Economics for Everyone: Second Edition

This week marks the official publication release of the second edition of Economics for Everyone: A Short Guide to the Economics of Capitalism.  In this blog I explain my motivations in writing the book, and promoting critical economic literacy more generally; the commentary was originally published by Pluto Books (the international publisher).  The book is released in Canada by the Canadian Centre for Policy Alternatives, and is available for purchase here: http://economicsforeveryone.ca/buy-book/. The e4e website contains many free resources and teaching materials for anyone who wants to undertake their own course in popular economics.

The first edition of my book, Economics for Everyone, was published by Pluto Books and the CCPA in June, 2008.  In describing the evolution of modern neoliberal capitalism, it highlighted the fragility of extreme financialization and speculation.  Within just three months, that warning was ratified in spectacular fashion by the collapse of Lehman Brothers, and the onset of the worst financial meltdown in global capitalism since 1929.

Seven years later, the publishers have now released the second edition of Economics for Everyone (revised and updated, with new chapters on inequality, racism and discrimination, and the global financial crisis).  Yet incredibly, the global economy is still writhing through the painful after-effects of that much-earlier meltdown.  Indeed, the new book comes out just as the EU’s stubborn attempt to impose its failed austerity vision on Greece (and much of the rest of Europe) is reaching the breaking point: threatened both by democratic popular resistance (in Greece and elsewhere) and by economic common sense.

No-one can predict how the European drama will unfold next.  Or how other after-effects of the 2008-09 crisis (such as the coming rise in U.S. interest rates) will shake still-fragile economies around the world.  What is certain, however, is that globalized, financialized, polarized capitalism is incapable of finding the stable and efficient equilibrium fantasized by conventional neoclassical economists.  Repeated outbreaks of credit-fueled, speculative exuberance are inevitably followed by panic, retrenchment, and recession.  This will keep happening.  We don’t know precisely when the next crisis will occur, nor its precise proximate cause.  But we do know another crisis will occur, with 100 percent certainty.  And we do know that the 99 percent of humanity who do not possess enough financial or business wealth to support themselves without actually working for a living, will be asked again to bear the brunt of the subsequent pain and dislocation.

In this context, I suppose it is fitting (if tragic) that this new edition is being released into an economic environment that is still marked by fear, fragility, and hardship.  And this highlights a key theme of Economics for Everyone – and one of my key personal motivations as an economist whose career has been rooted in trade union and social justice settings (rather than in academia or business).  Things will not get better for working people, if only the economy could recover, deficits be eliminated, and stability reattained.  Because this pattern of repeating crisis and growing polarization is hard-wired into the DNA of modern capitalism: an economic system organized around the self-serving decisions of a surprisingly small and privileged segment of society.  This crisis, no different from the last or the next, was not an unpredictable, unpreventable, one-off occurrence: a “black swan” event.  Rather, it was the predictable, preventable result of an economy that puts the interests of financial wealth above the interests of the vast majority in working and supporting themselves.  And it will happen again, unless and until we change the fundamental rules of the game.

The Canadian author and activist Naomi Klein coined the term “shock doctrine,” in her 2007 book of the same name.  She showed how ruling elites regularly take advantage of moments of fear and confusion, arising at moments of economic, social, or even natural disaster, to enforce painful changes that they were preparing for years – but that most people would not tolerate under “normal” circumstances.  Milton Friedman himself invented this doctrine when he wrote (in 1982):

“Only a crisis actual or perceived produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically Impossible becomes politically inevitable.”

Not surprisingly, the still-rolling global financial crisis has provided another textbook case of the application of shock doctrine.  Far from acknowledging their failed policies, let alone their personal responsibility, for the crisis and its consequences, global elites have become more aggressive in their effort to privatize public assets and services, slash income supports, and dismantle labour market protections.

As always, the austerity is justified with the standard excuse that society “just can’t afford” anything else.  And the ideology of scarcity which underpins conventional neoclassical theory is a natural analog to the dismal austerity which dominates (to varying degrees) policy across most of the advanced capitalist world.  But, of course, both parts in this ideological duet are false.  It is a lie that economies naturally operate at the edge of their supply constraint, with efficient markets constantly allocating all available resources (including labour) to their most productive uses.  And it is a lie that modern real-world economies cannot afford anything other than austerity.  There are hundreds of millions of unemployed in the world, and billions more doing precarious, unproductive, insecure jobs.  If these desperate people were given the opportunity to perform decent work, with decent tools and training, and decent standards and compensation, global output and incomes would grow enormously.  And governments could painlessly collect all the revenues they need to fund essential programs and infrastructure – yet after-tax incomes would still be higher thanks to all this new work.

In the long years of this so-called “Great Recession,” I have thought often about the last time global capitalism was mired in a seemingly incurable funk: the 1930s.  Then, too, repeated tentative recoveries always seemed to peter out.  Old-fashioned economic ideas (about monetary integrity and fiscal prudence) made things worse.  And ten years after the initial crash, the world economy was still stuck in depression.

What suddenly cured the problem?  World war, of course.  Not the battle itself (which was horrifically destructive to the economy as well as to humanity).  But the fact that the all-encompassing fight against fascism forced societies to adopt a radically different mode of economic decision-making.  Now things were happening in the economy not because they were profitable for private companies (although many of them were, and lucratively so).  Rather, economic activity was spurred by an overarching public demand to allocate every available resource to a crucial collective priority (defeating fascism).  In so doing, unemployment fell to zero (and women were recruited in large numbers into formal paid work), incomes were generated, and taxes collected.  Despite the sacrifices of the war economy, real incomes rose, nutrition improved, economic equality was boosted, and (for those on the home front, anyway) life expectancy increased.  Planning and social need suddenly outranked private profit as the key criteria of economic decision-making.

It does seem ironic that a war should improve economic and living conditions for large numbers of people.  But in fact it is the irrationality of the capitalist economy that is highlighted by this history.  So I conclude, only half-jokingly, that since war solved the last decade-long depression… why don’t we do it again?  We could declare war on pollution and poverty.  (After all, by some reckonings global climate change poses as existential a threat to humanity as did global fascism in the 1940s.)  We would marshall every available resource for the battle.  We would put people to work (building low-cost housing, public transit systems, clean energy grids, and more), pay for all those things, and still end up with higher incomes and better living standards (including the non-monetary benefit of living in a more sustainable environment).

It is clear from this history (and others) that unemployment, stagnation, precarity, and austerity are not inevitable.  They are the consequence of conscious choices by economic elites more concerned with protecting their privilege than with “growing the pie.”  We possess the collective capacity to work and produce, and hence “pay for,” the consumption and services that we need for a decent life.  The biggest hurdle may be political, not economic.  How can we inspire, prepare, and mobilize large numbers of people into a common cause that puts people and the planet first on the economic pecking order, and fights for a world of sustainable full employment?

I believe that a central ingredient in our strategy must involve a deliberate strategy to build popular economic literacy among our communities and movements.  For starters, we must have our own analysis of the current crisis: what happened, why it happened, what can be done to insulate working and poor people from its effects, and how to prevent it from happening again.  We must have enough knowledge, and enough confidence, to reject false claims about why we are suffering, and what we can and can’t do about it.

And then we must go further.  We need an inclusive, accessible and activist system for training our leaders and activists in the broader fundamentals of critical economics and political economy.  And we need to do it systematically and energetically.  Every social movement (unions, anti-poverty groups, equality campaigns, environmentalists, and others) needs to build this kind of education work into their overall movement-building strategy.  This will strengthen our collective understanding of how the specific challenges we face stem from a common source: the structures and dynamics of financialized, globalized, aggressive capitalism.  That understanding, in turn, will strengthen our collective ability to resist the regressive demands of employers and governments, and to fight for progressive change – both incremental and transformative.

Our members and activists need a different way of looking at the economic world, a different and more critical understanding of what the economy is, how it works (and doesn’t work), and who works (and who doesn’t work).  We want them to be able to discount the pompous and self-serving prognostications of professional economists – the overwhelming majority of whom (outside of academia) are employed by institutions (banks, corporations, business associations, and governments) with a vested interest in the status quo.  We want our members and supporters to know that economics is a contested discipline; that there is nothing ‘neutral’ about economics; that one’s view on economics depends on one’s position in the economy.  Finally, we want our movements to have an informed confidence in alternative policies.  They need enough critical knowledge about real-world economics to reject the claim ‘there is no alternative’ – whether that’s to globalization, austerity, or capitalism itself.  And they need enough confidence in the viability and legitimacy of the alternatives we are fighting for to sustain and empower our activism.

In short, progressive activists need our own ‘story line’ about the economy and economics.  Critical-thinking economists can help to build this story line by translating their more formal and technical research on the workings and failings of capitalism into more popular and accessible training initiatives, resources and materials.  Indeed, I wish that more left academic economists would invest time and creativity to respectfully share their knowledge with the activist movements that hunger for economic alternatives.  But the challenge of developing a mass critical consciousness about economics requires more than inviting progressive economics professors to teach occasional seminars.  We need a systematic and high-priority program to build awareness about economics and political economy among our leaders, activists and constituents, to prepare them to intellectually resist false models and false solutions, and to empower their own analyses and demands.  I hope that Economics for Everyone, and the associated free resources and curriculum materials available at www.economicsforeveryone.ca, can make a contribution to that goal.