Posts Tagged ‘The Invisible Hand’

The Invisible Fist (Part III)

Monday, July 23rd, 2012

I’m afraid I have more to say — and critique — concerning the CBC’s radio show The Invisible Hand, a tour-de-force of neoliberal ideology masking as “economics.” In its second show, it looked at the question of the apocalypse, following its first show on economic decision-making in times of crisis (see posts, part 1 & part 2).

The second show easily demonstrates how saving chickens, and not gold, is the way to roll when the apocalypse hits. At least this has a hint of sanity to it — chickens lay eggs, make more chickens, provide food, etc. Of course, what isn’t mentioned is that they require a local economy for their sustenance. The growing and provision of grain requires collective efforts, which requires not only small-scale trade but coordinated agricultural efforts. In short, raising chickens means communal levels of negotiation and organisation around resources. This argument is well-made against the more radical factions of neoconservatives who want to return world currencies to the gold standard, and who advocate hoarding gold. You can’t eat gold if the world goes down in flames.

Yet the second shows harbours an even more insidious level of neoliberal ideology concerning the primacy of the individual, precisely because the above models — of localized community around the chicken economy — are absent from the discussion. Rather, the show assumes a single individual having a choice: gold or chickens? There is no discussion of what raising chickens means, or how it would work. The debate over chickens vs. gold masks a more troubling series of assumptions concerning the apocalypse as a whole: that we will all be going it alone.

The show performs this ideological operation by setting-up a false debate and masking its terms. Under this debate, everyone can see that hoarding gold isn’t that smart if world (and local) economies collapse. Yet this scenario follows from the premises of the first show: the first show established an ideological illusion concerning human nature, ie, that in crisis situations we’d all act like individuals and/or are supposed to, without any kind of collective organisation, communication, principles of sharing, or ad-hoc communal formations with decision-making power to prioritize resources.

Indeed, the apocalypse show follows from this, as it presents the logical outcome of the first show: now there is definitively no governance or community. The apocalypse is here, we’re all on our OWN! In the apocalypse the neoliberal question becomes: what should I hoard? Instead of: what collective/communal arrangements will be the most beneficial in the pooling of resources?

History demonstrates that in every disaster scenario, those that survive are those that band together, pool resources, and learn how to share. Just look at the recent tsunami in Japan, or a few years ago in Thailand — nobody sits around with arms-crossed going “so, what did you hoard?” No, everyone is out there helping each other out. Look at New York after 9/11. In short, all of the economic examples presented demand a very narrow, restricted idea of human nature in terms of crisis. And it is a dangerous one: if you’re sitting around with chickens (or gold) and want to go it alone, you will die. Period. Neoliberal ideology implies that if you don’t hoard, and have no property, you will be excluded from trade (ie society) and thus be left to die, when in fact, historical fact, the opposite is true. Which leads to a question: who is this ideology serving? Do neoliberal economists actually believe this ideology, or do they only propagate individualist versions such as these so as to easier divide-and-conquer, given that most wealthy elites are not that individualistic at all, but operate through all sorts of elite networks, ie through insider-trading, old boy’s clubs, capitalist club retreats such as Davos, etc., all of which make up the privileged economic systems of power and wealth known as oligarchy?

In any case, neoliberal ideology is still definitively at work here in the second show, by insidiously establishing the parameters of individualist economics in times of crisis. And we should be led to ask by now: why is it that neoliberalism specifically requires not only crisis, but apocalyptic levels of crisis, to supposedly demonstrate its principles? Does this mean that we can only observe neoliberalist economics in effect if we reduce the world to crisis, if we bring on the apocalypse?

This thesis — that neoliberal economics requires crisis, if not the apocalypse, to reduce humanity to the Hobbesian savagery of go-it-alone individuality so as to allow for the deity-like “Invisible Hand” to work its magic — does make sense in a twisted fashion, insofar as neoliberalism economics are irrecoverably tied into the apocalyptic agenda of the theoconservative right.

The Invisible Hand and the right-wing, Evangelical/American Catholic Christian god occupy the same position: as the dealer of benevolent reward to believers, and punishment to non-believers (including homosexuals, pro-choicers, feminists, godless socialists, etc). This is why the Invisible Hand rewards the wealthy and punishes the poor: the wealthy have demonstrated their value as Christians of capitalism; the poor are deserving of their lot, as obviously they don’t believe enough in the system to let the Invisible Hand/God help them.

Of course, this isn’t the theology of the charitable Christian whose poor & meek shall inherit the Earth — though perhaps so if interpreted as: the poor & meek shall inherit what is left of the planet after the wealthy have plundered it, stripping the planet bare and exhausting its resources, thereby bringing about the End Times — during which the wealthy Christian elite are zipped up to Heaven during the Rapture. For more on this documented, direct connection between Christian theoconservatives and right-wing neoliberal capitalism, and how this ties into the Bush regime, the invasion of Iraq, the privatization of the US military, and the rise of Christian mercenary armies, see Blackwater: The Rise of the World’s Most Powerful Mercenary Army.

So how could this show be different? If I were doing this show it would be far more interested in questions of how people actually find ways to collectively problem-solve and troubleshoot economic questions (and crises, such as the one we are in right now — climate change!) rather than the underlying go-it-alone premise of individuals acting under the rationale of the “Invisible Hand” which is, basically, a fiction — a bed-time story for the disenfranchised. “One day, the Invisible Hand might touch you in a special place and make you rich too!” The Invisible Hand is yet another name for the depleted and destructive capitalist fiction that is the American Dream.

Right now, what we need is critical thought on economics, given that the prevailing neoliberal model has brought about the collapse of world economies, rewarding the criminal bankers with bailouts at the expense of the rest of us. All of us, the 99%, are paying for the criminal plundering of our planet by the wealthy 1%. Neoliberal economics has failed in even the most basic of its promises — the Reagan-era trickle-down theory — that a so-called “free market” results in eventual equality. The Invisible Hand does nothing to help: it is a fist that smashes all attempts at collectivity, which protects the wealthy elite with military force. Neoliberal economics has also failed at addressing truly pressing environmental issues that will, in the end, probably destroy us if intelligent action is not taken to address climate change, precisely because neoliberal economics is designed to bring about the apocalypse, if we are to believe the published theoconservative agenda. (This is not conspiracy theory — simply read what is on the record from right-wing US Republican representatives, and in Canada, members of the Conservative Party.)

Taking it home to Canada, it just appears to me that The Invisible Hand is a mouthpiece for the Harper government — it attemtps to sell Harper’s neoconservative policies by presenting as an uncontested, received truth the neoliberal doctrine…

The Invisible Fist (Part II)

Wednesday, June 27th, 2012

In response to my letter to the CBC’s new show on (neoliberal) economics, here is a thoughtful letter from host Mathew Lazin-Ryder. I certainly appreciate his response, though I’d like to emphasize, he appears to believe that “governments don’t exist.” Ponder carefully what he has to say. My response, which seeks to clarify his neoliberal position — that “markets” exist before governance — is below. We’ll see if he has the time to reply further. / tV

From: Invisible Hand <invisiblehand AT CBC.CA>
Date: Wed, 27 Jun 2012 15:20:03 -0400
To: “tobias c. van Veen”
Subject: Re: Economic Examples without Consequence

 

Hello Tobias,

Thank you for your email. Yes, things are always more complicated than time allows. As for economists not being one solid lump, that is quite true. Our research did find a broad consensus amongst mainstream economists about the economic principles behind anti-price gouging laws. There certainly are things over which economists disagree, but I’d put anti-price gouging laws below many others on the list.

I also understand that our simulation was an over-simplified version of reality, which is exactly as we intended it to be. Sure, there are what-if, and comparisons of laws and economic structures, which is why we reduced the variables. 1 city, 1 law. Price-gouging, non-price gouging. We also, of course, removed the variable of personal wealth. While this is indeed a simplification of reality, we found the judgement that if a person had 1 dollar, they might also have 10 dollars, an acceptable one.

Indeed, I heartily agree that there are better scenarios – an efficiently run government that operates purely in the interest of the populace. Unfortunately for the world, I’m not sure that government exists – it certainly did not in our simulation. There are deeper implications, there are further considerations, there are caveats and what-ifs. The idea behind our show is that before we can even begin to talk about those as a society, we need to know how the basics are supposed to work – or at least, what a significant, if not major portion of an academic field believes to exist.

All the best,

Matthew Lazin-Ryder
CBC Radio Vancouver

================

 

From: “tobias c. van Veen”
Date: Wed, 27 Jun 2012 12:52:28 -0700
To: Invisible Hand <invisiblehand@CBC.CA>
Conversation: Economic Examples without Consequence
Subject: Re: Economic Examples without Consequence

dear Mathew,

Thanks for your response, indeed.

> Indeed, I heartily agree that there are better scenarios – an efficiently run
> government that operates purely in the interest of the populace. Unfortunately
> for the world, I’m not sure that government exists – it certainly did not in
> our simulation.

This is troubling. Your entire model of economics is dependant upon *not having a government* ?

Who provides the currency in your model, then?

> There are deeper implications, there are further considerations, there are
> caveats and what-ifs. The idea behind our show is that before we can even
> begin to talk about those as a society, we need to know how the basics are
> supposed to work – or at least, what a significant, if not major portion of an
> academic field believes to exist.

I’m in that field, and many of us would say that what exists first are social relations of power, and thus the primacy of politics, over economics. That is why policy is set by governments.

Of course, I effectively understand what you are saying is the opposite: that the “basics,” for you, means economy before government, capitalism before democracy. That governance is secondary to finance, in short.

In short, you are a neoliberal capitalist and an anti-democrat, correct?

Ie, you believe that “society” exists in the “market” before there is political organisation or representation of the “society” in a State?

I’m just curious, as this is, of course, a basic tenet of neoliberalism, which privileges the “market” before governance. (As the radicals would put it money before human rights, profit before people.)

I’d say many people would find the idea that we should imagine economic scenarios without governance deeply problematic. As deeply problematic as imagining that people all have the same amount of money. It all sounds like a fantasy to me. The question is, who does this fantasy benefit?

I think it’s fairly easy to see whom: those with the most amount of money.

At least, unlike Thatcher, you find that there is such a thing as “society.” However, in your example, there was none. Only individuals — with money. So I take this as a bit of an error on your part.

If governments “don’t exist,” why should “society”?

I look forwards to further shows either questioning these troubling, anti-democratic assumptions, or, more likely, continuing to espouse neoliberalism as “basic tenet” — a core ideological operation if there was one.

You don’t mind if I quote you in an article saying that “governments don’t exist,” do you?

best,

tobias.

The Invisible Fist

Wednesday, June 27th, 2012

Letter to the CBC’s new show on (neoliberal) economics, The Invisible Hand. The letter is self-explanatory. The first episode provided such a weak justification of the so-called “free market” that any first-year philosophy student could’ve poked holes through it. 

 

dear Mathew & Invisible Hand,

Thanks for your new show. As a student of political economy, I found it interesting, and I always like it when radio tries to break down topics like economics for the listener.

However your example provided today was quite lacking in the reality department. I want to pick through it a bit, because I think you can go a lot deeper than this. The consequence of not revealing the true difficulty of economic policy decision-making is obvious: you refer to “economists” as if they are one bunch of people, all thinking the same thing. This, of course, is not the case. The “economists” you are referring to in your show on Hurricane Katrina are neoliberal economists, who believe in a fictional caricature known as the “Rational Actor,” who also plays in a nearly fictional environment known as “the free market.”

Indeed, current “economists” have finally begun questioning these models after fourty years of near unquestioned dominance within mainstream “economics” circles. But I digress.

Let’s liven up your example, and remember that all economics includes ethics. In short, economy, because it always involves people, and thus tensions between individuals and the collective authority that we call the State, is always political economy.

 

=== THE ICE IS FOR SALE : A REAL SCENARIO ===

In your example, ice is for sale during a disaster. Your customers include those seeking non-essential uses (corsages, cookies) and those seeking essential services (health care and emergency response).

But no mention is made of the purchasing power of the health care and emergency services. Let’s pretend we’re in Canada first.

 

SCENARIO 1: FREE MARKET ALLOWED, CANADIAN CONTEXT

 1. The hospital can only afford $10 worth of ice. At the normal rate of $1 per bag, it can keep alive its ten patients. At $9 per bag, it can only keep alive one patient. This is the first consequence of the so-called free market, where prices are allowed to rise during a disaster.

 1a. Of course, the hospital has emergency funds, and so they dip into them or borrow funds of the public trust to buy ice at 9x the price, thus paying $90 for the ice that would’ve cost $9 before the disaster. This has immediate consequences — the hospital has now spent the money it had saved up for a new diagnostic machine, and so cancer patients awaiting this new treatment will suffer, and perhaps die because of it. Further, the hospital now has debt to pay off if they borrowed the money, plus interest. Where will the hospital get the funds? In the Canadian system, from taxes and/or increased user fees. The ultimate consequence of hospitals paying 9x the price is that taxes rise to cover the trickle down effect of inflated purchases — all so that the corner-store ice owner could make 9x the profit, or, as neoliberal economists put it, “equitably distribute the ice to the agent with the highest need.”

Meaning, in short, we all pay the cost for a single individual’s wealth, while risking lives in the process.

 

SCENARIO 2: FREE MARKET ALLOWED, U.S. CONTEXT

 1. The public hospital can only afford $10 of ice. It is in the same situation above, except that it cannot raise taxes due to neoliberal economic policies that keep taxes down, so that the “free market” can operate more freely. After the disaster, the hospital is shut down as it costs too much money, and the 9x-the-cost acquisition fee is paraded as proof of the inefficiency of the public service. Scores of uninsured Americans fall through the cracks — the deaths are of course unreported, as there is no public service to do the analysis.

1a. Of course, there is a private hospital buying ice too that can well afford the ice. It buys a large chunk of the available ice with the wealth it has from privatized, high-end health services delivery. Those with health insurance (mainly the wealthy) receive the ice and live through the disaster.

The meaning here is obvious: services with equity survive, and so do their wealthy patients; those without wealth do not. Might makes right in this “free market.”

 

SCENARIO 3: NEITHER / NOR: THE STATE IS FOR ALL

In your example, you only offered two choices: either all bags of ice are sold for $1 at a first-come, first-serve basis, or the seller can raise the price to exclude so-called frivolous buyers, so that only those with the greatest need buy the ice.

Of course, this is already a fallacy. Investors can buy and hoard ice, creating a futures ice market during the disaster, and trade large amounts of ice to scaled buyers (those with wealth), creating price fluctuations that generate large amounts of profit. This already exists on a formal scale, and is called the stock market. During disasters, this exists in the form of what is usually called the black market. Throughout history, such markets have popped up — such as in Leningrad during the siege of World War II. However, the people turned on such “free marketeers,” distributing street justice to hoarders and profiteers. And for good reason; the above example should demonstrate that no market is “free” when there is inequality of means to begin with. So here’s a truly rational, third example:

1. The hospitals and all emergency services are given priority access to the ice market by the State. All corner-store shops are mandated to sell ice to health personnel at the normal rate of $1. In this scenario, hospitals and emergency professionals get what they need, thanks to the emergency provisios of the State, which steps in not to “interfere with the free economy” but to insure that the economy does not enter a period of hyperinflation that would only benefit the wealthy (those that could afford the ice or private services that can) and which would have disastrous consequences upon the impoverished and upon public health as a whole (the impoverishment of health services would result due to hyperinflation of necessary supplies).

Indeed, this is what we already have in Canada and the US: various services are declared essential services. (However, in the current situation, this is usually only enacted to limit the right of labour to strike, rather than to provide fair access to necessities — but I digress.)

 1a. In times of dire emergency — what is called a “state of exception” — the State can go much further than this. In World War II, many States introduced food stamps and rations. In this scenario, all ice production is monitored  and controlled by the State, to ensure that everyone receives a fair portion (this is also how Leningrad survived the Siege of World War II: without such strict rationing, ie, not only intervention of the State into the market, but direct control of supply and demand by the State, many more would have died). Indeed, in extreme examples, the State has the right to commandeer property and materiel (though today this is abused to kick out land owners for the benefit of mining, the oil and gas industry, shale fracking or pipelines — such as in Québec’s Plan Nord; but I digress again).

 1b. If things aren’t quite that bad, but bad enough, the State can introduce intermediary policies, such as demanding that ice be sold direct from producers and distributors to health services at cost — at enough of a margin to cover expenses and live from, but less than standard pricing, say at 40% off retail. In this scenario, less profit is made by one industry in order to better provide the required health services for all. In short, the short-term profits of the few are sacrificed to save the lives of the many. The State has every right to do this to protect its health care services in times of disaster.

Moreover, it is right to do so: by ensuring cheap supply to necessary services, there is no tab to pick up later. Companies selling the required services make a tad less profit, and certainly don’t reap in profits from price-gouging, but neither do they go under or face higher taxes as a result of the “free market,” had it been allowed “free reign” to raise prices to obscene levels.

 

=====

I sincerely hope that in future shows you go beyond the facile, bloodless examples you’ve already provided. There are no economic policies without consequence, especially when dealing with disasters. Economics always involves ethics.

The correct answer to the real-life problem of disaster supply management is that both of the options provided on the show — either $1 pricing or $9 price-gouging — are ultimately inefficient and wrong. In both cases the “market” is relied upon to provide necessities without any hint that a democratic state has the authority to garner what resources it needs to ensure the survival of the many, if not all.

This is what democracy means: it is above the market.

The actual reality is that the State ought to, and as in the case of Katrina, finally did step in and provide such necessities.

As for the Louisiana ice-seller, some laws are necessary here, because the actual issue is not price-gouging, but street justice. If a seller is seen as contravening the basic ethical principles of community that arise from human nature during such disasters, such a seller may be dispensed without mercy. Indeed, the law is there to limit such activities to protect the safety of such sellers. A better solution would be to have the State request all entrepreneurs to maintain prices at a fair percentage; and they too would be subject to certain pricing regulations when selling to health and other necessary services.

So in this case, Louisiana should not have made an example out of the truck seller (who sold generators).  A true example should’ve been made of the hired mercenaries — ie Blackwater USA — that poured into New Orleans to secure the privilege and property of the wealthy, distributing privatized violence at will, and introducing a climate of fear that descended into racism on a mass scale.

Hopefully your show will go much farther in demonstrating the ethical choices behind economic policy in future episodes, as well as showing that alternatives to either/or propositions exist. At the least, I hope your show will stop referring to “economists” as some homogenous group. As a political economist, I certainly found little to agree with in the models presented, for they are nothing but fictions designed to present what many of us “economists” would argue is a dangerous neoliberal ideology: that of the “free market.”