The Economy: Looks Bad

EDITORIAL, 20 Jan 2014

#309 | Johan Galtung

Sometimes a look at the basics is needed. They are reproduction of the nature on which we all depend, and reproduction of humans.  Formulas like renewability and recycling, to avoid depletion and pollution, and well-being, meeting basic needs for all to avoid suffering and misery, are good guides. With them guaranteed, let us extract, produce, distribute, consume, and enjoy!  Sounds rational.

But the basics are not guaranteed, not built into the system.

From the economy comes many products but also ecocrisis, misery, death, guided not by rationality but by the opposite.  How come?

One more look at basics: the production factors, adding to nature, labor and capital, technology and decisions (management). These two were the basics for nobody less than Smith and Marx, but easily forgotten.  To Smith, the driving force was not capital but decision: decide in favor of egoism, yourself, and the whole system will be at its best.  Marx observed that the system exploited labor into misery as long as they could reproduce themselves, meaning more labor, but not with wellbeing.  And yet, to Marx the driving force was not misery below and greed above, not capital, but technology, the means of production, which would change the mode–social setting–of production.  To Smith egoism was unchangeable, to be used; to Marx technology was autonomous with broad consequences, one being the socialization of means and mode.  It seems never to have struck Marx to let a social mode of wellbeing for all determine the choice of technology.

Of course there is something to Smith’s decisionism and to Marx’ technologism.  But we would have come further with a focus on the two basics above through primacy of naturism and laborism, not forgetting humans in general in favor of the workforce.  And then there is indeed accumulation of capital as the driving force, built into profit and book-keeping for companies, and into growth and GNP-Gross National Product for states.

“Use capital to make more capital” also applies to nature, labor, technology and decisions.  But there is one thing capital can do that the other four cannot: buying all the others.  Capital buys nature, impeding reproduction of nature and humans; capital buys labor to abolish itself by rewarding higher productivity; capital buys technology to reproduce capital, not nature and humans; and capital buys decisions by buying the decision-makers in companies and states.  In corporations processing nature the capital-owners were always well rewarded, less so in states processing decisions.

What have grown out of all proportions are companies processing capital-: banks headed by “banksters”, through speculation.  No scarce nature needed, no restless labor, only capital as resource and product and computer technology and egoistic decisions in favor of themselves.  They can even practice socialism by distributing profit fairly to all working as bonuses.  The big banks are known, not strange if smaller want to get into it.  Nor is it strange that they fight–meaning buy–everybody who can limit their “freedom” to speculate: voters by buying candidates, campaigns and media, legislators, executives, judges. Thus, compare the New York City sales tax of 4.5% with 0% on the stock exchange when buying and selling capital: only 0.5% tax would make $90 billion, twice the budget, available.  And yet they are exempted.  A cancer bribing other body tissues, and anti-bodies, for support.

How did it happen?  By making capital dirty cheap with interest rates toward 0%, “quantitative easing”.  Ivan J. Aziz of the Asian Development Bank (Development + Cooperation, 2013/12 pp. 479-81):

\Banks\ live from taking higher interest rates for the loans than the interest rates they pay on deposits.  That is the way things normally are–but central banks in North America, Europe and Japan too have been implementing abnormal policies.–what does a bank do when money is cheap?–it obviously becomes more risk-taking–start handing out as much money in loans as they can, especially in property sector and consumption credit–this led to “bubbles”.  At the same time, they start buying financial assets, shares, bonds, and so on which makes their balance sheets look more like those of institutional investors than–banks.  Both result from cheap money and both are risky“.

One factor underlying this is the US existential fear of the US$ losing its status as world reserve currency if countries turn to the euro (Iraq under Saddam, Iran) or talks about a gold-backed dinar (Libya under Gaddafi).  Added to low interest (guess who took the initiative) comes high killing, in Iraq and Libya, planned for Iran, and countries with state central banks (Lebanon-Syria-Sudan-Somalia).

As a result the planet is now hostage to unpayable debts: the Gross World Product is already lower than the combined world debt owed to banks. The debt is superior to the amount of money on the planet.

Added to this comes what Paul Krugman is arguing so well:  use public budget stimulus to get the economy going, do not cut the public budget to reduce public debt through austerity.  Austerity generates no growth; stimulus does, and will eventually lower the debt.

Added to this right-wing policy in the USA, now also in “left-wing” France comes USA-EU-Japan left inability to produce alternatives whether because they are bought, mental deficits, or both.

Krugman and Kristof in International New York Times celebrate the 50-year old war on poverty as a success, rightly wanting more (but getting less).  However, poverty and its extreme, the misery of suffering and death, is only one aspect of the scandal, the other is glaring inequality.  But what can be done with banksters in control?

Not much; hence the bad outlook.  The decision-makers in the leading corporations, the banks, will fight any control, not by killing but by bribing.  The decision-makers in the leading states, Anglo-American, will fight any control by killing, bribing and spying.

The way out is a dirty road, not the highway of dirty cheap money.  We have argued it many times in these editorials: people fending for themselves (Smith) with the social technology of cooperatives and self-employment (Marx).  Worry less about capital and more about survival.  Be prepared to struggle.  “Jobs” simply do not exist.*


* For much more see the author’s Peace Economics, TRANSCEND University Press-TUP 2012.


Johan Galtung, a professor of peace studies, dr hc mult, is rector of the TRANSCEND Peace University-TPU. He is author of over 150 books on peace and related issues, including ‘50 Years-100 Peace and Conflict Perspectives,’ published by the TRANSCEND University Press-TUP.

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