“[Karl Polanyi] identified a tension between what he considered to be the two organising principles of modern market society: “economic liberalism” and “social interventionism”, each with their own objectives and policies as well as support from the groups within society whose interests they are seen to serve. The aim of economic liberalism is to establish or restore the self-regulation of the system by eliminating interventionist policies that obstruct the freedom of markets for land, labour and capital. Through laissez-faire and free trade, social relationships are embedded within the economic system and subjected to unregulated market forces with support from the propertied classes, finance and industry. By contrast, the aim of social interventionism is to embed the economy within social relationships, thereby safeguarding human beings and nature through market regulation, with support from those adversely affected by the destabilising consequences of economic liberalisation and the self-regulating market – notably the working classes.
Polanyi argued that there is a conflict between the interest of capital in freeing itself from the constraints of society – and society’s interest in protecting itself from the social dislocation of the market (particularly that of finance). This generates a “double-movement” of counter-reactions by both capital and society, mediated by politics and the legal process. Without compensating social intervention, Polanyi contended that the pressure on vulnerable individuals and groups within society, arising from attempts at market self-regulation, would generate resistance in the form of labour, civic, social and political movements. If these become widespread – and discontent with the damaging effects of the self-regulating market intensifies – social order becomes more difficult to maintain; and in an effort to safeguard the existing system, political leaders may attempt to deflect dissatisfaction by scapegoating. However, at some point, the state is likely to be put in the position of having to decide whether to intervene on behalf of those affected or to risk social breakdown. In turn, the impairment of market forces associated with protective regulatory measures could set into motion a counter-movement on the part of capital to attempt to protect its own interests by freeing itself from social and political constraints. In response, the state would have to decide the degree to which laissez-faire should be restored and social protections and market regulations relaxed.”
Suzanne J. Konzelmann, Simon Deakin, Marc Fovargue-Davies and Frank Wilkinson (2018), Labour, Finance and Inequality, p.5-6
Professor Anwar Shaikh, author of this year’s magisterial Capitalism: Competition, Conflict, Crises, with some brief thoughts on the sustainability of capitalism. For him, its dominant forces, such as the drive for profit, need to be channeled through appropriate policy, and its destructive side effects somehow negated. The aim should be to benefit the many, moreso than in today’s often hugely unequal societies. This is something that I absolutely agree with and I remain hopeful for this kind of outcome, at least in the longer term.
The Economist magazine has a piece this week on the role of manufacturing in the UK. While it half-heartedly concludes that a larger, more competitive manufacturing sector may benefit the economy, it suggests that today’s shrunken sector is increasingly employing only highly skilled workers on high wages, producing hi-tech products. The piece argues that the hope that a larger sector would directly benefit those currently left behind by its relative decline over the last few decades is a forlorn one. In other words, jobs which pay more moderate wages and demand fewer skills would not be created, given recent trends.
I disagree. This argument merely extrapolates trends which were at least in part due to the periodic and sustained overvaluation of the pound vis-a-vis our trading partners. I have argued here recently that the serious imbalances in the UK economy could be significantly reduced by an economic strategy which gives a greater priority to a lower exchange rate. Continue reading
“The term ‘ecological economics’ should be a little redundant, as both words share the Greek root oikos (household) and together mean something like household-study household-law. It is telling that the two fields of ecology and mainstream economics have grown so far apart in the century and a half since they were named that they now represent completely different sets of principles.
The basic idea of ecological economics can be summarised by [Herman] Daly‘s argument with the World Bank economists: when you draw the box for the economy, you have to put it in a larger box called the environment. The human economy is a subset of the world system. Our inputs, in terms of natural resources, and outputs, including pollution, are like the metabolism of a kind of super-organism. We can analyse it using the same kinds of tools as we use to analyse other living systems, such as a cell, or a beehive, or a complete ecosystem.
Instead of being a closed system, like a machine, the economy is open to the environment. Attention therefore shifts from the inner mechanics of the economy to big-picture questions related to things like scale and timing and the flow of energy. Is the economy becoming to big relative to its environment? Is it consuming resources at too fast a rate? Is it adequately disposing of its own waste? Is it endangering the food chain on which it depends for its survival?”
David Orrell (2010), Economyths: How the science of complex systems is transforming economic thought
But remember, it’s all just models within models within models. They are all we have, so if we are to sustain human progress, we need to build better ones: better at explanation, and better at laying out the options for responding to change.
Divisions between the economy, society and the environment are a simplification, and a potentially dangerous one. Ecological economics offers useful ways of thinking about the state and direction of humankind as part of nature, rather than its master. So too does sustainable development. In my view we also need a political economy approach to the environment which studies how the costs and benefits of change lead to potential conflict and particular distributions of power in society. These processes require management by governments working with each other and with civil society. Such issues are surely the most urgent of our times.
While I applaud the vision outlined by this short video, I am pessimistic about the widespread implementation of these goals. In the absence of crisis (and some might argue that parts of the environment are already in crisis), it is not clear to me whether the minds of politicians and civil society are sufficiently focussed on the tasks ahead. Can we achieve widespread development and continued growth while sustaining the environment that it all depends on?
Action on the goals requires international cooperation. Some of this has already occurred. Having committed to change, nation states need to knuckle down on the policy front, acting with a more distant vision than is usual in politics and confronting vested interests. The largest and most powerful economies must in the end lead the rest, setting an example, creating much of the change that is needed and helping the poorer and weaker countries to develop their own economies in what must be a considerably greener fashion than today’s richest nations managed.
The rate of profit, a concept more or less central to all schools of economics, from mainstream neoclassical to Marxist, still gives rise to vigorous academic debates. Its source, measurement and effects remain controversial.
For Marx and Marxists, the exploitation of propertyless labour by the property-owning capitalists gives rise to surplus value, which is transformed into profit, as well as interest, dividends and rent. Surplus value arises from labour being coerced to work longer than is necessary to secure its own means of subsistence. Thus the workplace struggle between capital and labour over the length and intensity of the working day, as a social process, is vital to this kind of analysis of capitalism. Ultimately there is no profit without surplus labour. This is the production of surplus value, which gives rise to the potential for profit-making. Continue reading
I said I would post something on Paul Mason’s thought-provoking book, Postcapitalism – a guide to our future, which has just come out in paperback. It makes a good read, and contains a wealth of ideas from economics, political economy, and futurism, all mixed together in the author’s aim to inspire a progressive transition beyond capitalism, but not to socialism, which he admits has been a huge failure for the left. Instead, he calls his utopian vision ‘postcapitalism’.
Mason starts by describing the current political economic paradigm, neo-liberalism, as having reached its limits with the crisis of 2008 and the subsequent tepid, or in many cases absent, recovery. There has been sluggish output and productivity growth, alongside wage rises for those at the very top of the income distribution but barely any change for the middle and bottom. In fact, these trends were only temporarily overcome by the excessive expansion of credit prior to the crisis which allowed consumption to grow in countries such as the US and UK despite stagnant wages. Continue reading