The Economy Gods Don’t Exist: Reflections on Spain, why “America Is Not Broke”, and our Manufactured Economic Crisis of the Imaginary
The cry of the massive protests rocking Spain in the last few days, in the wake of massive economic crisis and coming elections, is for “real democracy.” Against all the major ruling parties. Against business as usual. If only the United States had something similar. But our country has bought the lies that the Spaniards in that square have realized are illusions. There is no economic crisis. It’s all made up. There are people, and they want to work. But why does the government keep laying people off, continuing to send the economy into yet a worse tailspin, while cutting services to help the un- and under-employed get by?
Why the call for ‘real democracy’? What could that mean in such conditions? And what does it have to do with our economic crisis, as a crisis that’s imaginary? And that can be fixed if we just realize this, and start working again? All we need to do is get rid of the illusions sold to us by the financial powers that be. We aren’t broke. The debt has been manufactured. There are people, they want to work, and there are resources. All we need is to set up the conditions, and they will work. So what’s the problem?
The people in the streets of Spain see this. What could their call for ‘real democracy’ mean?
New From Spain: People want their Government Back
So I finally saw the first mainstream English Language News Coverage of the massive protests going on in Spain right now. There’s a Reuters article here on HuffingtonPost. So for those looking for an update in English, it’s a pretty good article.
I still haven’t seen anything on the New York Times, which seems instead consumed with ‘L’Affair DHK‘ and the US Republican presidential contenders.
What I find really interesting about these protests is that they are a rejection of all three major parties in Spain at the present. An acknowledgement that the system is broken, radically so, and needs major structural reform. Of course, what’s powering all of this is the 21 percent unemployment rate in Spain, the degree to which most youth are simply out of work for the foreseeable future, along to the degree to which the financial consensus that rules Washington and the EU wants to impose austerity rather than real solutions.
Implications for the US
Similarly, in the US even the democrats are raving about the need to cut the deficit, while the clear sighted folks know, as Michael Moore so wonderfully articulated, that “we aren’t broke.” Paul Krugman and other lefty economists have shown over and over again that this crisis is manufactured by the Bush tax cuts, which if we’d just let fully expire, would take care of the current debt issues. But the Republicans have so cornered the market on ideas that for Democrats to even utter the word ‘tax increase’ seems impossible.
I like Rachel Maddow’s recent TV bit on MSNBC where she stands in front of the Hoover Dam, and argues that only a country with foresight makes investments like this, and that was the country the US used to be, and could be again. But we are in an age of radical disinvestment in the public/common, as evidenced in the radical cuts to the University of California, one of the major resources for getting folks into the middle classes in our largest state, or the massive cuts to the British university system.
Around the globe, financial power gambles and gets bailed out, yet has convinced us that they are magicians who can’t be tied down with regulations because they use crazy math to keep the financial wizardry going (sounds like the sacrifices the priests of yesteryear made to the gods of the weather!), while everyone else needs to tighten their belts.
The Economy Gods Don’t Exist: Why We’re not Broke, and the Crisis is an Illusion
But it is precisely the notion that the economy is some magical oracle that needs combating. Sure most folks won’t understand the complex economic calculations. And it turns out, most of the ‘quants’ couldn’t see the debt crisis coming either, and that’s because anyone who’s studied how these formulas works knows that the fundamental premises that many of them rely on, things like ‘rational economic actors’, ‘perfect information’, etc., are fundamentally flawed.
For those looking for some insights into what I mean by this, check out a book like Mark Taylor’s Confidence Games: Money and Markets in a World Without Redemption (2008), a book that does a great job of explaining the last major manufactured crisis of the economic imginary, in 1996. And for an alternate approach to economic theory, check out Eric Beinhocker’s truly excellent The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics (2007).
Point is, we need to communicate some very simple things about the economy to everyday folks so that they don’t feel mystified. And the people in Spain have it right. Everyone in Spain can see that there’s tons of people who want to work, they are smart, educated, there’s tons of natural resources in Spain, but no jobs, and calls for more austerity to cut everything. What would this lead to? The devaluing of everything in Spain, impoverishment of the people, yet a great opportunity for foreign capital to come in, buy everything for a song, and put everyone to work for pennies. In the process, capital takes control of just about everything, government no longer accounts for much of the economy, and ownership of much of the country’s wealth has been transferred to nameless, faceless organizations responsible to no-one.
The US Healthcare System: A Money Laundering Scheme Producing Maximum Profits for Minimum Services
Just like the US healthcare system, where shadowy forces called ‘insurance companies’ have rigged the system to provide maximum profits for themselves, minimum for doctors and providers, minimum care delivered, and one of the largest dollar to service innefficiencies of any nation on earth. The health care industry in the US is a giant money laundering scheme, a cabal that has rigged the system to deliver minimum care for maximum buck. The free market is supposed to, in theory, do the opposite of this, deliver maximum product for the minimum buck, but this market isn’t free, that’s why this is best called monopoly capital, it’s a market that’s rigged so only those with tons of money can play the market, namely, the corporations. And these very corporations, due to the Citizens United Supreme court decision, can now make unlimited campaign contributions to the political campaigns, whether or not they are based in the United States, based on the faulty logic that corporations are simply people in need of free speech.
But freedom for corporations means radical disenfranchisement of the people who simply can’t compete dollar for dollar with multinationals, and never will be able to. Our governments now serve the multi-nationals and financial powers that bought them fair and square, and who have convinced them, with effective lobbying and outright blackmail, that austerity is the only path.
How to Get Out of a Crisis of the Imaginary
And yet the people in Spain KNOW this isn’t true. Economics isn’t about crazy formulas. It’s about CONFIDENCE and EMPLOYMENT. If you create jobs, people have money to spend, which spurs production, which creates more jobs. If people are confident, they spend their money rather than save it, and the result is commerce, which produces more tax revenue, which pays back the jobs created by the government, with interest. It’s basic Keynesianism. And it works. And it’s simple. Everyone in Spain and the US knows that there are smart people who want to work, and resources are available, only ‘there is no work’. It’s as if ‘the economy gods’ were pissed at us.’A bad economy’, all we can do is tighten our belts . . .
This is a crisis of the imagination, but the protesters in Spain can see before them, with their own eyes, that it’s easy to recharge the imagination. People, in the center of the city, these people can work, so what’s the problem? There’s no jobs. But if people want to work, what’s the problem? The problem is imaginary, it’s simply one of lack of imagination, of lack of seeing the options right in front of us.
The same is the case in the US. If only the President and Congress would use the economic crisis as an opportunity to massively create jobs that would invest in our future. The time has come to hire thousands of new teachers, nurses, first-responders (police and fire), to invest in new infrastructure, to build things like the Hoover Dam. How do we pay for it? Simply repeal the Bush tax cuts on the wealthiest. And by putting more people to work, money will flow into the economy, and will come back into Federal coffers with interest. More people working, more money in the economy.
But those in power have convinced us that when the economy gods are angry, we need to suffer, and cut. This puts more people out of work, and let’s the multinationals, which are making record profits and paying less taxes than ever, buy everything for a song, and eventually, after everyone has suffered enough, come in and create an economic recovery that’s essentially jobless, since it’ll always be cheaper to ship jobs overseas (until they’ve bankrupted the metropolitan centers as well, leaving nothing but corporate run gated communities with private armies!), but in which all ownership is in the hands of the new corporate overlords that have bought everything. And then maybe you can get a job for a massive corporation getting paid next to nothing because these are the only jobs around.
The Government Needs to Defend Competition, by Competing!
This is where the government needs to step in as the ‘competitor of last resort’. Many people think of the government as bad for competition and ‘the market’, but when corporations have so distorted the ‘fitness landscape’ that determines the parameters of competition itself, competition by the government with the monopoly capitalist powers can actually set the playing field closer to even. Because the government can do things like change interest rates, print money, etc., things that can alter the playing field of competition itself. But the corporations have pressured the government to set the playing field so it only benefits profits, not people. Competition is fair only for profit creation. But in the long run, this distorts the economy, which is supposed to be a search engine not for the maximization of profit only, but profit AND SERVICES.
Ultimately, if a system like this continues, it will impoverish its own consumer base. And collapse, yet again. Take the logic currently dominating the system to its extreme, and you have a suicide machine. We go back to the situation of the late 19th century, in which massive industry was proletarianizing everyone, child labor laws are repealed, robber-barons rule the world – oh wait, we are already returning to this, only now we have the internet. But the economic situation is increasingly starting to look like the late 19th century, only this time, it’s globalized by means of economic systems like the IMF and WorldBank that impose the West’s rigged economic conditions on the rest of the world.
Only when people realize that the logic of austerity imposed on them by economists is imaginary, and that a new dream is needed, one in which people and resources can come together and create work – what a crazy idea?! – can we get out of these sorts of crises. Our economic crisis right now is completely manufactured. And the people of Spain see this.
What’s needed? Get them ALL out of power. And demand structural reforms. Get money OUT of politics. Get rid of two-party systems that quickly become one-party illusions of democracy.
Otherwise, the massive divide between rich and poor, greater in the US than any industrialized democracy than Brazil, will only get larger, as it is doing, thereby impoverishing our consumer base, and hurting the long-term power of the economy for short-term quarterly profits.
Fictional Capital, and Using Our Illusions for Ourselves
The economy is a confidence system. Work is real, products are real, but money is a fiction for how much people are willing to pay for things, how much confidence we have that things will be worth certain amounts. That’s why they call loaned money credit, credit is a degree of the confidence others have in your future worth, just like a bill in your hand is a concretization of the faith others have in production, labor, services, etc.
It’s time we had faith in ourselves again, rather than ‘the economy gods,’ those experts who speak from on high and tell us ‘there is no other way’ than tightening our belts. We can see the real world right in front of us, people willing and wanting to work, with the skills, with the necessary resources. All they need is a job. Someone with the confidence to pay them because they know their labor will produce value. The government needs to have that confidence when others won’t, because it doesn’t serve immediate profits to have that confidence, but rather, the profitability of the system as a whole. That’s what the government is supposed to be, the ‘corporation’ that looks out for the health of the system as such. And that’s what’s in crisis right now.
It’s time we believed in ourselves again.