Andrew's comments are interesting - because he is half right. I believe
he is right that the 'Third Way' looks as though it may become set as
'the acceptable compromise'. There is nothing wrong with compromise in
itself but it must serve a short-term purpose which allows a more long
term unified solution to be developed. Jack Straw's lecture to the Nexus
Conference last week defined this compromise as the economic status quo
(with a few tweaks to make it more 'efficient' in its own terms) with
social intervention to help those who get thrown off the economic
roundabout.
To me this is just a potentially disastrous rehash of what the
Conservatives tried to do. Disastrous because to allow the type of
economics we are saddled with at present to widen the spread of wealth
between nations and within them, increases the amount of social
intervention required while limiting the power of collective action at
any level to carry it out. Straw seems to think that the Tories pursued
'free-market' social policies - but this is self-evident rubbish, even
if repressive and paternalistic measures such as section 28, the
Criminal Justice Bill, 'prison works', draconian punishment of drug
users, blaming single parents, family values and so on were utterly
without effect. Straw's social intervention may be slightly more
evidence-based than that of the Tories, but will still be largely
ineffective in the face of rising economic inequality.
The 'new economic paradigm' which Andrew subscribes to is that of the
'weightless economy' as described by Diane Coyle. But this is so much
dangerous nonsense. It is to think that the froth on top of the beer is
the important bit - and that the more froth the better! None of the
things important to human life are weightless, or can be done inside
computers. Farming and food production will always need fertile land and
water. Teaching and caring for children and the sick will always require
intensive human labour and skills input. To remove human involvement
from even quite small projects is to make precisely the same mistake as
the socialist 'planners'. To get the best outcome for humans requires
humans to actually do it - although a bit of help for repetitive tasks
is of course useful.
In fact when you think of the human action desperately needed to sort
out third world poverty, starvation, conflict and disease; resource
depletion; environmental degradation; or simply community regeneration,
drug abuse and health inequality and failing schools here, I actually
think the idea of the 'weightless economy' is almost obscene in its
callousness. It is about worthless services traded to those who have no
real need for them but do have spare cash, for the sole purpose of
generating more money from money.
The eventual outcome of the globe-spanning deregulated competitive
economic system on its current terms is fairly clear, and has been well
described by those on the left(ish) such as John Gray and on the right
such as Rees-Mogg. The problem is that once enough people somewhere
realise that they have no chance of benefiting from >economic<
competition, why should they obey the rules set by those who do benefit?
Instead of economic competition we get religious or ethnic competition
and/or military competition. The seeds are already sown: Islamic
fundamentalism, Rwanda, the former Yugoslavia, the rise of racist
politics in Europe and Australia, Indo-Pak nuclear posturing.
Like Andrew - Marx too was half right. His problem was to forget the
finite rate of use of the material world, and that the bourgeois might
have some useful skills themselves. But he was definitely right about
the 'veil of money'. Take money away (say the millennium bug blew out
all banking systems) from the economy and try and imagine the problems
we would be faced with:
Let's assume that we keep the current private property conventions. We
all now have the problem of converting our property, labour or skills
into what we need for sustenance, most importantly - food, water,
shelter, healthcare. We need information too of course but for the sake
of argument let us say that the world's non-banking communication
networks carry on working automatically. Farmers will be fairly
well-off, but they will need people to work their land, will need
housebuilders and doctors. So they exchange food for their services.
Even lawyers and accountants will be of some use, since it is still in
everybody's interest to have consistent conventions of calculating
relative value and determining legal issues.
Now clearly the lack of money potentially causes difficulties -
bartering materials and labour becomes very cumbersome and the scope for
division of labour is limited - but by using computerised databases of
available skills and materials this could theoretically be overcome.
There will be other effects as well - for example there is little point
in building up surpluses of things unless you can use them or can
quickly exchange them for something you can use, since you will simply
have to store it. Exchanges take place on the basis of their relative
use-values, therefore their real benefit to the individual and how much
of his personal resources he is using up are given more weight. Dealing
directly in supplies of 'things' or of people's labour and skills means
much greater awareness of their limited supply, and less chance of
unwitting depletion or waste. To start up a business or to develop a
product would require the investment of materials, labour and skills
from others. To persuade them to do this would require them to believe
they had a genuine stake in the outcome and not to have a more
productive use for what they were donating. Doesn't this result sound
rather like a 'stakeholder' economy?
Why does money tend to stop this developing? I think the reason is that
money is valued differently, according to who has it and what they can
do with it, and depending on their access to information. To someone on
a low wage £1 is a meal, to a company director it is small change that
he can rapidly turn into £1.20 by investing on a stock market which
grows on the back of accumulating excess cash. In the world the company
director inhabits everyone else has just raised their income by 20% too
so he doesn't really feel any richer. He revalues things down by 20%. If
the low paid worker still produces the same amount of profit, this too
is revalued downward by the company director. He will want to see 20%
more profitability to feel things are not actually contracting! He has
therefore devalued the labour of his workforce, and will continue to do
so even if they improve productivity by 10%! Therefore cost-cutting and
downsizing become the order of the day. Even if instead the workers are
rewarded with a 10% pay rise in return for their productivity gain,
their relative share of total income compared to the company director
has deteriorated.
Let us consider another illustrative situation - with money. Imagine a
Hayekian utopia. There is a perfect 'minimal state' which ensures
maintenance of private property, the absence of physical coercion, that
all contractual obligations are performed, and there is perfect market
information and perfect competition. All this for no taxes! What would
actually happen? All human beings could freely trade their property,
labour and skills. Since everyone has unlimited access to different
sources of each commodity, knows of these sources and has access to
them, then no-one will be willing to pay more than what is required for
the source to continue supplying. This will obviously include payment
relative to the scarcity of the skills involved, and a premium for
improvement of the commodity if this is seen as desirable. No profit
over this could be achieved. Now clearly this is not a real world
situation, but the point is that in the economic free-marketeer's ideal
world, there are no excessive profits, and people are only paid what we
genuinely think they are worth! So big profits and big salaries
generally mean an imperfect market - monopoly, imperfect information -
through advertising, low quality goods or media hype, or lack of access
to alternative sources or other employment.
It's worth thinking about the consequences of any trend toward a genuine
consumer society with global access and increasing information about
costs. Since corporate profits must fall, banks will have to lower their
expected rates of return on capital. Share dividends will fall along
with the supply of cash that fuels the stock market. In other words a
truly global market with true competition and free information is
against the interests of those who wish to accumulate capital - it is
profoundly anticapitalist - and will never happen while businesses and
banks are heirarchical organisations run for the benefit of their
directors and a few big shareholders!
Actually governments wouldn't like it much either if they continued to
judge their performance through GDP growth - fall in profits means fall
in GDP. But wouldn't an economy where goods only cost what was needed to
produce them and people were paid what they were worth produce much
better quality of life? And isn't that what it should all be about - how
we balance the use of material and human capital and how we match them
up and distribute them to maximise quality of life for everyone? For
this money is not a measure, simply a lubricant of exchange.
Andrew might care to reflect on why the more most people see of John
Redwood (who Andrew thinks has the best understanding of economic change
of any British politician) the loopier they think he is! Perhaps in a
democracy we should consider that they might be right!
Diarmid Weir
djgw@febl.abel.co.uk
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