Category Archives: Ending Neoliberalism

Rescuing Economics from Neoliberalism – Dani Rodrik. 

As even its harshest critics concede, neoliberalism is hard to pin down. In broad terms, it denotes a preference for markets over government, economic incentives over social or cultural norms, and private entrepreneurship over collective or community action. It has been used to describe a wide range of phenomena—from Augusto Pinochet to Margaret Thatcher and Ronald Reagan, from the Clinton Democrats and Britain’s New Labour to the economic opening in China and the reform of the welfare state in Sweden. 

The term is used as a catchall for anything that smacks of deregulation, liberalization, privatization, or fiscal austerity. Today it is reviled routinely as a short-hand for the ideas and the practices that have produced growing economic insecurity and inequality, led to the loss of our political values and ideals, and even precipitated our current populist backlash.

We live in the age of neoliberalism, apparently. But who are neoliberalism’s adherents and disseminators—the neoliberals? Oddly, you would almost have to go back to the early 1980s to find anyone explicitly embracing neoliberalism. In 1982, Charles Peters, the longtime editor of The Washington Monthly, published an essay called “A Neo-Liberal’s Manifesto.” It makes for interesting reading thirty-five years later, since the neoliberalism it describes bears little resemblance to today’s target of derision. The politicians whom Peters names as exemplifying the movement are not Thatcher and Reagan, but Bill Bradley, Gary Hart, and Paul Tsongas. The journalists and academics whom he lists include James Fallows, Michael Kinsley, and Lester Thurow. Peters’s neoliberals are liberals (in the U.S. sense of the word) who have dropped their prejudices in favor of unions and big government and against markets and the military.

The use of the term “neoliberal” exploded in the 1990s, when it became closely associated with two developments, neither of which Peters mentions. One was financial deregulation, which would culminate in the 2008 financial crash—the first that the United States had experienced since the interwar period—and in the still-lingering euro debacle. The second was economic globalization, which accelerated thanks to free flows of finance and to a new, more ambitious type of trade agreement. Financialization and globalization have become the most overt manifestations of neoliberalism in today’s world.

That neoliberalism is a slippery, shifting concept, with no explicit lobby of defenders, does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a decisive shift toward markets from the 1980s on? Or that center-left politicians—Democrats in the United States, Socialists and Social Democrats in Europe—enthusiastically adopted some of the central creeds of Thatcherism and Reaganism, such as deregulation, privatization, financial liberalization, and individual enterprise? Much of our contemporary policy discussion remains infused with norms and principles supposedly grounded in homo economicus.

But the looseness of the term neoliberalism also means that criticism of it often misses the mark. There is nothing wrong with markets, private entrepreneurship, or incentives—when deployed appropriately. Their creative use lies behind the most significant economic achievements of our time. As we heap scorn on neoliberalism, we risk throwing out some of neoliberalism’s useful ideas.

The real trouble is that mainstream economics shades too easily into ideology, constraining the choices that we appear to have and providing cookie-cutter solutions. A proper understanding of the economics that lies behind neoliberalism would allow us to identify—and to reject—ideology when it masquerades as economic science. Most importantly it would help us develop the institutional imagination we badly need to redesign capitalism for the twenty-first century.   

Neoliberalism is typically understood as based on key tenets of mainstream economic science. To see those tenets, without the ideology, consider a thought experiment.

A well-known and highly regarded economist lands in a country he has never visited and knows nothing about. He is brought to a meeting with the country’s leading policymakers. “Our country is in trouble,” they tell him. “The economy is stagnant, investment is low, and there is no growth in sight.” They turn to him expectantly: “Please tell us what we should do to make our economy grow.”

The economist pleads ignorance and explains that he knows too little about the country to make any recommendations. He would need to study the history of the economy, to analyze the statistics, and to travel around the country before he could say anything. But his hosts are insistent. “We understand your reticence and we wish you had the time for all that,” they tell him. “But isn’t economics a science, and aren’t you one of its most distinguished practitioners? Even though you do not know much about our economy, surely there are some general theories and prescriptions you can share with us to guide our economic policies and reforms.”

The economist is now in a bind. He does not want to emulate those economic gurus he has long criticized for peddling their favorite policy advice. But he feels challenged by the question. Are there universal truths in economics? Can he say anything valid (and possibly useful)?

So he begins. The efficiency with which an economy’s resources are allocated is a critical determinant of the economy’s performance, he says. Efficiency, in turn, requires aligning the incentives of households and businesses with social costs and benefits. The incentives faced by entrepreneurs, investors, and producers are particularly important when it comes to economic growth. Growth needs a system of property rights and contract enforcement that will ensure those who invest can retain the returns on their investments. And the economy must be open to ideas and innovations from the rest of the world.

But economies can be derailed by macroeconomic instability, he goes on. Governments must therefore pursue a sound monetary policy, which means restricting the growth of liquidity to the increase in nominal money demand at reasonable inflation. They must ensure fiscal sustainability, so that the increase in public debt does not outpace national income. And they must carry out prudential regulation of banks and other financial institutions to prevent the financial system from taking excessive risk.

Now he is warming up to his task. Economics is not just about efficiency and growth, he adds. Economic principles also carry over to equity and social policy. Economics has little to say about how much redistribution a society should seek. But it does tell us that the tax base should be as broad as possible and that social programs should be designed in a way that does not encourage workers to drop out of the labor market.

By the time the economist stops, it appears as if he has laid out a full-fledged neoliberal agenda. A critic in the audience will have heard all the code words: efficiency, incentives, property rights, sound money, fiscal prudence. Yet the universal principles that the economist describes are in fact quite open-ended. They presume a capitalist economy—one in which investment decisions are made by private individuals and firms—but not much beyond that. They admit—indeed they require—a surprising variety of institutional arrangements.

So has the economist just delivered a neoliberal screed? We would be mistaken to think so, and our mistake would consist of associating each abstract term—incentives, property rights, sound money—with a particular institutional counterpart. And therein lies the central conceit, and the fatal flaw, of neoliberalism: the belief that first-order economic principles map onto a unique set of policies, approximated by a Thatcher–Reagan-style agenda.  

Consider property rights. They matter insofar as they allocate returns on investments. An optimal system would distribute property rights to those who would make the best use of an asset and afford protection against those most likely to expropriate the returns. Property rights are good when they protect innovators from free riders, but they are bad when they protect them from competition. Depending on the context, a legal regime that provides the appropriate incentives can look quite different from the standard U.S. style regime of private property rights.

This may seem like a semantic point with little practical import; but China’s phenomenal economic success is largely due to its orthodox-defying institutional tinkering. China turned to markets, but did not copy Western practices in property rights. Its reforms produced market-based incentives through a series of unusual institutional arrangements that were better adapted to the local context. Rather than move directly from state to private ownership, for example, which would have been stymied by the weakness of the prevailing legal structures, the country relied on mixed forms of ownership that provided more effective property rights for entrepreneurs in practice. Township and Village Enterprises (TVEs), which spearheaded Chinese economic growth during the 1980s, were collectives owned and controlled by local governments. Even though they were publicly owned, entrepreneurs received the protection against expropriation they needed. Local governments had a direct stake in the profits of the firms and hence did not want to kill the goose that lays the golden eggs.

China relied on a range of such innovations, each delivering the economist’s higher-order economic principles in unfamiliar institutional arrangements. Dual-track pricing, which retained compulsory grain deliveries to the state but allowed farmers to sell excess produce in free markets, provided supply-side incentives while insulating public finances from the adverse effects of full liberalization. The so-called Household Responsibility System gave farmers the incentive to invest in and improve the land they worked on, while obviating the need for explicit privatization. Special economic zones provided export incentives and attracted foreign investors without removing protection for state firms (and hence safeguarding domestic employment). In view of such departures from orthodox blueprints, calling China’s economic reforms a neoliberal turn, as critics are inclined to do, distorts more than it reveals. If we are to call this neoliberalism, we must surely look more kindly on the ideas behind the most dramatic poverty reduction in history.

One might protest that China’s institutional innovations were purely transitional. Perhaps it will have to converge on Western-style institutions to sustain its economic progress. But this common line of thinking overlooks the diversity of capitalist arrangements that still prevails among advanced economies, despite the considerable homogenization of our policy discourse.

What, after all, are Western institutions? The importance of the public sector, for example, in the club of rich Organization For Economic Cooperation and Development (OECD) countries varies from a third of the economy in Korea to nearly 60 percent in Finland. In Iceland, 86 percent of workers are members of a trade union; the comparable number in Switzerland is just 16 percent. In the United States firms can fire workers almost at will; French labor laws require employers to jump through many hoops first. Stock markets have grown to nearly one-and-a-half times national income in the United States; in Germany, they are only a third as large, representing one-half of national income.

The idea that any one of these models of taxation, labor relations, or financial organization is inherently superior to the others is belied by the varying economic fortunes that each of these economies have experienced over recent decades. The United States has gone through successive periods of angst in which its economic institutions were judged inferior to those in Germany, Japan, China, and now possibly Germany again. Certainly comparable levels of wealth and productivity can be produced under very different models of capitalism. We might even go a step further: today’s prevailing models probably come nowhere near exhausting the range of what might be possible (and desirable) in the future. 

The visiting economist in our thought experiment knows all this and recognizes that the principles he has enunciated need to be filled in with institutional detail before they become operational. Property rights? Yes, but how? Sound money? Of course, but how? It would perhaps be easier to criticize his list of principles for being vacuous than to denounce it as a neoliberal screed.

Still, these principles are not entirely content free. China, and indeed all countries that managed to develop rapidly, demonstrate their utility once they are properly adapted to local context. Conversely, too many economies have been driven to ruin courtesy of political leaders who chose to violate them. We need look no further than Latin American populists or Eastern European communist regimes to appreciate the practical significance of sound money, fiscal sustainability, and private incentives.

Of course economics goes beyond a list of abstract, largely common sense principles. Much of the work of economists consists of developing stylized models of how actual economies work and then confronting those models with evidence. Economists tend to think of what they do as progressively refining their understanding of the world: their models are supposed to get better and better as they are tested and revised over time. But progress in economics happens differently.

Economists study a social reality that is unlike the physical universe of natural scientists. It is completely man-made, highly malleable, and operates according to different rules across time and space. Economics advances not by settling on the right model or theory to answer such questions, but by improving our understanding of the diversity of causal relationships. Neoliberalism and its customary remedies—always more markets, always less government—are in fact a perversion of mainstream economics. Good economists know that the correct answer to any question in economics is: it depends.

Does an increase in the minimum wage depress employment? Yes, if the labor market is really competitive and employers have no control over the wage they must pay to attract workers; but not necessarily otherwise. Does trade liberalization increase economic growth? Yes, if it increases the profitability of industries where the bulk of investment and innovation takes place; but not otherwise. Does more government spending increase employment? Yes, if there is slack in the economy and wages do not rise; but not otherwise. Does monopoly harm innovation? Yes and no, depending on a whole host of market circumstances.

In economics, new models rarely supplant older models. The basic competitive-markets model dating back to Adam Smith has been modified over time by the inclusion, in rough historical order, of monopoly, externalities, scale economies, incomplete and asymmetric information, irrational behavior, and many other real world features. Yet the older models remain as useful as ever. Understanding how real markets operate necessitates different lenses at different times.

Perhaps maps offer the best analogy. Just like economic models, maps are highly stylized representations of reality. They are useful precisely because they abstract from many real world details that would get in the way. Realistic full-scale maps would be hopelessly impractical artifacts, as Jorge Luis Borges described in a short story that remains the best and most succinct explication of the scientific method. But abstraction also implies that we need a different map depending on the nature of our journey. If we are traveling by bike, we need a map of bike trails. If we are to go on foot, we need a map of foot paths. If a new subway is constructed, we will need a subway map—but we wouldn’t throw out the older maps.      

Economists tend to be very good at making maps, but not good enough at choosing the one most suited to the task at hand. When confronted with policy questions of the type our visiting economist faces, too many of them resort to “benchmark” models that favor laissez-faire. Knee-jerk solutions and hubris replace the richness and humility of the discussion in the seminar room. John Maynard Keynes once defined economics as the “science of thinking in terms of models joined to the art of choosing models which are relevant.” Economists typically have trouble with the “art” part.

I have illustrated this too with a parable. A journalist calls an economics professor for his view on whether free trade is a good idea. The professor responds enthusiastically in the affirmative. The journalist then goes undercover as a student in the professor’s advanced graduate seminar on international trade. He poses the same question: Is free trade good? This time the professor is stymied. “What do you mean by ‘good?’” he responds. “And good for whom?” The professor then launches into an extensive exegesis that will ultimately culminate in a heavily hedged statement: “So if the long list of conditions I have just described are satisfied, and assuming we can tax the beneficiaries to compensate the losers, freer trade has the potential to increase everyone’s well being.” If he is in an expansive mood, the professor might add that the effect of free trade on an economy’s long-term growth rate is not clear either and would depend on an altogether different set of requirements.

This professor is rather different from the one the journalist encountered previously. On the record, he exudes self-confidence, not reticence, about the appropriate policy. There is one and only one model, at least as far as the public conversation is concerned, and there is a single correct answer regardless of context. Strangely, the professor deems the knowledge that he imparts to his advanced students to be inappropriate (or dangerous) for the general public. Why?

The roots of such behavior lie deep in the sociology and the culture of the economics profession. But one important motive is the zeal to display the profession’s crown jewels in untarnished form—market efficiency, the invisible hand, comparative advantage—and to shield them from attack by self-interested barbarians, namely the protectionists. Unfortunately, these economists typically ignore the barbarians on the other side of the issue—financiers and multinational corporations whose motives are no purer and who are all too ready to hijack these ideas for their own benefit.

As a result, economists’ contributions to public debate are often biased in one direction, in favor of more trade, more finance, and less government. That is why economists have developed a reputation as cheerleaders for neoliberalism, even if mainstream economics is very far from a paean to laissez-faire. The economists who let their enthusiasm for free markets run wild are in fact not being true to their own discipline.

*

How then should we think about globalization in order to liberate it from the grip of neoliberal practices? We must begin by understanding the positive potential of global markets. Access to world markets in goods, technologies, and capital has played an important role in virtually all of the economic miracles of our time. China is the most recent and powerful reminder of this historical truth, but it is not the only case. Before China, similar miracles were performed by South Korea, Taiwan, Japan, and a few non-Asian countries such as Chile and Mauritius. All of these countries embraced globalization rather than turn their backs on it, and they benefited handsomely.

Defenders of the existing economic order will quickly point to these examples when globalization comes into question. What they will fail to say is that almost all of these countries joined the world economy by violating neoliberal strictures. China shielded its large state sector from global competition, establishing special economic zones where foreign firms could operate with different rules than in the rest of the economy. South Korea and Taiwan heavily subsidized their exporters, the former through the financial system and the latter through tax incentives. All of them eventually removed most of their import restrictions, long after economic growth had taken off. But none, with the sole exception of Chile in the 1980s under Pinochet, followed the neoliberal recommendation of a rapid opening­-up to imports. Chile’s neoliberal experiment eventually produced the worst economic crisis in all of Latin America. While the details differ across countries, in all cases governments played an active role in restructuring the economy and buffeting it from a volatile external environment. Industrial policies, restrictions on capital flows, and currency controls—all prohibited in the neoliberal playbook—were rampant.

By contrast, countries that stuck closest to the neoliberal model of globalization were sorely disappointed. Mexico provides a particularly sad example. Following a series of macroeconomic crises in the mid-1990s, Mexico embraced macroeconomic orthodoxy, extensively liberalized its economy, freed up the financial system, sharply reduced import restrictions, and signed the North American Free Trade Agreement (NAFTA). These policies did produce macroeconomic stability and a significant rise in foreign trade and internal investment. But where it counts—in overall productivity and economic growth—the experiment failed. Since undertaking the reforms, overall productivity in Mexico has stagnated, and the economy has underperformed even by the undemanding standards of Latin America.

These outcomes are not a surprise from the perspective of sound economics. They are yet another manifestation of the need for economic policies to be attuned to the failures to which markets are prone, and to be tailored to the specific circumstances of each country. No single blueprint fits all.

*

Before globalization took a turn towards what we might call hyper-globalization, the rules were flexible and recognized this fact. Keynes and his colleagues viewed international trade and investment as a means for achieving domestic economic and social goals—full employment and broad-based prosperity—when they designed the global economic architecture in Bretton Woods in 1944. From the 1990s on, however, globalization became an end in itself. Global economic arrangements were now driven by a single-minded focus on reducing impediments to the flows of goods, capital, and money across national borders—though not of workers, where the economic gains in fact would have been much larger. 

This perversion of priorities revealed itself in the way trade agreements began to reach behind borders and remake domestic institutions. Investment regulations, health and safety rules, environmental policies, and industrial promotion schemes all became potential targets for abolition if they were deemed to stand in the way of foreign trade and investment. Large international firms, rendered footloose by the new rules, acquired special privileges. Corporate taxes had to be lowered to attract investors (or prevent them from leaving). Foreign enterprises and investors were given the right to sue national governments in special offshore tribunals when changes in domestic regulations threatened to reduce their profits. Nowhere was the new deal more damaging than in financial globalization, which produced not greater investment and growth, as promised, but one painful crash after another.

Just as economics must be saved from neoliberalism, globalization has to be saved from hyper-globalization. An alternative globalization, more in keeping with the Bretton Woods spirit, is not difficult to imagine: a globalization that recognizes the multiplicity of capitalist models and therefore enables countries to shape their own economic destinies. Instead of maximizing the volume of trade and foreign investment and harmonizing away regulatory differences, it would focus on traffic rules that manage the interface of different economic systems. It would open up policy space for advanced countries as well as developing ones—the former so they can reconstruct their social bargains through better social, tax, and labor market policies, and the latter so they can pursue the restructuring they need for economic growth. It would require more humility on the part of economists and policy technocrats about appropriate prescriptions, and hence a much greater willingness to experiment.

*

As Peters’s early manifesto attests, the meaning of neoliberalism has changed considerably over time as the label has acquired harder-line connotations with respect to deregulation, financialization, and globalization. But there is one thread that connects all versions of neoliberalism, and that is the emphasis on economic growth. Peters wrote in 1982 that the emphasis was warranted because growth is essential to all our social and political ends—community, democracy, prosperity. Entrepreneurship, private investment, and removing obstacles (such as excessive regulation) that stand in the way were all instruments for achieving economic growth. If a similar neoliberal manifesto were penned today, it would no doubt make the same point.

Critics often point out that this emphasis on economics debases and sacrifices other important values such as equality, social inclusion, democratic deliberation, and justice. Those political and social objectives obviously matter enormously, and in some contexts they matter the most. They cannot always, or even often, be achieved by means of technocratic economic policies; politics must play a central role.

But neoliberals are not wrong when they argue that our most cherished ideals are more likely to be attained when our economy is vibrant, strong, and growing. Where they are wrong is in believing that there is a unique and universal recipe for improving economic performance to which they have access. The fatal flaw of neoliberalism is that it does not even get the economics right. It must be rejected on its own terms for the simple reason that it is bad economics.

Boston Review 

Winston Peters’ view on capitalism will challenge new Govt – Chris Trotter.

Crucial to the success of the “unfriendly capitalism” indicted by Winston Peters has been its stalwart bodyguard of “expert lies”.

Ever since 1984, when its unfriendliness began gathering pace, a seemingly endless procession of “experts” has been summoned to represent this new “unfriendly” capitalism’s cruelty as kindness.

Some of these so-called experts were paid for by the big corporations. Others were commissioned by government agencies to prepare the way for changes destined to place an ever-increasing number of New Zealanders at the mercy of private economic power.

None of the core institutions of the New Zealand State were exempted from this “restructuring” process. Health, education, social welfare, the trade union movement, the universities, local government: all fell victim to the “gleichschaltung” (co-ordination) demanded by an increasingly foe-like capitalist system. And, in each case, these government “reforms” were presented to the public as the only rational response to what was, after all, “expert” opinion.

In a tiny number of cases, the tendered “expert advice” was so extreme that the Government of the day simply balked at introducing reforms that seemed so patently politically unsaleable. For the most part, however, the experts’ findings were accepted and implemented.

That these arguments, for what can only be described as dramatic and socially-wrenching change, were received uncritically, and then promoted enthusiastically, by the news media was a crucial factor in their success. It encouraged the view that economic management had become such a complex business that “ordinary people” could not, realistically, be expected to play any useful role in the formulation of economic policy.

It required the system-threatening shock of the Global Financial Crisis of 2008-09 to set off a world-wide revolt against what we now call “neoliberal” economic orthodoxy – and the “experts” who have for so long expounded and defended its “principles”.

This revolt has come late to New Zealand because, through the worst years of the Global Financial Crisis, the Chinese economy’s absorption of so many of this country’s exports shielded it from the high levels of unemployment and the swingeing austerity programmes which have unsettled so many larger western nations.

On October 20, however, the NZ First leader, Winston Peters, from the stage of the Beehive Theatrette, told New Zealand that: “Far too many New Zealanders have come to view today’s capitalism, not as their friend, but as their foe. And they are not all wrong. That is why we believe that capitalism must regain its responsible – its human face. That perception has influenced our negotiations.”

In that moment, it was clear that the revolt against neoliberal economic orthodoxy and the lies of its “experts” had finally reached New Zealand’s shores. That, in his declaration for a Labour-NZ First-Green Government, New Zealand was experiencing its very own “Brexit” moment, would become even clearer when Peters declared that he and his party had rejected the option of a “modified status quo” in favour of “real change”.

Just how much “real change” Jacinda Ardern’s government is willing to countenance will be revealed in the people she chooses to advise her.

At the APEC summit in Vietnam in early November, where she is hoping to persuade the remaining 11 signatories to the Trans-Pacific Partnership to allow New Zealand to renegotiate the Investor State Dispute Settlement provisions of the agreement, who will Ardern include among her expert advisers? A prime minister whose ambitions extended no further than slightly modifying the status quo would limit her APEC entourage to all the usual MFAT and private sector suspects. A prime minister determined to signal her commitment to “real change”, however, would invite Professor Jane Kelsey to join her in Danang.

A “Real Change” Government, determined to reverse the draconian policies adopted by a Ministry of Social development advised by neoliberal “experts”, would call upon the experience and expertise of Sue Bradford and Metiria Turei. Those who find themselves astonished and/or offended by the thought of two such bitter opponents of this country’s actuarially inspired and excessively punitive welfare system being asked to advise Jacinda’s government on its root-and-branch reform should, perhaps, pause and consider just how radical (albeit from the opposite end of the political spectrum) was the “expert” advice that created it.

In his review of four recent books addressing the worldwide “rage against the elites”, Professor Helmut K Anheier, of Berlin’s Hertie School of Governance, writes: “It is well within elites’ power to make decisions that benefit all of society, rather than narrow interests. Elites have surely failed in this regard over the last quarter-century, but they need not continue to fail in the future.”

But, is it reasonable to expect “real change” advice from the same neoliberal elites whose ideologically-driven recommendations created the very problems our new government is pledged to solve?

Capitalism with a “human face” has no need of a bodyguard.

Out Of The Wreckage – George Monbiot. A story of our times, ‘The Politics of Belonging’.

We possess an unparalleled sensitivity to the needs of others, a unique level of concern about their welfare, and a peerless ability to create moral norms that generalise and enforce these tendencies.

.

Our astonishing tendencies emerge so early in our lives that they seem to be innate. In other words, we appear to have evolved to be this way.

.

We survived despite being weaker and slower than both our potential predators and most of our prey. We did so through developing, to an extraordinary degree, a capacity for mutual aid. As it was essential to our survival, this urge to cooperate was hard-wired into our brains through natural selection. It has not been lost.

.

The emotional pain caused by isolation from other members of our group drove us to return to them, so that we did not get picked off by predators or die of starvation. Social pain and physical pain are processed in our brains by the same neural circuits (emotional pain, at some point in the evolution of social mammals, seems to have hijacked the physical pain network).

.

Social contact reduces physical pain. This is why we hug our children when they hurt themselves: affection is a powerful analgesic. Opioids relieve both physical agony and the distress of separation, which might explain the link between social isolation and drug addiction.

.

Social pain can be harder to bear than physical pain, which could be why some people self-harm in response to emotional distress: it could be interpreted as an attempt to replace emotional injury with physical injury. As the prison system knows too well, one of the most effective forms of torture is solitary confinement. We, the supremely social mammal, cannot cope alone: we need connection – togetherness – just as we need food and shelter.

.

Our extraordinary capacity for altruism and our remarkably social nature are the central, crucial facts about humankind. Yet we remain, to an astonishing degree, unaware of them. This is partly because our minds – which are always on the lookout for signs of danger – emphasise the rare but spectacular acts of violence a small proportion of the population inflicts on others, but not the daily acts of kindness and cooperation the rest of us perform, often unconsciously. This tendency is reinforced today by news reports.

.

We remember, for example, the two terrorists who murdered twelve people in Paris in January 2015, and our recollection of that horror persuades us that evil is a central feature of the human condition. Less prominent in our minds are the 3 million people in France and the millions elsewhere who gathered, lit candles and marched in public places in solidarity with the victims. These people, not the two terrorists, represent the human norm. Our innate tendency is to stand together against threats to our well-being, to treat an attack on one as an attack on all.

.

This is what we are. But something has gone horribly wrong.

.

An epidemic of loneliness is sweeping the world. Once considered an affliction of older people, it is now tormenting people of other generations. Our time is distinguished from previous eras by atomisation: the rupturing of social bonds, the collapse of shared ambitions and civic life, our unbearable isolation from each other. There are over 7 billion souls on Earth, but many people are unable to find anyone with whom they can connect.

.

We live in an era of astonishing material wealth – albeit poorly distributed. But the great general advance in material conditions has not been accompanied, as our forebears might have expected, by general happiness. Instead, this age of atomisation breeds anxiety, discontent and dissatisfaction – conditions that afflict even the wealthiest classes.

.

Craving contentment and a sense of connection, we succumb to compulsions that often find expression in a frenzy of consumption. We chase brief spikes of satisfaction, which soon subside, to be replaced by the urge for another hit.

.

Consumerism – ever restless, never sated – threatens us with climate breakdown, helps catalyse a sixth great extinction, imperils global water supplies, and reduces the many wonders of the living world to the same grey waste. We rip the Earth’s living systems apart to fill the gap in our lives, yet the gap remains. This compulsive, joyless hedonism consumes not only the wonders of nature, but also ourselves.

.

Society, the world’s living systems, our happiness, our self-control, our sense of belonging: all are falling apart. Why has this happened?

.

The pursuit of material satisfactions dulls our concern for other people and for the living planet. It blinds us to our place in the world and the damage we impose on others. It propels us down a narrow corridor of self-interest, self-enhancement and immediate gratification.

.

These tendencies are reinforced by an economic system that puts a price on everything and a value on nothing; a political system that promotes economic growth above all other aims, regardless of whether it enhances human welfare or damages it; and organisational and technological changes that could scarcely have been better designed to drive us apart. We were once brought together by work, travel and entertainment. Now these activities tend to estrange us.

.

Globalisation has weakened our connections with our neighbours and neighbourhoods. Jobs are outsourced to cheaper workforces, causing, in some cases, the collapse of local economies and the communities that depended on them. Power is outsourced to global institutions we cannot influence, undermining our sense of self-ownership and political community. A globalised media creates the impression that, wherever we might be, life is elsewhere.

.

But above all, I believe, the trend towards social breakdown is driven by the dominant political narrative of our times. This narrative is a reiteration of the story told by the philosopher Thomas Hobbes in 1651. He asserted that the default state of human relations is a war of everyone against everyone else. Life in the state of nature, he famously observed, was ‘solitary, poore, nasty, brutish, and short’.

.

Competition and individualism are the values at the heart of the twenty-first century’s secular religion. Everywhere we are encouraged to fight for wealth and social position like stray dogs over a dustbin: competition, we are told, brutal as it may be, will enhance our lives to a greater extent than any other instrument. This story is supported by a rich mythology of rugged individualism, and advanced through an inspiring lexicon of lone rangers, sole traders, self-starters, self-made men and women, going it alone. The word ‘people’ has been widely replaced in the media by ‘individuals’. The most cutting insult we can throw at someone is ‘loser’.

.

Seeing some people grab vast wealth while others go hungry (at the time of writing, the world’s eight richest people have the same net worth as the poorest half of its population) reinforces the sense that this is a dog-eat-dog world. We either join the fight in the hope of triumphing over others or face destitution.

.

Many economists insist that we are typically selfish and self-maximising. They use a term to describe this perception of humanity that sounds serious and scientific: Homo economicus. Most of them seem to be unaware that the concept was formulated, by J. S. Mill and others, as a thought experiment. Soon it became a modelling tool. Then it became an ideal. Then it evolved into a description of who we really are.

.

We have heard the story of our competitive, self-maximising nature so often, and it is told with such panache and persuasive power, that we have accepted it as an account of who we really are. It has changed our perception of ourselves. Our perceptions, in turn, change the way we behave.

.

One result of this mistaken belief is the loss of common purpose. Our tendency is to stop seeing ourselves as people striving together to overcome our common problems, and to view ourselves instead as people striving against each other to overcome our individual problems. Never mind that these problems are often much bigger than we are, and arise from structural forces that no person acting alone can tackle. As individualism is the religion of our times, it must be the solution to whatever crisis we face.

.

Everywhere we seem to hear the same low, insistent whisper: ‘You are on your own.’ Neither the state nor society will save us. They will not solve our problems, even if these problems – such as climate change or economic crises or public health disasters – cannot be addressed by other means. No solutions are proposed for insecurity, precarity and desperation. Indeed, as the cruel eighteenth-century doctrines of Thomas Malthus and Joseph Townsend – ‘it is only hunger which can spur and goad them on to labour’ – are disinterred, precarity and desperation are recast as the necessary incentives to encourage the poor to work harder.

.

The loss of common purpose leads in turn to a loss of belief in ourselves as a force for change. Many, in recent years, lost their belief in the promise of democracy: that, through voting, mobilising and campaigning, we can make our political systems work for all of us, rather than just a select few. We have tended to face our crises with passivity and resignation. Faith in democratic norms is collapsing. A study published in the Journal of Democracy revealed that, while 72 per cent of those born before the Second World War in the United States believed it was essential to live in a democracy, this figure fell to just 30 per cent of those born in 1980. One in six of the people surveyed asserted that army rule would be a good or very good development – a proportion that has more than doubled in twenty years. A similar slump in political faith has taken place in other countries.

.

If politics as usual no longer delivers, people look elsewhere for answers. This ‘elsewhere’ often means demagoguery: movements characterised by the extreme simplification of political choices, the abandonment of reasoned argument, and scapegoating. The reaction against democratic failure has licensed a clutch of suppressed hatreds – of women, immigrants, racial and religious minorities, difference of all kinds. We witness the resurgence of the kind of politics that until recently seemed to be everywhere in retreat.

.

The potential consequences are grave. Governments founded on lies and exaggerations are making promises they cannot possibly keep, and blaming an ever wider array of scapegoats when they fail to materialise. If jobs are destroyed en masse by automation, this will enhance the need for distraction. As people become angrier and more alienated, the net of blame will be cast wider.

.

Eventually the anger that cannot be answered through policy will be turned outwards, towards other nations. Lacking other means of disguising their failures or establishing legitimacy, governments will discover the potential of foreign aggression. Terrorism provides ample opportunities for justification. Major war, which seemed until recently a distant prospect, begins to look like a plausible threat.

.

We are better than we are told we are, better than we are induced to be. By recognising our good nature and coming together to express it, we can overcome the multiple crises we face that cannot be solved alone. By reconnecting with each other we can conquer loneliness, unhappiness and the loss of our sense of meaning and purpose.

.

Though we still need it, we can no longer rely only on the state. Nor can we rely on the workplace to supply either social connection or economic security. But we can find some of the help we seek in community. By reviving community, built around the places in which we live, and by anchoring ourselves, our politics and parts of our economy in the life of this community, we can recover the best aspects of our humanity. We can mobilise our remarkable nature for our own good and the good of our neighbours.

.

We will no longer walk alone. We will no longer work alone. We will no longer feel alone. We will restore our sense of belonging: belonging to ourselves, belonging to our communities, belonging to our localities, belonging to the world. In turn, we will develop a politics and an economy that belong to us. By rebuilding community, we will renew democracy and the hope we invest in it. We will develop political systems that are not so big that they cannot respond to us but not so small that they cannot meet the problems we face. We will achieve something that, paradoxically, we cannot realise alone: self-reliance. By helping each other, we help ourselves.

.

The strong, embedded cultures we develop will be robust enough to accommodate social diversity of all kinds: a diversity of people, of origins, of life experiences, of ideas and ways of living. We will no longer need to fear people who differ from ourselves; we will have the strength and confidence to reject attempts to channel hatred towards them.

.

By rebuilding community, we become proud of our society, proud of our institutions, proud of our nations, proud of ourselves. By coming together we discover who we are. We ignite our capacity for empathy and altruism. Togetherness and belonging allow us to become the heroes of the story.

.

We are astonishing creatures, blessed with an amazing capacity for kindness and care towards others. But this good nature has been thwarted by a mistaken view of our own humanity. We have been induced by certain politicians, economists and commentators to accept a vicious ideology of extreme competition and individualism that pits us against each other, encourages us to fear and mistrust each other, and weakens the social bonds that make our lives worth living.

.

Though it is not the only factor, this has helped to usher in an age of loneliness, in which, on this crowded planet, we are disconnected from each other as never before. The result is an epidemic of unhappiness and of psychological and physical illness. The atomisation we suffer has eroded our sense of common purpose and sapped our belief that, by working together, we can change life for the better. It has undermined democracy, and allowed intolerant and violent forces to fill the political vacuum. We are trapped in a vicious circle of alienation and reaction.

.

By coming together to revive community life, we, the heroes of this story, can break the vicious circle. Through invoking the two great healing forces – togetherness and belonging – we can rediscover the central facts of our humanity: our altruism and mutual aid.
Where there is atomisation, we will create a thriving civic life. Where there is alienation, we will forge a new sense of belonging: to neighbours, neighbourhood and society. Where we find ourselves crushed between market and state, we will develop a new economics that treats both people and planet with respect. Where we are ignored and exploited, we will revive democracy and retrieve politics from those who have captured it.

.

In doing so, we can reclaim our happiness, reclaim our self-reliance, reclaim our pride, and reclaim our place. We will belong once more both to society and to ourselves.

.

I propose a name for this story: ‘The Politics of Belonging’.

.

Community, togetherness and belonging are values invoked across the political spectrum. Thomas Paine and Edmund Burke might have agreed on little else, but in this respect they seemed to be as one. Paine wrote: ‘The mutual dependence and reciprocal interest which man has upon man, and all the parts of civilised community upon each other, create that great chain of connection which holds it together.’ Burke famously insisted: ‘To be attached to the subdivision, to love the little platoon we belong to in society, is the first principle (the germ as it were) of public affections. It is the first link in the series by which we proceed towards a love to our country, and to mankind.’ Few people would disagree with either writer on this point.

.

Many of those who have voted for demagogues and extremists have stumbled into this choice through disillusionment, alienation and the absence of stories that make sense of their lives. Most are not ill-intentioned. When they heard someone calling through the political void – someone who, instead of speaking in robotic platitudes, named their problems and promised solutions, however crude and unlikely those solutions were – they responded. A few years previously, they might have voted for parties that emphasised entirely different values.

.

The task of effective politics today is to reach across the divides and find common ground.
*
I have sketched out the basic components of a new story. But if it is to help to catalyse change, we need to know more. We need a deeper understanding of the problems we confront.

.

The central task of this book is to show how community can be rebuilt and how the politics of belonging might develop.

.

I see this book as just one of the many building blocks required to construct a new politics. It sits upon the foundational work of many inspiring people, and I hope it will encourage others to contribute to a new political architecture. Like all the best things in life, this is something we should build together.
***
Out Of The Wreckage: A New Politics for an Age of Crisis
by George Monbiot

.

get it from

Amazon.com

.

Out Of The Wreckage, A New Politics for an Age of Crisis – George Monbiot.

Nations and peoples are largely the stories they feed themselves. If they tell themselves stories that are lies, they will suffer the future consequences of those lies. If they tell themselves stories that face their own truths, they will free their histories for future flowerings.
Ben Okri, A Way of Being Free
***

.

You cannot take away someone’s story without giving them a new one. It is not enough to challenge an old narrative, however outdated and discredited it may be. Change happens only when you replace it with another. When we develop the right story, and learn how to tell it, it will infect the minds of people across the political spectrum.

.

Those who tell the stories run the world. The old world, which once looked stable, even immutable, is collapsing. A new era has begun, loaded with hazard if we fail to respond, charged with promise if we seize the moment. Whether the systems that emerge from this rupture are better or worse than the current dispensation depends on our ability to tell a new story, a story that learns from the past, places us in the present and guides the future.

.

Stories perform a fundamental cognitive function: they are the means by which the Emotional Brain makes sense of the information collected by the Rational Brain.

.

A string of facts, however well attested, has no power to correct or dislodge a powerful story. The only response it is likely to provoke is indignation: people often angrily deny facts that clash with the narrative ‘truth’ established in their minds. The only thing that can displace a story is a story.

.

Effective stories tend to possess a number of common elements. They are easy to understand. They can be briefly summarised and quickly memorised. They are internally consistent. They concern particular characters or groups. There is a direct connection between cause and effect. They describe progress – from a beginning through a middle to an end. The end resolves the situation encountered at the beginning, with a conclusion that is positive and inspiring.

.

Our minds appear to be attuned not only to stories in general, but to particular stories that follow consistent patterns.

.

In politics, there is a recurring story that captures our attention. It goes like this:

Disorder afflicts the land, caused by powerful and nefarious forces working against the interests of humanity. The hero – who might be one person or a group of people – revolts against this disorder, fights the nefarious forces, overcomes them despite great odds and restores order.

.

Stories that follow this pattern can be so powerful that they sweep all before them: even our fundamental values.

.

The two most successful political stories of the twentieth century – both of which have survived into the twenty-first – are diametrically opposed to each other, but follow the same narrative pattern.

.

The social-democratic story explains that the world fell into disorder – characterised by the Great Depression – because of the self-seeking behaviour of an unrestrained elite. The elite’s capture of both the world’s wealth and the political system resulted in the impoverishment and insecurity of working people. By uniting to defend their common interests, the world’s people could throw down the power of this elite, strip it of its ill-gotten gains and pool the resulting wealth for the good of all. Order and security would be restored in the form of a protective, paternalistic state, investing in public projects for the public good, generating the wealth that would guarantee a prosperous future for everyone. The ordinary people of the land – the heroes of the story – would triumph over those who had oppressed them.

.

The neoliberal story explains that the world fell into disorder as a result of the collectivising tendencies of the over-mighty state, exemplified by the monstrosities of Stalinism and Nazism, but evident in all forms of state planning and all attempts to engineer social outcomes. Collectivism crushes freedom, individualism and opportunity. Heroic entrepreneurs, mobilising the redeeming power of the market, would fight this enforced conformity, freeing society from the enslavement of the state. Order would be restored in the form of free markets, delivering wealth and opportunity, guaranteeing a prosperous future for everyone. The ordinary people of the land, released by the heroes of the story (the freedom-seeking entrepreneurs) would triumph over those who had oppressed them.

.

Because of their narrative power and a disastrous failure to develop effective countervailing stories, they have yet to be replaced. The facts changed, but our minds did not. If the rupture is to be resolved for good rather than for ill, we need a new story. Our challenge is to produce one that is faithful to the facts, faithful to our values, and faithful to the narrative patterns to which we respond.

.

Like many people who seek a generous, inclusive politics, I have been listening for such a story, waiting for its bugle call to resound, so that we can rally in the expectation of a better future. The wait continues. Most mainstream parties seek only to tweak existing narratives.

.

Despair is the state we fall into when our imagination fails. When we have no stories that describe the present and guide the future, hope evaporates. Political failure is, in essence, a failure of imagination. Without a new story, a story that is positive and propositional rather than reactive and oppositional, nothing changes. With such a story, everything changes.

.

In seeking to develop a restorative political story around which we can gather and mobilise, we should first identify the values and principles we want to champion. This is because the stories we tell propagate the beliefs around which they are built.

.

When stories are designed for a political purpose and circulated to advance this purpose, they have the power to change or strengthen our values. The most grotesque doctrines can look like common sense when embedded in a compelling narrative, as Lenin, Hitler, Georges Sorel, Gabriele D’Annunzio and Ayn Rand discovered. The failure to tell a new story has been matched by an equally remarkable omission: the failure to discern and describe the values and principles that might inform our politics.

.

Values are the bedrock of effective politics. They represent the importance we place on fundamental ways of being, offering a guide to what we consider to be good and worthwhile.

.

Our values tend to cluster around certain poles. Social psychologists sometimes describe these poles as intrinsic and extrinsic. Intrinsic values, in their purest form, are expressed as compassion, connectedness and kindness towards all living beings, including oneself. Extrinsic values are expressed as a desire for self-enhancement, through gaining, for example, status or power.

.

People with a strong set of intrinsic values and a weaker set of extrinsic values have high levels of self-acceptance, strong bonds of intimacy and a powerful desire to help other people. They are strongly inclined towards empathy, understanding, and independent thought and action. Research across seventy nations suggests that intrinsically motivated people are more open to change, have a stronger interest in universal rights and equality, and a stronger desire to protect and cherish both human beings and the natural world than more extrinsically motivated people.

.

Surveys of both children and adults reveal that the value which tends to be favoured above all others is what psychologists call ‘benevolence’, by which they mean protecting or advancing the welfare of people we know.

.

The smaller number of people at the extrinsic end of the spectrum are more attracted to prestige, status, image, fame, power and wealth. They are strongly motivated by the prospect of individual reward and praise. They have little interest in cooperation or community. People who emphasise these values tend to report higher levels of stress, anxiety, anger, envy, dissatisfaction and depression than those at the intrinsic end.

.

We are not born with these values. They are strongly shaped by our social environment, by the cues and responses we receive from other people, and by the stories we tell ourselves and each other. They are also shaped by the political environment. If people live under a cruel and grasping political system, they tend to normalise and internalise it, absorbing its dominant trends and translating them into extrinsic values. This, in turn, permits an even crueller and more grasping political system to emerge. If, by contrast, people live in a country in which no one is allowed to fall out of the boat, in which social norms are characterised by kindness, empathy, community and freedom from want and fear, their values are likely to shift towards the intrinsic end. This process is known as policy feedback, or the Values Ratchet.

.

If our purpose is to create a kinder world, we should embed within the political story we tell the intrinsic values that promote this aim: empathy, understanding, connectedness with other people, self-acceptance, independent thought and action.

.

Those who promote this story should know what their values are and be able to name them without hesitation or embarrassment. In doing so, they help to develop a social environment that fosters their aspirations, turning the Values Ratchet in the right direction.

.

Principles could be seen as the soil that derives from the bedrock of values. Political principles are the fundamental propositions at the heart of a political philosophy. In other words, they are a description of the world as we would like it to be. Again, they need to be expressed clearly and overtly, so that they can be explained and spread with pride and conviction.

.

A Statement of Principles

.

1.We want to live in a place guided by empathy, respect, justice, generosity, courage, fun and love.
2.We want to live in a place governed by judgements that are honestly made, supported by evidence, accountable and transparent.
3.We want to live in a place in which everyone’s needs are met, without harming the living world or the prosperity of future generations.
4.We want to live in a place in which the fruits of the work we do and the resources we use are fairly and widely distributed, in which shared prosperity is a general project, and the purpose of economic life is to enable universal well-being.
5.We want to live in a place in which all people have equal rights, in practice as well as in theory.
6.We want to live in a place in which all people can feel secure, confident, safe and cared for.
7.We want to live in a place in which, regardless of where they were born, everyone has a neighbourhood of which they feel proud, where they can freely participate in the life of the community.
8.We want to live in a place which, proudly and consistently, supports people in need of help, including those fleeing from danger and persecution abroad.
9.We want to live in a place in which a thriving natural world provides a refuge both for rich and abundant wildlife and for people seeking relief from the clamour of daily life.
10.We want to live in a place whose political system is fair and fully representative, in which everyone has a voice and every vote counts, and whose outcomes can neither be bought nor otherwise engineered.
11.We want to live in a place in which decisions are taken at the most appropriate level, to enhance democratic participation and connection.
12.We want to live in a place in which everyone has access to the information needed to make meaningful democratic choices, and in which political debate is honest, accessible and inclusive.
13.We want to live in a place in which education is a joyful process, encouraging children of all abilities to engage with enthusiasm, and adults to continue learning throughout their lives.
14.We want to live in a place in which good housing, fast and effective healthcare and a healthy, sufficient diet are available to everyone.
15.We want to live in a place that helps to build a safe, prosperous and resilient community of nations.
16.We want to live in a place that is open to new ideas and information, and that values creativity, research and discovery.

.

A set of principles, important as it is, does not constitute a story. Nor can all the principles I have listed be incorporated into a story – they cover too much ground to create a coherent or satisfying narrative. But in seeking to develop one, we should be constantly aware of what we are trying to achieve. If the story succeeds, is it likely to advance these principles or clash with them? Is the political environment it creates likely to nurture the society they describe?

.

***

.

Out Of The Wreckage: A New Politics for an Age of Crisis
by George Monbiot

.

get it from

Amazon.com

.

Don’t let the rich get even richer on the assets we all share – George Monbiot.

Are you a statist or a free marketeer? Do you believe that intervention should be minimised or that state ownership and regulation should be expanded? This is our central political debate. But it is based on a mistaken premise.

.

Both sides seem to agree that state and market are the only sectors worth discussing: politics should move one way or the other along this linear scale. In fact, there are four major economic sectors: the market, the state, the household and the commons. The neglect of the last two by both neoliberals and social democrats has created many of the monstrosities of our times.

.

Both market and state receive a massive subsidy from the household: the unpaid labour of parents and other carers, still provided mostly by women. If children were not looked after – fed, taught basic skills at home and taken to school – there would be no economy. And if people who are ill, elderly or have disabilities were not helped and supported by others, the public care bill would break the state.

.

There’s another great subsidy, which all of us have granted. I’m talking about the vast wealth the economic elite has accumulated at our expense, through its seizure of the fourth sector of the economy: the commons.

.

That it is necessary to explain the commons testifies to their neglect (despite the best efforts of political scientists such as the late Elinor Ostrom). A commons is neither state nor market. It has three main elements. First a resource, such as land, water, minerals, scientific research, hardware or software. Second a community of people who have shared and equal rights to this resource, and organise themselves to manage it. Third the rules, systems and negotiations they develop to sustain it and allocate the benefits.

.

A true commons is managed not for the accumulation of capital or profit, but for the steady production of prosperity or wellbeing. It belongs to a particular group, who might live in or beside it, or who created and sustain it. It is inalienable, which means that it should not be sold or given away. Where it is based on a living resource, such as a forest or a coral reef, the commoners have an interest in its long-term protection, rather than the short-term gain that could be made from its destruction.

.

The commons have been attacked by both state power and capitalism for centuries. Resources that no one invented or created, or that a large number of people created together, are stolen by those who sniff an opportunity for profit. The saying, attributed to Balzac, that “behind every great fortune lies a great crime” is generally true. “Business acumen” often amounts to discovering novel ways of grabbing other people’s work and assets.

.

The theft of value by people or companies who did not create it is called enclosure. Originally, it meant the seizure – supported by violence – of common land. The current model was pioneered in England, spread to Scotland, then to Ireland and the other colonies, and from there to the rest of the world. It is still happening, through the great global land grab.

.

Enclosure creates inequality. It produces a rentier economy: those who capture essential resources force everyone else to pay for access. It shatters communities and alienates people from their labour and their surroundings. The ecosystems commoners sustained are liquidated for cash. Inequality, rent, atomisation, alienation, environmental destruction: the loss of the commons has caused or exacerbated many of the afflictions of our age.

.

You can see enclosure at work in the Trump administration’s attempt to destroy net neutrality. Internet service providers want to turn salience on the internet – now provided freely by a system created through the work of millions – into something you have to pay for. To ensure there is no choice, they have also sought to shut down a genuine internet commons, by lobbying states to prohibit community broadband. In the crazy plutocracy the US has become, four states have made this form of self-reliance a criminal offence, while others have introduced partial bans.

.

Communities should be allowed to take back control of resources on which their prosperity depends
Another example is the extension of intellectual property through trade agreements, allowing biotech companies to grab exclusive rights to genetic material, plant varieties and natural compounds. Another is the way in which academic publishers capture the research freely provided by communities of scientists, then charge vast fees for access to it.

.

I’m not proposing we abandon either market or state, but that we balance them by defending and expanding the two neglected sectors. I believe there should be wages for carers, through which the state and private enterprise repay part of the subsidy they receive. And communities should be allowed to take back control of resources on which their prosperity depends. For example, anyone who owns valuable land should pay a local community land contribution (a form of land value tax): compensation for the wealth created by others. Part of this can be harvested by local and national government, to pay for services and to distribute money from richer communities to poorer ones. But the residue should belong to a commons trust formed by the local community. One use to which this money might be put it is to buy back land, creating a genuine commons and regaining and sharing the revenue. I expand on this idea and others in my recently published book Out of the Wreckage.

.

A commons, unlike state spending, obliges people to work together, to sustain their resources and decide how the income should be used. It gives community life a clear focus. It depends on democracy in its truest form. It destroys inequality. It provides an incentive to protect the living world. It creates, in sum, a politics of belonging.

.

To judge by the speeches at this week’s Labour conference, the party could be receptive to this vision. The emphasis on community and cooperatives (which in some cases qualify as commons), the interest in broadening ownership and fighting oppressive trade agreements, point towards this destination.

.

I hope such parties can take the obvious step, and recognise that the economy has four sectors, not two. That’s the point at which it can begin: the social and environmental transformation for which so many of us have been waiting.

.

The Guardian

.

New Zealand Election. “It’s the Economy, Stupid!” – Bryan Gould. 

It was Bill Clinton who identified the main issue in his election campaign as “It’s the economy, stupid”.

And so it almost always is, and New Zealand’s 2017 election campaign will be no different.

Of course other issues will matter too, but it is the economy, and the impact its fortunes will have on individual voters, that will usually have the greatest impact on the greatest number.

That is not usually seen as a plus for parties of the left. It is usually thought to the extent that it is almost an article of faith for some voters, notwithstanding the evidence of their own experience, that parties of the right are best equipped to manage the economy, and that other contenders for power necessarily start therefore at a disadvantage in that regard.

So Jacinda Ardern showed commendable courage when she devoted part of the time she had available in the first leaders’ debate to an economic issue.  That issue was productivity, or the lack of it.

Many experts, whether on the left or right, will agree that productivity growth is the essential factor in a successful economy. And most will say that our record in this regard is not good enough.

Why does it matter? Because it measures how much each individual worker across the whole economy produces on average. If our productivity gains are sluggish, as they have been, and fall behind those of other countries, we slip further down the international ladder in terms of living standards and prosperity.

We have been able to increase national output over recent years, but that is almost all down to taking in more immigrants. That produces a larger cake overall, but it does nothing to raise individual living standards, indeed, the reverse, since there are more slices to be cut from only a slightly bigger cake and we have to share our existing capital equipment with that greater number.

So, if productivity growth is the only sure way of raising living standards and providing more resources to spend on essentials, like housing, health and the environment, why have we failed to produce a better performance?

Because, as Jacinda Ardern pointed out, we have failed to invest in the new skills, new techniques, and new equipment and technology needed to increase the productive capacity of each member of the workforce.

We have failed to provide young people as they join the workforce with the skills, the training and apprenticeships, that are needed in a modern and competitive economy. We have handicapped our workforce by saddling large numbers with poverty (engendered by inequality) so that they have to contend with poor housing, health care and educational opportunities.

We have failed to provide incentives so that the necessary investment in new productive capacity, especially in research and development, and new equipment, is made.

And we have refused, for ideological reasons, to use the power of government to make good all these deficiencies.

Perhaps less obviously, we have failed to do what more successful economies do as a matter of course, move resources to the growth points in the economy. Where are those growth points? They should be, and almost invariably are, in the export sector, which is where the biggest markets are and where economies of scale, and therefore productivity gains, can most easily be achieved.

So, has our focus been, as it should, on improving our export performance and improving our export returns?  No, quite the contrary. We have insisted on running an economic policy characterised by high interest rates (in international terms at least) and an overvalued dollar.

As a result, our exporters face a constant head wind, because they have to charge a premium on everything they sell. And that makes it difficult both to compete for sales and  to earn a proper return on what they do sell. Just ask the dairy farmers or the Manufacturers and Exporters Association what the high dollar has done to them. Little wonder that the return on investment is so low that there is little to spend on raising productivity.

These failures are the government’s Achilles heel in managing the economy.  It seems Jacinda Ardern picked the right issue to focus on.

Bryan Gould, 1 September 2017


If you think Basic Income is “free money” or Socialism, think again – Scott Santens. 

First, saying basic income is socialism is as absurd as saying money is socialism. It’s money. It’s all it is. What do people do with money? They use it in markets. In other words, basic income is fuel for markets. Markets are a wonderful invention that serve to calculate via a massively distributed computer comprised of people, what goods and services should be made, using what, going where, by whom, of what quantity, etc. It’s an incredible act of decentralization built upon supply and demand signaling.

When someone has money and wants to buy something, that is a demand signal. Businesses meet this signal with supply. Basically, buying is like voting. We vote on what we want using money as our ballots, and we do this over and over and over again, every day. Now imagine someone has no money in a system built around markets. How do they vote? They can’t. The market thus confuses this lack of a vote as a “no” vote. These two signals are of course very different. One is zero and one is null, but markets don’t know that. They can’t differentiate between them. This means markets containing people who don’t have enough money to signal their demand can’t function properly.

continued at ScottSantens.com

.