Time to kick over the prevailing orthodoxy in economic thought

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Something is seriously wrong with the economy, here and abroad. By now, the Canadian mainstream media should have recognized it. Instead, we get reassurances from business sources about "recovery" being just around the corner.

In Canada, the U.K., and the U.S., experts offer the same failed analysis (government failed), and governments propose the same discredited solutions (reduce deficits).

The G20 finance ministers met last week in South Korea in advance of next month's heads-of-government meeting. Nothing of substance was agreed about in terms of what to do about global imbalances. Disagreements over exchange rates and currency policy persist. The American Treasury Secretary claimed victory anyway

Even though news about the economic crisis is lacking and diverse points-of-view sadly unavailable, many in Canada and elsewhere are not fooled. Recognition of the need to re-evaluate our economic thinking is spreading.

In France, the orthodox views are taking a beating. The French government want to push full retirement benefits back to age 67 from age 65. As Mark Weisbrot points out the retirement age was set in 1983, and since then the French GDP has increased by 45 per cent.

People in France realize the issue is not a shortage of money, and have said no on a massive scale to reforms that would eliminate hard-won social gains. Spontaneous work stoppages are taking place throughout France, and strategic strike action by trade unions has succeeded in restricting access to gasoline supplies. The protests have the support of 70 per cent of the population.

Amazingly, les lycéens (high school-age students) have taken to the streets all over France in support of existing retirement legislation. The students want to retire someday themselves, and they want jobs to open up sooner, not later.

This week at the University of California, Berkeley, enterprising students posted the Kick it Over manifesto on the door of a Nobel prize-winning economics professor. Kick it Over was the Ad Busters response to the economic crisis, singling out the economics profession for its contribution to misunderstanding our world. The manifesto does not mince words, but it has had little impact on the economics profession. If anything existing positions have hardened since the economic crisis began in 2007. The orthodox economists are even less tolerant of heterodox views.

In the early 1970s, with the appearance of stagflation (slow growth and rising prices) a economic counter-revolution was launched by U.S. business groups, aimed at limiting existing social insurance measures, and forcing individuals and families to fend increasingly for themselves in times of poverty, ill health, retirement, and unemployment.

The economic counter-revolutionaries drew heavily on right-wing thinkers Milton Friedman and F.A. Hayek. Mainstream economic theory was revised to embrace fully market liberalism, and policies were engineered to target inflation instead of unemployment.

The results of the successful counter-revolution are now on display: over 30 years later the wealthiest Americans have gotten much wealthier; and the poorest have gotten poorer. Public services have deteriorated, and public infrastructure is collapsing. The market solutions supported by Democrats and Republicans alike hastened an economic crisis deeper than any since the 1930s.

In the U.S., it is still widely thought that somehow government is to blame for the failure of financial markets in 2007-09, which ignited the crisis. The Obama administration is about to pay at the polls in the upcoming mid-term elections for the Senate and House of Representatives. That he took office, after the crisis was well underway, and the bailouts of big banks was a done deal, does not seem to matter.

At this time what is needed is both to Kick It Over -- the prevailing orthodoxy in economic thought needs to be gotten rid of -- and to organize another revolution in economic thinking, akin to the one that brought in the strong welfare state in northern Europe after the war, and the weaker variety in the U.K and North America.

This time the focus needs to be on building a new economy, not shoring up capitalism through fiscal policy. Indeed, de-legitimizing capital as the source of all knowledge and wisdom about how to run the world is the first task. De-commodifying labour, recognizing that land and money are fictitious commodities not suited to market decision-making, and looking to establishing an economy based on global solidarities is what needs to be on the agenda in Canada, and elsewhere.

Duncan Cameron writes weekly on politics and is president of rabble.ca.

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