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Features

We Are the Experts and the Economy Belongs to the Working Class

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A cross-Atlantic, online ‘Armchair’ conversation with Professor John Weeks.

John Weeks (JW) is professor emeritus at the School of Oriental and African Studies in London, U.K.  As a critical economist and commentator, he has widely explored and analyzed the inner workings of a capitalist system running amok with the lives of the working class – from Sierra Leone to the shores and homelands of the US Empire.

Newtopia associate Glenn Brigaldino (GB) has virtually sat down with Prof. Weeks, to discuss some inner workings and traits of our economic system and how it might be saved, from itself and the 1%.

Glenn(GB): Since the 2008/9 global economic upheaval, recovery has been slow, spotty and in particular for the working classes anemic or non-existent. Banks, mortgage brokers and the car manufacturers along with the oil industry, weathered the self-induced storm fairly well. The governments of the major capitalist economies turned socialist and ‘bailed the culprits out while letting their working citizens foot the bill. Today, the storm has certainly calmed down from the turbulences of five years ago, but a massive, accelerated redistribution of wealth from the bottom to the top 0.1% of society has been the price to pay.

In some ‘developed’ economies, notably in the Eurozone, unemployment rates have hit and even surpassed 20% in some countries; especially young people are heavily affected and face uncertain futures. My question to you Prof. Weeks:

In principle, growth fixated capitalist societies are capable of achieving annual growth rates of 2% or 3%, distribution issues aside. Does this mean that it will take 10 or 15 years to erase double-digit unemployment rates or, can the globalised free-market system ‘deliver’ full employment before 2020, at least in the Eurozone, Japan and North America, the traditional capitalist countries?

(JW): If “austerity” policies continue in Europe and Obama yields to conservative pressures to reduce public spending in the United States, no substantial recovery can occur.  By “substantial” I mean two percent or above.  In the absence of an active fiscal policy private investment will remain depressed, reinforcing the public expenditure cuts.  With the major capitalist countries trapped in self-imposed stagnation we cannot expect any substantial demand stimulus from exports.

This does not mean zero growth, because the nature of capitalist economies is to expand.  However, it will be very slow at best.  Should policy change and governments use fiscal policy to stimulate growth, rapid expansion could occur in the early years of the recovery, on the basis of idle labor (unemployment) and idle capacity.  With conscious, purposeful fiscal policy the recovery could begin quite rapidly, as was the case in the first year of the Obama fiscal stimulus of 2009, though that stimulus was well below what was necessary to achieve sustained growth.

In the longer term the growth rate of the developed capitalist economies would level off, determined by the rate of growth of productivity.  Investment, low in almost all of the developed countries for the last decade, could raise productivity growth. The experience of the 1950s and 1960s indicates that developed countries have the potential to sustain growth rates close of four percent per annum.

So to give you a number, full employment anytime soon, in less than 10 years without considerable economic policy shifts, is not possible.

(GB): In the early 1970s, a group of social and economic experts associated with the ‘Club of Rome’ think tank published a critical and forward-looking report titled ‘The Limits of Growth”. If I can capture the central argument in a few words, it was postulated that the earth’s natural resources are finite and unrestrained and accelerated growth in consumption and profit driven economies is not only unsustainable, it can also not be replicated on a global scale. A dramatic reconfiguration and rethink of the dominant capitalist development model is called for.

Since then, it seems there have been very few limits to economic growth. Globalization has taken off some 15 years ago: best exemplified by the economic rise of China, which since then has possibly grown to a greater extent than the GDP of all of Europe in 1972.

Has the earth’s carrying capacity been grossly under-estimated and have technology and innovation opened the door to a long-term period of efficient management of ecological challenges without the need for drastic changes to the institutions and social relationships within capitalist free-market economies?

(JW): I am not an expert on the relationship between the environment and the economy.  However, I would make a few general points.  It is in the nature of capital to attempt to expand without limit. Therefore, unregulated capitalism can and may destroy our environment beyond repair.  Whether there is a regulated form of capitalism that would not destroy the environment is an extremely controversial and complex issue.

Production processes within capitalist relations that are consistent with safeguarding the environment might provide the investment opportunities to drive sustained growth.

Extremely strict public sector regulation would be required in accord with a clear political goal to drastically reduce and ultimately, eliminate the use of hydrocarbon fuels and to drop all nuclear options.

(GB): Whenever I spend a few days in the United States, just an hours’ drive from where I live up north, the contrast between affluence and living beyond the outer margins of economic well-being, strike me as extremely pronounced. Usually I visit upstate New York, where nature is at its scenic best. You can genuinely appreciate the environment, especially In the Adirondack region. At the same time, you’ll find it hard to ignore the countless crumbling, paint-starved houses, and almost entire towns in places. Most people living there are likely to have only modestly paid jobs, but will still almost all have a vehicle or two, some maybe even a small motorboat.

Many will own sizeable arrays of aged furnishings and rarely utilized household items, accumulated over the years of living in the world’s largest consumer society.  While passing through the towns and small cities, you will sense that many local residents may spend more time shopping and in fast food outlets, than engage in outdoor activities or with direct social interactions with fellow local citizens.  Maybe not and I guess you are wondering by now, “is there any question coming?”

(JW): I’m sure there is!

(GB): Alright, here it is: would you contest the thesis that after generations of actual and imagined material affluence, even as real impoverishment among citizens in affluent countries deepens, that the large majority of people in these European and North American countries would rather go on a free shopping spree and keep on consuming as if there is no tomorrow than occupy a shopping mall to protest low wages and unfair prices?

(JW): I disagree with the “shopping spree” thesis.  Most people who go “shopping” in the developed countries are poor or near-poor, lower and lower-middle class.  These people are “shopping” to house, clothe and feed their families.  To do so in the United States, households have gone massively into debt, a phenomenon closely linked to the decline in real wages.

To demonstrate this, I provide a box from my forthcoming book, The Economics of the 1%.  It demonstrates that most US households have responded to stagnant incomes by the only way they can, borrowing.

At the 1936 Democratic convention, Franklin Roosevelt said in his acceptance speech, “The hours men and women worked, the wages they received, the conditions of their labor — these had passed beyond the control of the people, and were imposed by this new industrial dictatorship.”

Now, in the 21st century, we have a re-invigorated industrial and financial dictatorship.

household-income

(GB): Thanks for sharing this preview, I just wonder what this table would look like if poverty rates were superimposed onto the table: would it show that while the actual number of people in poverty might have risen, the percentage portion of the overall population they make up, may have dropped – could that be?

(JW): I have a similar diagram for poverty rates, which shows that the share of the population in poverty did not decline in the 2000s and rose substantially during 2008-2011, to about 15-16% of households.

(GB): Prof. Weeks, any thoughts on the ongoing civil strife and violent political turmoil in Syria and Egypt? There could be good reason to believe, that democratic aspirations do not have much of a chance at materializing in societies seemingly caught in ‘time warps’ of cultural and theological conservatism. Democratic civil societies throughout the ‘Arab spring” world are at best in their infancy. Most certainly they are marred by ideological conflicts that oscillate between secular democratic society and theocracy.  Many of the social norms and values held by large parts of the population, may well be diametrically opposed to integration into the free-market driven, profit oriented globalised economic (dis-)order.

Do you see concrete options to arrive at peaceful political settlements that all factions can agree to in order to (re-) build democratic social institutions and provide economic opportunities to ensure the needs of rapidly growing populations can be met in a sustainable manner?

(JW):  I lack the expertise to provide any useful insight into events in North Africa and the Middle East.  I would only make the general comment that these events of the last five to ten years clearly demonstrate a marked decline of US influence in the region.  The US government no longer exerts dominant control in the region, not even in Israel where the far-Right government has repeatedly treated the Obama administration with the contempt it so richly deserves.  A rare bit of optimism came with the recent refusal of the UK Parliament to endorse military action in Syria.  For reasons of past experience rather than current expertise, I strongly believe that US and European intervention would make conditions worse for the Syrian people.

(GB): As we discuss this issue, we can almost assume with certainty, that the US will have launched some sort of attack on the regime in Damascus by the time this Newtopia interview goes online or shortly thereafter. As for matters having, if not gotten worse, then at least not any better than prior to an US-driven invasion, we only need to take note of the resurfacing sectarian violence in Iraq, where over 1000 people have been killed in July alone.

(JW): Also, recall that the US government has killed hundreds of civilians with drones in Afghanistan, Pakistan and elsewhere, casting the US commitment to “humanitarian intervention” into doubt.

(GB):  I hope the interview questions so far have not place too much of a political spotlight on you as an expert on the inner workings of the capitalist economic system. Perhaps, with a ‘closer to home’ question you could offer some economic ‘food-for-thought’ for Newtopia’s readers on how to make the economy work for them instead of mainly for the One-Percent. We all must make daily living within the confines of the inequality generating economic system we live under to keep ourselves and our loved ones ‘above water’.  In your opinion, are there specific actions we can take social relations to nurture or ways of living to embrace, which can ease the way we secure our livelihoods?  To add on, could this be done in unison with actions to reverse political corruption, social erosion and income inequality?

(JW):  I have written extensively on these issues.  My clearest statement is at the end of my forthcoming book, which I provide below:

‘Implementing Economics for the 99%’

At the level of the entire economy the public sector should function as the social institution responsible for maintaining full employment, so that very one who wants a job can find one.

A government that fails in this task qualifies for Roosevelt’s description of Republican administrations during 1920-1932:

“For twelve years this Nation was afflicted with hear-nothing, see-nothing, do-nothing Government. Powerful influences strive today to restore that kind of government with its doctrine that that government is best which is most indifferent.”
[Franklin D. Roosevelt in a speech on October 31, 1936 at Madison Square Garden, New York City].

Exactly this type of government held sway in most of the advanced countries at the end of the twentieth century and into the twenty-first, whatever the political parties in power called themselves.

In essence, public sector policies were design to launch public sector increases in its expenditure to achieve a level of aggregate spending that reduced unemployment to its practical minimum. As the economy recovered, the public sector scaled back its spending to match the private sector increases. The policy package is technically simple, easily implemented and as feasible in the twenty-first century as during the immediate post World War II decades of the twentieth century.

(GB):  If simple, then why don’t governments in crisis today apply this approach?

(JW): Well, a fully employed work force with a large portion receiving wages inadequate to meet basic human and social needs does not serve the interest of the vast majority of working people. On the contrary, a low-wage, fully employed labor force might better meet the interests of the 1% than the scandal of the highest unemployment levels in the advanced countries since the Great Recession of the late 1920s. A society whose economic institutions function for the many, not the few, requires the public sector to design and implement policies for an equitable distribution of income with no person and no household below the poverty line.

(GB):  A social and economic issue raised just recently by fast food industry workers on strike across the US, asking for a wage increase to $15 an hour and the right to unionize.

(JW):  Precisely, these are people who often have never in their entire working lives moved even an inch above the poverty line. You see, first and foremost, poverty reduction differs fundamentally from poverty alleviation.  The latter involves reducing (“alleviating”) the misery of the poor, while the former seeks to eliminate poverty itself.

The US “food stamp” program, later named the Electronic Benefit Transfer, which provides people with the means to purchase food and non-alcoholic drinks in supermarkets and fast food outlets, falls into the “alleviation” category.  The British system of housing benefit also fits this category.  At least two characteristics of these programs identify them as “alleviating”:

1) they were income (“means”) tested, so only those defined as poor receive them, and

2) they do not directly enhance the income earning potential of the recipient.

Successful poverty reduction programs enhance earning capacity and protect people against falling into poverty once out of it.  For neoliberals education serves as the most important, sometimes their only, poverty reduction mechanism.  While educating people to enhance skills should occur in any decent society, it does not in itself reduce poverty.  The newly skilled person must find a job with take-home pay above the poverty level, as well as enjoy protection against difficulties large and small that would provoke a return to destitution.

Improving people’s education may contribute substantially to poverty reduction if a society that provides health care for all, ensures a living wage, and adequately supports workers when they fall into unemployment.  Without full employment, a national health system, minimum wages and unemployment protection, more education only results in more highly skilled population in poverty.

(GB): A trend increasingly observed in North America is that the costs for post-secondary education have sky-rocketed and scores of students find themselves not only in heavy debt after graduation, but also without education-relevant jobs for years, or can get into jobs that just a decade ago, required only, say a high school degree instead of a bachelors degree.

(JW):  It’s a trend not limited to the US and Canada, it is very real in Europe too. Not to forget that in the ‘new economic power houses’ like Brazil and China, there are tens of millions of graduates eagerly looking for ‘at level’ jobs as well, displacing youth with lower academic credentials as they move into the workforce.

(GB):  An important observation to make, John. Don’t experts have something to say about all of this?

(JW): There are countless shortfalls in competence among mainstream economists, the proponents of ‘fakeconomics’ against the welfare of society as I have come to describe them.  Among its worst obfuscations for the future of humanity is the mis-treatment and mis-representation of the gathering environmental disaster.

(GB):  I would be quick to add that many of the so-called fiscal experts and corporate managers themselves seem to lack basic academic skills, explaining in part how it came to happen that they tossed the global economy into the deepest turmoil we have experienced, at least in most of our lifetimes.

(JW): That is a valid point to make. Moreover, when it comes to the environment, mainstream economists; usually compare the cost of restrictions to protect our planet against the benefits of those restrictions. Many books are devoted to demonstrating how this approach misleads and misinforms decision making in general.  For the environment this so-called cost-benefit approach is completely inappropriate and pernicious.

“Cost-benefit” claims to calculate the “trade off” between costs and benefits on the assumption that these apply to the entire range of possible outcomes.  For the process of environmental change this approach contradicts scientific analysis and evidence on environmental change.  For our climate, oceans and quality of the air itself, changes are not “marginal”: they do not respond well at all to “more of the same”.

Economists installed in the political and economic institutions of capitalism, provide little technical expertise for the protection of a sustainable environment. The same applies to those economists advising on the allocation of resources for different elements of health care, social welfare, labor benefits and of course education systems.  In a genuinely democratic and decent society, allocation of these human necessities requires impartial and socially aware technical expertise to inform both the public and its political representatives in making these decisions.

Think of it this way: when we are sick, we consult doctors about medical care; we do not expect them to advise us on the not management of the economy. When it comes to democratic political institutions and public policies, why would we rely on unelected economic technocrats to decide who gets a decent education, which families qualify for better social benefits or who needs to be paid a decent living wage?

(GB):  Before we wrap up this interview with you Prof. Weeks, I will make one more push to get some advice from you, acknowledging that your expertise may not fully extend into this field, but how do you think the political struggle for more economic justice will unfold and organize in the next two or three years? Can we hope to see the 99% gain some economic, social and political ground?

(JW):  If ground is gained it will be on the basis of a rejuvenated workers’ movement, through reform of existing trade unions or emergence of new ones.  My son is a trade union organizer in Britain and it is the type of work he does on the stop floor and in the streets, confronting capital, that brings me hope.  The linking of the workers’ movement to the struggle against racism and sexism represents the path to replace the capitalism of the 1% with a social democracy of the 99%.

(GB):  Professor Weeks, thank you for this cross-Atlantic interview. Newtopia readers will certainly appreciate your views and insights and hopefully, share them widely both on- and offline!

(JW):  I thank you for this opportunity to join in the extremely important work that you do in fostering progressive thought and action.

John Weeks has a new book forthcoming in October, ‘The Economics of the 1%: How mainstream economics serves the rich, obscures reality and distorts policy’, to be published by Anthem Press. You can download an information sheet on Prof. Week’s web site.

Article Written by Glenn Brigaldino

Glenn Brigaldino is an independent political analyst living above the 49th parallel. He was a contributor to the 2002-2005 Newtopia Magazine venture and remains loosely affiliated with the new project.

In the early 1980s he was an active member in the German Green party, until it became absorbed in the political mainstream. As a specialist in international cooperation, he has worked for aid and relief organizations in Africa, Europe and elsewhere.

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