Publications
Partners
The global economy that affects us all is based on lies; on the distortion and misrepresentation of the views of usually much-lauded economists. It seems crucial to drive this point home as we continue to be told that greater productivity, and the up-skilling and re-skilling of workers, will vanquish poverty and unemployment.
In a world of surplus productive capacity, let alone surplus production, along with rapidly increasing automation, many within the labour movement recognise that this is clearly nonsense. But few seem to realise that the rationale for the system — that unfettered trade is to the benefit of all — is based on a sometimes-severe distortion of the facts.
As a result, we are constantly lied to – often, perhaps, by wilfully ignorant people. Or those unwilling or uninterested in seeking out the roots of the economic crisis the world now faces.
Laissez-faire trade?
This system can be sourced to the sometimes gross and often conscious distortion of the work of Adam Smith, perhaps the most influential and quoted political economist of the past 200 years. He is widely hailed as the man who did most to support laissez-faire trade without regulation or intervention of any sort.
Only he did not. Adam Smith specifically advocated a range of state interventions in the economy, including the regulation of banks. And he supported the moves taken by the British government in 1720 to restrict or ban shareholder companies on grounds that they were inherently prone to corruption.
Much more importantly, Adam Smith held that value was a product of labour. This labour theory of value was taken up by Karl Marx and is the basis of the economic theories of Marxism. It holds that the basic value accorded to any product or service is determined by the amount of "socially necessary" labour taken to produce it.
Kenneth Arrow, a Nobel economics laureate, who worked 200 years later, is also quoted as a supporter of free and unfettered trade being to the benefit of all. Like Smith, he would probably be spinning in his grave, were he to see how his work has been used and abused.
In an abstract mathematical model, Arrow showed that unfettered free trade could be fair and to the benefit of all. However, "only in an ideal world".
Such a world does not exist in reality.
And, in a comment that should have strong resonance today, especially given evidence at the current Zondo inquiry, Arrow added: " In a capitalist society, economic power is very unequally distributed, and hence democratic government is inevitably something of a sham."
Living the lie
So we — owners, managements, and workers — together live a lie that is overwhelmingly destructive, but beneficial only to the few at the expense of the many. As a result, democracy — rule by the people, for the people — continues to be an illusion.
As Kenneth Arrow also noted: "In a system where virtually all resources are available for a price, economic power can be translated into political power by channels too obvious for mention." In other words: he who pays the piper ultimately calls the tune.
As further justification for maintaining the present system, those who dogmatically support neo-liberalism also, equally dogmatically, present only one alternative: the levels of state control exercised in the former Soviet Union and other self-proclaimed "socialist" states.
However, the fusion — at whatever level — of the state and capital amounts to forms of what was termed state socialism when, in 1883, elements of social welfare were introduced in Germany. But this was done to appease workers who were demanding the extension of political and economic democracy under the banner of socialism.
Stuck with the system
This is all a history we should be aware of as we try to come to terms with an ultimately destructive economic system justified by lies and distortion. But it is a system we are, for the time being, stuck with.
And while understanding the problem may not bring about an instant cure, it may stop what seems to be a headlong rush toward greater crisis and suffering. The myth of a free and fair global market needs to be shattered and intermediate steps can be taken to at least slow down the rush to further catastrophe.
Here a leaf can be taken from the labour movement book: insist, for example, that all state contracts be awarded on a labour-intensive basis. Or insist that local producers be helped by halting the dumping of everything from poultry to biscuits and canned goods onto the domestic market.
Small steps, but at least steps in the right direction, in terms of job creation and the alleviation of poverty. A better world is clearly possible, only not under the present economic system.
* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER
