Political Economy IX

The Case for Expanding the Study of Political Economy

George Hewison              Political Economy Newsletter                     Volume 2, Number 3, March, 2014

In a old fairy tale, Hansel (with his partner Gretel) thought he could find his way out of the labyrinthine forest by leaving a trail of bread crumbs that birds promptly ate, thus wiping out his exit strategy. Modern economics is a little like the bread crumbs and of little or no help finding our way out of chaos.

Economics concerns itself with investigating the relationship between values produced and consumed in society. For example, the economists of the Conference Board of Canada (and I’m not singling them out as they do some fine work) have analyzed the latest federal government budget. Like the Conservative Government (headed by that Prime “Economist”, Stephen Harper) that crafted it, their pronouncements are a calculated guess, based on vast numbers of other guesses. For example, will the plummeting Canadian dollar (relative to the US Greenback) stimulate exports? Or, has the shuttering of Canadian plants and mothballing of equipment in the aftermath of the 2007-08 crisis made short term investments in manufacturing unlikely, thus off-setting any benefits to export increases? Will the lower Canadian dollar make the cost of importing raw materials needed by existing manufacturers prohibitive? Is the plunging Canadian dollar the sign of deeper structural problems of demand within the Canadian economy? What effect will the dead weight of massive indebtedness by Canadians have? Will the cost of food imports weigh heavily on Canadian consumer demand? Will the Conservative fixation on balancing-the-budget-by-2015 at the expense of social programs and civil servants; and the effects of belt tightening have deleterious effects on demand? These are the concerns of economists…and much, much more!

We know that being part of a globalized economy makes economics guessing and second-guessing hazardous at best, and made worse by spin doctors trying to put the bravest face on Canadian and global capitalism. But the limitations of some economics stand exposed when all their global hopes are pinned on tepid growth in a United States economy that has battered confidence in their system.

We are in deep crisis and economics needs a theoretical makeover.

The science of political economy must start from reality and the data that economics conveniently provides. Political economy must go beyond best guesses and concern itself with investigating the relationships between people engaged in creating and distributing the wealth of society. Those relationships lie at the heart of any society and when it is obscured by corporate economic apologia, escape from crisis, is impossible. If we hope to learn from Hansel, and get out of the on-going economic and social cul-de-sac, we need to look beyond bread crumbs and the obvious data of crisis and its effects on a struggling society; and lay bare the driving logic of the for-profit system. Modern political economy must concern itself not just with the quantitative but also with the qualitative.

In earliest times of the exchange of one producer’s labour for the labour of another, the relationship between the two persons was obvious. They were face to face and their exchange of useful “things” reflected the reality that they were not just exchanging “things” but were really engaging in an exchange of their respective labours. Each was a part of society’s overall division of labour and it was scientifically observable. As the division of labour and the exchanges of various proliferating products of human labour expanded, producers became more remote from, and eventually anonymous to, one another. Exchanges took on the appearance simply as the exchange of “things”, especially after the introduction of money. But remoteness or anonymity, despite appearances, does not change the underlying reality that commodity exchange is fundamentally an exchange of the labours of multimillions of individuals or groups of people. Today, a health care worker in Canada is part of a vast global exchange of labour as is a Honda auto factory worker in Thailand. While the economist may compute what is the total number of useful things being produced and distributed by any given society (or the quantitative), the political economist must also be concerned with examining the alienation of the producers of useful things from the very things which they produce (or the qualitative).

What is different today under capitalist relations of production is that producers (workers) sell their power to labour to capital that in turn converts that useful labour into profit. What is different is that a handful is appropriating the wealth created by hundreds of millions; and the wealth imbalance, including in Canada, is staggering and growing.[1] Economists who accept a warped view of reality that our society is only about the exchange of millions of commodities, or useful things while ignoring or obfuscating the qualitative reality can’t really be expected to come up with even good guesses. So it is not just a quantitative relationship of respective GDPs, trade imbalances or governmental budgets reflecting choices within a limited context, but a qualitative relationship and not just between a hospital worker and the boss in Canada and the worker and his or her Honda employer in Thailand, but also about how the total social product of all human labour and each worker’s share of the combined social product of all labour is considered.

Karl Marx referred to the substitution of reality for illusion as the ‘fetish of the commodity’ and that is a problem for modern economists. They are mostly fixated on the donut hole rather than the donut.

 Capitalist economics has failed to anticipate or explain the biggest economic crisis since the Great Depression (or to explain the Great Depression for that matter, as economists still argue over the causes of the “Dirty Thirties”), and there is growing doubt that economics can begin to explain why the current economic recovery is so difficult. We have been subjected to three decades of neoliberal economic dogma, premised on allowing free market forces to find ‘equilibrium’. That dogma replaced four previous decades of Keynesian economic doctrine that challenged the ability of the so-called ‘free market’ to right itself. After double digit inflation and massive state debts, Keynesianism eventually surrendered the ideological field in the 1970s to the neoliberals who reverted to freeing the market from the constraints inflicted by Keynesians. In practice, most official economics has since then been an admixture of, and tension between, free market and state interventionist practices.[2] As Ronald Reagan launched the neo-liberal assault, he famously quipped “we are all Keynesians now.” Despite the obvious failure of neoliberal economic doctrine, the current mix of corporate economics dominating the globe, especially with the Harper Conservatives, is much more neoliberal than Keynesian.[3]

Nobel Laureate, Paul Krugman, writing on the crisis of 2007-08: “in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever. Lucas (Robert Lucas also a Nobel Prize winner, of the University of Chicago) says the Obama administration’s stimulus plans are ‘shlock economics’, and his Chicago colleague John Cochrane says they’re based on discredited ‘fairy tales’. In response, Brad De Long of the University of California, Berkeley, writes of the ‘intellectual collapse’ of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten…What happened to the economics profession? And where does it go from here?”[4]

In fact, now the aforementioned Brad DeLong suggests that we may be in for two lost decades. In an article entitled “The Second Great Depression”, he paints an exceedingly grim picture for working people and society. DeLong, initially hopeful about the prospects of avoiding another Great Depression says “I now suspect I was wrong. Compare the on-going crisis to the Great Depression, and there is hardly anything ‘lesser’ about it. The European economy today stands in a worse position compared to 2007 than it did in 1935 compared to 1929, when the Great Depression began. And it looks as if the U.S. economy, when all is said and done, will have faced certainly one lost decade and perhaps even two.”[5]

In fairness, both Krugman and DeLong believe that larger doses of Keynesian-type stimulation would get society off the disastrous austerity fixation of policy makers throughout the industrialized world. For them, unemployment and stagnation remain the greater danger, and they are right. Their views, however, are met with a steady stream of derision by other economists[6] who point to the collateral damage to the economy of inflation and debt.

And in this, Conservatives are also partially right. Debt and inflation are a problem and ducking this reality only strengthens the Right Wing. Modern liberal economics can’t handle this reality and is another reason for deepening our appreciation of political economy and not simply grasping for stimulus straws as the sole means to solve deepening economic and social crises.

There is a second important reason for studying political economy. There is growing recognition[7], that a class war is being waged by the very rich against the rest of society. The seven decade period of the Welfare State and the Rand Formula (in labour relations part of the Welfare State) that flowed from Keynesian economic doctrine is crumbling.  There is a narrative that our social safety net (or social wage if you prefer) is too rich in times of economic restraint. There is a parallel narrative that the path to renewed prosperity lies through removing all impediments to investment and economic growth, foremost among them, curbing the power of unions. The assault on unions is couched in simplistic language to make it appear that workers, after all these years, are getting the “freedom of choice”, or getting the “right to work” when in fact what workers are getting is the shaft--the right to work, union-free, and for less.

The attack on labour, our societal standards and now our democracy and civil rights at this particular historical juncture is not a fluke or an accident of history. It is a sign of a strategic shift favouring international capital over labour to the greatest degree ever. So called trade deals, spying on activists, changes to electoral laws and shrinking civil liberties only gives a glimpse of the tasks before progressive humanity, and organized labour in the first place. The growing imbalance in power and its effects will prevail until labour and the rest of society pursue effective alternatives to recalibrate the power relationship. A big part of recalibrating has always meant offering meaningful alternatives to the rule of capital and popularizing it so that it becomes a powerful material force in the struggle.

Organized labour has begun a rethinking of its strategies of the past number of decades that appeared to work well for past times. Now, new forms of organization and new alliances with the community are in their experimental phase, but old habits and practices learned in the past die hard, both within leadership and especially within the membership of organized labour who have come to expect their leaders to work miracles at the bargaining table and beyond.

The Wisconsin School of labour relations[8] that emerged during the New Deal and governed North American labour-management relations (including in Canada) for the past seven decades created many illusions, especially when combined with an effective strategic campaign to marginalize the militant Left (McCarthyism and the Cold War) within the labour movement. Those illusions that labour and capital had common interests masked the real state of affairs. Now the strategic Modus Vivendi worked out between capital and labour seventy years ago is being tossed by the most bellicose spokespersons for capital, because they believe that the strategic balance has shifted to such an extent that they can get back to profit-taking without the nuisance of unions, i.e. the one large social force having the capacity to rally the rest of society to prevent the erosion of hard won rights.

To develop needed perspective on the unprecedented assault on Labour and our community; and to build a winning strategy, including alternatives to the growing power of capital, demands we take a broader and deeper look at the causes for the broadside on living and working standards, standards that we achieved over decades of struggle. Out of this examination, we hope to achieve greater capacity-building to not only effectively defend our movements, but to move them forward. The study of political economy and the search for alternatives by the largest numbers of activists possible is on history’s agenda.

There is widespread and growing social movement around the globe in response to crisis. Much of it is spontaneous (reacting) and lacking in overall programmatic focus. It also lacks institutional memory in that most participants have no knowledge of the history of our struggle to achieve the gains that we did make over the generations. Canada is no exception. Some movements are single issue; and some embrace a wider social context. Some point to the obvious and growing wealth gap such as the Occupy Movement while others such as Ford Nation in Toronto or other Tea Party-types fall prey to simplistic corporate “solutions” with attacks on society’s vulnerable or the organized labour movement.

 

George Hewison is a lifelong union organizer and former officer of his union, the United Fishermen and Allied Workers Union on Canada’s west coast. He embraces political and social activism in the interests of social justice and fundamental social change. He believes in the power of working people, who, if given the proper tools, can change the world. One of those tools is a deepening understanding of how our society is put together. He has been the recipient of many important lessons, both positive and negative, from veterans of Labour’s struggles stretching back decades. He has spent most of his adult life sharing those lessons with others.

For a number of years, he has also engaged in a study of the political economy of capitalism, including its current iteration, and conducts discussion groups with interested folks who share his desire to understand and explain the complexities of the social, economic and political world around us.

He continues a tradition of combining working class activism with the power of song and continues to tour and perform extensively. He may be reached at georgehewison@gmail.com .

 

 

As well, a growing part of the population is becoming disillusioned by an electoral process that promises much and delivers little or nothing…or worse! That cynicism has global dimensions fed even more by left-leaning social democratic and socialist governments and parties close to governing who are not immune to the power shift and can’t deliver meaningful alternatives to the rapidly growing power of capital. Governments are voted in and voted out with the electorate predictably getting more disenchanted with electoral and paternalistic politics. Leaving the political field to capital is, however, no answer: another reason to engage in a study of political economy and developing broad alternatives on a more massive scale.

 

 

 

 



 

[1] Oxfam, “WORKING FOR THE FEW Political capture and economic inequality”, January, 2014. (An outstanding document on the relationship between the economic and the political-my opinion).

 

 

[2] “We Are All Keynesians Now…and Monetarists Too”, Glen Hodgson, Senior Vice-President and Chief Economist, Forecasting and Analysis, Conference Board of Canada, Blog January 24, 2014.

 

[3] The latest federal budget is draconian in the extreme. It is fought largely on the backs of Canada’s social programs and retired federal employees.

[4] New York Times, Krugman Paul, How Did Economists Get it So Wrong” 04/09/2009

 

 

 

 

[5] DeLong, J. Bradford, “The Second Great Depression”, Foreign Affairs, Journal of the Council on Foreign Relations, July/August 2013.

[6] Cochrane, John H., “How Did Krugman Get It So Wrong”, Institute of Economic Affairs, Blackwell Publishing, Oxford, 2011.

[7] No less than one of the richest men in the world, Warren Buffet, acknowledges ‘class war’ and that his class is winning.

[8] Labor Economics and Industrial Relations-Markets and Institutions”, edited Clarke Kerr and Paul D. Staudohar, Harvard University Press, Cambridge, Massachusetts 1994.