Why the status quo is incompatible with progressive economics


The Greens have faced criticism over the years for not being ‘economically credible’. But as NSW MLC candidate Abigail Boyd explains in this extract from her presentation at last November‘s National Conference, credibility can be difficult within the economic status quo.

By Abigail Boyd

The Greens have faced criticism over the years for not being ‘economically credible’. But to be fair, it hasn’t been easy to be seen as credible within the confines of an economic status quo that is incompatible with our core principles.

It’s not credible, for example, to be arguing for ecological sustainability within an economic system that cannot recognise the value of a tree until it has been cut down; a system in which cleaning up an oil spill is counted positively towards our economic productivity while a diverse abundance of marine life is not.

It’s not credible to argue for social justice within an economic system that, by design, results in economic inequality widening year after year, where now just eight men own more wealth than the poorest 50 percent of the global population – eight men with as much wealth as 3.6 billion people.

It’s not credible to argue for improved participatory democracy without acknowledging that the economic system we live in creates and actively reinforces inequalities of power.

And it’s not credible to argue for peace without acknowledging that so much of the world’s violence is caused in the pursuit of profit and the accumulation of resources.

Put simply, it’s not the Greens that aren’t economically credible – it’s our economy that isn’t credible in light of our Green principles.

And starting with the global financial crisis, we’ve seen a real awakening around the world recognising that the economic status quo needs to change. Whether it’s Bernie Sanders in the US, Jeremy Corbyn in the UK or Jacinda Ardern in New Zealand, reflecting on capitalism – and admitting its flaws – is becoming more acceptable.

I say starting with the financial crisis, perhaps because that was the first time that I woke up to capitalism’s flaws and began to think about how we might fix them. As a banking regulation specialist in London at the time, I saw very clearly the precursors to the financial crisis, as well as the way in which the crisis hit the most vulnerable people while leaving the wealthy and powerful relatively unscathed, and the way in which the regulatory response to the crisis now threatens to cause the next financial crisis.

So today I’m going to talk to you about how we get better at questioning the economic mainstream and how we make space to start dreaming of, and then building, a better kind of economy.

Our existing economy

To the likely horror of economists in the room, I’m going to start by saying that economics isn’t that special.

Firstly, an economy is not a thing – it’s an idea, a notion. It often gets presented as some natural, immovable force instead of something that is designed by people. And the idea that economics is too hard for the average person to understand is self-serving – when politicians wring their hands and say, ‘Oh, we’d love to get everyone out of poverty but, you know, the economy’, they are using our lack of economic confidence as a shield.

Secondly, the way an economy works is inherently political, and not scientific. The economy is simply the way in which we decide to produce and distribute goods and services, including how we share in any surplus. Whether or not we can afford to build hospitals instead of buying submarines is a political decision. Whether we provide subsidies to fossil fuel companies and not renewables is, of course, a political decision. And you don’t have to be an ‘economist’ to have an opinion on economics – anyone interested in politics is by definition an ‘economic thinker’.

So our current version of an economy here in Australia is based on old-fashioned 19th century principles, crafted at a time when we were pretty ignorant about a lot of things – long before we knew much about global ecological systems, for example; when we couldn’t foresee the impacts of information technology on markets; and at a time when our knowledge of human psychology was pretty limited.

In the 80s, Reagan and Thatcher’s neoliberal policy ideas amped capitalism up. Neoliberalism is focused on markets and business, through low taxes, small government and privatisation. The ideas of ‘what’s good for business is good for the economy’ and ‘wealth will trickle-down from rich to poor’ have been the economic status quo in Australia for decades now, unchallenged by both major parties.

And this neoliberal society has not only changed our material wellbeing – leading to widening inequality and the trashing of our environment – but it has also changed the way we think. It has encouraged us to be in constant competition with one another, to act and think as individuals, to equate acquisition with success, and to put a price on everything in our lives.

So, how do we get out of this current destructive neoliberal state and move to an economy fit for the 21st century? We have to, firstly, unpick the myths and, secondly, we must dare to dream of something better.

 Unpicking the myths

There are too many to go into in this talk, but a few of the big ones:

  1. Firstly, the myth that ’there is only one possible kind of economy’. There are loads of possible economies we could have. The capitalist society we have here in Australia is, of course, very different to the capitalist societies in other countries (think Sweden, for instance, or Japan), with myriad possible different policy settings influencing how those economies work in practice.
  2. Another myth is that ‘the only alternative to neoliberal capitalism is Soviet-era communism’. Rubbish. Let’s remember that the current version of the economy suits those with wealth and power very well, and by questioning the economic status quo, we are also challenging existing power structures. It’s not surprising that these sorts of things are said to shut down criticism. As I’ve said, there are multiple versions of capitalist economies, and there are multiple types of more progressive economies that we could have instead.
  3. Another clanger is that ‘GDP is a valid measure of economic success’. We really need to stop talking about GDP. The concept of gross domestic product was developed at war time and is grossly incompatible with a 21st century economy. It’s a measure, for example, that values the sales of formula milk, but not a mother’s breastfeeding; it values me getting paid to look after someone else’s child, but not my own; it values sales of Encyclopaedia Britannica, but not the use of Wikipedia. It is a very poor measure of economic productivity and success and there is growing acceptance by governments around the world that it should be replaced with a measure that includes factors providing an indication of wellbeing and sustainability.
  4. The need for economic growth is another myth. Mainstream economists view endless economic growth as a necessity, but nothing can keep growing indefinitely and an endlessly growing economy is incompatible with both economic and environmental sustainability. What matters is not growth regardless of wellbeing, but wellbeing regardless of growth. Or, in other words, we don’t care how big the pie is if only the 1 percent are getting to eat it!
  5. Finally the myth that ‘Wealth trickles down’. We’ve had decades to take data now, and we know that this is false – everyone does not benefit when the wealthy are better off. In fact, there is concrete evidence now that in countries with high economic inequality, even the wealthiest people in those countries are much worse off than in countries with low economic inequality.

Daring to dream

Once we bust through those myths, we can begin to dream of something better. Using concrete examples, we can then paint a picture of a new economy. For example, a Universal Basic Income is a great example of a reform that would push the economy in a new direction, both because of its redistributive effect but, equally as important in my mind, its potential to re-establish the social contract between government and the people (where government has a responsibility to ensure people’s basic needs are met) and to break down this pervasive and toxic neoliberal idea of ‘lifters and leaners’.

Couple that with free life-long education to ensure people can move out of unsustainable or outdated industries and into new industries. Discard the idea that we need an excess of workers in the ‘labour market’ and instead work towards a goal of full employment for those who want a job. Continue to push for public ownership of essential services.

Encourage different kinds of co-operative and collaborative business structures to sit alongside traditional profit-focused corporations.

Implement taxation reform where we focus on taxing extreme wealth and the income derived from capital instead of labour.

These are all examples consistent with our current policy platform, and are the beginnings of an economy much more suitable for the 21st century.

And people are ready to open their minds when it comes to our economy. Young people in particular, living within a system in which they are materially less well-off than their parents, do not support the current economic system. A survey in 2016 showed that over half of young Americans, for example, do not support capitalism.

Like all the other things we strive to change, progress can take time – but the push for a progressive economy is getting stronger. I feel we are reaching a turning point. We missed the opportunity in the aftershock of the 2007-08 financial crisis. When the next crisis comes, we must be ready to push for an economy that is credible for an ecologically sustainable, just and peaceful world.

Abigail Boyd is The Greens’ lead woman candidate for the NSW Legislative Council in the 2019 state election.

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