Four Economic Benchmarks We Need Now

July 13, 2010 12:12 PM

With capitalism in crisis, can it be sustained or is it altogether outdated? As Umair Haque asks though, perhaps a better question is: "are organizations and markets making decisions that help make people, communities, and society better off in the long run, by allocating their scarce resources to the most productive uses?"

Though economists and management thinkers extolled the virtues of innovation repeatedly, firms were just mastering low-level product, service, and technological innovation. Ironically, it was the most powerful kind of innovation that was left ignored, and so simply stopped happening: institutional innovation.

so how to overcome entrenched interests, political sclerosis, cultural biases and relentless demographics? haque posits new measures of national income, well-being and returns and developing new currencies to use "that are independent of countries and regions; people will [have] the choice to escape..."

BONUS
A Novel Defense Of Minimum Wage Laws - "Without unions and minimum-wage laws, corporations compete on who can pay the least. With them, they compete on who has the best employees and they invest significantly in those employees. Which is exactly what we want, especially since raising the minimum wage is unlikely in and of itself to increase unemployment visibly."

Keynes and Social Democracy Today - "Today, ideas about full employment and equality remain at the heart of social democracy. But the political struggle needs to be conducted along new battle lines. Whereas the front used to run between government and the owners of the means of production – the industrialists, the rentiers – now, it runs between governments and finance... The new focus on the need to tame the power of finance is largely a consequence of globalization. Capital moves across borders more freely and more quickly than goods or people do. Yet, while large global firms habitually use their high concentration of financial resources to press for further de-regulation ('or we will go somewhere else'), the crisis has turned their size into a liability... Rather than securing investment for productive sectors of the economy, the financial industry has become adept at securing investment in itself. This, once again, calls for an activist government policy." cf. markets versus democracy: an EU view & state capitalism - "We're in a race to see whether politics will become the dominant means of allocating financial wealth in this country."

The Choices That Pay Us Back - "Of course, any sorts of these plans could only be passed in a nation that was a Democracy. That is a form of government where policies are debated by the populace, then voted on by their elected representatives on behalf of the citizens. That was the form of government the United States was in the earliest portion of its history. No longer. It has since become a Corporatocracy: An elected Parliament of Whores who work on behalf of corporate interests. Any idea that conflict with those corporate interests, regardless of how innovative or potentially useful, don’t stand much of a chance." cf. Slick Justice? More on the Fifth Circuit and Its Ties to Oil & Government for Sale: How Lobbyists Shaped the Financial Reform Bill

Slouching Towards Utopia? The Economic History of the Twentieth Century - "A parasitic caste or class existing by virtue of their organized ability to threaten violence and then take a substantial share of the agricultural (and craftwork) producers' crops becomes the rule soon after the coming of agriculture. Such castes and classes live better albeit more dangerously than the peasants. (If they didn't live better, after all, why accept the extra danger?) They live more dangerously because, after all, if they do not their numbers grow until they, once again, are at the Malthusian margin—and what good is being a noble if you have to live like a peasant? Whatever social system they evolve will break down unless it (a) keeps their numbers low enough to maintain an edge in standard-of-living, (b) keeps their lifestyle focused enough that they maintain their edge in violence, (c) keeps their numbers high enough that with their edge in violence they can maintain control, (d) keeps their numbers and their skill high enough to avoid being conquered by neighboring similar groups of thugs-with-spears, and (e) keeps their exactions low enough that they are not destroyed by revolting peasants with nothing to lose anyway. Upper-class social systems that accomplish those five goals tend to be terrifyingly stable in human history since the invention of agriculture. And whenever such a system does collapse another replacement almost invariably soon grows up in its place."

Chapter 15: The Knot of War, 1914-1920 - "Hobson is a proto-Keynesian, believing that the major economic problem is the business cycle that causes mass unemployment, and that the business cycle is made much worse by the maldistribution of income. The rich save a lot. Often the investment spending to soak it up is not there. The only potential balance wheels are military spending and exports. Hence empire, militarism, and arms races are a way of boosting exports via captive markets and soaking up savings so that the rich can continue to collect their wealth without triggering enough business cycle instability to bring the system down."

Thought and Society - "Not thinking about society, but how society and culture shape thought. Especially collective cognition: accomplishing cognitive taskes en masse." cf. Gabriel Tarde's rediscovery, Protest and the politics of dissent, Feasibility conditions on social reform & Actual letter to a liberal friend

Measuring the stock of human capital - "Human Capital Accounting in the United States, 1994–2006" cf. Treating R&D as Investment, Rather Than Expense, Boosts GDP & "Manufacturing"

Pricing the environment - "You cannot put a price on the value of a thriving pelican population. And if you could, there would be no one to claim the damages, because wildfowl don't have standing." cf. Socially responsible investors were on to BP for some time & Life matters!

The water market: a thousand times bigger than oil by 2030 - "Supply of essential commodities like electricity and water are seen by many as human rights issues to be tackled by governments, rather than price-driven conundrums to be tackled by free markets. Dealing in such commodities can arouse more suspicion than excitement in the public imagination. But can water keep the traders out forever? Seems unlikely if there's supply/demand imbalances to be taken care of, and money to be made from doing so."

Acid-Rain Market Collapses - The original U.S. cap-and-trade market, which succeeded in slashing the emissions that cause acid rain, is in disarray following new rules that render polluting allowances virtually worthless.

Restaurants Join Bid to Save Fisheries - As the appetite for seafood soars, restaurant companies such as McDonald's are pressed to promote sustainable solutions.

A Core Set of Global Environmental Indicators

posted by kliuless (15 comments total)

The second link appears to be here in error.
posted by l33tpolicywonk at 12:17 PM on July 13, 2010

The second link appears to be here in error."

Obviously, Al Gore's errection is not sustainable.
posted by pwnguin at 12:27 PM on July 13, 2010

One of the key points I've taken from Harvey is that capitalism can and will survive in the near term (absent our conscious choice to end it) but it won't be resolving its inherent crises; instead it shifts the crisis around either geographically or between sectors.
posted by Abiezer at 12:49 PM on July 13, 2010 [1 favorite]

The second link appears to be here in error

What's the problem? capitalism==wankery. So?
posted by Trochanter at 1:15 PM on July 13, 2010

One of the fundamental issues with real life is that you can't just side scroll over on the tech tree and see what technologies you need so you can switch over to some swank new econimic-ism. I'm hoping they fix this in the next release.
posted by Kid Charlemagne at 1:17 PM on July 13, 2010 [3 favorites]

you can't just side scroll over on the tech tree

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public." -- Spock
posted by cowbellemoo at 1:31 PM on July 13, 2010 [1 favorite]

The Haque piece includes the enigmatic:

"Creating 'product'? Stop. Create a currency instead"

In addition to the obvious problems one might have in trying to undercut a government-enforced government monopoly (as experienced by the Liberty Dollar folks), it also seems rather unproductive in exactly the same way as some of the worst examples of Wall Street's barely legal (and not in the good way) three card montie "innovation." Why would someone advocating reform of the current system openly discourage people from producing real, usable goods and services that people need, and instead becoming yet another useless middleman collecting a vig on the whole economy in the name of "growth"?

Or maybe I've been too blinded by the prisioner class infrastructure to understand.
posted by LiteOpera at 1:56 PM on July 13, 2010

... or is it altogether outdated?

Not outdated. Just incomplete, particularly in the areas of externalities and a few market sectors characterized by perverse incentives.

"Pragmatic eco-libertarianism" is the wave of the future.


You heard it here first.
posted by ZenMasterThis at 2:16 PM on July 13, 2010

Lots of good looking stuff here. The Harvey cartoon is really well done. Thanks.
posted by Trochanter at 2:43 PM on July 13, 2010

I'm always amazed at how many different forms of government there are. Particularly when you consider that many of these have been tried.
posted by poe at 3:23 PM on July 13, 2010

FWIW, the Liberty Dollar operation looks remarkably similar to a "warehouse bank" scheme. Just in case you were wondering why they got busted by the feds. Warehouse banks grew up out the the Posse Comitatus tax fraud rackets. The Liberty Dollar situation looks a little different as many of the warehouse banks were actually just frauds on the "depositors" and often were found to have stolen the assets when raided.

Not that the financial crimes of the big boys are any less odious, but they are better regulated.

/ end tangent
posted by warbaby at 4:46 PM on July 13, 2010

See also parecon.
posted by lalochezia at 6:20 PM on July 13, 2010

The problem is Globalization. Quote from a recent book published in June 2010:

According to Canadian philosopher John Ralston Saul, grand economic theories seldom last more than a few decades. He cites unbridled capitalism that died in 1929 after a run of about 30 years, Communism, a blend of antireligious, economic, and global theories that lasted 45–70 years, depending on geographical regions, Keynesian economic policies that ran for about 45 years, and today’s globalization which has been on center stage for roughly 30 years. In Saul’s view it’s just about time for globalization to start singing its own swan song. Perhaps the situation in the EU is the opening stanza of a very long medley of songs, since grand ideologies seldom leave center stage voluntarily, generally having to be dragged off, kicking and screaming. But the signs of decline are clear and they are turning a muddled and confused situation into a landslide victory for the anti-globalization forces

To understand what’s happening, here is a brief summary of the arguments presented in Saul’s immensely illuminating article “The End of Globalism,” which every reader of this book should ponder.

First of all, globalism is based on the notion that the nation-state as a power is passé and can be replaced by the power of the global markets. So economics, not politics, would determine the course of human events. Such global economic forces would protect the populace from the mistakes of prideful, local leaders, and give the individual a better life through enlightened self-interest. Or so goes the theory, anyway.

Historically, one can trace the birth of globalization to 1971, where in the Swiss mountain village of Davos, a club of corporate leaders was founded to look at civilization through the eyes of business. Soon the business people were joined by feckless government leaders and greedy academics looking for sponsors for their very definite, but almost totally meaningless, projects. The ideology that bound this group together was the notion that the public good could be regarded as a by-product of trade, competition, and self-interest. Four years later, the G8 was founded to mimic the Davos ideology that the world should be seen as one great corporation, ignoring social standards, human rights, organized religions, and anything else not overtly aimed at commercial self-interest.

Of special interest is that what really opened the door to globalization was the economic crisis that began with the oil-price shock of 1973. The new ideology that came forth to fill the vacuum left by the leaders who had lost the ability to deal with the situation was called globalization. As with all successful religions, globalization promised to solve every problem. Simple, broad-sweeping solutions with responsibility ultimately lodged in the hard-to-pin-down, invisible hands of corporate moguls. No one had to take responsibility for anything; the markets would miraculously solve all.

For two decades, government after government simply shifted most of their economic power onto the global markets by passing legislation favorable to global corporations, entering into alliances like the EU, enabling floating currency exchange rates, and the like. As the unregulated debt and currency systems allowed transnational corporations to accumulate assets greater than most countries, it was a logical step to regard these firms as new nations themselves, a kind of virtual nation devoid of geographic boundaries, citizens, obligations. Finally, in 1995 the system peaked with the GATT agreement leading to the founding of the World Trade Organization, a central body created to deal with matters of trade. So the reconceptualization of civilization through the looking glass of economics reached its critical point.

Following the breakaway policies of many governments in Central and South America to re-take control of their own destiny from the global corporations, in 1998 Malaysia refused to follow the global rules and pulled its currency off the market in response to the economic crisis in Asia at the time. The Malaysians made their currency nonconvertible, and fixed its value at a level just low enough to benefit exports. They also blocked the export of foreign capital and imposed tarifs on imported goods—all to the horror and condemnation of western governments and corporations, who one and all predicted an imminent collapse of the Malaysian economy. But no such thing took place.

Just one year later, in 1999, bankers and other leaders began to praise the Malaysian “experiment.” And at the very same time, the citizens of New Zealand, a country that had become almost a poster child for globalization 15 years earlier, voted to change direction by endorsing a strong government hand in regulating both the national economy and the private sector.

As an epitaph to the entire notion of globalization, in January 2003 the “visionaries” of Davos invited Malaysian prime minister Mahathir Mohamad to address them on the opening day of their annual meeting, heaping praise upon him for his country’s economic success. All of a sudden the reconstructed globalists realized that the Malaysian success stemmed from leadership at the nation-state level and was based upon a total rejection of globalist economics. The frosting on this particular cake—or the last nail in the coffin, depending on your choice of metaphor—came just a few days later when newly-elected Brazilian president, Luiz Inacio Lula da Silva, laid out a vision of responsible nation-state populism to the same audience. So in a span of just a few days, in the very birthplace of globalization, several governments of very different types all turned away from the concept and painted a picture of the world as if the nation-state were again the pillar upon which power and influence rest.

posted by stbalbach at 9:14 PM on July 13, 2010 [4 favorites]

Regarding John Paul Saul's "“The End of Globalism", which was published in Harper's magazine in 2004, he then expanded it into a book The Collapse of Globalism and the Reinvention of the World (2005). Following the recent economic collapse, which he predicted, The Collapse of Globalism was re-issued in 2009 with a new epilogue that addressed the crisis.
posted by stbalbach at 9:32 PM on July 13, 2010

I've got to read some of his stuff. "Voltaire's Children" sounds really interesting, too. I'm reading Chris Hedges' "Empire of Illusion", just now, and the JRS quotes are probably the best thing in it.
posted by Trochanter at 9:41 PM on July 13, 2010