Is capitalism sustainable? Thoughts from Anwar Shaikh

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 on manufacturing in the UK: why I disagree

PrintThe 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

Ecological economics: human progress as part of nature

599px-The_Blue_Marble“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.

The UN’s Sustainable Development Goals: pipedreams or a call to action?

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.

Capitalist profit and different responses to recession

Contando_Dinheiro_(8228640)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

Postcapitalism: Paul Mason’s ‘guide to our future’?

MasonCoverI 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

Austerity extended? Economic rebalancing in the UK and Europe


UK Chancellor of the Exchequer George Osborne

The UK government’s Chancellor of the Exchequer, George Osborne, has today announced that his prized goal to achieve a budget surplus by 2020 will be abandoned, as reported by the BBC here. This is apparently justified by the likely shock to the economy resulting from the outcome of the recent vote to leave the EU.

Before the anti-austerity camp throw up their hands in celebration, this apparent sign of flexibility may simply mean that, in the absence of a change of government, tax rises and spending cuts may go on for longer. But flexibility is to be welcomed, especially if the economy slows significantly, which could lead to a relatively larger budget deficit than otherwise.

I have argued before on this blog, and the government has paid lip-service to the fact, that a major rebalancing of the UK economy is required, away from debt-fuelled consumption, and towards investment and exports. Continue reading