The radical nature of austerity
We live in an era of unrivaled technological capacity. We’ve mastered the art of satisfying material human wants. Be it food, drink, clothing, housing, medicine, or any other important need, we as a species have arrived! All these needs and many more can easily be satisfied within the limits of our technology and manpower. Better yet, it should only improve given the promises of robotics and other labor saving technologies that are in sight today.
When we begin with this basic premise, the unbelievably radical nature of what’s being asked of us becomes more clear. Despite our ability to satisfy all important material wants, we’re somehow being asked to accept ever rising austerity and reduced living standards! We must accept widespread poverty, homelessness, degradation, uncertainty, and, in the process, prepare ourselves to be modern day gladiators in a 21st century world of unending global competition! Something is very wrong here!
Capitalism may have played a positive role in earlier centuries when it overthrew feudalism and channeled early industrial technological progress, but it’s always been a highly problematic system of concentrated power. It’s become increasingly clear, however, that today’s capitalism no longer has a positive role to play and it’s in fact a very present danger to humanity. Any system that enforces needless pain on populations and fails to allow societies to live reasonably close to their full potential is immoral and deserves to be overthrown.
I’ll address in this post two key premises of today’s capitalism that act diametrically against human welfare. The first is the ideology that we’re inescapably in a global competition. In today’s world of massive transnational corporations, each of which sits in an oligopolistic position of power, the elevation of competition to a primary principle benefits only the owners of these goliaths along with others of great wealth. Representatives of these concentrated centers of power trot the globe threatening governments with relocation if they fail to compete in meeting their demands for ever lower taxes, flexible and low cost labor, and reduced regulation. Who are the owners? They’re passive stockholders, rentiers, who lack any real knowledge of the business and perform absolutely no management function. Their contribution is not only useless but widely seen as hurtful in that they foster a short term culture directed at nothing other than immediate profit. Their right to profits and influence isn’t based on any rational principle, only tradition. The 500 largest global corporations, the “Global 500” control nearly 40% of total global revenue. Why shouldn’t these production bureaucracies be managed in the interests of everyone rather than a tiny elite of passive stockholders? Since ownership and control of these companies are separate, there’s no particular reason their efficiency should drop if the absentee stockholders were removed from the equation. What a beginning if these companies could be operated globally in the interests of society.
The second premise is that purchasing power, i.e. money, can only be created by those who succeed in global competition. In this view, the living standards of society must be held subservient to the whims of those with wealth. Should corporations decide to limit their activities in a particular state or if living standards decline for other causes, society has no option other than borrowing from holders of wealth. And, should these lords decide not to lend, misery and austerity are the only natural result. This premise, like competition, is basic to capitalism but it’s critical to know there’s no law of nature that decrees purchasing power must be limited to the dictates of wealth. All currencies today are fiat and the currency issuer has complete freedom to assure living standards are maintained. The Functional Finance views of Abba Lerner and today’s Modern Monetary Theory are key monetary insights that every progressive needs to know.
Of course these two premises – that the world must be centered around competition and that purchasing power must be controlled by the wealthy – are hegemonic and therefore very difficult to overcome. But they must be attacked if we’re ever to advance to a better world.