Everything that is being said, written, and discussed throughout the financial press, mainstream media, and throughout closed door discussions between business leaders and politicians are 180 degrees wrong. They have swallowed a bill of goods that had been invented by neo liberal economists which legitimizes theft on the grandest of scales. And it is you they are stealing from. That is not to say the majority of these 'experts' are necessarily insincere or malevolent. We need to accept a fact that appears absurd at first. And that fact is; when it comes to economics, the stupidity of our political and business 'betters' is mind boggling.
To say that reading the financial press and trying to follow the machinations of economics is confusing is more than an understatement. It is an exercise in futility. They, the wizards and masters of the financial universe, really don't know what they are talking about. What is crucial is that we, the people, don't turn our backs on the fundamentals of political economy just because 'they' have taken the art of scam to whole new level of confusion and bewilderment. It is important that we look at, examine, and debate the fundamentals of what our material world consists of and how it's made.
The Value of Work
Everything around you that you own and use is the result of effort of a vast army of unseen workers. The material reality we live in and with is not only the basis of wealth, it is wealth. The great attribution error of our economic gurus is that wealth emanates 'from' the top and finds its way to the rest of us. In reality, the very genesis of wealth starts in the process of work. The erroneous assumption that we need thieves and parasites to make it all possible has us all in a bind with nowhere to turn. Maintaining this assumption has devastating consequences for us as societies and as individuals. We need to pay attention.
We find ourselves in the midst of a grand Globalization experiment gone bad. The promise is, it will get much worse. It is an economic experiment penned by Milton Freidman of the Chicago School of Economics, Ludwig von Mises and Freidrich Hayek of Austria, French economist Jean Baptiste Say, and generally the authors of what we call neo liberal economics.
On the question of value, these marginalists have parted company with Adam Smith and David Ricardo who knew that analysis of the role of work itself was central to scientific economic study to understand what it is that determines value. They tackled questions about what it is that encourages wealth to grow and what determines its distribution between classes in society. They saw an objective measure of value as a precondition for coming to terms with these problems. Smith suggested it was to be found in labour. Ricardo built his work from these notions and they developed the idea of use-value as opposed to exchange-value. This was to be elaborated on later by Karl Marx.
There is no doubt that that the shallow focus of the marginalists and the concept of marginal utility which serves as their basis for economic theory is valid on a micro level. It suits the interests of business. But when we consider the multiple confounding factors of the larger economy, marginal utility curves do not and cannot take us where we need to go. It is a superficial and vulgar view of economics. We must go deeper to discover what it is that determines value. We must go to Ricardo, Smith and for more depth, Marx.
The Limits of Capitalism
Aside from a passionate revolutionary condemnation of capitalism as an evil entity, we must consider the limits of what it can achieve as a motivator and player in our societies. The marginalists and capitalists themselves will not even suggest that it is meant to provide jobs, care for the poor, or bring the majority to a level of material satisfaction. It not only won't do those things, it can't do those things. It is limited in its utility and it has been unfairly cast into a role that it cannot live up to. Moreover, the notion that the so called 'market' will produce what is best for society is simply wrong. For instance, the vital needs of citizens such as medicine or health care, housing, food, whatever the case may be, may be lacking to a small or large degree. The easiest and most profitable way to invest however may be in the production of play stations or in buying and manipulating stocks, bonds, commodities, currencies and so on. (For the sake of staying with more grounded and less ethereal concepts, let us stick with the manufacture of commodities.) If play stations sales will result in the most profit, then research, energy, and investment will focus on play station development, manufacture, and distribution. Research and development related to human beings vital needs is relevant if profits can be made.
Capitalism goes beyond the possibility of marginalizing human needs. It is often an impediment to human needs and the security of human health. Again, this is not the fault of capitalism per se. It is a problem of misattribution and overdependence. As we can see in the bizarre health care configuration in the United States, if there is a way to make a buck, your needs will be served and served well. If not, good luck with the mirage Americans rely on for public health.
Capitalist motives are very good at compelling the production and provision of trinkets, shiny toys, and killer hamburgers. It is abysmal as an engine for the provision of human needs. It is our collective dependence on it that is the crux of the matter. It runs governments and rules the world. It even controls us down to the most basic elements of our lives.
We need to criticize and condemn our dependence on this rather simplistic method of making a buck; this sleight of hand. Like all things, overdependence leads to disaster. Like dependence on heroin, it will sicken and eventually kill the host body. It had been a solution, a source of energy for production and material security and has evolved to become our overarching collective nemesis. It has become a social sickness and has the characteristics of addiction.
Our Wealth is Our Work
Supply and demand graphs help explain the price of something in a given time or place but it does not explain why things have the exchange value they have. Adam Smith's labour theory of value has far more relevance to our understanding of how we value commodities. According to Smith, the exchange value of commodities is determined by the amount of labour measured in working hours necessary to make them (given current levels of technology). Bicycles sell for less than cars in part due to the fewer hours to making bicycles than cars. In the same period of time, a person may make many bicycles (notwithstanding technological factors) but only one car. Smith and other economists tested this theory by comparing prices of commodities with the necessary labour time needed to produce them. They found that while it does not explain the exact price of things, it does explain why they exchange for their approximate prices.
This theory takes the mystery out of the concept of value by relating exchange value to human labour. Consider the fact that the basis of capitalist economies is surplus value, that is, the hours of labour beyond what the worker is paid for and the value that is appropriated by the capitalist; that this is the basis of the wealth of capitalists. When we consider what can be done with labour power in terms of developing priorities, goods and services, we may then consider possibilities beyond the poor and short sighted rationality of the marginalists. We might abandon the superstitious nonsense that the theft of the value that is produced by labour as an indispensable ingredient to economic success. In other words, we can afford to abandon the notion that exploitation, greed, and theft are necessary evils for societies to function well. At that point, we may go beyond the limitations as well as the financial tyranny of capitalism itself.
The upshot is this: everything you see around you in terms of material goods is real, tangible wealth. You computer, you stove, your television are tangible items that make your life better. Money is but a means of getting them. It is not the actual wealth itself. And each and every one of the items that make your life better that you are willing to pay for is probably some form of modified rock or energy; modified by work. We can, minus our collective addiction, provide all the goods and services we all need and then some.
What Happened to the Golden Age of Capitalism? Not so long ago the trajectory was upward. The sky was the limit. Wages were increasing, social programs were being implemented everywhere, material deprivation seemed a thing of the past. What happened to the American Dream? The answer is, that is what it was; a dream. It was based in gross exploitation of the capitalist hinterland (formerly known as the Third World) where starvation and brutal oppression were essential ingredients to our soft lives. It was also based on the clever wealth sharing mechanisms of John Maynard Keynes which, due to the diminishing rate of profit (that's another story) as well as the need for capital to grow, are no longer a realistic option.
At this point capitalism has grown beyond Keynes. Keynes policies and recommendations have become archaic. Keynes provided capitalism with a longer shelf life than classical unbridled capitalist anarchy could have expected otherwise. But now, we're back to square one.
It also could be argued that defense spending has done more for the overall health of capitalism in the 20th century than Keynes distribution policies. It certainly cultivates and maintains hegemony. The United States government doesn't spend more than all nations on earth to save women from the Taliban.
At this point we can see that advanced capitalism is not living up anything close to stability or equilibrium. Capitalism is showing itself to be an anarchistic loose hose, flipping and whipping depending on the mood of speculators. Rather than stability, the economy is subject to the whims of a bizarre grand global casino game. Furthermore, it is becoming clear that what is good for profiteers is not good for the general population and vice versa. The stock market booms with news of bailouts or quantitative easing (printing money) for the wealthy or, when announcements of austerity measures against the general population are made.
The neo-classical experiment is on and we are in the midst of it. The patterns that are emerging looking grim. And from these patterns and hardships an awareness of the true nature of capitalism is growing.
A specter is haunting the planet…