Our lived experience today with market capitalism is one of seeing dishonesty and waste. We see dishonesty in the ads; You too can be a southland rugby playing tough bastard if you buy the Isuzu d max SUV; it’s patronising. Constantly being yelled at, ‘but wait there’s more.’ All the puffery. And the sales of 40%, but it’s actually fake starting from massively overinflated prices. The poor quality of goods, and everything plastic.
Capitalism is inefficient and wasteful and we can see it everyday. But deeper than the waste; currently in large enterprises there is no concern taken for whether all demand for goods and services is met, because that is the governments problem. There is no accountability about world resource use because the pricing mechanism is not good enough to send the correct signals on wasting resources or damaging the biosphere. The proof of that is the climate and pollution crises.
But was the market and capitalism always like this? In town/village life demand and supply sort of worked in real time but at the end of a market day because some produce would waste they could sell at low prices to poor people or even give away. The monasteries often performed social welfare functions. The market system was sort of efficient but there are significant other values than a straight profit motive at work.
Much later Henry Ford famously paid his workers extremely well to expand the number of people who could afford to buy his car. Also through mass production techniques he drove down the cost of the car. He burnt the money candle at both ends because he hoped it came back for him. It did.
His context of course was a new technology with a huge number of competitors (lots of car companies) and plenty of effective alternatives; trams, trains, horse and carriages. And very bad roads. Like others he chose to use the existing infrastructure concept that previously used barrels of whale oil to now use barrels of oil (rather than electricity). But he was also massively subsidised by government building of roads and infrastructure that supported his cars. But his wealth accumulation came because Ford had to produce a quality good and service at a reasonable price to make a profit.
But through all this growth there were devastating boom and bust cycles that unjustly ruined ordinary peoples lives. The accumulation of wealth was very much left to its own devices except for the wealthy elite sponsored government violence in crushing unions or making wars in other countries to secure assets. This economy was about raw power and was quite unjust.
Many or most people at this point will say this is overstated I’m demonising market capitalism and neo-liberal economics, because the facts show life is so much better now than it used to be. We see this in the life expectancy data, we see this in the comfort of how people live their lives, we see this in lower disease, we see this in the technology advances. The data is true, but not delivered by market capitalism.
In the 1930’s economics reached its Galileo age; John Maynard Keynes transformationally saw the economy revolved around the people; the demand side of the economy. If the demand side stayed strong the economy stayed strong. The government, was the only force capable of organising to the scale needed to support the demand side of the economy.
And the tasks of the government were to ensure essentials like health, education, public infrastructure, housing etc. And government supplied this more efficiently because the market does not supply to those who can’t pay the equilibrium price. And the cost of government services is much lower because it does not have to deliver a profit. The cost of profit drives up prices.
The domestic economies boomed under a benevolent social wealth government, and research thrived bringing many of the advances through the auspices of government money. But since the 1980’s economics regressed with the belief in the invisible hand of neo liberal economics theory. That theory was developed when reflecting upon a relatively small scale, largely rural society without much government infrastructure visible. By imagining the invisible hand in charge we now have a housing crisis, education crisis, health crisis, and finally the climate crisis being strengthened etc. Things are declining and will continue to do so rather than improving under the challenges we face.
The current wealth and success of our society is largely the remaining legacy of Keynes’s insights. But Labour and the Greens appear ruled by the same incrementalism and cohabitation with neo-liberalism that did not work for Helen Clark. And incrementalism to what? A stasis with inequality and desperate need. Perhaps they delude themselves that they are following New-Keysianism when Keynes said nothing of that sort. Keynes was transformational.
And who are Labour and the Greens cohabiting with? The current neo-liberal capitalism is not same as the one of Henry Ford. Market capitalism has completely changed. It is no longer essential to produce quality goods and services as a path to wealth. Rana Foroohar in her book ‘Makers and Takers’ records the US transition from a nation of makers of things (producers of quality goods and services) to the ‘financialisation’ of the economy, and US companies becoming takers and producers of little. Pushing for low wages, moving jobs to nations with lower labour and environmental standards. Driving prices up to maximise profit and supporting that by pushing debt onto consumers so they can afford to make purchases. Using tax havens to avoid tax. Investing in shares, bonds and capital as the new path to easy low effort low cost wealth.
Unfortunately she is very moderate on solutions. An old book but as I recently read it, time has already shown how her few moderate solutions did not pan out. Stronger solutions are now needed. Now is the time of transformation not incrementalism.
Labour seems to have no vision to sell to the electorate of how or what future society we will get to. It’s just some amorphous low brow neo-liberal ‘better than National society’. And it is better than National. The Greens possibly have a vision but they don’t seem to have a coherent series of steps to get there. It’s all new gimmick taxes and statements. Like ‘yes we want green trees cities’; when all their housing policy and urban densification is about destroying trees and greenery by allowing maximise profit development with no community involvement.
I must add there are many good changes in Economics like Behavioural economics, or Doughnut economics. It is starting to take on intellectual maturity as a subject, but as yet these are not in the leadership.
In my next series ‘The people’s economy’ I will go through some steps to transform the economy, tax and legal changes, and expectation changes, so that it more strongly supports local smaller businesses and initiatives, encourages less waste and recycling (not just relying on people to do it but putting in an actual structural driver). But these are just dreams unless there are practical political steps. Because those who make money from the existing status are inclined to fight so political steps are necessary to have awareness of how to deliver change.