Fake economics (2014)

Book Review from the April 2014 issue of the Socialist Standard

Economics of the 1%. How Mainstream Economics Serves the Rich, Obscures Reality and Distorts Policy. By John F. Weeks, Anthem Press, 2014

'The first man who, having fenced in a piece of land, said “This is mine,” and found people naïve enough to believe him, that man was the true founder of civil society. From how many crimes, wars, and murders, from how many horrors and misfortunes might not anyone have saved mankind, by pulling up the stakes, or filling up the ditch, and crying to his fellows: Beware of listening to this impostor; you are undone if you once forget that the fruits of the earth belong to us all, and the earth itself to nobody' (Jean-Jacques Rousseau, Discourse on Inequality, 1754).

The '1%' are the percentage of people who own the world and profit from it. Weeks's target is mainly the neo-liberal agenda of 'free' markets and reduced state intervention. He argues that this economics obscures the reality of capitalism and distorts the policies of governments. Weeks wants 'a capitalism fit for human life'. He defends 'markets as effective social mechanisms, if and only if they are regulated through a democratic process for the collective good, not when they are left “free” to concentrate riches in the hands of a few.' The result of following the neoliberal agenda is that 'workers lose and capital gains (it is a class issue)' (Weeks's emphasis).

Despite quoting Rousseau approvingly it is clear that Weeks does not really think that the fruits of the Earth belong to us all, and the Earth itself to nobody. He favours the economist JM Keynes's proposal for a capitalism 'wisely managed'. Keynes's General Theory was 'the greatest economics book of the twentieth century'. Like Keynes, Weeks believes that governments can 'end the recession by stimulating the economy through public spending. It really is that simple.' But as Oscar Wilde said, the truth is rarely pure and never simple. By focussing on the 'golden age' of capitalism – the 30 years or so after World War Two – Weeks presents a seriously distorted account of what capitalism is and what it can do. For a start, the 1 percent has existed during the last 200 years or so of capitalism. And there is nothing in Weeks's account of a 'wisely managed' capitalism to suggest the 1 percent would cease to exist. For a work of economics there is precious little on what drives capitalism – profit. His fix for what ails capitalism is essentially political – democratic accountability. He recognises that there can be class struggles between workers and capital but attributes this to a 'fake' economics rather than the minority ownership of the means of life.

The Socialist Party has a unique record with regard to Keynes and the economics he gave his name to. From the start we recognised that Keynes' solution to mass unemployment (increased government spending) failed to address the issue of profitability. Capitalism – the profit system – is built on the antagonism between profits and wages and economic crises are ultimately the result of a failure of profitability. As we have seen in recent years, an important factor in restoring profitability is holding down wages and attacking workers' standard of living. Weeks's own work obscures the reality of capitalism, but it may inspire in some the illusion that capitalism can be 'fit for human life'.

LEW