By Howard Richards
Some of us think 2008 was a lost opportunity. Humanity had a chance to change course to save itself and the biosphere. We blew it. Could 2019 be a second chance?
The reason why 2008, instead of some other recent year, stands out as a change opportunity is that toward the end of that year investors were losing money. The basic reasons why new economies and new social structures are necessary and not merely optional have been the same for a long time. They are:
Human labour is becoming obsolete as a factor of production.
Nature is dying and humans are killing it (along with themselves).
The well-known old alternatives to capitalism have not worked.
The suffering of humanity is a constant in recent history. According to International Labour Office figures, on a world scale less than half of workers have reliable sources of income. Even among the steadily employed minority, life tends to be tough and insecure. Recent dramatic illustrations have been the boat people desperately trying to get into Europe (where unemployment is chronically high); and the economic migrants crossing Mexico on foot desperately trying to get into the United States (where the real unemployment rate now is not the bogus official 4.7% but 21.5%).
The agony of nature has been getting steadily worse every year, not just in 2008. For example, today’s pesticide-based agriculture is now estimated to have terminated 73,000 insect species. Since 2006 honeybee populations have declined by 40% in the USA, and so on.
What made 2008 different is that investors lost money. Lots of it. That made humanity’s and the earth’s ongoing crisis a systemic crisis. The media said it was a crisis. It was not just that the power elite suddenly found itself on the brink of an abyss staring down into annihilation. It is that the motor the moved the economy had seized up. It stopped. It threatened to stop everything else.
In 2008 we blew it. 2008 was a time to acknowledge the absurdity, as well as the cruelty, of a system that requires every adult to find a buyer who finds it profitable to buy her labour power (or else buyers for her goods and services, in cases of self-employment) in order to establish her right to having been born. Who is in charge here? Are the people serving the economy, or is the economy serving the people? The answer is obvious, and it is absurd. And cruel.
In 2008 we had a chance to do something about the insatiable appetite for profit of the beast that rules us. But we (or at least those of us who made the key decisions) believed the economists who give that insatiable appetite the name “growth.” They told us that the only way to create a bigger slice of the pie for everyone was to increase the size of the pie. They told us that getting back on the path of steady growth would be our salvation. It would create employment. It would enlarge the tax base, and in that way fund government services for the poor.
The one and only path to growth, they told us, was to make investment profitable again. Investor confidence had to be restored. Investors had to be convinced that they could turn money into more money by resuming the permissive acts they had halted.
Some of us did not believe the orthodox economists. But we had no choice. Their logic was the conventional wisdom. It got away with pretending to be science. So private debt was turned into public debt. The welfare state –already at best in a process of orderly retreat– was decimated. Huge quantities of money were created by fiat – essentially printed. They were provided on terms near zero interest to selected members of the human species. The selected beneficiaries of government largesse and of wage restraint and all the rest of it, were said to be the only people who could crank up the old bread machine that had broken down and make it work again. Only they could create employment.
Welfare clients were humiliated. Bankers were subsidized. Corporate executives were subsidized too. Many executives seized the opportunity to borrow tons of money in the corporation’s name, and then to direct the corporate entity to buy its own stock. This raised the price of the stock. It increased the number of treasury shares held by the corporation itself. It decreased the number of shares held by the public. Presto, earnings per share went up. (Treasury shares are not counted when earnings per share is calculated.) Therefore, per the terms of their compensation packages, the executives were entitled to a bonus. Another, and even more disastrous consequence of moving heaven and earth to get back to growth, was creating even bigger economies even more incompatible with the basic laws of biology, chemistry and physics. (A “bigger” economy is one with a higher GNP, which means that in a given territory in a given year more new products are bought and sold; more human relationships are commercialized, more stuff is under the Christmas tree, more cars are on the road, more of nature –including hybrid seeds and privatized water– is commodified),
The basic idea was and is that the world runs on profit. Without profit it does not run. When the economic system breaks down it has to be repaired by greasing its wheels with profit. Replacing the system with another is thought to be is out of the question –for the third reason why new economies are needed that I gave above. Namely, because the well-known old alternatives to capitalism have not worked.
One might be tempted to say, along with Margaret Thatcher, that there is no alternative; that if there is another crash in 2019, there will have to be more bailouts of banks at public expense, more austerity, and more monetary incentives designed to motivate the rich to create jobs. One might be tempted to say all these things, BUT if one reflects that in addition to being unfair and unstable, the system is also (as pointed out above) unsustainable, then going on and on with more-of-the-same is not just interminable suffering for the majority. It is impossible.
In this light, it is a consolation to reconsider 2008 as a might-have-been. It might have turned out differently. As many heterodox economists urged at the time, 2008 was an historical opportunity to try out the new ideas they had been trying out in theory, just waiting for a crisis like this to provide an opportunity to try them out in practice. By 2008 creative thinkers and innovative practitioners had already learned from the past and projected alternative futures. Gulag all over again, or the social democracy that bloomed after World War II but then faded, were not the only alternatives to government intervention in the economy for the purpose of making the rich richer — believing (with more or less sincerity, and with the more or less mental laziness) that government acting like Robin Hood in reverse, stealing from the poor to give to the rich, was the only possible solution to the problem.
2008 was an historical opportunity for the rich themselves to wake up, along with everybody else waking up. To wake up and realize that the inevitable consequences of the system now dominant — violence, inequality, misery and an uninhabitable planet– are not consequences anybody wants or desires. There is not one single human being, not even the richest one, whose interests are served by a system driven by devising ever more complicated ways to turn money into more money.
The best that can be said for the existing dominant system is that the alternatives are worse. But certainly, social democracy was better while it lasted. And certainly, the number of alternatives that have not been tried is very large. Indeed, in principle the number of untried alternatives is infinite. And there are many alternatives that have been tried. Hundreds of little-known alternatives have been successful on a small or medium-scale. Examples range from economía solidaria in Spain, to Ithaca Hours in New York State, to LETS in Australia, to local public banking in China and in Rosario (Argentina) and in North Dakota, to the Aravind eye clinics in India, to monasteries in France and around the world, to public ownership of mineral wealth in Norway and Botswana and in many other places, to sustainable cooperative rice farming in Bali. Successful best practices could be scaled up.
Assuming that 2019 might bring humanity another opportunity to change course and save itself and the biosphere, let me express here a few of my many opinions about how to go about it.
To solve the basic problem, we need to redefine the basic idea. The problem is not how to sweeten the deal for big investors to make it to their interest to produce our daily bread and to give us a job baking it. The new basic idea is building a global mosaic of ecology-conscious democratic economies, solidarity economies, people’s economies.
But. What I just said is basically true, but as long as the world is dominated by the necessity of capital accumulation, as it is now, a big part of the problem for the time being still is how to attract investment. The challenge is to attract investors who will be partners with a conscience. They need enough profit to cover the costs of production including the cost of capital and what Alfred Marshall called normal profit (“the supply price of business” i.e. what it costs to make it worth the while of the entrepreneur). Given what they need, they can and often will, align with other sectors to promote the common good together. Gavin Andersson calls this “unbounded organization.”
At the same time that the bankers, investors and capitalists themselves become day by day more ethically enlightened partners with government and civil society (partly because they are humans too and, in their hearts, they want to be good; and partly because the bad apples among them are increasingly shunned by the rest of society) the middle and lower classes move forward taking back control of their lives.
Building the people’s economy means more cooperatives, more of diverse forms of private and community and public ownership like those European legislators have been busy authorizing during the last decade , more non-profits, more endowed charities, more employee-owned enterprises, more workers on corporate boards, more mini businesses and small businesses, more independent professionals, more volunteers, more home gardens, more community gardens, more neighbourhoods and territories running their own local shows, more hospitals run by health professionals, more media owned by working journalists. You get the picture.
But remember too that, especially as robots take over production, there must be more dignified livelihoods for more people that do not depend on any business at all, not even on a worker-owned coop. Growing numbers of workers are walking the streets unemployed because there is no market for the products they would make if they were employed.
Guy Standing is right when he says that the key to funding a universal basic income is to capture economic rents. Move money from where it is not needed to where it is needed. A “rent” is a windfall income above and beyond the cost of production. It is a surplus beyond what is needed to get the wheels of business turning. (My own view, however, is that a universal basic income is best achieved by private and public funding of multiple activities that have human and ecological value: such as sports, music, reforestation, cleaning up the plastic in the ocean, art, philosophy, research, lifelong learning and so on. Funding activities is a way to give everyone dignity and discipline, not just money.) Ellen Brown is also right when she says another way to fund ending economic exclusion is to take all or some of the power to create money away from private bankers. Put money creation in the hands of public or semi-public institutions who will the use the proceeds to fund a universal basic income. Thomas Piketty is right to advocate inheritance taxes and cracking down on tax havens.
Making human social rights (like decent employment, pensions, health care…) realities instead of broken promises, requires a double approach. One: All of us, not just the government, are responsible for achieving compliance with human rights. Two: The government must cease to be what Joseph Schumpeter called a tax-state. It must have multiple sources of income, not just one, starting by adding income from rents from natural resources, and continuing with income from banking and creating money. Net result: The government has less to do and more to do it with. The waiting time for getting a hernia operation in a public hospital drops from a year or more to a month or less.