serving society while not damaging the environment. And if that means that the economy cannot grow anymore, that may not be a bad thing. This little country already produces $45,000 worth of wealth per person (including children) per year and has built up capital many times that much.
An end to growth forces us to reassess how that wealth is distributed. Until now, we have attempted to grow our way out of our problems, alleviating poverty and injustice and worsening environments by lifting everyone’s incomes. Without growth, we will have to build a fairer society. Because there are only two stable systems for an economy that is not growing – equality or authoritarianism where privilege is maintained by violent suppression.
Increasingly, I think that we are going to have to learn to live with a post-growth economy whether we like it or not. We’ve gone on too long with the other model – growing at an cost – to the point where we have fundamentally undermined the environment that supports the economy. Peak oil, peak metals, climate change, water shortages, peak food, and the loss of natural services from falling biodiversity are all making growth nigh on impossible and a long period of economic retrenchment likely.
We should have always treated the economy as a tool to serve our collective needs within the environment’s constraints. Instead, we elevated it to the status of a god. Now, environmental degradation and resource exhaustion will leave us with no choice but to live within those limits. We need to build a system with two goals: fairness and sustainability.
Next up in the series: ideas on how to do it.
The current rise of populism challenges the way we think about people’s relationship to the economy.We seem to be entering an era of populism, in which leadership in a democracy is based on preferences of the population which do not seem entirely rational nor serving their longer interests. ...
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Over on Pundit, Claire Browning sums up David Suzuki’s warning on Friday.http://pundit.co.nz/content/david-suzuki-an-elder%E2%80%99s-vision ‘Course, no-one’s listening, and we continue to worship ‘growth at all costs’.
It’s sad really, only when we’ve used up every ounce of the natural resources, will we realise that we are part of that web.
Looking forward to seeing some politicians grab this ‘new economy’ approach in the lead up to the elections. Who do you think will grab it?
Interesting stuff coming out of TEEB as well (The Economics of Ecosystems and Biodiversity – that grew from G8). The economic research, science, case studies, facts and models are all there – just no-one’s prepared to grasp them.
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CTU Economic Strategy
capcha – “recommend”
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I wanna 500 acre estate upstate in the hamptons with a five car garage and a chopper to take me to work in manahattan in the mornings and a huge entouragfe of flynkeys to carry the money.
and a whole bucnh of other stuff!
We worship the economy at the expense of the community. This is a deliberate result of the primacy of private property. If we were to worship community as the primary deity the economy would become a hand maiden to our needs as opposed to our private wants.
Nice to see fundamental questions being posed, rather than enquiry being limited through taking basic assumptions about the efficacy of the market for granted. Look forward to your upcoming posts Marty.
Meanwhile, it seems to me that growth is integral to a market economy. It nurtures and promotes the conditions (competition) that insists growth occurs under pain of being ‘wiped out’ via a take-over or simply going bust. The companies that grow most aggressively accrue power in the market. That power allows them to tilt the market in their favour when considering their competitors…more ‘buying power’ allows them to buy at rates smaller companies can’t compete with or to monopolise the supply chain altogether (eg, supermarkets locking growers into sole supply arrangements) and to sell at rates smaller companies can’t compete with…loss leaders, and very low profit margins relying on profit to flow from large volumes of turnover… (Consider supermarkets versus small grocery retailers or hardware ‘mega stores’ versus small hardware stores…if they even still exist anywhere!)
The long and the short of it, as I seem to be saying in thread after thread these days, is that a market economy cannot deliver equitable outcomes and will, no matter how it is constructed, reassert the need for competitive dominance with all the deleterious consequences that flow from the elevation of that basic principle.
Anyway. As I said, glad to see that debate predicated on some previously unquestioned economic assumptions is finally taking place.
I have to say that growth is not integral to a market economy. (I note you did not use the term ‘free market economy’). It is integral to a debt based economy geared to ever increasing supplies of money and interest payable however, but I suggest that is not quite the same thing.
How do you compete successfully in a market economy (however and to whatever extent it’s regulated) if you don’t grow? Stand still and you will be consumed by bigger players.
It happens to small family run businesses all of the time and is a art of the explanation as to why we no longer have a plethora of family butchers or bakers etc. And the small businesses that persist…that seek to merely survive, (corner dairies for example) do so in an economic environment that is tilted overwhelmingly against them by the economic muscle flexing of dominant, powerful ‘big players’.
Bill you wrote :”…..is that a market economy cannot deliver equitable outcomes….”
It seems that those with the muscle do not want to create or deliver equitable outcomes. There is a belief amongst many that wealth equates to success and that success means that you are “better” than the “others”.
I had a neighbour who looked down on others whose car was older than hers. (Us) She became very angry with another neighbour when they came home with a brand new car. This seems to be typical of those who believe that the market economy will deliver that advantage. Hence John Keys belief expressed as that the poor people are envious of us rich and successful folk.
“It seems that those with the muscle do not want to create or deliver equitable outcomes.”
Of course they don’t. Their power derives from not delivering equitable outcomes.
Hi Bill, the kind of growth you are talking about is one company growing larger, not the whole economic system growing larger. Ex. a $1M p.a. market shared between 5 players, where one of them gets the upper and and eventually takes over the other 4 players means that yes, one player is now much bigger. But its still a $1M p.a market hence no growth to the economic system there, no extra use of resources or input of money needed.
Satisfying the growth imperatives of a market economy involves expanding the market economy by creating new markets; not simply competing for dominance in the already existing market, no?
If you are talking about a capitalist style market economy where shareholders are demanding % ROI year after year, then yes, that is a situation where the demand is for exponential growth. And of course that will not be sustainable.
I guess your next question would be – is there any other kind of market economy?
Nicely put Bill.
I think peak everything will either render more equality or terrible inequality if elites are able to seize and maintain power. The Nero thread comments about how equlity will need to be enforced and will require watchdogs to make sure equality remains are true.
As Heinberg put it: Future growth is not possible.
Check out this re the mineral situation:
http://gizmodo.com/5219598/how-long-will-our-world-last-yes-we-are-screwed
For my money I want a steady state economy with most of the focus on the domestic market to keep our money circulating here and our people in work.
As I tried to articulate and reason in that thread I simply don’t buy the argument that “equlity will need to be enforced and will require watchdogs to make sure equality remains…”
It is possible to construct an economy that nurtures and promotes solidarity, diversity, equity and self management (ie democracy)…a project that would seem to embody Marty’s sustainability and fairness. (The sustainability stems from the economy being under the direct control of producers and consumers ( we would presumably not support ourselves to make decisions that were utterly detrimental to our environment ), rather than as at present where market dynamics largely dictate the actions and choices of producers and consumers)
It’s not really “market dynamics” that do that though. It’s the profit motive and ownership processed through a market system designed specifically to benefit the rich that cause the massive imbalance that we presently have.
I’d have thought private ownership and profit accumulation were necessary components of market economies. I can’t see how you can separate them out. Take out private ownership and you have taken out an avenue to, and platform from which to exercise power in the market. Take out the profit motive and you’ve taken out the competitive basis of the market.
Are you then left with an economy that could be reasonably described as a market economy?
I’d say that the most fundamental aspect of a market economy is the exchange of goods and services which are also instrumental to the operation of society. We cannot do without such exchanges. This makes even a democratic system of production and distribution such as parecon a market system. This is in stark contrast to the command economies of the USSR, China and the capitalist countries.
The concept of ownership needs to be looked at as well. Me owning my computer is a viable form of ownership but me owning the land that my house sits upon isn’t as the land cannot be removed from the commons. Me poisoning weeds on my section could, and probably will, also poison the potatoes that my neighbour has growing for dinner. The most visible example we have of this in NZ is how much farming has poisoned and polluted our rivers and lakes.
The point about ownership is that we’ve taken it too far and allowed the majority of resources to be owned and controlled by a small section of society which is good for them but not for society as a whole and certainly not for the majority of the population.
Profit is theft. It is a process by which an individual can have more and more without actually producing any wealth or doing any work. You’ll note that workers tend not to have any profit and, in fact, tend to work at a loss. As I said, the rules that govern the market have been designed to benefit the rich.
Trade is a reality that preceded the development of market economies by many millennia. Market economies simply dictate terms of trade.
But market economies aren’t primarily about trading, but about deciding what is produced and how it’s distributed.
No, the market rules dictate the terms of trade. If those rules dictate private ownership of resources, the means of production and profit then that is what you’ll have. If they dictate common ownership and fair distribution then you’ll get that instead.
That’s what you worker and consumer councils are for, Ergo, parecon is a market economy. It just has different rules than the ones promulgated by the capitalists.
If you are going to maintain that all economies are markets, then no meaningful analysis of our current economy will be possible.
Production and distribution are at the heart of all economies. But not all economies are market driven.
What marks a market economy is that buyers are compelled by the innate competitive nature of the market to to buy cheap. Similarily, sellers are compelled to sell dear. In other words, in a market economy everyone seeks benefit or advantage by ripping everyone else off. Decisions of production and distribution are made with profit in mind because profits lead to power through the concentration of resources in private hands that profit makes possible. In other words, market competition fosters inequity and private ownership.
Meanwhile, would you say that a command economy is just a market run on different rules? I don’t think you would. I think you’d say it was an economy revolving around different tenets… eg, some might claim (rightly or wrongly) that whereas market economies have private profit as a principle concern command economies make decisions with social considerations to the fore.
And a parecon is an economy built around different tenets to those of market based economies. More, pareconists are quite explicit in rejecting markets because market mechanisms undermine and destroy the very things that a parecon seeks to foster…(solidarity, equity, diversity and democracy).
Bill, whatever the outcomes are for economies given I think some form of collapse is inevitable within the decade, solidarity, diversity etc may be in short supply at least initially until people understand that working together rather than doing one another down or making wild grabs for resources is the best way forward.
I did read the links you put up about parecon. I find it hard to imagine many people willingly giving up or changing their current mindset to a fairer system because for many that word does not exist given their fondness for status competition.
If you dare utter how unfair the economy is at the moment for low paid workers, how inadequate benefits are for people experiencing hard times, how unfairly wealth is distributed and how the tax system is gamed in the favour of the more fortunate (like owners of rental properties), you’re likely to be met with looks from people suggesting you’ve lost your mind, to mention, even think of such things and that’s why I think an element of compulsion in the short term would be needed – should have clarified post with “initial”.
So what about economic initiatives or experiments being undertaken by or taking root among the systemic market losers insofar as such people already know (if only instinctively) that “doing one another down” results in them being the ones done down? eg Women, minorities, the poor, the unemployed, single parents…
Yeah thats why The Standard works so well. Some of us have already escaped from The Matrix, others of us are still trying. However the majority ‘out there’ are still cripplingly dependent on the system.
Moves towards democratic socialism would be helpful.
Firstly, ensure that workers are paid enough to build up their own capital. Secondly, supplement that capital with low cost (possibly Government provided) venture capital. Thirdly, take any legislative and regulatory steps needed to promote the ease of use and robustness of communally owned, co-op and collective style entrepreneurial start ups.
“Firstly, ensure that workers are paid enough to build up their own capital. Secondly, supplement that capital with low cost (possibly Government provided) venture capital.”
So spread the possibility to indulge in market based competition wider? Why?
“Thirdly, take any legislative and regulatory steps needed to promote the ease of use and robustness of communally owned, co-op and collective style entrepreneurial start ups.”
The legislation already exists. The Industrial and Provident Societies Act 1908 is a much under utilised piece of legislation that allows for setting up well structured and empowered workers collectives and housing collectives.
To enable workers to own the means of value added production for themselves, and to have democratic decision making power over their work.
Thank you Marty for starting this thread. However, I think it is important to clarify some definitions before discussing economics.
One of the greatest bones of contention is the definition of money, credit and debt. There are many who believe:
1. That money is debt
2. That money has an intrinsic value (such as the value of gold, silver or other commodities)
3. That money and bank credit are identical
4. That private bank credit and public bank credit are the same
5. That FIAT money is good or bad
6. That FIAT money is private bank credit
7. That money is FIAT – defined by law and issued by the government on behalf of the public
And so on …
As you can see – without clearly defining the debate – or even central pillars of the debate – we can be left chasing our tails without achieving anything.
While I agree with many who regularly post – on pretty much everything to do with economics, there are many who I agree partially with because we don’t agree on the definition of money.
Why is the definition of money soo important to a debate on economics?
Because the definition drives the resultant economic theories. For example, many economic schools define money as a function of the intrinsic value of scare commodities – while others define money as a creature of law who’s value is defined by it’s stamp completely devoid of any intrinsic value.
These two definitions are polar opposites and represents the varied nature of economic thought that many of the posters subscribe to, Keynesian vs Austrian vs Libertarian vs Socialism vs Communism vs Free Market Capitalism vs Neo-Liberal vs Liberal and Neo-Classical vs Classical and so on.
What most of us agree on is that the current economic model forces growth at the expense of the society we live in as well as the environment that supports us. However, how we define money also defines the framework of the problem.
Many of us see the current monetary system as central to the problem. For example, I define our current monetary system as a private FIAT debt money system. Authors such as Michael Rowbotham – in his book “The Grip of Death: A Study of Modern Money, Debt Slavery, and Destructive Economics” have demonstrated that a function of private debt based economies (whether FIAT or not) is the requirement for growth to service the interest load on the debts incured – simply as a result of the type of money (debt based bank credit) the economy is using.
As you can see – if we don’t agree to a clear definition of money, as well as a clear definition of the money systems currently employed – we could easily incorrectly frame the debate initially.
Just some food for thought.
By the way – my definition of the ideal money supply is a publicly issued FIAT paper currency with a legal Government stamp defining it’s value – completely devoid of any intrinsic value, that can only be issued by the Government for the public good, that is legal tender for all debts public and private.
This is almost what we have now – except that our Government has privatised the right to issue the currency to the foreign (Australian) private banks, as debt based bank credit – which incurs interest payments which require a growth in the economy to service the interest payments. currently our money supply is 98% debt based interest bearing private bank credit and only 2% interest free publicly issued Government money (as defined above).
As you can see – merely changing the manner in which money is created in our country will have a profound effect on our behaviour to each other, our society and the environment.
^ Dude A+.
“Because the definition drives the resultant economic theories. For example, many economic schools define money as a function of the intrinsic value of scarce commodities – while others define money as a creature of law who’s value is defined by it’s stamp completely devoid of any intrinsic value.”
Why is money the starting place for economic analysis”? It’s money that is worshipped and like all gods it stands in for something much more earthy. We need to start with the earth before we get to heaven, as someone nearly said.
I would suggest that the reason that money is god, is that it is the universal commodity that stands in for all other commodities as having inherent exchange value in the market. Marx call this view of commodities as having inherent value the ‘fetishism of commodities’ because the real source of value was human labour and not commodities. They had value only insofar as the socially necessary labour time embodied in them. And once these commodities were exchanged for a univeral equivalent, money, the original connection back to human labour power was all but obscured. Starting with money, and not human labour, as exploited under capitalism, is symptomatic of commodity fetishism. Its an irony for someone opposed to the market to embody market-speak.
Cheers Dave,
You prove my point … bear in mind that you will be debating a diverse range of people with a diverse range of ideas, such as Austrians who define money (simply put) as a commodity as well as people like myself who define money as a receipt for the exchange of goods and services and so on.
Your definition colours your ideal economy. That’s not a bad thing – it just is what it is. However we will not reach a definition of an ideal economy without agreeing fundamental terms – and that is the point I am making above.
@nzfp
Money can be many things. It is a commodity (or a universal commodity standing in for all commodities, i.e. a measure of value because it represents the value of commodities) a means of exchange (which is its particular use-value as the universal equivalent). It also takes on fantastic appearances as the poster boy for capitalism .
Because of its centrality it comes to ‘stand in’ for the labour that creates the value in commodities. It inverts and abstracts the process of value production by seeming to represent the value of alienated labour in the commodities themselves. This is legitimated in politics and law which defines and defends the social relations that appear as market relations based on the ownership of commodities.
Non-Marxist theories of money are trapped in the fantastical realm of commodity fetishism, seeing money as value itself, or facilitating exchange of commodities as embodying value. Or worse, neo-classical economics which has prevailed for the last century ignores the labour basis of value and attributes it to demand alone i.e. price. Hence knowing the price of everything and the value of nothing.
But the point is that money reflects the shimmering surface of capitalist society because it is a necessary part of the real economy without which capital would not circulate and accumulate.
When Marty talks about the economy as unreal or worshipped like a God he is picking up on the surface impression but failing to explain why we worship such figments in ignorance of their earthly origins.
Captcha irony = nicest
Dave,
Money is not God, I never defined it as God. I simply gave a definition of money as a creature of law – defined by law and issued by our Government on our behalf to facilitate trade, to equate goods and services. Money is not backed by anything – it simply equates services (such as labour) with goods (such as commodities). However, without understanding this, it is easy to confuse God with money, to assign some intrinsic value to money making it an object of worship.
See my reply to nzfp above
Small Is Beautiful, E. F. Schumacher
Almost all value that exists isn’t created by human labour but by the environment that we live within and that we cannot live without.
As I keep saying, money is not a resource. The resources that we have are human knowledge, human skills and the physical resources such as metals, water and minerals etc all of which are limited to the renewable resource base. How much can be extracted and recycled without harming the natural ecosystem that we rely upon to live.
Yep. 38 years later and “Small Is Beautiful” is still speaking sense .
It’s not something we choose to do, it is something we must do or we die… Providing for oneself and one’s family is the essential building block of economies – think subsistence farm…
So it’s not a choice, it’s not for society it’s for individuals and any economic activity comes at the expense of the environment – from clearing a forest and using the timber for heating and construction then using the land for argiculture, to drilling for oil to produce the fertiliser keeping half of the seven billion of us alive…
Also there is no limit to economic growth as long as we increase our use of renewable power and increase efficiency…
So said the bacterium on the petri dish.
3 days of exponential growth later the entire microbial civilisation overcrowded and wiped itself out. Shows how smart and how forward thinking you are.
“Also there is no limit to economic growth as long as we increase our use of renewable power and increase efficiency…”
Assuming we can do both of those things infinitely, yes.
But we can’t. So no.
@CV, except we’re not bacterium on a petri dish are we, it is already clear that without any intervention the world’s population will be topping out in the 9 – 11 billion mark… We can reduce the ultimate number by increasing development in the third world via free trade, while also massively increasing living standards there, this is the best way to reduce (and eventually reverse) population growth…
By then it is reasonable to assume (given current trends) that we should have, AI, fusion and wide spread nanotechnology…
Of the two of us, CV I’m not the one who somehow thinks he is part of the special generation that is going to wreck the world, that it’s all coming to an end because of the evil rich pricks…
So much for forward looking…
I’ve already put some thoughts here as to ways towards a sustainable economy. http://kjt-kt.blogspot.com/2010/10/prescription-for-new-zealand.html
The capitalist state is the executive committee of the ruling class.
http://www.rollingstone.com/politics/matt-taibbi/blogs/TaibbiData_May2010/233953/83512
First of all the premise that ‘the Economy’ is something we ‘choose’ to do is ridiculous (see South Park for a representation of this dumbassedness). Second, while I agree there may be limits to growth in the sense that there is a limit to consumption of finite resources (oil, rare earths, water etc.), there is no limit to human ingenuity (ie. technology) that can help us use these resources more wisely. Remember that ‘growth’ as a concept doesn’t have to mean a higher rate of use of resources.
Now, I’m not an expert at how that could be done but I’d rather let people (groups, corporates, NGOs, CRIs etc etc etc) do it the way they individually and collectively think is best rather than imposing arbitrary limits on the energy required to make this transition.
The other problems are how do you provide for needs without the price signals in the market, and, I think most difficult, how do you provide a fair and just system of rewards for work (labour). Capitalism, at least, for the most part, aside from high financiers and bloody lawyers (and many other examples I’m sure someone will point out), gives in relative proportion to what you put in, physically and intellectually.