This fall, the Center for Popular Economics will host the inaugural ‘Reel Economics’ film series. The series will screen six award-winning independent films, and then host a discussion on the political economy of the topics explored in that film. All films will be free and open to the public, and screened at the Unitarian Universalist Community of Amherst.
A still from ‘Under the Same Moon’ by Patricia Riggen
The series will kick off on Wednesday, September 14th at 7pm with Ava DuVernay’s groundbreaking Middle of Nowhere. After the film, John Jay professor (and CPE member) Geert Dhondt will give a short talk titled ‘Mass Incarceration in the Neoliberal Era,’ with time for informal discussion and questions from the audience. Dhondt’s talk will explore the political-economic structures that have led to the quadrupling of the US prison population 1980 to 2008 (from half a million to 2.3 million people), and why this growth has been targeted at black and brown people. Dhondt has spoken and written widely about the political economy of race, crime and justice.
“Neoliberalism” is a contested term. A lively debate exists on what the term exactly entails. Politically, it is also very controversial: few politicians will call themselves “neoliberals”. Without trying to provide definitive answers to the questions raised in this debate, I am convinced it is an appropriate term to describe the phase within capitalism that started in the 1970s of the twentieth century. The economic crisis in the West at the time made Keynesianism and the welfare state lose legitimacy with elites, policymakers, and among large sections of the population. This gave way to the beginning of a new neoliberal phase.
Free range for business
Neoliberalism as a hegemonic project was loosely based on the ideas of Milton Friedman, Friedrich von Hayek, and their companions at the Mont Pelerin Society. More importantly, the neoliberal premise was that everything will be better if corporations and investors are allowed to function with the least impediment. It is no wonder, then, that expressions like globalization, liberalization, deregulation, and privatization gained prominence.
Two important players within the political-economic field became neoliberal targets. On the one hand the workers’ movement and trade unions, which had ensured that there were significant limitations on the way businesses could treat their employees, were targeted. On the other hand governments that had – under pressure from labor movements – restrained the freedom of businesses through regulations, taxation, social security and barriers to globalization were also targeted. The neoliberal project aimed to curb the power of both these institutions, or change them in ways so that they would operate as per the wishes of the capitalists.
In her recent post, Devika Dutt asks what is to be done about globalization. The benefits of trade and globalization are real, so how do we balance them with the costs to marginalized workers? How do we assure the dislocated workers, many of whom are unfortunately gravitating to Donald Trump and nativist causes like Brexit, that their interests are being taken into account when globalization and trade agreements are signed? And how can we persuade them that the flows of immigrants are not going to damage their livelihoods? I have one suggestion.
Abandoned factory in Cleveland
Economists do purport to take into account the costs and the benefits of trade agreements – cost-benefit analysis, of course. Economists tally up the costs and the benefits, put it all in terms of money, and voice their support if the benefits outweigh the costs. One problem with this cost-benefit method is that a dollar to a rich person is obviously not as valuable as a dollar to a poor person, so how do we know whether we’re not just redistributing funds upward and making people unhappier? This is a very old observation, and it was part of an epistemological problem that plagued Economics until the 1940’s. The way out was a simple work-around, the Kaldor-Hicks compensation principle. The original formulations of the principle are more complex, but in practice it is invoked in a simple form: a proposal is good if the benefits and costs are such that the gainers can theoretically compensate the losers and still have benefits leftover.
Problem solved? Well, no. The compensation doesn’t actually happen, it’s entirely theoretical. The laid-off workers, the abandoned towns — the fact that they could be compensated satisfies the principle*. And the old concern, that a rich man’s dollar is not as valuable as a poor man’s dollar, is entirely skirted around. So my suggestion, to answer the original question of this post, is that we make the compensation actually happen. Agreements are good if the benefits outweigh the costs and the gainers actually compensate the losers.
Dislocated workers are sort-of compensated now – often with retraining for lower paid jobs. But that’s peanuts compared to the costs to the workers and their communities. If an agreement is good then there are more than enough benefits to fully compensate dislocated workers.
I don’t pretend that such a simple solution would be simple politically. Trade advocates will not like it. Perhaps the principle of actual compensation would be merely rhetorical, something unions and worker advocates can put forward to show that they’re not the enemies of progressive globalization. But it puts the burden where it should be. If trade advocates claim the benefits outweigh the costs, then they should have no trouble making the compensation happen.
On April 13, Verizon workers began a strike to demand that Verizon give them a fair contract. The workers were on strike for about six-and-a-half weeks, despite losing their health insurance. They demanded that, among other things, Verizon keep more jobs in the country instead of outsourcing them to save on labor costs, especially since Verizon is a company that makes billions of dollars in profits annually and can afford to do so.
Filipino migrant workers in Hong Kong. (Source: Wikipedia)
This sentiment has become a growing concern among workers in the United States as is evidenced by the strength of the presidential campaigns of both Bernie Sanders and Donald Trump (with widely differing degrees of racism and xenophobia, of course). Read more
The stock price of Valeant Pharmaceuticals, 1994-2016
Bethany McLean, in this summer’s issue of Vanity Fair, has done a terrific piece on the meltdown of Valeant Pharmaceuticals, a company led by a billionaire wonderkid who wasn’t. Before losing $81bn from a $90bn company that offshored its way to a meager 5 percent tax bill, Valeant price gouged sick people. McLean writes about Syprine and Cuprimine, the only drugs available to treat Wilson’s disease. The drugs were invented in the 1950s and formerly available for $1/dose, and now cost a stunning $300,000 for annual treatment after Valeant bought the patent. The piece highlights the terrible, inefficient system of drug distribution and development, as well as the scary behavior of corporations that puts all of us at risk. Read the whole thing here.
If Valeant Pharmaceuticals were one bad apple, we could leave the story at that. But the story reads more like a microcosm of our ‘recovering’ economy, and we should heed the warnings here of a system that puts short term shareholder return above all else. Read more
In August 2014, the New York Times described the erratic work schedule of Jannette Navarro, a single mother who worked for $9 per hour on a part-time job at Starbucks. Her wage would have been at poverty level even on a fulltime schedule. But because her total hours varied from week to week, she could never count on a stable income stream, rarely bringing home more than $1000 per month. In addition, because her work schedule changed frequently, seldom with more than three days’ notice before the start of the work week, she could not commit to finishing her degree, she had chronic childcare crises, and she had recurring conflicts with members of her extended family who were often called upon at the last minute to provide childcare. She would sometimes arrive at work as scheduled, only to be told that business was slower than expected and she should return home. She was afraid to ask for a more stable schedule because she feared being assigned fewer hours of work.
Ms. Navarro is not alone in this regard. Using a national sample of American workers aged 26-32 in 2011, researchers at the University of Chicago estimated that 38% of them got notice of their schedules one week or less in advance (Lambert, Fugiel and Henly, 2014). Examining a broader group – all civilian employees aged 18-65 – and defining unstable scheduling as varying starting and stopping times that workers have little control over, I conservatively estimated that 11.5% of American workers had unstable schedules in 2004, up from 6.6% in 1997. (McCrate, 2012) (More recent data for the entire country and a broad age group are not yet available.) This is not work-life flexibility for workers: among young Americans who are paid by the hour and whose hours vary from week to week, about 50% reported that their employer determined their schedules unilaterally. Another 45% enjoyed some discretion, or consultation with their employer, in setting hours (Lambert, Fugiel and Henly, 2014).
Capitalism is all around us. And because of that, we easily forget about it, in the way that a squirrel might be thrown by the concept of ‘forest.’ Of course, if prompted, we know it’s there (it’s on our citizenship exam!). It’s one of the amazing things about capitalism: as it lives in our minds, it’s both everywhere and nowhere at the same time. We contribute to this omnipresence/invisibility when we posit the capitalist process as natural, or as the inevitable end of history, or collapse the particular social institutions of capitalism into the generic and universal term ‘the economy.’ That is, we push capitalism into the background and inhibit our ability to use capitalism as an analytical category in our moral reasoning. This erasure, then, weakens our moral reasoning and hinders our ability to liberate ourselves.
When we look around the world, we see things we don’t like: poverty in the midst of plenty, persistentunemployment, long standing and widening disparities between groups, and environmental ruin. To engage in adequate moral reasoning about the things we don’t like, we need to understand what their causes are. Here by way of assertion, but worked out elsewhere in detail: many of the things we don’t like are caused by capitalism. But since the culprit – capitalism – is pushed from our field of view, our moral reasoning is rendered inadequate by extension. Read more
We’ve had too many attacks of late: after a terrible March 22nd terrorist attack in Brussels which took away more than thirty lives, a bombing five days later in Lahore brought more misery and pain. This time the second largest city of Pakistan was struck by a devastating terrorist attack in which more than seventy people lost their lives, specifically targeted at Christian Pakistanis who were celebrating Easter in a public park, though the victims were both Christians and Muslims.
The brutality of the two attacks is similar, but both public outcry and modes of analysis have been wildly divergent. In the countries of the global North, and especially in the US, we did not see an outcry and outrage at the similar scale as we observed after a devastating attack in Brussels. We must sincerely ask, why? Is it simply because we in the US can better relate with Europeans (but not everyone has a European ancestry in the US)? Or is it because we don’t expect a rich European country like Belgium to be under attack? Or because terrorist attacks not something new for a third world Muslim majority country like Pakistan? Or is it just a coincidence and there is not a systemic rationale/prejudice behind it? We don’t know. But we want readers to think about it.
Similarly, in the mainstream media a lot has been said about the prevailing socio-economic and cultural aspects of Belgian society. But when it comes to country like Pakistan not much is said in terms of socio-economic and cultural aspects. This article is a modest attempt in this regard.
“The worst crimes are not always the punishable ones.”1
George Orwell was an esteemed writer, political philosopher, socialist, and critic, who braved the Luftwaffe hellfire and joined the armed resistance against Franco’s rise to power. He hated dictatorship in all forms, from dogmatic fascism in the West to the dehumanizing communism of the East. He wrote against totalitarianism, and in his novel, 1984, imagined a world in which thoughts were punishable by death, while “vaporizing” political dissenters was not only legal, but official policy.
Indeed, power corrupts, and absolute power corrupts absolutely. And those with power use it to legalize their corruption. Their touch reaches far, scores of people harmed by their maneuvering. Ultimately, corruption is a parasite, stealing much from the masses, and enriching only a few. Of course, there are horrible people everywhere, who roam the streets, stealing, destroying property, or murdering, but they rarely hold political sway, and so their crimes are reviled and punished – and very rightfully so.
The Limited Liability Act of 1855 allowed British corporations to separate their firm’s financial liabilities from the assets and wealth of their owners. This was expected to encourage entrepreneurship and investment which in turn would generate employment, prosperity and lead to greater innovation. If a limited liability firm goes belly up, it’s investors are not required to liquidate their assets. However, if the firm’s owner is a sole proprietor, as is generally the case with small businesses, then there is unlimited liability and debts have to be repaid at all costs. Today most countries have some form of limited liability clause in their rule books, but only for a select few citizens. This disparity has consequences: wealthy entrepreneurs can take chances risk free, petty entrepreneurs live in danger, and governments are made subject to the will of lenders.
“Jack and the Giant Joint-Stock”, a cartoon in Town Talk (1858) satirizing the ‘monster’ joint-stock economy that came into being after the Joint Stock Companies Act 1844. (Source: Wikipedia)