Chapter 1: A Novel Idea: Harness the Economy to Good Causes

The economy could be run in a dramatically different way, with more benefit to everyone and far less harm to many people and the planet. Whereas there are many critiques of current economic management, few seem to appreciate just how fundamentally misguided are the ideas on which it is based. Central ideas and practices are wrong, irrelevant or perverse in various combinations.

If we clarify our ideas of what an economy is and how it works then a far more positive prospect emerges. This short book is to alert people to this prospect, and to help them avoid being intimidated by the expert ‘econobabble’ and false authority of mainstream economists.

There are today many good people pursuing many causes and doing a lot of good for the world. They promote tolerance, reduce conflict, enshrine principles and help the needy. They defend environments and promote farming methods, products and lifestyles that are healthy for people and the planet.

Yet we still seem to be going backwards. The land and the planet are degrading at an alarming rate, politics just seems to get nastier, and intolerance and conflict continue. Part of the reason for this is that there are fearful people in influential roles who spread their loathing in their efforts to assuage their own fear. But a deeper reason is that our economic system promotes division, exploitation and insecurity. So long as that is true the fearful will find fertile ground for their alarmism and the good works will be trampled and subverted.

If it seems economists make no sense, you are right. That’s not just because economists speak a strange language that normal people can’t understand. It is also because their ideas are nonsense. Example one, the central theory of free markets is an irrelevant abstraction. Example two, the Federal Government creates money, it doesn’t borrow it, so the so-called budget deficit problem is a misunderstanding and a beat-up. Examples three to five, private banks are incentivised to maximise our debts, financial markets are far too big and have become parasitic, and the poorly-regulated financial sector destabilises the whole economy. Nor are these the only important problems – we’ll work our way through others in the following chapters.

The current regime has come to be called neoliberalism. It has also been called economic rationalism, market fundamentalism, Thatcherism, Reaganism, neoconservatism (in the US) among other labels.

And how is it working, the economic management based on all the neoliberal misconceptions and myths? Fantastic, we’re told ad nauseam. Perhaps, on the other hand, you feel we’re not actually doing so well, what with the stagnation of wages, the astronomical price of housing, the cost of education not far behind, dramatically rising inequality and increasing dissension and conflict in our once easy-going, fair-go land of Oz.

You’d be right about that too. The economy is increasingly anaemic. Its poor performance makes the social and environmental price we are paying for our current material lifestyle even less justifiable.

The ‘reforms’ of the 1980s were supposed to set us up for an unprecedented era of prosperity: twenty six years, and counting, with no recession – ta-DA. Yet the official claims fail to account for two things. First, we’ve run up huge debts that have been covering up for our stagnating national income. Second, the GDP per person has not been rising much, but the GDP keeps rising anyway because we’re importing immigrants at a frantic rate, so politicians still keep proclaiming ‘the economy has grown’.

The actual performance is well short of official claims, and it has placed us in a parlous position, in which we carry huge debts even as the productive part of our economy has been hollowed out through the misguided idea that free markets will take care of everything, combined with the side effects of the recent mining boom.

THERE ARE FAR MORE SENSIBLE IDEAS available. They are not too hard to understand. They would allow us to live better with less effort, and to take better care of the needy and the social fabric, as we used to. They would allow us to stop trashing the land and perhaps, if we’re lucky, to stop ruining the planet before it’s too late.

Some of the ideas offered here have been around for a long time, others are more recent. They have developed at the margins of the mainstream economics profession, or completely under its radar. They are reasonably well developed and there are plenty of other sources that will give a more thorough account. They are neglected through a combination of deliberate suppression by an ideological mainstream, a failure to comprehend ideas that don’t fit with common habits of thought, and the difficulty of being heard through the cacophony of a well-paid, narrowly focussed commentariat parroting common misconceptions. You don’t have to take my word for these quite strong claims, the Appendix quotes highly qualified economists, some of whom use rather stronger language.

Of course any challenge to the status quo will encounter vigorous resistance from those who benefit from present arrangements. The alternative ideas will be labelled absurd, irresponsible, dangerous, subversive and so on. They may be labelled as socialism, cultural Marxism (whatever that is) or even communism (an epithet not much used these days) though they are not much more radical than the social democracy of the post-WWII era. Every advance in democracy and the welfare of ordinary people has been so labelled throughout history, and we should expect nothing different this time.

In the following brief chapters I’ll walk you through the main alternative ideas. Some of them are things we used to do, within living memory. Others are a little more novel, but not hard to grasp. You can decide if they make better sense than what’s being done now.

Each chapter will briefly outline a topic. There is much more that could be said, but the point here is just to bring these views to your attention. Much more detail is available in the quoted sources. So as not to be interrupt the flow, sources will be noted at the end of each chapter, referring to the Bibliography at the end of the book.