Opinions Column: Everyone’s Economics

By Dr Annavajhula J.C. Bose, Department of Economics, SRCC (University of Delhi)

Do you want to learn economics for a fairer society, enjoyable with humorous and educational cartoons? This indeed can be an antidote to the confusing and ideological way that economics is normally taught and reported or presented in a needlessly abstract and technical manner. I invite you to explore www.economicsforeveryone.ca where you can run your own economics course. This can be a springboard for you to seek solutions for the special economic problems of a developing country such as India.

This course is owed to the ingenuity of Jim Stanford who does not want you to forget the following dozen big things about this economics.

What we call the “economy” is simply the way human beings work together, to produce goods and services, and then decide what to do with what we produce. Everything about the economy changes over time.

The economy embodies conflicting interests between different groups, and economics closely reflects those conflicting interests. Different approaches to economics rise and fall, depending on the course of economic (and political) debates and conflicts. Every approach to economics combines an analysis of how the economy works, with a set of values and assumptions regarding how it should work (and in whose interests).

Work or human effort is the only force that transforms the resources and raw materials we get from nature into goods and services we can use.

The invention, production, and accumulation of “tools” (defined broadly to include machinery, structures, infrastructure, and other kinds of physical capital) has been the central feature of economic development through human history. Developing and accumulating more advanced tools, and training people to use them effectively, must occur at the same time in order to make work more productive.

About 85 percent of households in developed capitalist economies rely on employment as their dominant source of income. Managing the employment relationship is a central aspect of capitalism. Employers face a complicated challenge to try to minimize their labour costs, while simultaneously maximizing the effort and discipline of their employees. This relationship introduces an inherent conflict of interest between workers and capitalists. At the same time, there are times when workers and capitalists may choose to cooperate with each other.

A great deal of productive, necessary work occurs inside the household, mostly done by women and without pay. Remembering that this work needs to be performed, analyzing how and by whom it is performed, and making changes to it over time, are central issues in economics.

Capitalists aim to maximize the profits on their investments by poaching customers, workers, resources, and capital from other capitalists. Competition therefore introduces a new constraint on the way that individual capitalists operate. It’s no longer just greed that motivates them, it’s also fear. That fear (of being driven from business by more successful competitors) forces executives to behave in certain ways, regardless of their personal preferences or values. Capitalism has become more competitive over time, not less (thanks to technology, globalization, privatization, and improved management skills).

Natural environment is both a source of direct ecological benefits (fresh air, open spaces, recreation, and so on) and a source of raw materials for production. The economy cannot continually run down the quality of the environment without humans eventually paying an enormous economic price. Developing sustainable practices (to stabilize and preserve environmental quality) is an urgent economic priority.

Financial institutions can play a useful role in facilitating investment and production by companies in the real economy. But this function may be overwhelmed by pointless, wasteful, or downright destructive financial activity. Speculators seek to profit from the purchase and resale of paper assets, rather than from the production of useful goods and services.

Government actions and programs have tended to reinforce and stabilize the basic relationships of capitalism; guaranteeing private property rights, supplying business with needed inputs (like reliable infrastructure and skilled, disciplined workers), expanding markets, and managing social relationships in a way that promotes both stability and profitability.

Modern globalization is inherently biased in favour of corporations and investors. Free-trade agreements and other aspects of globalization give them more mobility and more power, while limiting the ability of national governments to regulate international flows of goods and capital. In contrast to free-trade theory (which claims globalization benefits everyone who participates), globalization may help or hurt a national economy. It can increase or decrease demand for a country’s products (via the trade balance), and it can strengthen or weaken investment (via capital flows). A country’s competitiveness determines whether globalization is helpful or harmful.

Workers and poor people get only as much from the economy as they are able to demand, fight for, and win. Demanding a fairer deal from the system, and building the organizational and political power to back-up that demand, is the only way to redivide the pie.

Sources: Stanford, Jim. 2015. Economics for Everyone. Second Edition. Pluto.

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