Who benefits from the economy?

How can we configure current technologies to help us distribute wealth more fairly? For a start, we have to stop thinking of economics as a dirty word.

By Greta Werner
Thursday, February 25, 2016

Another Greens member recently told me they thought economics as a whole was about as bad as ‘selling your grandmother’. Many people probably have this perception, which is why they avoid thinking about it. 

As far as I’m concerned, nothing could be further from the truth! Economics is simply the study of how we distribute the ‘benefits of social cooperation’ as theorist John Rawls puts it in his 1999 work, A Theory of Justice. These benefits can be distributed fairly — or unfairly — and it's up to us to work towards one or the other.

However, first we need to understand what the benefits of social cooperation are. 

Each to their own

If cooperation suddenly ceased, then every person would have to gather and prepare their own food, make their own clothing and build their own shelter. 

This is the vision offered to us by the Trumps of the world — according to them, no one ever gave them a hand up, so they should give no one else help either.

Of course, they're fooling themselves. Even the process of learning to look after oneself involves the cooperation of those who care for us when we are young. At the beginning and end of life, we are completely dependent on the cooperation of those around us. It's hard to imagine what would really happen in a society where Trump's utter self-interest plays out but it's not pretty.

Instead of this social dystopia, we have societies in which the division of labour allows for immense economies of scale, producing enormous wealth. However, our wealth is dynamic, in that it is the product of trillions of concurrent acts of cooperation, using the products of past cooperation (i.e. built up capital such as machinery and knowledge) to keep the economy going. 

Individualists have the tendency to overlook the extent to which their wealth is dependent on the cooperation of others. They attribute their wealth or poverty to themselves, unaware that structural features of the economy have contributed to their 'fate'. 

A capital idea

A simple way to describe the current structure of the economy (which is actually made of many legal, technological and physical structures and social conventions, some of which clash) is to point out that it is dominated by hierarchical organisations (firms) in which those who own capital organise others to produce commodities which are sold for profit.  

This is the ‘economic sphere’, which, as Yanis Varoufakis, former finance minister of Greece, has pointed out, seems quite separate to the ‘political sphere’ where each person is supposed to get a vote. 

Yanis Varoufakis, former Greek finance ministerIt’s worth pausing here to encourage everyone to view Varoufakis’ TED talk, because he makes a very compelling case for how to combine Marxian, Keynesian and libertarian insights to bring the political and economic spheres back together to fix the enormous waste of human productive capacity that we currently see. For example, he points out that the huge mountain of debt that has built up around the world is matched by a huge mountain of spare cash that investors are too scared to invest because of a decline in demand (due to austerity). Other market failures include climate change, loss of biodiversity, poverty, the GFC which was part of the boom/bust cycle of capitalism, and the list goes on.

This horrible mess seems like a bunch of wicked problems, particularly as the political will to solve these problems at government level is in the minority, and the agreement and coordination needed seem impossibly far away. 

The sharing economy

But let’s have a look at the phenomenal amount of social cooperation which does, in fact, take place. Many uncounted and unmeasured parts of the economy contribute to our wealth, such as when neighbours share the ‘school run’ or when we make gifts for each other or clean homes that we share with others. All these kinds of activities add to the social capital of a society and contribute to its wealth. 

At the moment, these moments of cooperation operate very much on a private scale but I suspect that current technologies can be adapted to help us distribute the benefits of social cooperation fairly. In the process, I think we will be able to solve many problems which exist due to market failures. 

In his TED talk, Varoufakis notes that if people could organise themselves to work for capital instead of wages, the gap between those who own the capital within an organisation but don’t work within the organisation, and those who work for the organisation, but don’t own its capital, can be closed. We would have to find a way to organise work such that the capital produced within an organisation is shared with each worker who is contributing to its creation, and which people could take with them when they move to new jobs. 

Wage labour would not exist within this system, and instead every worker becomes a social entrepreneur. Though this seems like a difficult idea to put into practice, organisations such as Uber already require workers to bring their own capital (their car), and software such as Xero already allows small business people to keep track of complex financial flows. Add a social network media such as LinkedIn, and we are nearly there! The time to cooperate with each other, to build our social capital, is now.

Greta Werner is an honours candidate in Political, Economic and Social Science at the University of Sydney. She coordinates campaigning for St George Greens local group in NSW, coordinates the Primary Ethics programme for her local school and lives in Sydney's Banksia with her partner and three children.