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Numbers released this past week show, once again, that the European Union’s economy failed to grow in the last quarter, making this officially the longest recession the EU has ever suffered. Numbers from America revealed a sudden, unexpected drop in manufacturing growth. Even now that the stock market has finally re-reached its post-crash heights, troubling indicators like this continue to appear, an uncomfortable reminder that the collapse of ’07 is still with us.

Behind the ugly numbers lies a raging debate about economic theory and policy. On one side, the followers of John Maynard Keynes, such as Paul Krugman, lead economist of the NYT. On the other, the beliefs of Hayek, Mises and the “Austrian School“. Keynes is renowned for his role in ending the first Great Depression through New Deal style spending, whereas Hayek prescribes what has come to be known as austerity – cuts, privatization and tax relief for the wealthy. Both of these sides are winning in their own way – Krugman is pretty blatantly winning the argument, while most of the world’s governments are still pushing austerity measures.

Losing the Argument
Among the strongest arguments for austerity was the landmark study, Growth in a Time of Debt, held up around the world as proof that a high debt:GDP ratio led to falling economic growth. Fortunes for authors Reinhart and Rogoff recently took a turn for the worse, though, when 28-year-old grad student Thomas Herndon took a close look for a class project and realized that the crux of the argument was based around a spreadsheet error in Microsoft Excel. He listed other methodological errors, of course, many of which had been pointed out before (and all of which should have been obvious). This humiliated many austerity proponents to the point where Stephen Colbert joined in the fun, and young Mr. Herndon has gone on to continue debunking Reinhart and Rogoff’s responses.

Other high-profile criticism of austerity has been coming from a surprising source – the International Monetary Fund. Leading officials, including Christine Lagarde, the IMF’s managing director, have started to urge restraint with austerity. Given the IMF’s history, this says a lot – they spent decades as the leading global proponent of Third-World austerity (“Structural Adjustment”), usually with similarly dismal results.

Perhaps most damning of recent condemnations has come from an entirely different unexpected source – the new Pope, Francis. His Holiness, in a recent address to foreign ambassadors, made his feelings quite clear; “The worship of the golden calf of old has found a new and heartless image in the cult of money and the dictatorship of an economy which is faceless and lacking in any truly human goal”. His speech touched on the “common good”, curbing speculation and focusing on the plight of the poor, themes echoed by many cardinals and, not surprisingly, the Greek Orthodox Church. Makes ya wonder, doesn’t it – if even the world’s most revered religious figure is talking about the “tyranny” of capitalism, why is it so hard for the rest of us to have a serious conversation about it?

These are only a few examples I could name – they’re quite well publicized if you know where to look – and it’s not as if the New York Times, IMF or the Pope are hard to find. Among those opposed to austerity are some of the biggest names in capitalism today and their arguments are quite well-founded in standard (capitalist) economic theory. It feels odd, as an ardent anticapitalist, to be taking a side at all, but it does help to give a little context. Even by their own standards, these policies aren’t working.

I’m no economist, but the flaws in this logic should have been apparent long ago. For starters, if the source of the European Debt Crisis was the high cost of “Eurosocialism”, then why were Spain, Italy and Greece most afflicted, and not Sweeden, Denmark and Norway (their merciless creditors)? How was putting thousands more out of work, cutting wages, increasing tuition and raising working-class taxes supposed to “stimulate the economy”? And, of course, how come the countries which worked hardest to implement these policies aren’t getting better?

The View From Below
What’s remarkable is how little of this filters down to the local level. When we look in our own newspapers (at least, outside the business section), it’s as if the only people objecting were camped in Zuccotti Park. Our politicians, even (sadly) those on the left, are similarly convinced about the need to pass “austerty budgets”. From the front page, or any television or radio station, it’s hard to tell there’s any argument about the economic merits of cutting, deregulating and downsizing, except from a few long-haired hippie socialists and ageing union leaders.

While economists are ignored, though, conditions on the ground have steadily worsened. Unemployment numbers, especially around youth have been at crisis levels in multiple countries for a while now, reaching even the point of public, politicized suicides. Greece in particular has been pushed to the edge of a total social breakdown by austerity, shown best by the frightening rise of the neo-Fascist Golden Dawn in Parliament and on the streets. Italy and Spain aren’t far behind, and the widespread breakdown in support for the EU itself has been dramatic. Parties on both the left and right are now openly expressing disdain and the future of the superstate itself is in doubt. If there’s one reason above all others that many capitalists are critical of these policies, it’s because they’re genuinely concerned that austerity will cause another collapse.

The effects of austerity can be charted in another way, as David Stuckler and Sanjay Basu just illustrated in their new book, The Body Economic: Why Austerity Kills. Stucker, a “leading expert on the economics of health”, with a host of ivy league credentials, decided to study the subject using the same “evidence-based” approach used when testing new treatments, only to award a failing grade. Their study found ten thousand additional suicides and up to a million extra cases of depression across North America and Europe since the austerity programs begam, and a 200% increase in Greek HIV rates. As far as positive effects of austerity go, when comparing different countries and policy responses, they find little evidence that austerity actually leads to more “growth”. Health care spending in particular, they argue, stimulates the economy far better than bailout cheques.

Why bother listing off the opinions of people I obviously don’t agree with on just about any other issue? Because they’re very important people as far as these debates are concerned. This brings up the very interesting question of why they’re having so little impact on policy or public debates. Part of it can be ascribed to the incredibly successful marketing of ideas that’s left many incapable of distinguishing between “economics” and the opinions of a radical fringe of right-wing economists. It takes more than propaganda, though, to sway the policies of so many governments. In spite of all the evidence, austerity is still going ahead, which tells us something about the real motives at work, and how power functions within this global Leviathan. Why embrace an economic strategy with such clearly devastating results? As the old saying goes; cui bono? Who benefits? How do they benefit? And how the hell were they able to accomplish it?

Is austerity a failure? That depends on the intent. If the point was to bring us back to “prosperity” then austerity measures have most certainly been a miserable failure. If the point was to shift capital flows toward a tiny elite of bankers and shareholders, it was largely successful. Corporate profits just had another record-setting year and thanks to the bailouts, the financial industry has rebounded nicely. Even the stock markets are setting record highs again. While most of us are suffering, a few are making off like bandits. To characterize this as a robbery, though, would be somewhat inaccurate. The bailouts were robberies – austerity is more of a racket. Rather than a one-time theft, austerity’s payments just keep coming in. At its core, austerity is a permanent shift in the way money and resources flow in our society. It’s not about bringing back “prosperity”, it’s about changing who prospers.

Behind both the profits and the suffering lies a clearly political, albeit still very economic motive. The two are never far apart, since both fundamentally come down to the many bargaining processes which rule our lives. Austerity entails shedding a lot of responsibility, public and private, for the well-being of workers. Shifting this burden alters the fundamental balance of power, allowing a few to gain far more leverage and thus make much larger returns. High unemployment and low welfare rates are classic examples of this – how much you get paid tends to come down to whether you could find a better paying job (or OW cheque) faster than your boss could find some desperate scab who’d work for less. For this reason, cuts anywhere tend to have reverberations everywhere and often gain a lot of political support from people who don’t seem directly affected.

There’s another dimension to this shift, though, which helps to explain why so many other capitalists are angry. Neither the state nor capitalism are monolithic hierarchies. Within each are a lot of competing individuals and factions. What’s good for banks isn’t always good for auto-makers, and what’s good for auto makers isn’t always good for retailers. Marx wrote long ago about the inherent conflict between “industrial” and “financial” capital, but this is only one of many examples. Some investors seek stable, long-term growth, while others look for large but risky short-term returns. Since most of the major players in finance these days are playing, primarily, with other people’s money, it’s obvious which they prefer (and why their clients are so annoyed). A lot of people in the business world held a strange fixation for Occupy Wall Street and often echoed support for its message. They weren’t calling for “class war”, though, just some stability to the current class system, a totally understandable response given the way bankers had recently lost their fortunes at the global craps table. These days, this is often articulated, ironically, in the language of GDP growth, also backed up by plenty of evidence.

As I’ve already mentioned, austerity is one of the only points where I agree, even partially, with Krugman or Lagarde. Nonetheless, I still feel the capitalist critique of austerity is very relevant here. It reveals a lot about austerity, but even more about capitalism itself. As for political strategy, I’d say there’s two big implications. The first, given this kind of widespread opposition, is that a political victory against austerity is entirely possible, maybe even probable. The second, though, is that it doesn’t end there. Defeating austerity alone is hardly a “radical” goal and in many ways would likely strengthen the status quo. That’s why so many capitalists support it, and that’s the inherent danger of reformist politics.

Austerity is like a fad diet – unhealthy, unsustainable and usually resulting in an actual weight gain. The national debts derided by austerity proponents skyrocketed most (especially in America) during the reign governments like Reagan and (either) Bush, who came to power pledging to eliminate them. This embezzlement continues not for any of the stated reasons – economic recovery, stimulating growth or brining “prosperity” – but because it benefits a few people in positions to sway public policy anyway. Above all else, it’s a frightening reminder that powerful people don’t need to win an argument to get their way, and it begs the more general question of why we allow these people to hold such power in the first place.

This year America’s collective gas bill is on track to hit half a trillion dollars. With that comes not only colossal public expenses, but crippling blows to individual finance. Some Americans are reportedly paying up to 50% of their income on their cars between insurance, repairs, fuel and other expenses. Those with the largest burden, of course, are often the poorest. A new website and project from the New America Institute is hoping to bring attention to the high cost of car ownership. The Energy Trap features personal video testimonials from all over the US talking about the time and money being devoted to people’s commutes.

This high cost is starting to take its toll (often literally). The Globe and Mail recently ran an interesting article about “Peak Cars” (RTH link), which notes that rates of driving have already been falling for some time, especially among young people. Because of the high cost of insurance, generally low incomes and already high debt burdens, it just doesn’t make sense for many young people to drive. For most younger men I know especially, it’s pretty much an either-or choice of having your own car or appartment, and I must admit that I would have trouble owning a half-decent car for less than I pay in rent. Putting this in visual and financial terms, Streamline Refinance released this ‘infographic‘ about how much commuting costs in terms of housing or how much it effectively lowers your wages. They claim a thirty mile commute is the long-term equivalent of just under half a million extra to spend on a home (after mortgage voodoo is worked out), or nearly a million if both couples drive it.

Cars provide a perfect example of how costs in our society get hidden by distribution. Governments certainly spend a lot on roads, highways and parking lots, – more than any other form of transport, and most other programs – but that doesn’t buy any vehicles. On top of the horrendous cost of roads (often tens of millions per kilometre for urban highways), there’s also the price of the cars themselves as well as their fuel and parking spaces. These costs are borne by the public, so they don’t show up on government balance sheets except as tax revenues. Instead they’re paid directly by us, or hidden in the prices of everything we buy (“free parking” at malls, trucking costs etc). Despite this illusion, the price of cars is still a very real public cost – simply paid for directly by us and not by the state.

There are, of course, a great many public costs associated with cars. Virtually every part of the industry receives massive public subsidies (oil, manufacturing, roads etc). This includes policing, the incredible increase in regulations needed for traffic management, and the criminalization of many otherwise-harmless activities like “jaywalking”. It includes health care costs related to accidents, inactivity and air pollution, as well as the incalculable price of human suffering for those affected. And then there’s the environment costs – mining, quarrying, oil extraction, roads, parking, smog, sprawl, climate change – any of these, alone, generate billions in “externalized” costs for the environment and society. Oh, and then there’s oil wars…

What this demonstrates is that demanding “jobs” or “growth” as a cure-all to economic issues can in fact lead us into traps that really aren’t economic or efficient at all. Automobile manufacturing is pretty much the primary industry in Ontario, linked by some to one out of four jobs. Taken uncritically, that’s a massive boon to our economy. But is it? We need to be wary of “progress” measured only in hours worked or money spent – neither relates directly to our welfare or quality of life. Health, safety, air quality – these things do. The more intently our economy focuses on the abstractions it creates, the more it loses focus on measuring or accounting for real world value, and the more detached and alienated it becomes.

With the decline in first-world manufacturing, most people (especially in Hamilton) are no stranger to the idea of work becoming more irrelevant and pointless. If you have any doubt that a person can be employed full-time for purposes which create next to no real-world value, I’d suggest a short stint at one of our many call centres. Complex and expensive machines like cars provide an attractive remedy to that, since they’re one of the few things we still make. Unfortunately, making pointless machines is no more useful than making pointless phone calls. Time spent building cars and roads is time which by definition isn’t spent on housing, food or medicine (all are in fact more expensive as a result). Decades of development make it fairly clear that providing a posh fleet of luxury vehicles for the wealthy doesn’t equate to feeding the hungry or housing the homeless. The last decade has shown pretty clearly what happens to the world’s poor when we try using part of our food supply (corn) to supplement our fuel supply.

It’s time to focus on our needs, and not ill-defined amorphous ways of getting them like “jobs” or “economic growth”. If we need to get from one side of town to another, there are ways of achieving that which don’t involve over a hundred horses’ power per person. There are bikes, trains, feet and buses. There are better ways to efficiently use those cars (ride and car shares), and there are far more efficient ways to build and arrange cities so a half-hour car ride isn’t necessary to reach school, work or amenities. If we need homes, let’s devote our funds and efforts toward building the best and most efficient homes possible rather than convoluted methods of financing them. If we need food, let’s grow it. If we need clothes, medicine or tools, let’s make them. Doing these tasks is “work” too, often far more rewarding than most jobs you could name (which is why so many people do them when not paid for it). If the jobs we’re working and institutions we’re relying aren’t meeting our needs, why continue to meet their demands for cash and labour?

With the growing shortages of just about any resource one can name, the environmental struggles of the past century are about to become a lot more “real”. With declining economic prospects and growing energy costs, “green living” is going to go from being a middle-class lifestyle fad into a basic demand of millions of poor people, even more than today. This is a necessary transformation if the environmental movement is to grow and evolve. Rather than asking ourselves what we can do to shame and cajole motoring suburbanites into changing their “evil” ways (cars, meat, McDonalds, Wal-Mart etc), it’s time to ask ourselves how we can help the growing chunk of society who can no longer afford to be a part of this industrial, petrochemical society. How do we help people live through the winter when natural gas and fuel oil are no longer available (Canada has already seen a fuel oil shortage, and our gas reserves are plummeting)? How do we help people get to work, school or grocery stores when they have to sell their car? If environmentalism wants to become a truly popular movement, these are the kind of questions we needs to ask. Most people don’t benefit from pollution and environmental devastation any more than we do from sky high bank and corporate profits. It’s time to stop pretending “the environment” is a separate issue from the political and economic woes faced by average people – all economic issues are ecological, and vice versa. Once we all recognize this, we may finally be able to do something about it.

A recent post from Joe Weisenthal, one of my favourite voices from the business press, is too good not to share. A monumental moment has arrived, which threatens to change the face of economics forever: capitalists have started reading Marx. If this isn’t a sign of chaos to come, I don’t know what is. Are we now going to see “Hot Marxist Stock Tips” alongside the market advice now dispensed by Peak Oil “experts”? Or is this simply a sign of some very frightened bankers?

Everyone’s got an opinion on Marx. Most are horrifically uninformed, including many “Marxists”. For those that have read some of his work, most have only read The Communist Manifesto – more of a pamphlet than anything else. Capital is very different – dense and analytical, and very few people I know have made it through. Despite all this, as the great academic anti-hero of the last century, it’s nearly impossible to find a university where he isn’t talked about extensively in a very broad range of subjects, from sociology to literature.

What did Marx actually say? I certainly can’t do it justice. Nothing I’ve ever come across compares to Prof. David Harvey’s online course Reading Marx’s Capital, though it’s quite a commitment time-wise. The arguments he put forward here, near the end of his life, are probably the best and most thorough description of the failures of capitalism ever written. Using classical economists like Smith and Ricardo as his starting point, he investigated ideas like value, money and price. Unlike those writers of the previous generation, though, Marx was not simply articulating the philosophy of a new era (the shift from feudalism to capitalism). By the time of Marx, who wrote Capital a century after the French and American revolutions, the consequences of this new system were becoming clear – slums, sweatshops and a new kind of class structure. In this system, as Marx described, work was bought as a commodity from desperate sellers for much less than it was worth, and the difference between that ‘use value’ and ‘exchange value’ allowed capitalists to turn a hefty profit at the worker’s expense, which of course would mean that the worker stayed poor and had to continue working.

What was written in the Manifesto itself contained fairly little analysis, but on prediction which has come to define him ever since: the end of capitalism. I may not be the biggest fan of historical determinism, but it’s a little chilling how well old Karl predicted the unfolding of events a century after his own death. This prediction is based on a couple factors which could be seen growing by the 1870s but haven’t really come to dominate until the 1970s – corporate globalization, the intensification of consolidation and a broad ‘squeeze’ on profits. As he wrote, when no more avenues for expansion exist, and only one or a few mega-corporations remain, the system will fall either as a result of it’s own contradictions or because the few remaining centres of power become easy targets for a revolution of everybody else. This would be the beginning of the next phase of economic evolution, which he called communism but actually wrote fairly little about (and even less that was clear or consistent).

With all of the discussion about money, debt and economics right now, there’s a desperate need for a counterbalance to the pseudo-libertarian nonsense of Ron Paul and others. Every day I read more scathing condemnations of debt, patents, banks, markets and (especially) the dreaded Federal Reserve. Try as I might, I can’t disagree – it’s essential to question all of these things right now. But rather than constructing elaborate conspiracy theories to explain how this is all connected, let’s look at what they actually have in common: they’re all forms of capital. From your landlord to your bank to your boss – and there’s no secret society needed to explain why they’re in control or how they do it. So why is everyone so afraid to say it?

There is no doubt that there’s a lot the world today could learn from Marx’s actual writings, rather than superficial readings of them. I’ll be the first to admit that he’s not a prophet and there are many others who are at least as relevant. The anarchists of this era were just as involved in worker’s movements, and had no problem predicting exactly where a society centred around Marx’s ideas would lead. We should be dusting off all these old books and more. Before we continue our inane quest for “new ideas”, we should at least be sure we understand old ones.

Winona Laduke is a long time writer, activist and academic on issues of environmental and indigenous rights in America. She’s run for vice President with Nader. Her views are a fair bit off the usual spectrum of “acceptable discussion” in America. In her talk, she speaks about the need for a new, green economy to not just use renewable energy for national energy independance, but for local, community level energy and food security with renewable power. Telling the story of installing wind turbines on her own dirt-poor Anishnabe reservation, she makes a very compelling case for us to stop buying power from toxic and repressive national power grids. As she notes, 70% of the world’s Uranium is under Native land in nations like America, Canada and Australia, as is much of the disposal. She touches on seed saving and traditional crops, as well as the evils of Monsanto. And most importantly, she makes re-localization of every kind a priority of green economics, something more people need to take into account.

Talk – Missouri State University

These two papers come to us from Kevin Carson at the Mutualist Blog and Center For a Stateless Society. Carson describes himself as a “free market anti-capitalist” and examines many issues around economics, technology and production in an anarchist context. Fiercely critical of the unchecked power of non-state tyrannies (corporations, patriarchy etc) in right-wing libertarian theory, but also of the tendencies of left-wing libertarians/anarchist to fall back into the authoritarian traps of Marxist-style command economies. His works touch on an unbelievably vast amount of historical and technological research, so it isn’t for the feint of hard, but few other writers compare in terms of his grasp of current trends in alternative and appropriate technologies.

In the first paper, Carson describes both traiditional models of local, independent production and emerging networks and technolgies which bring high-tech manufacturing capabilities within the reach of individuals and small groups. With an investment of a few hundred or thousand dollars amateurs have been building a wide array of small-scale manufacturing technologies such CNC mills and 3D-printers out of recycled spare parts for a tenth or a hundredth of what similar commercial-grade machines would cost. By producing open-source designs with open-source hardware, as Carson explains, individuals and communities can reduce their dependence on the wage economy for income while creating cheap, flexible and highly capable network or producers working out of garages and community workshops. In the context of a faultering global economy and unsure energy future, he examines both the possibilities and barriers to these kinds of systems, and how they might fit into a future stateless society.

The Homebrew Industrial Revolution

In this second paper Carson describes the role of local-scaled decentralized production and it’s role, both historically, presently and in a hypothetical stateless future. He brings up countless case studies of how traditional local economies (such as the Tuscan Villiage) and experimental worker’s co-operatives and barter networks (like LETS) can create functioning local alternative economies which can help communities weather the storms of recessions, depressions and grand-scale political changes. It’s long and pretty complicated (36 page .pdf, ouch), in terms of history and economics, so you may wish to just check out his web sites and read some shorter pieces (such as Another World Was Possible, about the collapse of the Berlin Wall and fall of Apartheid). If you can slug it out, though, it brings up a lot of issues and touches on a lot of important thinkers and organizations, such as Kropotkin, the Knights of Labour, experimental alternative currencies, Robert Owen, Gandhi, hacklabs, the open-source movement, urban farming, “Venture Communism”, local production, Transition Towns, and Ecovilliages.

Society After State Capitalism: Resilient Communities and Local Economies

We work too much. It’s purely insane that with the increases in productivity, growth in the workforce and gains in efficiency over the last century that we still haven’t managed to get the workweek under 40 hours. In fact, over the last few decades, we’re actually working more, without any real growth in wages. Here are a couple of links which shed some light on the subject.

Workers of the World Relax – two short movies put out by the Work Less Party of BC.

Mathematics of Wasted Labour – Taken from J. W. Smith’s World’s Wasted Work II, illustrating how much of the American workforce is totally unnecessary. This link, also on Globalissues, is also drawn from Smith’s work goes into more detail about the specifics of this waste.

The Abolition of Work by Bob Black…always controversial, but a definite classic.

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