Economics has precedence over all other human endeavors. This is not a ranking or a value judgement; it’s a statement of fact. Economies, or the production, allocation and distribution of surplus goods (to survive), determines who is given the freedom to pursue alternative enterprises.
Every art installation, every monument, every scientific advance, every aspect of human culture not directly necessary for basic survival was and is enabled by surplus production. When art is commissioned from an artist, they are free to paint, sculpt, compose… and need not find other means of generating (survival) income. When publicly funded grants or privately funded awards are allocated to scientists, they are free to pursue their scientific interests (discover new drugs; untangle the nature of the universe; identify physical systems supporting life on Earth). Their time devoted to science and not to other (survival) income generating work. The same applies to architects; but get this, it also applies to the builders. Think about farmers of ancient Egypt; they were so good at producing foodstuffs that they were able to generate enough (surplus) to feed the laborers who built the pyramids. If those farmers were less efficient, it is likely that a number of builders would have had to farm for a living. As it turns out, ancient Egypt had the surplus production to support the construction of many monuments.
When the rise and fall of civilization(s), society(ies) and culture(s) is viewed through through the lens of the allocation of surplus production, it becomes evident that human achievement is an emergent property of economics. And the emergence of complexity is more important than ever before as today’s technology laden economies rely ever more on robust physical and intellectual infrastructures to meet the needs and demands of an ever growing global population.
But the economy is not working for many Americans. Our life expectancy and quality of life are declining; our infrastructure is in a state of collapse and our institutions of high learning under increasing stress. Indeed, there are far more examples than space and time can accommodate.
These are all byproducts of emergent flaws systemic to capitalism. Understanding these flaws is key to developing an economy which serves all people, not just the rich and powerful.
[This an immediate continuation of a series presenting an alternative economic narrative. Because many concepts were introduced in earlier parts, it would be useful to read them first:
Part 1a: It's not the economy, Stupid; it's economics
Part 1b: The depth and breadth of economies
Part 2: The ecology of economies
Part 3: Eleven economics lessons from ecosystems]
The systemic flaw of today’s economy is capitalism. To understand this, consider the water cycle in its most basic form. Figure 1 depicts the geochemical water cycle of the planet which accounts for most of the water that cycle through the environment.
Biological entities have evolved mechanisms to capture and retain water as it progresses through this inorganic cycle to sustain themselves (Figure 2).
As the number of biological organisms increased and new forms evolved, ecological communities emerged (Figure 3) along with
biological mechanisms to stabilize local water cycles.
As human societies evolved, we harvested the fruits of the water cycle (by hunting and gathering) and made use of the cycle (agriculture) to develop modern economies (Figure 4). And had economies followed the basic tenets of terrestrial ecosystems, we would likely not currently be in a state of economic and social turmoil.
When economic systems are imposed onto economies, the powers that be presume to know how the interplay of social, cultural and economic relationships meld into a functioning stable economy. What they did not understand is the most productive, stable and resilient economies are ecosystems which consists of an astonishing complex array of
biological relationships including antagonistic, competitive and mutualistic.
Capitalism is an economic variant of predation which gives capitalist owners control over the productivity of workers through the rights and privileges conferred by private ownership of the means of production. Within legal constraints, owners are free to extract labor from their workers. In the past, owners had a sense of stewardship derived from the inheritance of land and property through many generations of the same family. In the U.S., relaxed familial obligations, mobility and ease of property transfer has eradicated this principle and reinforced the practice of investing/owning solely for short term gain.
An example of the disastrous effects of short term profit driven economic policy resulted in the Dust Bowl and contributed to the Great Depression. Prior to the advent of commercial agriculture, the Great Plains had a complex stable, productive and self-sustaining ecosystem comprised of florae and faunae adapted to temperate grassland biomes (Figure 5).
Transplanted European farmers co-opted these vast fertile vistas into profit generating cereal farms (Figure 6)…
… and for a number of years, they were quite successful (Figure 7).
However, domesticated cereal crops and mechanized farming practices did not stabilize and preserve the soil like the native grasses with their mat roots (Figure 8).
Soil, along with vegetation, retains water in local ecosystems to help maintain a life sustaining water cycle. On thin soil, cereal crops were unable to grow, store and retain enough water to maintain a regular water cycle (Figure 9), triggering the droughts of the Dust Bowl.
The result was a human created environmental disaster, the deliberate, if inadvertent,
desertification of the Great Plains, leading to the collapse of farm economies in multiple states. The loss of farm income set in motion the largest mass migration in American history.
Post-Great Depression reforms transferred some measure of economic control to workers and successfully stabilized economy for the post-war boom. But three decades ago, supply side economics came into vogue, touting ‘reducing barriers to production’ and ‘ramping up capital investment’ as the means to promote economic growth. This has shifted so much power to the capitalists that their desires guide essentially all government and fiscal policy and set the stage for the economic equivalent to desertification.
Supply side economists were able to liberalize the definition of ‘barriers to production’ to include ‘cost of production’, making wages fair game for capitalists.
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Profit = consumer price – cost of production
Cost of production =
labor (worker wages) + facilities + materials + transportation
Facilities (buildings, tools & equipment) = wages + materials
Materials = wages + land + facilities
Transportation = wages + facilities + materials
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With carefully coded cultural references and political doublespeak, the capitalist elite have been extraordinarily successful at loosening regulations and rules to give themselves free reign to prey on workers worldwide. The undermining of labor unions, privatization of government services and globalization have all damaged the ability of American workers to mount significant opposition to their agenda. Repeal of financial, safety and environmental regulations frees capitalists from costs of compliance; international trade pacts give corporations higher legal standing than national governments (global governance through trade agreement); subsidies, tax cuts/breaks/loopholes and government contracts/subcontracts transfer public funds into private hands; and government austerity eliminates calls for tax increases. Some policies have the potential to deliver government contracts to private suppliers: military action enriches the military industrial complex and intelligence contractors; war on drugs and immigration policies enriches the private prison industry; charter schools and testing enriches school management corporations and test providers. Then there are social issues (women’s rights, LGBT rights, civil rights, gun rights - added bonus, directly benefits gun manufacturers) which help capitalists maintain their political influence so as to retain their hold on public policy.
Capitalists have transcribed the farming practices of Dust Bowl into weaponized policy designed to extract most production, not just surplus production, from their workers. (Ecologically, surplus production is the loss a prey population can sustain with no loss to viability. Economically, it is best defined as profits based on paying workers a fair living wage.) They eliminated or minimized worker defenses against capitalistic depredations (Figure 10) as a way to freeze and reduce wages over time and transfer manufacturing jobs abroad (compare Figure 4B and Figure 11B, see Figure 11H, L). Loss of domestic manufacturing jobs have swelled the ranks of domestic low wage workers (Compare figure 4A and Figure 11A) while expanding the base of (foreign) workers from from whom capitalists can extract even more capital (Figure 11L).
As a short term strategy to boost investment returns, the transfer of capital from workers to capitalists was extremely profitable (Figure 11C, D). And having amassed enormous personal wealth and income, capitalists are more intent than ever to extract labor from their workers and effectively syphon capital away from active, domestically productive circulation, intensifying the desertification of the domestic economy.
But this volume of capital transfer comes at a price. The consequence of reducing the income of workers is less spending by consumers, or a reduction in market activity [decoupling production (by moving factories abroad) from domestic consumption doesn’t increase domestic consumption when consumers have no income to spend]. This decreases the total amount of productive capital circulating in the economy (compare blue arrows in Figures 4 and 11). Circulating (productive) capital is the food workers and their families eat, the medical care that keeps them healthy, the public services which educates them, the rent and mortgage payments that houses them; in short, all spending. And it cannot be stressed enough, in light of current economic trends, the productivity and spending of the largest strata of workers is the momentum which keeps capital moving and productive. Taking capital out of circulation challenges the resilience and wellbeing of workers and reduces their productivity (compare Figures 4A, B and Figure 11A, B). Continuous drainage of capital sets up a downward spiral of economic decline.
Capitalists defend their predatory corporate policies with the false ‘trickle-down’ meme. They claimed that boosting their income (Figure 11D) would increase their spending output (Figure 11E) which would inject more capital into the system which would eventually ‘trickle-down’ (blue arrows, Figure 11E - F - G - J - A) to boost job creation. And capitalists did spend their extra income: they spent their wealth to build factories abroad and pay foreign workers (Figure 11H, L); they bought risky financial instruments and fueled the housing bubble; they ‘bought’ foreign bank accounts (Figure 11H) to avoid paying U.S. taxes (none of which increases domestic productivity). Fact is, consumer spending of high income earners do not increase with income because they’re already at peak consumption. Any increase in wealth/income of capitalists is ‘spent’ on investments that further their wealth. And in the past several decades, that been not been the domestic economy.
If capitalists continue siphoning away domestically produced capital, consequently contracting the domestic job market, the fear is productivity will eventually decline to subsistence levels. At that point, any predation, no matter how low, becomes unsustainable (Figure 12). As it stands now, workers have been so depleted of capital that capitalists are moving on to bigger prey, the higher tier producers; job contraction is now affecting professional workers (see here and here). The nature of predators is to prey so an economic system that extolls predation will cultivate predators and predatory economics ahead of all else.
Automation threatens a similar outcome by bypassing workers (Figure 13). In the absence of earned capital, workers cannot circulate capital. By excluding the major drivers (workers) of circulating capital, automating production under a capitalist economic system risks the cessation of capital movement.
Extreme collapse is unlikely to happen because
workers would probably revolt first. It is the responsibility of American workers and especially our policy makers to avert either outcome. It’s job of economic policy makers to establish and maintain a stable sustainable flow of capital.
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Thus far, this discussion has focused on traditional economic issues through an unconventional lens. This lens also lends itself to viewing non-conventional economic issues from an economic perspective. Discrimination, for example, is a deeply rooted, pervasive social phenomenon which has been discreetly cultivated by capitalists. It serves as a reliable fount of discord to distract workers from their self-interest (‘I don’t trust those so’n sos… Who knows what trouble they’d stir up in a union.’) and a means to identify a less worthy class (‘I can hire a so’n so to do this job for a fraction of what you’re asking’). Discrimination further stratifies and fragments workers which disrupts attempts to organize cohesive opposition to capitalists (Figure 14). So at least some of the responsibility for social unrest, racist incidents, sexism, classism, etc. is attributable to capitalists, validating yet again the precedence of economics. Economics (the wellbeing of workers) not predation should police public policy, whatever their names or titles.
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A note on the Greek debt crisis: Austerity in recession to reduce government debt is the same as turning off the sprinklers in a drought to keep reservoirs full. To impose greater austerity onto Greece in the midst of a major recession is to deliberately desertify its economy to the extent that its entire productive capacity is destroyed (Figure 12 with exports - 12H - draining all productive capital). Greece would have much better prospects of retaining and improving productivity and productive capacity without external financial ‘aid’.
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The final part will describe solutions to our economic woes in the context of the ecological economic cycle.