<http://www.monthlyreview.org/301dowd.htm>
Refuting the Big Lie
by Doug Dowd
Hugh Stretton, Economics: A New Introduction (Pluto Press, 1999), 864 pages, $90
hardcover, $35 paper.
Capitalism was first firmly established in Britain in the eighteenth century and
it was then and there that economics was born, in Adam Smith�s Wealth of Nations
(1776). Economists have served capitalism ever since, but only in the past
quarter-century has capitalism needed�and gotten�so much from them.
As the twentieth century began, given the intrinsic inequalities of capitalism,
the existence of political democracy in almost all capitalist nations
constituted an ongoing threat to capital�s rule, a threat intensified by
capitalism�s tendency toward intermittent economic crisis and socioeconomic
weakness.
For much of the nineteenth century, economics tended toward ideology; by its
end, it was pure ideology. But ideology alone was no match for the challenges of
the new century.
In the first half of the twentieth century, the crises were so pervasive and
became so deep that economists could propose nothing to avoid or alleviate them.
When something was proposed, as with Keynes during the depression of the 1930s,
neither capital nor most economists took heed before the Second World War�except
in Nazi Germany, which invented the military Keynesianism that undergirded
capitalism in the decades of the Cold War.
And what about economics? The years after the war were also the years in which
business had lost its unchallenged power and prestige, having laid a very large
and rotten egg before the war, as had mainstream (�neoclassical�) economics. A
substantial group of �new economists� had also come into being, �educated� by
the depression, the New Deal, and the war, aware and supportive of the need for
socioeconomic reforms. Their ideas and policies were effectively shaped by the
then-relatively powerful labor movement and a liberalized public, with
significant support from those in big business who had learned from the war just
how useful governmental (especially military) expenditures could be. Not for
nothing were the two decades or so after the war called Cold-War liberalism.
Global economic expansion took hold as the 1950s proceeded, and the following
decade was the most expansive ever, aided and abetted by the Cold War. But
superstate or no, capitalism�s laws of motion had only been modified, not
repealed.
In the early 1970s a unique and deep crisis�called stagflation�began to surface;
by 1974, it had become global. Simultaneous, severe, and sustained increases in
both unemployment and prices occurred. Capital had realized in the fifties and
sixties that it could tolerate a bit of shared power and the costs and taxes of
the warfare-welfare state, only so long as their sales and profits kept them
ahead of the game. But the global excess capacities of the seventies ended that
particular honeymoon.
Thus began what Richard DuBoff has aptly termed �the corporate counter-attack.�
It was an attack whose main aims were to weaken unions and get rid of the social
wage in both the private and public spheres: to return to the raw capitalism of
yore.
Corporations could not and did not fight that battle alone. They assiduously and
successfully increased their efforts to influence public opinion through the
media, and it was then that their political �contributions� began their quantum
leap toward present levels, and achieved the key victory of placing Ronald
Reagan in the White House. Reaganomics was initially seen as laughable and its
policies as some combination of stupid and cruel. Now the policies are taken as
common sense, and the economics as the new gospel.
It is that virtually unchallenged economics that Hugh Stretton effectively
demolishes in his superb book. He is a great teacher; he writes clearly and
without the priestly air so common to economists. His scope is extraordinary in
its combination of breadth and depth; by comparison, other texts rightly seem
both absurd and pretentious.
Stretton�s economics answers the two big questions that serious people have been
led to believe economists do answer, but which they really do not: �What do we
need to know about how the economy functions?� and �What can and must we do to
make it meet human, social, and environmental needs?� Rather than answering such
questions, mainstream economics spreads capitalism�s big lie: �What�s good for
business is good for everyone, everything, everywhere�: which is then delivered
daily by the media and politicians.
Stretton puts another economics in the place of the big lie: an economics that
we need and can understand and use. Stretton is an Australian who studied in his
own country, in England, and in the United States and who did a stint in
government. He knows what he�s talking about; he also knows that experience
itself does not guarantee good sense. Here a few excerpts in which he comments
both on the importance and the wrongheadedness of today�s economics:
The resort to deregulation, privatization and smaller government since the 1970s
proves to have been a mistaken response to the new troubles of �stagflation,�
and an active cause of some of them. Economists share responsibility for that
�right turn� in economic policy. Without their expert authority it is hard to
believe that the various political and business groups who drove the new
strategy could have persuaded majorities to support it, or tolerate it, for so
long.(ix)
He goes on to say that �bad economic theory can cause as much suffering and
death as bad medicine or engineering can,� and lists some of the dangerous
beliefs that fill textbooks and serve as an ongoing rationale for public
policies. Here are a few:
Monetary restraint alone will stop inflation and then revive employment�in
conditions in which it won�t do either.
Reducing public investment will increase private investment�when in fact it will
reduce private investment.
Free trade and exchange will make our manufacturers efficient�when in our
particular circumstances it will put too many of them out of business, increase
long-term unemployment, and wreck our balance of payments.
Cutting wages would increase employment�when it would not.
Shifting taxes off the rich onto the poor will induce the rich to employ more of
the poor�which it will not (63, emphasis in original).
And then consider this statement on globalization. You will find nothing like it
in any mainstream text:
Globalization . . . is a program to create private corporate rights to trade,
invest, lend or borrow money and buy and own property anywhere in the world
without much hindrance by national governments. It would bar governments from
most of the common methods of helping or protecting their national industries
and employment. It is a winners� program promoted chiefly by some business
interests, governments and neoclassical economists in Europe and the United
States. One of its purposes is to intensify international competition for jobs.
Together with other Right policies it is likely to maintain some unemployment in
the rich countries and reduce the wage rates of their lower-paid workers, and
reduce the proportion of secure employment (179-180).
MR readers likely already take the positions of those quotations and many others
like them. So why work through such a long book? Because if people like us are
to be politically effective, we must be able to gain a firm grip on why the
ruling ideology is not only rotten but wrong, in general and in particular. But,
as the great Italian Marxist Antonio Gramsci put it long ago in another context,
it is equally essential to offer an alternative set of analyses and connected
policies, in this case, another economics that supports a much different, much
better society.
Ah, it may reasonably be said, but we have Marx, and Baran, and Sweezy, and not
a few others. True. But it is also true that the powerful critique of capitalism
provided by Marxian political economy, necessary though it is, is not sufficient
for the political movement we require.
In our own time and place, capitalism controls not only the means of production
and thus the conditions of work but also, through formal and informal education
(known as propaganda when others do it), has come to control the hearts and
minds of the people, even of those who sense in both their hearts and minds that
something is terribly wrong. There has never been a time when the ruling ideas
of the ruling class have saturated popular opinion as much as today. Those who
have been able to resist must, however, know better what they already know, must
learn as much as can be learned and help both themselves and others unlearn.
Gramsci was speaking to this need in his own country, in his own time, a time
when capital�s hold was much weaker than now. But it was still powerful enough
to conquer one of the strongest socialist movements in the world and to put
fascism in its place and Gramsci in prison.
Those who work through this book carefully, and any serious person can do so,
will know more about the economy than is presently being learned by an economics
major, and will also be able to refute the arguments of such majors�and their
professors. I hope that many economics teachers will adopt this book for their
classes. But it is unique in that an individual or, better, a small group
reading responsibly and meeting regularly can move through it well and go on to
work with others to the same end, as teachers themselves.
What, specifically, can we learn and unlearn from this book? The first two
hundred pages are an introductory critique of conventional economics, both for
what it is and for what it lacks: studies of changes and growth, in terms of
institutions and history, technology, needs and wants, threatened social capital
and natural resources, and much more that is usually given only a passing
glance, if that. The next four hundred pages present a substantial critique of
the theoretical core of economics�demand and supply and distribution�and offer
systematic alternative analyses; they also cover the complex realities of
consumption and productive institutions (households, businesses, and
governments). Finally, they contain an excellent analysis of the distribution of
income and wealth.
Stretton�s treatment of mainstream theory is represented by this appraisal of
�models,� the main fix of economists:
The only activities [that mainstream economics] models are people trading their
individual endowments, in equal exchanges, for the private market goods they
individually want.�[It] is fair to call the simple model a capitalists� or
property-owners� model.�It chooses to equate passive ownership and active work
as similar �endowments,� similarly productive. It accepts the unequal
distribution of capital ownership as �given,� it puts no value on the
productivity that is lost when households can�t get adequate household capital,
or use public capital. It chooses criteria of economic inefficiency which are
indifferent to unlimited inequalities. The criteria are also based in favor of
what people want as consumers rather than what they want as paid and unpaid
producers. It encourages a systematic preference for privately profitable
production over other modes. And many of the economists and others who use the
model are unconscious of the values which shape it, and believe�wrongly�that it
is an objective, value-free representation of economic activity (220-225).
This superb book concludes with another two hundred pages on economic and
national strategies designed to confront and meet contemporary needs and
possibilities. In this brief review, only the character of Stretton�s policy
proposals can be suggested. As a dyed-in-the-wool lefty, I see them as highly
valuable in themselves and as decisive steps toward what we have been working
for: a safe, sane, and decent society, for one and all, across the globe, in
presently rich and poor societies. Less abstractly, that means effectuating
policies that move as swiftly as possible toward ample education, healthcare,
housing, and opportunity for all. In turn, those policies imply a downward
redistribution of income, wealth, and power and substantial changes in the
structures of both production and consumption.
Like many who read this review, I believe we need a democratic socialist
society. But we have no significant socialist movement now. What we do have is a
growing (if not yet unified) movement of protest against what exists and for
something much better. All the elements generating that movement are treated in
this book, both in analysis and in policy. Working for and achieving such linked
reforms could�even must�serve as the prerequisite for the achievement of an
effective socialist movement.
