We desperately need a new way to think about our national economy. I am not an economist, but then again neither are most of the pundits and politicians who define our economic policy discussions. I think the way they lead us to think about the economy is overly positivistic, drawing unreflectively from a perspective that thinks of economics as a science (which, to be honest, it is not) that has discovered the “laws” of the economy.
What we need, I think, is a way of thinking that sees the economy as one of society’s primary social institutions. Social institutions, such as government, education, and the family, are organized fields of shared rules, positions, practices, and relationships centered around certain fundamental human and societal needs.
In other words, the economy is not some kind of autonomous natural or physical thing that operates according to universal laws. Rather, the economy is the way that a society organizes the production and distribution of necessary and desired goods and services. Different societies have developed different ways of conducting economic life.
This means that there are no ahistorical, gravity-like universal economic laws; there are only institutionalized patterns of thinking and behaving. And, our ways of thinking about the social institution of the economy, our general economic perspectives, are not merely descriptive; they also are normative and prescriptive in the sense that they motivate behaviors and economic policy decisions. So, economic realities – like all social realities- are social constructions.
For instance, the way many of us think about our national economy is derived from a general economic perspective that presumes human beings are driven mostly by direct material self-interest. The nightly, daily, minute-to-minute economic reporting we see, hear, and read is centered on the values of profit, growth, and expansion. These beliefs are manifest in the specific criteria used to measure and evaluate the economy’s health and performance. These values and goals include, most illustratively, profit and GPD growth. So we say our economy is healthy when profits are up and GDP growth is strong.
So, we try to address the problems of inequality, such as people going without enough to eat or a place to stay, by using profit-enabling incentives to motivate corporate real estate developers and industrial agriculture to house and feed the poor. Likewise, we respond to the climate crisis by trying to make environmentally friendly practices profitable.
Gas crisis? Subsidize and enable profits for the fossil fuel industry in the hope that firms will increase supply and reduce prices. Inflation? Raise interest rates to preserve the economic profitability of banks and finance while surpressing employment and consumer demand, forcing people to adjust to unfulfilled needs. Shortages on the shelves of shops and stores? Subsidize production to ensure profitability to companies in the hope that they will increase available supplies.
It should be clear by now that these kinds of policies are rarely successful. Time and time again, practices like directly building good housing for the poor, supporting locally-anchored small farming, controlling the prices and profits of companies that produce basic goods, or forming community utilities using renewable energy are not considered or seriously thought about by policy makers because they lay outside of the prevailing general economic perspective.
Besides imposing costs on ordinary people while rewarding corporations and the wealthy, this is short-term thinking at it’s worst. For example, it overlooks the fact that often the main cause of the increasing prices of basic items like food, medicine, and fuel is the unchecked power of a few profit-seeking corporations in what are increasingly noncompetitive market sectors. Or, we fail to notice that so-called supply chain shortages are the result of past practices by profit-seeking corporations that moved manufacturing overseas in search of cheaper labor.
When presented with these kinds of progressive alternatives to current practices, policy-makers, politicians, and pundits often state that doing anything other than the type of things we have traditionally done goes against the strict laws of economics. But, what if we acknowledge that these limits are not the economy is not the result of “natural laws” but, instead, reflects policy choices derived from a socially constructed general economic perspective? Then we might learn to judge the performance of the economy according to goals like sustainability or the fulfillment of human needs. These different values and goals would lead to a different general economic perspective, one based in social or community interests rather than private self-interest.
For example, if there was a shortage of milk products in our stores while demand remained strong, the current general economic perspective would accept that prices must rise, denying milk to many low income families while maintain access for those better off. But this is not an economic necessity. Thinking with a social interest general economic perspective, we could decide to reorganize the market for milk by providing access first to those who need it most. We could pass laws that direct stores to prioritize selling milk to families with children or folks with health issues requiring it. In other words, we could adopt a distribution model based on need and social trust rather than profit and private interests. No universal economic laws make this choice impossible, we simply have to change our shared economic perspective. The “market “ is not some necessary natural system operating according to permanent and unchangeable “laws;” rather, it is a social field operating within the social institution of the economy as part of the interdependent institutional structure of society.
With this kind of thinking, we might come to understand that slowing down GDP growth and profit rates in order to protect the natural environment and/or social equity is a good thing. We might see that measuring our society’s performance by the dailys ups and downs of stock markets is short-sighted. We might learn that economic growth and corporate profit can be limited by the requirements of social fairness and the needs of a healthy natural surround.
One important attempt to create a new social interest general economic perspective is available in Dr. Kate Raworth’s concept of the “doughnut hole economy.” Her new economic perspective values sustainable growth, even it is slower than what could be produced by narrow self-interest. It calls forth analytical thinking designed to create economic behaviors that meet human needs, even if they lower the rate of corporate profit. It acknowledges that a thriving society should do more that just produce ever-increasing amounts of goods and services.
My main point here is that it would be beneficial if we were more aware that the ways we respond to economic problems are the result of human choices rather than “natural laws.” Dairy corporations and grocery chains could accept lower profits in order to create a more just distribution of their products. Pharmaceutical companies could accept lower profits in order to provide wider and more balanced access to important medications.
We could choose to build our economy around the needs of humanity and it’s natural environment.
We can choose a different future.
This Post is republished on Medium.
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