We’ve lived so long under the spell of hierarchy—from god-kings to feudal lords to party bosses—that only recently have we awakened to see not only that “regular” citizens have the capacity for self-governance, but that without their engagement our huge global crises cannot be addressed. The changes needed for human society simply to survive, let alone thrive, are so profound that the only way we will move toward them is if we ourselves, regular citizens, feel meaningful ownership of solutions through direct engagement. Our problems are too big, interrelated, and pervasive to yield to directives from on high.
—Frances Moore Lappé, excerpt from Time for Progressives to Grow Up

Tuesday, November 25, 2014

[Capitalist] Economics in crisis

Click here to access article posted by David Ruccio from Real-World Economics Review.

Ruccio posts a couple of graphs from economist Cornelia Strawser followed by some questions she feels must be addressed by the dramatic decline of worker compensation. Here is the main graph showing this decline followed by her questions.

   

    1. Does the falling labor share arise from rapid technological change?

    2. Or does it reflect changing power relationships?

    3. Is it a result of globalization, hence inevitable and irreversible?

    4. Or is it an anomalous business cycle development that we can expect to fade away?

    5. What does increasing financialization contribute to the falling labor share?

    6. Is the labor share made worse by our reliance on monetary stimulus – which encourages more financialization – having failed to deploy a more stimulative fiscal policy?

    7. If private-sector productivity growth is not raising worker wages, why should workers support it, and should it be a national priority?

    8. Does the rising capital income share contribute as much to investment demand as the falling labor share subtracts from consumption? Or, since investment demand depends on final consumption demand, does the falling labor share instead cause a vicious downward spiral of self-reinforcing underconsumption and stagnation?

    9. Is there a case for a compensating structural tax reform that would place a relatively greater burden on capital incomes, and less on labor?
My short answers are as follows: 1) no, 2) yes, 3) no, 4) no 5) it attempts to offset consumption missing from workers, 6) inevitably and eventually yes, 7) stupid questions, 8) not in the long term, yes, 9) stupid question.

Of course, her questions are posed within a capitalist framework which cannot question the system itself. It's the system with its built-in contradictions that is the problem. 

Australian economist Steve Keen has some useful insights (at 4:45m in video) about the contradictions of capitalism, but being a capitalist economist he must not stray too far from orthodoxy. 
The conventional way of thinking about finances is that finances is.?.a profit center in capitalism. You've got the industrial sector which is profit, service sector which is profit, finance profit center. [However]Finance is fundamentally not a profit center. It's a cost of doing business. In fact, if costs get too high, you actually weaken the economy--you don't strengthen it. What you get is the risk of capitalism is being imposed on the workers, when the essence [rationale] of capitalism is that capitalists are the risk takers.
However, this economist continues on to blame a section of the capitalist class, the financiers, for the problems of the economy. Financiers are only the top echelon of the ruling capitalist class, and the capitalist layers below them are completely beholden to this top layer. Besides the two layers are thoroughly integrated with bankers sitting on many industrial corporation boards. And now we see banks owning a significant number of industrial companies. So, Steve Keen can blame them all he wants, but nothing will ever change their close identification with each other. Finance is the ownership of money whereas the industrial and service capitalists are the "owners" of economic enterprises (under capitalism). But, capital is capital, and capitalists don't care how they increase their wealth and power: whether with the production of goods and services or with the renting of their money to those engaged in the true profit centers.

Throughout the remarks of capitalist economists, you will always find that growth is their focus, and economic growth is always good simply because the system cannot function without it. This immediately creates a contradiction with planetary limits which we are now approaching, and possibly exceeding to our peril. Like never before, capitalism is in crisis along with the teaching of capitalist economics.

So, let us end this commentary on a lighter note by viewing these two Australian comedians who discuss economic growth (thanks to Wolf Street)