By Howard Richards
“The question is whether finance will promote economic growth and rising living standards or create unproductive credit and use government to enforce creditor claims by imposing austerity and reducing large swathes of the population to debt peonage.”
This précis of the pickle that is our prison was written by Michael Hudson. It could have been written by Yanis Varoufakis; or, perhaps slightly altered, by Joseph Stiglitz, Robert Reich, Bernie Sanders’ advisor Stephanie Kelton, or any of the distinguished scholars committed in their hearts to serving the common good, whom I shall call “the Economists on the side of the Angels.” (EA)
Let me start by fleshing out the sort of point of view I take the quote to epitomize with a seven-point telegram. It aspires to highlight typical elements of an EA rap:
1. The history of economics is no longer part of the curriculum, because if it were taught the students might learn something.
2. Steady social progress was being made in some of the old days, where “old” designates, for example, the thirty glorious years of social democracy in Europe after World War II, the Progressive Era in the USA, and the first-generation post-colonial regimes headed by progressive intellectuals (Kwame Nkrumah, Milton Obote ….)
3. Since around 1980 (when Ronald Reagan, Margaret Thatcher and Helmut Kohl were elected) the rentier class has succeeded in rewriting the rules of the economic game in its own favour.
4. The global economy has been deliberately (and often secretively) designed to lower wages and to extract rents.
5. A neoliberal ideological juggernaut has been imposed on the world, privatizing public assets and decimating human social rights, seeking to reshape virtually every institution in the service of an ultra-individualist political and ethical philosophy, and at a practical level in the service of what Karl Marx called fictitious capital (i.e. bankism, finance capital with no productive function). The juggernaut has been imposed by force and fraud, elaborately and pretentiously disguised as reason.
6. The economics justifying unlimited accumulation by the few, austerity for the many, often militarism, and often ecological irresponsibility, has been in the best cases bogus. In the worst cases it has been non-existent. In the worse cases it has sometimes been pure fabrication, not supported by any credible research or by any credible theory.
7. A moral imperative flows from the sort of point of view I am telegraphically sketching, prescribing what we should do to right a world governed by wrongs. It is: Throw the thieves out of the temple! Usher in the angels! Democratize Europe! Political Revolution!
Now I will send a second seven-point telegram. It does not pretend to express anybody’s point of view other than my own. However, it also does not pretend to say anything new that others have not said better sooner. It summarizes what I have concluded so far from my reading of other people’s writings and my experience (perhaps most importantly my experience living in Chile before, during and after the military coup that deposed Salvador Allende on September 11, 1973).
1.In the old old old days (per Marcel Mauss) humans could relate to each other as friends or as enemies, but it took many centuries of cultural evolution for us to learn to relate to each other as customers and vendors. The creation of the deep structure of market society (per Karl Polanyi) has been slow, uneven and painful, proceeding at different paces in different places.
2. Once established, simple exchange (the starting point in Chapter 1 of Marx’s Capital) leads inexorably, speeded or slowed by the causal powers of many other structures, to a physical organization (körperliche Organisation) of the production of the means of subsistence driven by capital accumulation, extracting surplus (Mehrwert) and repeatedly re-investing it to produce more surplus. (Chapter 25)
3. The basic deep structure, simple exchange is called la séparation marchande by André Orléan, “institutionalized irresponsibility” by E.F. Schumacher, and das Tauschprinzip by Theodor Adorno — echoed by Charles Taylor’s characterization of modern society as “bargaining society” and anticipated by Sir Henry Maine’s (1861) definition of the principle of modernity as “contract.” It is the e = mc2 of the social sciences. Its consequences never stop.
4. In a regime of accumulation every institution must serve the overriding objective of attracting capital by making investment profitable. The path from simple exchange to regimes of accumulation is illumined by Alfred Marshall’s “law of substitution.” It states that more efficient methods for making products (and therefore for making money by selling them) drive out and eliminate the older less efficient methods. The path is illuminated by Eugen von Bohm-Bawerk’s law of the superiority of roundabout production. It states that more highly capitalized production with longer lead times and more sophisticated technology and marketing ends up winning in the marketplace. It is illumined by John Locke’s observation that wealth and power reinforce each other. With more wealth you can hire more soldiers and build bigger fleets. You can use military power to acquire more wealth. Per Paulo Freire and Leo Tolstoy: behind economic exploitation, guaranteeing it when not directly creating it, there is always violence.
5. The post World War II social democracies (per Jürgen Habermas) were never stable or sustainable. They could not reconcile a welfare state with the need to cut taxes to attract capital. Their gradual and continuing demise has a deep structural cause, namely das Tauschprinzip.
6. Contemporary bankism is built on the ruins of social democracy. The preceding regime of accumulation, based in part on raising wages to make investment profitable by increasing consumer demand, has been replaced by a new regime emphasizing turning money into more money by extending credit. The transition from one regime to the other was driven by the structural need to make investment profitable so that the vital processes of life could continue –quite apart from any economic theory or political victory or deliberate plan.
7. The war economies featuring government deficit spending that finally brought the world out of the depression of the 1930s have become permanent under social democracy and under bankism. Permanent deficit public spending’s (and spiralling private debt’s) initial deep cause was the depression; the cause of depressions (per Hyman Minsky) is the inherent instability of the system; the cause of the system’s inherent instability is its deep structure: institutionalized irresponsibility.
My second telegram suggests amending the first, adding another key question. Per Bucky Fuller the new question might be: “Can humanity graduate from class-two (entropically selfish) evolution into class-one (syntropically cooperative) evolution?”