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Joe Bord © 2002


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An accusation often made against the often inchoate anti-globalisation movement is its lack of a coherent alternative political economy. The deflationist puritans of the ‘Washington Consensus’ have successfully established a monopoly over talk about the economy - if capitalism is the only game in town, then the neo-liberals set the rules. But clearly there are numerous possible combinations of ownership and exchange structures, both within and between capitalist countries. The task is to optimise these arrangements fairly, with the aim of reducing the misery and wretchedness of the global poor.

Poverty exists where human need is not translated into consumption. This may be where there is an actual dearth of goods: due, for example, to the disruption of war, natural disasters, or insufficient transport from areas of surplus. It may also occur where the state fails in its duty to act as compulsory purchaser of last resort, in the event of speculative hoarding of scarce resources. So far as basic goods in times of crisis, or public utilities are concerned, the consumption of a society must be organised collectively. However, in the private sector of a mixed economy, poverty is caused by the lack of effective demand on the part of individual consumers: the poor do not have the purchasing power to satisfy their needs. It is very rare for production to collapse in markets where liquid demand exists for goods. The key to curbing poverty is the effective management and distribution of demand, which both stimulates production, and ensures that goods are allocated according to the choices of the poor themselves (determining in turn the most efficient allocation of investment).

The most revolting instances of contemporary want are invariably accompanied by gross deprivation of demand. The collapse of relatively well-developed market economies, such as Argentina, has been marked by crises of liquidity. The commissars of sub-monetarism at the IMF and World Bank have forced the slashing of public spending and raising of taxes, turning a debt crisis into a slump. The alternative would have been to reschedule debt, and allow the currency to depreciate against the US dollar. This alternative strategy would have injected a degree of inflation into the economy both by public expenditure and reduction of taxes on small and medium-sized businesses, encouraging people and firms to spend. Argentina’s purchasing economy would then have moved into gear, stimulating domestic profits and production, since the price of imports would have increased relative to their domestic substitutes. At present, the appropriation of Argentina’s capital by international lenders has created a run on the banks, and the seizing up of the entire financial system.

The problems of ill-developed, primary-commodity producing countries are somewhat different, but can still be traced to the lack of a fair distribution of purchasing power. Subsistence farmers are vulnerable because they do not earn to consume: their only source of monetary liquidity comes from sporadic agricultural surpluses that they might be able to sell on local markets. There is a case for directing aid subsidy into the hands of these farmers through income support cash payments. Relatively small amounts of money would very often make a huge difference to productivity (e.g. through the buying of tools) and living standards (e.g. through the establishment of savings). There would, of course, be inflationary effects, but these would be moderated by the stimulus to production and competition. The inflation fetish is a rhetorical weapon in the armoury of monetarism, used without discrimination to obliterate any redistributive initiative. Yet ‘inflation’ means very different things in different economic contexts: in the case of the least-developed systems mentioned here, any monetisation of subsistence will be ‘inflationary’, but it is impossible for markets to develop without the presence of effective consumers. Meanwhile, the sectors of third world economies that do create potential demand for imports by earning foreign exchange (and for domestic goods, through multiplier effects), are either isolated from the rest of their economies or subject to corrupt rent-seeking by local elites, warlords, and expropriatory capitalists. Little of the exchange earned in cultivating cash crops, extracting mineral wealth, or manufacturing basic export goods finds its way into the pockets of the labourers and wider society. The capital that is siphoned off is usually exported rather than reinvested. Asian nations that have broken free have done so initially by controlling capital export and by directing domestic spending. Their experience shows that to begin with at least, it is better to gain foreign exchange by exporting manufactures from domestically owned industries rather than by attracting foreign direct investment, which tends to repatriate profits. Separately, a robust minimum wage regime would be beneficial in circulating purchasing power to the poor in basic sectors, so long as it could be enforced universally to beat undercutting.
This argument is far from exhaustive, but the general lines are clear. Contemporary neo-liberalism fails the poor because it fails to manage demand. The degree of trade liberalisation, the balance of ownership and regulation, are all empirical questions contingent on the optimal distribution of purchasing power. The best way of attacking this pernicious ideology is with the ‘visionary empiricism’ of social democracy and the mixed economy. Such monetarist arguments that obtain do so in mature post-industrial economies, and even then they have been outstripped by the sophistication and range of the means of liquidity. In the developing world they are worse than useless, and have caused hunger and despair.

In terms of its practical consequences, this is very close to a Keynesian argument, but there is a fundamental difference that takes a policy programme closer to socialism, or ‘Left’ Social Democracy. Classical economics treated money as a veil for goods and services actually produced and circulated: a stand-in for barter. Neo-classical theory has inherited this basic assumption, hence the neo-liberal obsession with inflation. The Keynesian revolution treated money as a commodity with its own peculiar properties in particular systemic circumstances. But the most accurate description of money conceives it as a socially sanctioned moral claim to the resources of an economy. Every pound or dollar is a kind of right, or means of exercising a right, to goods, according to the choice of the holder. Most obviously, these rights are created by the legal structures of currency areas (usually, but not always, nation states). The distribution of these rights proceeds according to the complex balance of power and obligation within and between societies. Neo-liberals have a peculiar idea that this balance can be factored out because of the ‘just process’ of market transactions. But it is a basic principle of justice that it should not be determined by force: and every society has hitherto been shaped more or less by violence. Most often this has been perpetrated by groups turning themselves into owning strata by grabbing resources. Quite properly, there is condemnation, for example, of Robert Mugabe’s expropriation of post-colonial landholders in Zimbabwe, for the benefit of his henchmen and cronies. Sometimes we hear a faint echo of the violence of the original imperial land-grab. At no point are we reminded that the distribution of land in Britain owes much to comparable acts of expropriation during the enclosures. It is easy to see how this sort of thing works with land, which is highly visible, but the assertion of control of resources and production by force happens all the time. The naïve ideology of capitalism would like to think that its goods are given ‘from each as they choose, to each as they are chosen’: but in fact it takes from each as they are forced, and gives to each as they are powerful.

The distribution of purchasing power to the poor rectifies this injustice because it peaceably returns a moral right to property. One thing that Marx got absolutely right was that capitalism makes all property social in character, even as the distribution of power over it becomes grossly unequal. It would be impossible to work out compensation on an individual basis for persons in the third world, say. The orthodox Marxist answer is to push for the proletariat to take over the social property of capitalism as a collective class. But we have seen how the violence involved in this process invariably destroys the prospects for a better society: corrupting revolutions even as they are carried out. The redistribution of purchasing power is an alternative path to equality. It makes the dubious social product fairer by allowing the victims to share in its spoils. Justice is not like pregnancy; it is a matter of degree. The aim of politics should be the reduction of suffering, and the first argument for demand economics is that it will do more than any other model to combat the curse of poverty. The trade-off is a degree of accommodation with the market: nevertheless morally it will lead to a fairer system, mitigating the historical violence of capitalism.




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