For me, it’s unbelievable. In the Diplomat, Yukon Huang and Patrick Farrell repeat an austerity orthodoxy:
The current growth slowdown has given rise to a widely shared view that China needs to shift to a more consumption-driven growth model and reduce its dependence on investment. Yet standard growth theory tells us that consumption is not part of the equation. Consumption is the result of growth; it does not drive growth.
This is part of an ideology that assumes that all savings are invested—when in fact they might just sit as cash in a bank account or be gambled in the non-productive sorts of games that led to the 2007 financial crisis—and that entirely neglects that in a capitalist system, producers will only produce and service-providers will only provide their services if they have someone to sell their goods and services to. But the austerity ideology, which I associate with neoliberalism, lives on nonetheless, and has lived on, despite a dearth of supporting evidence, for well over three centuries. Importantly, this ideology rationalizes tax cuts for the rich on the imagination that they will invest and put people to work. With the employment to population ratio and labor market participation rates in the U.S. stuck at 1970s and 1980s levels, serious skepticism is long overdue. And while some in the U.S. try to blame structural unemployment, China is a beneficiary of economic globalization and its present problems can hardly be blamed on a lack of qualified workers.
What both supply-siders and demand-siders seem to neglect is that the economy is a system, with what in complexity theory, we call mutual causality. Among other things, this means that both suppliers and consumers need to be healthy, which I think demand-siders would acknowledge, but which supply-siders clearly neglect. When Mark Blyth critiques the (neoconservative) moralism of austerity, in which savers and the private sector are pronounced ‘good,’ and consumers and the public sector are pronounced ‘bad,’ he argues that the allegedly ‘virtuous’ depend upon the allegedly ‘sinning.’ (And yes, as Blyth acknowledges, much of this will be familiar to Paul Krugman’s readers.) The trouble is that, as near as I can tell, economic theory continues to rely on linear causation—in its strictest sense, associating single causes with single effects—rather than allowing for a more nuanced view of actors influencing each other.
In short, the current economic and political orthodoxy fails to recognize that when the allegedly brilliant ‘creators’ respond to a perceived market need, that need should be seen as a ’cause’ just as surely as the productivity that responds to that need. Contributing to the confusion, a considerable amount of so-called ‘need’ is in fact artificial, engendered in a public seen increasingly as consumers, who are needed to sop up excess production and who have thus been encouraged to take on debt to pay for it. Again, linear causation is far too simplistic here. And austerians’ moralism simply neglects the consumerist history of the twentieth century. Because all this is exploitative of natural resources, it is ultimately unsustainable. But it is also unsustainable in the short term because it instrumentalizes consumers, failing again in a fallacy of linear causation to recognize that they are the same people who are workers, and seeks to exploit them in both roles, paying them less and less, while inducing them to spend more and more, taking on more and more debt. Then, of course—the morality again—we punish consumers for taking on more debt than they can handle even as we bail out the speculative debt that led to the financial crisis.
The chasm of immorality is wider and deeper even than this, particularly in ways I have previously discussed that are peculiar to the quantitative reduction and fallacy of linear causation that are intrinsic to positivism in practice. First, the economic system no longer exists to serve humanity. Rather, human beings are expected even to surrender their lives in defense of the economic system. Second, the value of human beings has largely been reduced to money, even when regardless of their competence, some people have come to be valued in multiple orders of magnitude greater than other people. We deny that, of course, pretending we don’t assess people by how much money they make, but generally speaking, can we seriously claim to venerate or even respect a janitor or farm worker in the way that we do a Warren Buffet, Steve Jobs, Bill Gates, or even Donald Trump? Third, the so-called “free” market is anything but a place of equal opportunity. But we pretend that it is, even as 1) the rich who are able to decline or delay acceptance of a deal in order to obtain better terms get richer and 2) the poor who have only themselves to offer and who cannot hold out for better terms, but need to offer themselves even just to survive get poorer. But all too often, we valorize inequality as an ‘incentive.’
The simple fact is that capitalism celebrates the strong and bullies the weak. But we carry on as if doing so was moral. We ought to be thinking about that. But we won’t. Because we’re too busy listening to the likes of Yukon Huang and Patrick Farrell.
- Yukon Huang and Patrick Farrell, “Is the China Growth Model Dead?” Diplomat, September 15, 2015, http://thediplomat.com/2015/09/is-the-china-growth-model-dead/↩
- Daniel Altman, Neoconomy: George Bush’s Revolutionary Gamble with America’s Future (New York: Public Affairs, 2004); Mark Blyth, Austerity: The History of a Dangerous Idea (Oxford, UK: Oxford University, 2013).↩
- Bureau of Labor Statistics, “Household Data, Table A-1. Employment status of the civilian population by sex and age,” n.d., http://www.bls.gov/webapps/legacy/cpsatab1.htm↩
- Kevin Drum, “10 Reasons That Long-Term Unemployment Is a National Catastrophe,” Mother Jones, December 23, 2013, http://www.motherjones.com/kevin-drum/2013/12/10-reasons-long-term-unemployment-national-catastrophe; Economist, “The three types of unemployment,” August 17, 2014, http://www.economist.com/blogs/economist-explains/2014/08/economist-explains-8; Paul Krugman, “The Structural Obsession,” New York Times, June 8, 2012, http://krugman.blogs.nytimes.com/2012/06/08/the-structural-obsession/; Paul Krugman, “Bill Clinton and Structural Unemployment,” New York Times, September 6, 2012, http://krugman.blogs.nytimes.com/2012/09/06/bill-clinton-and-structural-unemployment/; Matthew Yglesias, “Why is it taking longer and longer to fill open jobs?” Vox, June 20, 2015, http://www.vox.com/2015/6/20/8815561/job-vacancy-duration↩
- Robert E. Scott, “Manufacturing Job Loss: Trade, Not Productivity, Is the Culprit,” Economic Policy Institute, August 11, 2015, http://www.epi.org/publication/manufacturing-job-loss-trade-not-productivity-is-the-culprit/↩
- Fritjof Capra, The Web of Life: A New Scientific Understanding of Living Systems (New York: Anchor, 1996); Joanna Macy, Mutual Causality in Buddhism and General Systems Theory (Delhi, India: Sri Satguru, 1995); Edgar Morin, On Complexity (Cresskill, NJ: Hampton, 2008).↩
- Mark Blyth, Austerity: The History of a Dangerous Idea (Oxford, UK: Oxford University, 2013).↩
- Anup Shah, “Creating the Consumer,” Global Issues, May 14, 2003, http://www.globalissues.org/article/236/creating-the-consumer↩
- John H. Bodley, Victims of Progress, 5th ed. (Lanham, MD: AltaMira, 2008).↩
- Charles A. Reich, The Greening of America (New York: Crown, 1970).↩
- Committee on the Judiciary, H.R. Rep. No. 109-031, pt. 1 (2005); Robert Kuttner , “The Debt We Shouldn’t Pay,” review of Debt: The First 5,000 Years, by David Graeber, New York Review of Books, May 9, 2013, http://www.nybooks.com/articles/archives/2013/may/09/debt-we-shouldnt-pay/↩
- David Benfell, “Money is even more broken than I thought,” Not Housebroken, June 25, 2014, https://disunitedstates.org/?p=6449; David Benfell, “Paying for money with human lives,” Not Housebroken, February 18, 2015, https://disunitedstates.org/?p=7331↩
- Christopher Hayes, Twilight of the Elites: America After Meritocracy (New York: Crown, 2012).↩
- David Benfell, “Money is even more broken than I thought,” Not Housebroken, June 25, 2014, https://disunitedstates.org/?p=6449; David Benfell, “The ‘Oracle of Omaha’ goes on believing,” Not Housebroken, May 26, 2015, https://disunitedstates.org/?p=7561↩
- Thomas M. Shapiro, “Introduction,” in Great Divides: Readings in Social Inequality in the United States, ed. Thomas M. Shapiro, 3rd ed. (New York: McGraw Hill, 2005), 1-7.↩
- Max Weber, “Class, Status, Party,” in Social Theory: The Multicultural and Classic Readings, ed. Charles Lemert, 4th ed. (Boulder, CO: Westview, 2010), 119-129.↩
- Ben S. Bernanke, “The Level and Distribution of Economic Well-Being,” Board of Governors of the Federal Reserve, February 6, 2007, http://www.federalreserve.gov/newsevents/speech/bernanke20070206a.htm; Charles M. Blow, “The President, the Pope and the People,” New York Times, December 4, 2013, http://www.nytimes.com/2013/12/05/opinion/blow-the-president-the-pope-and-the-people.html; Scott Sernau, Worlds Apart: Social Inequalities in a Global Economy, 2nd ed. (Thousand Oaks, CA: Pine Forge, 2006).↩