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.
