Re: Priming the World Pump

[BERNIETUCMN@xxxxxxxxxx id <01HPOQN2O1GW8ZI7W8@xxxxxxxxxx>; Sun, 23 Apr 1995 17:47:06 -0400 (EDT)]

Thornton

     Pardon me for a long and tardy response to your comments.  Your raise
two questions which I'll try to answer:

>    Could you give the "Invisible Hand" more time to work?

>    Who would you define as appropriate to conduct the central
>    planning?

ONE MORE CHANCE FOR THE INVISIBLE HAND?

     In general, my belief is that the Invisible Hand had a reasonable trial
run during the 19th Century, and that we do not need to spend the next
century re-learning those lessons.  While unregulated capitalism unleashed
tremendous technological advance and a great expansion of production, the
cost in human suffering was also very high.  Its cutthroat competition,
tendency towards monopoly, periodic financial crises, and its concentration
in a few hands of great wealth (gained at the expense of the many who
produced that wealth), led to movements which seemed to threaten
capitalism's very existence.

     For about a century (from Bismarck to Reagan) capitalism managed to
save itself by negating its own tendencies (i.e., its propensity to consume
the social fabric of the society which is its host).  A wide range of
measures to protect the security of society -- from child labor laws to
environmental protection -- kept both capital and its opponents alive, in
symbiotic conflict.  Where capitalism was overturned, as with the Russian
Revolution, control of the means of production was hijacked by a new class
whose privileges came from owning the state.  Their capacity to organize
production was profoundly sabotaged by their need to maintain a monopoly of
political power.  Without political freedom, central planning is inherently
arbitrary and corrupt.

     While the Stalinist world was no model to be emulated, it did provide
the Third World with the semblance of an alternative to capitalism, which
they used for leverage and bargaining power in dealing with the First World.
 I believe that the failure of bureaucratic state collectivism has removed
any shred of economic independence for the Second and Third World.  All
channels are now open for the flow of capital, which can no longer be
bottled up under the control of any state.  Capital is again unleashed and
up to its old tricks.

     Capitalism (especially, within the framework of the welfare state) can
work tolerably well for most people in those limited times and places where
and when the system is expanding rapidly, because those conditions improve
the bargaining position of the majority of people who actually produce the
goods.  When labor is in short supply, workers can wrest for themselves a
rising share of the fruit of their efforts.  But these halcyon conditions
are the exception, not the rule.

     The limits of Keynesian expansion within this country were reached in
the welfare/warfare state of Lyndon Johnson in the 1960s.  The productive
dominance that was the base of U.S. power coming out of World War II could
not be maintained.  Keynesian stimulation led increasingly to inflation and
trade deficits.  While inflation eventually kept real wages from rising, it
was no longer an acceptable instrument of control because U.S. manufacturing
had lost its monopolistic power at the global level and could no longer
simply pass along price increases without loss of sales.  Out of this crisis
of profits came a new resolve to root out inflation and lower real wages.

     All of the growth in the U.S. since the 1960s has been in non-union
sectors, or by moving industrial jobs to non-union parts of the country.
 The great exception is the public sector, whose rising union membership is
now under relentless attack.  The proportion of workers who now are
organized has sunk well below the critical threshold that labor would need
to have the power to lift prevailing wage rates.  Despite the lack of any
monopoly power on the part of labor, the labor market does not produce full
employment at any wage rate.  Rather, there is continuous high unemployment
and a slow perpetual undertow on wages.

     The decline in real wages and the continuing unemployment reflect the
policy of the Federal Reserve and the political class (of both parties) to
cut off any expansion which might reduce unemployment.  The objective of the
policy is precisely to lower labor's share of the national income -- to make
the U.S. more attractive and therefore "competitive" for capital investment.
 High real interest rates, which exceed the rate of growth of national
income, serve to assure that capital will win the spoils of a one-sided
class war.

     All this makes sense from the point of view of doing what is in the
best interests of capital.  But this is not in the interest of most people
in the U.S., the Third World, or elsewhere.


A LIBERTARIAN ALTERNATIVE TO THE CAPITALIST MARKET

     I am a libertarian socialist.  I do not like remote bureaucratic
institutions.  I do like people taking responsibility for their own lives in
their workplaces and communities.

     What kind of world do we want to live in over the new century?  Today,
no one is empowered to answer that kind of question.  I believe that the
inability of both neoliberalism and bureaucratic collectivism to deliver a
good life to most people, will force into being a new model, in which people
find that they have to think globally before they are able to successfully
act locally.

     Such a model might look to alliances of consumer and producer
cooperatives as the nodes of a new kind of safety net.  These would differ
from corporations and atomized consumers in that they would find it in their
interest to look beyond maximization of profit or immediate advantage.
 Rather, they would be guided by a wider range of values, starting with the
desire to keep intact communities of work and residence.

     Communities of cooperators cannot insulate themselves fully from the
ravages of market forces.  But, to the extent possible, they would have
reason to seek reciprocal arrangements promoting mutual stability.  In a
world of constant change, such arrangements must also be flexible and fluid,
or else the whole body of cooperators would find that they had become
fossilized, and that their bonds of solidarity were too restrictive to
maintain.

     The key to continuity and security in a dynamic world is to internalize
the costs of change by offering re-assurance and inclusion to all members of
society.  It must be fully recognized that there are no disposable people in
a community.  Maintaining social cohesion has a cost -- compensating those
whom both capitalism and bureaucratic collectivism have been willing to
sacrifice as the price of progress.  But those systems also have costs which
they cannot recognize from within their own logic.  Environmental
devastation, both East and West, is the biophysical indicator of failure to
internalize costs in these systems.  Treating labor as freely disposable,
failing to respond to basic humans needs, also creates toxic human waste
products that return in an external form as crime and other ills, making the
public space unliveable.


DEMOCRATIC MONETARY SYSTEM

     Alliances of cooperatives could address the very real problems
affecting the larger world over the longer run.   But until there is
democratic control over the monetary system, the options for cooperative
activity will be severely constrained by an artificial scarcity of capital.

     I believe that the creation of fiat money on an international scale
will come of necessity, without reference to the democratic control of these
funds which I am proposing.  It will come through the back door of bailouts
of unpayable international loans; maybe even our own indebtedness as a
country will one day be so clearly in-credible (not creditworthy) that only
monetization or renunciation of the debt can kick the credit system back to
life.

     No new institution would be needed for the monetization or forgiveness
of debt.  But this clearing of the debt overhang would not solve the
structural fault which caused it -- a system which retards development in
order to keep capital scarce and well-rewarded.

     The monetary structure within which the Invisible Hand roams free, is
always political, and is now fully international.  Those who are
increasingly feeling the screw would best be advised to point that
instrument back in the direction from whence it came.  The "mechanism" for
this change of direction would be the rise of political movements
representing the growing number of losers in each country.  Most likely,
they won't achieve national power in enough places to set up a new world
monetary order.  They can, however, restore a credible threat to capital --
that there is some kind of alternative lurking.  This could force capital to
discipline itself to act responsibly enough to keep society manageable.

     What if these movements do achieve political control in enough places
to give them the power to re-structure the world monetary system?  I don't
believe that they would start out with a mandate to abolish the market.
 Rather, the task would be to build a new framework for the governance of
capital, such as a social charter (including human rights); preference for
investments in cooperative enterprises; and the establishment of goals for
growth leading to full employment and greater equality of incomes within the
sphere of cooperating nations.

     In addition to establishing the ground rules for capital, an
international economic body -- as democratically representative as possible
-- would be needed to work on guidelines for the allocation of new fiat
money.

     Investment should largely be made in the Third World in the form of
endowments, which would only be "repaid", as contributions to the common
investment fund, as incomes rise.  The primary focus should be on building
infrastructure (including protecting environmental resources) and human
development (health, education).  This would provide income in less
developed countries which would be the basis for effective demand, inducing
new production, with the greatest impact occurring locally, but also
providing international markets for high-tech products and services from the
currently developed world.  A secondary focus for investment would be the
re-gearing of production and life in the developed world to conserve and
ultimately reduce its disproportionate use of the world's resources.

     This would be well short of central planning -- a marked contrast to
the current mechanism of command and control now provided by the IMF and
World Bank, which has put us on the road to producing more unnecessary
deaths than Eichmann and Stalin combined.