Towards New Directions in Understanding Economy

920

Gary Stix a senior editor of Scientific American recently apologized for a misguided approach taken in recent issues of the magazine. The magazine had highlighted cutting edge low-emission technologies while ignoring the economic and political conditions needed for these technological innovations to develop and expand. In other words the complex social side of the problem was ignored.

Naomi Klein also has recently rethought her own view of and approach to social change. After the atrocities of communism and the betrayals of center-left political parties, social change activists and environmentalists such as herself have tended to oppose government intervention or hierarchical modes of organizing. However, she now finds fault with the type of leaderless protesting that she had once championed. She has written that

“the fetish for structurelessness, the rebellion against any kind of institutionalization, is not a luxury today’s transformative movements can afford.”

She argues now for something like – “a Marshall Plan for the Earth” a collective undertaking in the tradition of the New Deal or the Apollo Program. The reduction of our options, as we saw to some degree in our recent Provincial election, to those of austerity versus extraction, poisoning versus poverty is false. There is an important third way possible for us.

However, sorting out this third way is no easy or simple matter. It will involve a new and better understanding of economy and of politics, particularly of the relationship between economy and politics, an area of enquiry that has traditionally been called political-economy. We should pause to ponder briefly the opportunities and challenges of this third way that increasingly is being sought and pointed towards.

Economic policy can be determined either by elected officials or by officials who have achieved power by other means. Such officials now have the technical tools for exercising political control over economic processes for better or worse – usually better for some vested interests and worse for others. And it is this introduction of political power relationships into economic processes that is of particular interest and concern for the student of political-economy.

For a contemporary example of the economic distortions resulting from the misguided use of political power in our own country – the Canadian government is estimated to subsidize the fossil fuel industry at the level of 1.3 billion dollars per year and is said to have no real plans to shrink carbon pollution. By comparison, in Germany, the world’s fourth largest economy, 33% of its energy needs now come from renewable sources. It has reduced its carbon emissions 23% from 1990 levels and created 370,000 jobs

It is not inevitable for the biases of partisan and power politics to become involved in political-economy in this manner with such egregious consequences or distortions affecting our collective well-being. Partisan political intervention in the economy can exacerbate partisan biases so as to even destroy competition with increased monopoly, thereby destabilizing the pricing mechanism of the economy. Such instability can exacerbate the booms and busts of the business or trade cycle which can be destructive and even genocidal for the marginalized and disadvantaged of the world.

Is it possible to change the old political-economy with its destructive booms and busts into a better functioning economy? If it is possible, it will require intelligent human adaptation to the technical dynamics and constraints of economy. A distinction will need to be made between short term practicality where too often foul is fair and fair is foul to a longer term practicality where the goal is the improvement of people’s standard of living.

Such a change will require two fundamental conditions: 1) an increase in the number of independent and intelligent economic decision makers and 2) the assurance of a better functioning economy. These conditions depend upon a wide-spread understanding of economy and of the dynamics of economic process or system.

There is simply no short cut around people being properly educated in the complex dynamics of the economy, and who are then resolved to respond to these dynamics intelligently. Intelligent response presently is at best only partial. There has been tremendous capital and wealth accumulation but when surplus profit begins decelerating signalling a scheduled rise in the standard of living of the people, investors and bankers tend to panic. This is not primarily because of greed but because of ignorance of the dynamics of indirect and direct production-expansion, and its complex interrelationship with income and monetary distribution.

And so without this proper understanding, there can be no intelligent response or adaptation and the first law of our baser nature tends to dominate our behaviour – self-preservation. It is this that turns a recession into a depression or crash and all the economic, social, political, and environmental disasters that can go with it. 

There is the possibility of transforming a dysfunctional economy into a better functioning economy where it is understood that development and growth cycles have both rapid and slow phases and to which we can adapt appropriately so that there are no longer the dysfunctional booms and busts of the conventional economic cycles.

Is this transformation humanly possible? Yes, but an intellectual and moral conversion is required – not so much from greed but from culpable ignorance in our institutions, especially our educational institutions.

The Canadian thinker, Bernard Lonergan, who contributed greatly to this third way in economic understanding now seemingly sought after by the younger thinkers and activists of today such as Stix and Klein, wrote of the seriousness of the economic problem at the very beginning of his For a New Political Economy (1998):

In the introduction to his General Theory Mr. Keynes considers the objection that only the more intelligent type of expert is able to understand the highly abstract theorems of modern economics. His answer is not altogether satisfactory. He says that if practical men such as politicians and bankers and industrialists do not succeed in grasping the issues, then inevitably they will be eliminated. Undoubtedly they will, but so shall we, for they are our leaders.(p.3)

Hugh Williams

Debec, NB                                                                                              November 14, 2014

LEAVE A REPLY

Please enter your comment!
Please enter your name here