Summer reading! Review of Stanford’s second edition of Economics for Everyone

Looking for something to take with you to the cottage, the beach or the cafe?  Check out  Jim Stanford’s 2nd edition of Economics for Everyone.  Here’s a review by Peter G. Prontzos first published in the Vancouver Sun.

Book review: A fresh look at the dismal science of economics

Economics for Everyone:A Short Guide to the Economics of Capitalism (2nd Ed.)

By Jim Stanford

Pluto Press

The global economy is still recovering from the “Great Financial Crash” (GFC) of 2008. Understanding the causes of the meltdown is not a simple task, and devising a more stable, prosperous, and egalitarian alternative is even more difficult. That’s why it is fortunate that Jim Stanford has re-written his groundbreaking study, Economics for Everyone.

Stanford explains how the economic collapse was the direct result of “financial products and practices that were unethical, unstable, and unsustainable”, and which were unregulated by governments. Indeed, in many cases, it was the earlier deregulation of Wall Street — which attended the rise of neo-liberal capitalism — that allowed the financial sector to make such risky moves in the first place.

The author makes the links between the GFC and the imposition of “austerity” demands by governments, whose real agenda is, “to claw back public pensions, reduce income security … drive down wages … and privatize more public assets.” (Greece is perhaps the best-known victim of these counter-productive and inhumane policies).

This market failure, along with the growing gap between the one per cent and everybody else, exemplifies one of the most important points in this discussion: that economic decisions are not necessarily based on an objective “science.” Instead, they are also political choices that societies make.

For instance, it is generally agreed that unemployment could be lowered significantly if the Bank of Canada and the government were not so determined to keep the rate of inflation to around two per cent, which is what giant corporations usually prefer.

On the other hand, many — perhaps most — Canadians would prefer economic policies which would create more jobs (as well as giving a higher return on investment such as RRSPs), even if another result was a slightly higher rate of inflation.

Stanford explains that one of the benefits of high levels of unemployment for corporations is that working people are more likely to tolerate lower wages and more stressful working conditions if they know that there are very few decent jobs available.That’s what Stanford means when he argues that there are indeed alternatives, depending on who is calling the shots. “The economy embodies conflicting interests between different groups,” he notes. Stanford himself, who holds a PhD in economics, is employed by the Unifor, Canada’s largest private sector union, with more than 305,000 members across the country. (He is also a regular panelist on CBC TV’s, The National).

The main goal of his book is to provide exactly what the title implies: a way to understand how the economy works because we are so profoundly affected by it. Fortunately, he explains, “you don’t have to be an economist to know a lot about economics.” Which is not to say that it is an easy read. It takes both time and thought to work your way through its 400 pages. It is, however, clearly written and includes many informative charts, pictures, and figures to explain its ideas and show how the various economic elements interact with each other.

A rather unique feature is the invitation to take part in an interactive dialogue with the author. The reader is invited to weigh in on a number of topics, and some contributions are posted on his website. (Check it out: www.economicsforeveryone.com).

As impressive as this book is, there are a few aspects which could be improved. For example, Stanford rightly explains that Adam Smith celebrated the “deregulation of markets … and policies to protect the profits and property rights of early capitalists.”

It would be helpful to mention that Smith also distrusted capitalists, felt that this economic system is unjust, and was appalled by the way workers were treated. In fact, Smith wrote that most people who have to sell their labour in order to make a living would be psychologically damaged “unless the government takes pains to prevent it” by mandating decent pay and working conditions.

Stanford and Smith (and Marx!) also agree on what is known as the “labour theory of value: “Productive human activity is the only force that adds value to the wealth we were given by nature.”

It follows, then, that those who work the hardest and produce the most value — sweatshop workers, perhaps, and farmers, and child care providers, for instance — should reap the largest rewards.

In contrast, Stanford writes that: “The financial industry is not, in itself, productive,” and he provides a number of examples to support his case.

He ends by urging “workers and poor people … to organize” and fight for a fair distribution of the wealth that they have created.

This book does a commendable job of explaining the workings of our economy, so if you don’t have the time or inclination to take economics courses, you can learn a lot from this volume.

On the other hand, if you are studying mainstream economic theory, this book may be especially valuable, as it provides an alternative perspective to the hegemonic values of orthodox neo-liberalism.

Peter G. Prontzos teaches Political Science at Langara College.