Political Economy and Contemporary Capitalism

Radical Perspectives on Economic Theory and Policy

Ron P. Baiman, Heather Boushey, Dawn Saunders

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317462675
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This volume covers the theoretical method, macroeconomics, microeconomics, international trade and finance, development, and policy of economic theory. It incorporates various alternative approaches as well as a broad spectrum of policy issues.

1

Introduction

Political Economy Today, Political Economy Tomorrow

Dawn Saunders

Where We’ve Been and Where We Are

This is the third in a series of readers compiled by members of the Union for Radical Political Economics (URPE), representing three sucessive decades of political economic thought. In the introduction to Macroeconomics from a Left Perspective, Book I of The Imperiled Economy (1987), Cigdem Kurdas remarks on the predictive quality of the essays in the 1978 predecessor, U.S. Capitalism in Crisis, in looking ahead to the economic uncertainty and instability of the 1980s. In introducing Book II, Through the Safety Net (1988), David Gordon highlights the turn of 1980s policy debates toward the fashion now known as neoliberalism. Today, we consider again our current economic condition and our prospects for the future, as perceived by the creative and decidedly unorthodox minds of URPE members.

Economists always live in interesting times, but surely it doesn’t get much more intriguing than now. As we stand in the twilight of what was once called “the American century,” we are confounded by an American economy that refuses to slow down. We are more connected to the rest of the world than ever before, yet economists marvel as the sheer weight of stock market–driven American consumerism seems to anchor an economy on the brink of the chaos and stagnation infecting much of the world. Some see a hope that this anchor can keep the others from falling further, perhaps even pulling them up to safety.

But hope for whom? Should expansion be driven by a consumerism fueled by a massively regressive redistribution of wealth, and sustainable only by continued and erratic speculative frenzy? Few economists believe this trend is sustainable. Should we worry that the most successful consumer markets are “high-end” ones, such as high-priced homes and sport utility vehicles? Should we wonder that only in these past two years, thanks to the “tight” labor market that continues to worry Wall Street and the Federal Reserve, has income in the bottom 40 percent of income groups begun to recover from the long slide in real earnings that began in the 1970s? If these gains occur only during periods of “unsustainable boom,” what’s next for workers and families in the United States.?

Left political economy, as David Gordon explained in The Imperiled Economy, looks to the nature of capitalism itself as the source of the periodic swings and crises that both enrich or bankrupt the rich and powerful, and that open doors or slam them shut on everyday folks. And beyond the wilder swings of fortune are the ongoing trends that expand or contract the hopes and prospects of ordinary people. Inherent in capitalism, and the institutional structures that develop to support it, are “rules” that restrict equitable access to the productive potential of market economies. Democratic governments periodically seek to revise the rules according to the most vocal concerns of their constituencies. But political voice is itself subject to market forces, and those who cannot compete for access lose their voice over time: thus the decline in real earnings and the rise in inequality, thus the transformation of the welfare system, thus the decline in unionism, thus the potential transformation of Social Security. This latest development is perhaps the most telling sign of the current hegemony of neoliberalism, that our one almost universal support system, our last legacy of the New Deal, may yet be transformed into a wholly or partially privatized system. There again, the marketing of policy is demonstrated.

And Where We’re Going: The Next Generation

URPE could not have lasted thirty years, certainly a period hostile to unorthodox economic thinking, if it was not able to continue to engage new thinking and new thinkers. Our journal, the Review of Radical Political Economics, encourages original academic scholarship, as does URPE sponsorship of presentations and panels at major economic conferences. Both of these outlets have been especially important to young scholars in the field. Our own annual summer conference offers a less formal meeting of minds, and is particularly accessible to undergraduates as well as graduate students, and also to nonacademics: many of our panels and workshops center on activism as well as academics. This book is an invitation to all readers to explore alternative ways to see economic reality. We hope we have achieved a collection that is accessible to any open mind. It is our conviction that a wider dessimation of alternative points of view will further the prospects for the democratic realization of a more equitable society, both domestically and globally.

Young readers, including those of you in college, may only dimly remember the recession of 1991–1992 and the lingering high rates through 1995. Economic restructuring transferred permanent jobs into consultancies or temporary employment in the name of “flexibility” and “competitiveness.” You have heard that your own employment will be characterized by frequent job and even occupational changes. Aware that decent incomes depend on education, students today leave college with higher average debt loads than any time in history, as they and their families are asked to carry an increasing share of the costs of preparing for their future economic contributions to society.

But with all this uncertainty, many of my students are dazzled by Wall Street wealth (some experiencing it personally). They hear of a “virtuous cycle” of low inflation, low unemployment, and (finally) rising levels of productivity growth that, combined with low interest rates (thanks, they’re told, to the neoliberals’ elimination of the federal budget deficit) promises the end of the business cycle as we knew it. Aspiring young entrepreneurs hear that capital is cheap and easy to get: riches seem within one’s grasp. Why, then, should they be interested in the undersides of the market economy exposed in these articles?

Because most of them care about the incongruity between great wealth for some and dimming prospects for others, and many wonder about the relevance of the economic abstractions of their introductory classes to the real world. Economics develops and applies analytical methods learned throughout one’s education; even in its most abstract, neoclassical variant, it is good brain exercise. But critical reasoning skills are also challenged and stretched by exposure to those aspects of economic reality that do not fit neatly onto supply and demand curves or Keynesian cross diagrams. In the messy economic reality living people face, simple answers must give way to explorations, analysis, and critical discussion.

In these pages, readers will discover that political economists are asking questions that need to be asked, looking under the rug, behind the numbers, around the corners. You will find that this is not a homogenous group of thinkers and writers: many of our colleagues call themselves heterodox economists, emphasizing not only the differences in perspective that separate themselves from “orthodox” or mainstream economic perspectives, but also acknowledging the wide range of approaches to the real economy that fit under the broad tent of alternative economic theory. Many will disagree with each other on important points almost as much as they differ from the mainstream. All share a commitment to how much it matters to approach the study of our economy from a perspective that does not privilege the privileged.

The Plan of the Book

As editors, we chose to break with the precedent set in The Imperiled Economy of dividing the subject matter up between micro and macro divisions. This arbitrary division is rooted in the particular history of the discipline of economics, especially the period marked by the development and rising influence of Keynesian theory. But surely Keynes did not mean to bifurcate economics. Neither did the classical economists, including Marx, see economic reality this way, although they discussed topics that we would consider microeconomic (wage determination, for example) as well as macro-economic (economic growth). But without a preconceived division between macro and micro, Marx was able to examine the relationship between wage determination and economic growth (what he called accumulation).

Even the concept of the economy is an arbitrary abstraction: it represents only certain aspects of social reality, composed largely of what radical economists refer to as social relations in the production and distribution of the means of material support. It is also the history of our discipline that we have separated out specific relations, such as buying and selling, working and owning, borrowing and lending, from all the other things people do with and for and to each other. There is a long tradition in radical economics of highlighting the social relations of production and the material basis of class divisions as being a major contributor to understanding the economic and social reality of power and subordination, and there are articles here that represent that point of view. But others would argue that in isolating its range of study away from other kinds of social relations (such as race, gender, family, and sexuality), as well as creating artificial boundaries between the various relations traditionally described as economic, the discipline of economics has limited its ability to make sense of the real world. This view is also well represented in this volume.

The sections below contain articles useful in illustrating “macro” as well as “micro” topics as they are traditionally understood, as well as articles that defy classification on those grounds. While the sections are divided into broad topical categories, we admit some of the articles could have as easily been placed in one section as another.

Section I. Conceptual Approaches to Political Economy

Are economists social scientists or social scientists? We open with Bruce Pietrykowski’s reminder that the subject matter of all economic inquiry is social reality. Yet economists differ in the perspectives they bring to their study of that reality, and in the degree to which they recognize that social complexity may not be fully captured in a paradigm borrowed from the physical sciences. Mathieu Carlson suggests that left political economists can be similarly distinguished in terms of their reliance on a paradigm based on class categories: he suggests that “orthodox” Marxists share with neoclassical economists a reliance on a deductive method of reasoning, one based on the central role of the extraction of surplus value rather than neoclassical assumptions of rational individualism. Ellen Mutari describes the development of a feminist tradition that has found class alone to be insufficient in describing the real world, as it left out both gender as an organizing category and patriarchy as a system of social organization and source of power and privilege.

William Dugger and Howard Sherman return us to the tradition in political economy in which class is a starting point in social analysis. Dugger presents an institutionalist view of class, as being dependent on the differing relations of society’s members to key elements of power and change: income, work, wealth, and technology. Sherman argues that change is rooted in class conflict, in which technology also plays a central role, through the mismatch that periodically develops between slowly changing social relations and rapidly changing technology.

Julie Matthaei addresses the dilemma of what to do with a modern, multifaceted form of political economy: how do the “hyphenated progressives” (Marxist-feminst-antiracist-antihomophobic-ecological) go about “growing a liberated economy”? The dilemma of finding unity in diversity requires, she suggests, a new discourse, and a willingness to embrace real-world attempts at establishing antihierarchical institutions.

Section II. Capitalism’s Dynamic Path: Accumulation and the Rate of Profit

Opening this section, Fred Moseley examines the limited success of efforts of U.S. capital to recover from the stagnation of profit rates in the 1970s and 1980s. Moseley argues that strategies increasing the proportion of unproductive to productive capital partially counteracted capital’s success in increasing the rate of surplus value. Following another Marxian tradition, Jonathan Goldstein describes U.S. economic history as being alternately affected by the shifting balance of power between labor and capital, resulting in alternate routes to economic crises (“profit-squeeze” or “underconsumption”). Recent global trends in income distribution, financial disruptions, and macroeconomic policies, he suggests, points toward the potential of a truly global underconsumption crisis. Ismael Hossein-Zadeh sees U.S. economic history through a Marxist long-wave perspective. He argues against “end of history” and “breakdown” views of capitalism, and attempts to elucidate the effects of class struggle and other social forces on the long-term development of capitalism.

Alternatively, Edward Nell explains U.S. economic history (and the long-run dynamic of aggregate demand) by reference to the changing institutional structures accompanying the transition from nineteenth-century craft-based production to corporatized mass production. What new dynamics, he wonders, might we encounter as a result of the institutional innovations wrought by the dawn of the information age?

Section III. How We Live: Employment, Labor, and Income Distribution

So, can Marx, Kalecki, Friedman, and Wall Street all be wrong? Meaning, is there something to this non-accelerating-inflation-rate of unemployment (NAIRU) business? No and yes, respectively, suggests Robert Pollin: both Marx and Kalecki understood unemployment was “functional to the operation of capitalist economies,” just as neoclassicals, in their own way, understand that “unemployment rates are an outgrowth of class struggle over the distribution of income and political power.” Heather Boushey considers, as did Marx, that the “reserve army” of the unemployed may have different ranks, or different categories of workers with different functions in the labor market. In examining the relationship between racial and gender differences in unemployment in specific markets, she finds evidence that employment inequality—differential access to jobs—affects wage inequality in insidious ways.

Examining the trend toward increased income inequality, Chris Tilly concludes that commonly discussed factors such as globalization and technology cannot explain why the United States has become so much more unequal than other industrial countries experiencing the same trends; needed, he says, is an understanding of the institutional changes promoting profits before people, especially excluding many families of color and single-parent families from our supposed prosperity. This last group, as Tilly and Randy Albelda explain, are subject to the “triple whammy” of low earnings, reliance on a single paycheck, and the need to care for children given those two constraints. Again, the U.S. stands out among the world’s wealthier countries as being the least able (or willing?) to meet the needs of this group.

The effort to improve labor market outcomes through union organiza...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Figures, Tables, and Boxes
• Preface
• Acknowledgments
• 1. Introduction: Political Economy Today, Political Economy Tomorrow
• Section I. Conceptual Approaches to Political Economy
• Section II. Capitalism's Dynamic Path: Accumulation and the Rate of Profit
• Section III. How We Live: Employment, Labor, and Income Distribution
• Section IV. Examining Money: Finance and Inflation
• Section V. The Global Political Economy
• Section VI. Exploring Policy Questions: Theory and Applications
• Index
• About the Editors and Contributors