Occupy Economics, Occupy the Economy

by Hank Van den Berg
UNL Professor of Economics

I am writing this column on the airplane while returning from a conference at the University of Massachusetts organized by the “International Coalition of Associations for Pluralism in Economics” (ACAPE). This is an idealistic organization that brings together economists from a wide variety of fields and perspectives in order to help the profession escape from the narrow cultural bias that currently dominates economic thinking. This organization is the polar opposite of the mainstream economics organizations which mostly propound the same failed ideas that led to the Great Depression, the 2008 Great Recession—and the next failure of our economic system. I found it stimulating to experience the defiant mood among these economists from the Marxist, libertarian, institutional, historical, structural and other heterodox schools of economic thought. Their defiance no doubt stems from the fact that many of them foresaw the current economic crash and recession.

Now, while mainstream economists continue to ignore reality and ‘cautiously’ suggest that economic recovery is underway, the economists assembled in Amherst were not so blind. They saw that unemployment is not getting better, government debts are still growing, investment is insufficient to maintain critical infrastructure, education was being cut at all levels, incomes were not growing for most people, and carbon emissions were still rising rapidly. They were not afraid to point out that the economic system has failed. These heterodox (non-orthodox) economists accordingly voted overwhelmingly to “occupy economics.”

The System We Have, and the Culture That Supports It

One economist, Jerry Ravetz, used the term “elite folk science” to describe how mainstream economics “can have functions other than those of the increase of positive knowledge.” He accuses mainstream economics of providing “reassurance for a general worldview” often called neoliberalism. The well-known economic historian Robert Heilbroner was more to the point: “The best-kept secret in economics is that economics is about the study of capitalism.” Economics graduate programs instill in their students a specific cultural bias that points them to what questions to ask, the methods with which to answer those questions, and how to present their answers. Graduate programs often explicitly state their mission as teaching their students ‘to think like economists.’ This phrase has become a code word for ‘adhere to the orthodox mainstream school of thought.’

Mainstream economics today is a creature of this ‘neoliberal culture.’ Concocted from a skewed interpretation of ideas from the Enlightenment, this culture views an ideal society as one where individuals pursue their own interests in a laissez-faire economic system. Neoliberals want to limit the role of government and establish private property as the basis of economic organization. The term ‘capitalism’ is usually used to describe the neoliberals’ preferred economic structure. Operating as a type of religious belief, the neoliberal paradigm represents the economy as a stable system of self-adjusting markets that, ‘like an invisible hand,’ translate self-centered individual behavior into socially optimal outcomes. Those quoted words were written by Adam Smith in 1776, and although he actually never emphasized the idea, today’s mainstream economists in government, business, finance, and academia take the invisible hand as their guiding principle.

Actually, it’s easy to see where the belief in the invisible hand appeals to those who care about human freedom. The capitalist free market system is depicted as one in which people are ‘free to choose’ under the guidance of the impersonal ‘market’ where everyone competes equally and without privilege. This neoliberal or capitalist religion has become so firmly embedded in our economic culture that few mainstream economists question it. So complete is this free market faith that they will argue that any failure of the system can only be attributed to the markets having been somehow prevented from operating freely. Accordingly, economists have pushed free-market policies, the privatization of the natural commons, and limits on collective action through government.

Things though have not worked out as advertised.

Instead of greater personal freedom with open competitive markets and an eternal capitalist expansion that trickles down benefits for everyone, free-market policies have saddled us with an oppressive and unequal economic system. Deregulation, the abandonment of anti-trust enforcement, the privatization of the commons, the withdrawal of the social safety net, and the abandonment of society’s commitment to providing common social and economic capital to guarantee fair and egalitarian outcomes have given us mercantilism. This is a system in which business and wealthy elites use the government to further their interests. Our current political/economic system of ‘one dollar, one vote’ is nothing other than mercantilism.

Neoliberalism Supports Modern Mercantilism

Mercantilism goes back at least 500 years, when it manifested itself in colonialism, slavery, the theft of foreign resources, and the concentration of economic wealth—and, therefore, political power—in the hands of the few. Recall that colonialism was the joint effort of private business interests and a government’s military and bureaucratic forces to capture overseas territories. The common myth is that mercantilism disappeared with the rise of democracy and the dismantling of colonial empires. But the truth is that it is still with us, more powerful than ever. Corporate empires have replaced the traditional national empires. This has happened because most democracies have been completely taken over by business and financial interests.

Today, we have neither democracy nor capitalism; we have modern mercantilism.

This neoliberal alliance of money and government has created a flawed system which has lately has been generating multiple deficits. Government budget deficits are the logical result of the intense pressure by the wealthy for lower taxes and higher expenditures on their favored industries and businesses. As taxes have fallen, special interests have in turn pushed for greater ‘defense’ expenditures to protect overseas investments and ventures. Bank bailouts, ‘economic development’ subsidies and tax breaks, and agricultural subsidies that benefit large industrial farms are just a few other examples of how mercantilism breeds deficits and public debt. Higher budget deficits accordingly militate for cuts in public services that benefit those who cannot buy political influence. It’s a downward cycle in which the 99 percent invariably lose.

Secondly, the mercantilist system depends entirely on maximizing profits for the business and financial elites, and it ignores environmental problems like human-caused global warming, species loss and the decline in biodiversity. These environmental disasters in the making have large costs for the mostly disenfranchised population, while the short-term benefits from destroying nature accrue largely to the wealthy. The World Wildlife Federation estimates that humanity already uses nature’s services at 130 percent of the Earth’s capacity, which is why we are raising atmospheric temperatures, killing off species at 1,000 times the normal rates of extinction, and losing the implicit insurance that biodiversity provides for human survival.

Finally, mercantilism’s ever-larger appropriation of national income by the financial and business elites is causing very large income inequalities. This inequality undermines the viability of the economic system. After all, the economic system is a circular-flow system in which people’s demand for products fuels production, which in turn provides the incomes that again enable people to demand the products, and so on, ad infinitum. But the increased concentration of income means that many people are receiving less within that circular flow, and the growing poverty means that producers will have fewer and fewer people to sell their goods to. No amount of loans, housing bubbles, and other financial gimmicks can permanently prevent the collapse of overall demand. Therefore, production ultimately falls, unemployment rises and—without sales—profits and earnings for the wealthy fall too. The elite of our mercantilist system will try to use government to mitigate, or just postpone, the collapse, but subsidies, bailouts and tax decreases cannot continue forever. And now it is very clear that Mother Nature is preparing another huge bill that we carelessly racked up over the past 200 years.

How do we stop this decline?

So, how exactly do we deal with this combination of insufficient demand for output and nature’s limits to continued material economic growth?
Obviously, we have to completely change the way we work, live and behave. We need a new culture. Among the many things we will have to do are:

1. Get along with less material wealth.
2. Work less.
3. Engage in social activities that replace current energy-intensive individual consumption.
4. Abandon the myth of ‘rugged individualism’ and recognize that humans are socially dependent creatures.
5. Organize society so that all members enjoy status and a sense of participation.
6. Reduce income and wealth inequalities.

These goals mean that we will have to do more through our government collectively, such as providing universal education, healthcare and a social safety net to provide people with equal opportunities and social security. Without government, opportunity and social security depend on individual accumulation, which tends to lead people to overproduce, overuse resources, and overestimate their ability to cope with misfortune and disappointing outcomes. Collective solutions include public transportation, community internet, universal healthcare, and setting up the government as an employer of last resort. Emphasis must be on community resources, the egalitarian provision of social and cultural capital, and public ownership and management of the natural environment. With more equal access to the things we need to enjoy life, we can get by with much less energy-using individual material consumption.

We will also have to establish a more democratic process through which the public interest can be pursued. To create such a true democratic process, we will need things such as:

• Public funding of elections, political transparency, and the opening for all groups and people to run for office and vote.
• More economic power for workers, including worker ownership of businesses, strong labor laws that protect labor organizations, living wages, full employment guaranteed by the government.
• Nationalization to reverse the earlier privatizations of nature and the commons.
• Education that is free at all levels and available to all.
• Education that provides people not only with specific work skills but also with a cultural understanding of their economic, social and political systems (democracy demands this!), and the general knowledge necessary to participate in broader cultural interactions.
• A 20-hour workweek that, with our current technology, would provide the material goods to sustain a comfortable lifestyle—say the one we enjoyed in 1956.
• Shorter workweeks mean people will have time for education, social interaction, voluntary activities, sports, games and intellectual pursuits that consume little or no carbon energy and greatly enhance human well-being.

This list is by no means complete. I only list these points because they illustrate that the needed changes are radical. They are unapologetically ‘socialistic’ and they most certainly increase the size of government. To pay for them we will need to tax the rich and take a good portion of their disproportionate accumulation of wealth. We will also have to tax everyone more as we replace individual consumption with collective activities and services. Of course, a more humane society will reduce the need for wasteful government expenditures on war, incarceration and surveillance.

Change Will Be Very Hard

The most difficult aspect of this survival strategy is that it will take collective action to accomplish these changes. Individual efforts alone will accomplish nothing if those actions do not spur collective action. We can only defeat the power of the wealthy few with large numbers; the wealthy have more money, and they have hired guns. Only with large numbers will we get to the point where the hired guns hesitate and refuse to follow orders to shoot at their fellow ‘99 percenters.’ And only when the hired guns defect will the elite finally be forced to concede some of their wealth and power. We need numbers, large numbers, acting in unison—not lone dissenters or a few quiet Prius drivers. A lot of people need to wake up, organize, get angry, and openly demonstrate their resistance.

This conclusion sounds harsh. We have all been brought up thinking each one of us can make a difference acting on our own. The vested elite would love to convince all potential activists to spend their time raising organic tomatoes or writing long letters to politicians. They know full well that only an organized active movement of many people working together can topple their well-entrenched mercantilist system, which is why they work so hard to keep us fragmented.

Fortunately, the participants in the Occupy Wall Street movement understand this. It has been entertaining to listen to the mainstream corporate news media repeating the claim that the OWS movement seems to be disorganized and aimless. The truth is that the movement has correctly understood the need to start the difficult process of changing the system wholesale rather than making isolated, incremental demands that can then be endlessly argued about. There is little sense in arguing with the mercantilist interests about marginal adjustments to the economic and political systems they control. Let’s face it: the power of wealth has to be pushed out of the political system: it will not leave voluntarily. We need numbers, persistence and courage. And we should stop accepting half measures and promises. The work for wholesale change begins now—and we don’t dare stop till we get it.

Of course, we will all have to give up our SUVs, our 3,000-square-foot homes beyond the suburbs, weekend flights to Las Vegas and new clothes every season. We will have to ride the bus or train with other people, and we will have to walk a bit more. We will have to eat less meat, get along with more seasonal and local foods, and reduce the amount of pre-packaged prepared foods. We will have to learn to entertain ourselves more often as leisure time expands, and some of that extra time will have to be used to participate in democracy. We will have to inform ourselves about economics, politics, social issues and many other relevant topics. We will have to think more.

Yes, I know, this sounds like a lot of work. But we really don’t have any other option.

Time is running out for making the lifestyle changes that might enable humanity to survive the perfect storm of mercantilist and environmental collapse that’s rapidly bearing down upon us.

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