Home > Uncategorized > Inequality and morbid symptoms of a financialised system

Inequality and morbid symptoms of a financialised system

from Ann Pettifor and issue 92 of RWER

Today as the world endures the crisis of a global pandemic, “an old order is ending in convulsions”. So writes Rebecca Spang, historian of the French revolution in The Atlantic (Spang, 2020). In the 1790s, money, debt and the non-payment of taxes by France’s rentiers, played a critical role in revolutionizing France. Today purveyors of money and debt – creditors, investors and speculators – both avoid taxes and prey on a global economy radically weakened by the Great Financial Crisis and the policy response to the events of 2007-9. As a result, and unsurprisingly, the international economic system is  both unprepared for, and prone to increasingly frequent “convulsions”. COVID19 is but the latest, and will cause long-lasting economic damage. Above all, and according to Case and Deaton, COVID19 is expected to widen the US’s “already vast inequalities in health and income”.2

The “pillars” of the global economic system are fabricated on shaky, “liberal” foundations (see Pettifor, 2006, 2017a). It is an international system specifically designed to expand markets for creditors and investors; and to protect, above all others, the interests of private creditors. The most important foundations of the system are capital mobility, the marketisation of interest rates and exchange rates. The system is largely maintained by the world’s hegemon – the United States – which uses its role as issuer of the world’s reserve currency to protect the interests of private finance, in particular Wall Street. US monetary power is backed in turn by military power, used to maintain control over access to, or the denial of access to markets worldwide.

A central tenet of the system is that wherever possible, the policy autonomy of governments (whether democratic or not) must be constrained and subordinated to governance by those active in capital, goods and labour markets. The global system – its regulations and laws  – are thus largely governed by private authority. 

 Obscene levels of inequality are but one of the outcomes of the current global economic order or architecture. Addressing inequality is, therefore, not just about individual policy focus, it is about international system change.

Inequality is not the only outcome of the system. Other worldwide outcomes include: immense, and unaccountable corporate power; high levels of costly private and public debt; sky high levels of rent (wealth) extraction by the owners of both financial and physical assets; weak or non-existent public health infrastructure; low levels of investment; high levels of  fraud, illiteracy, homelessness. Capital mobility facilitates drug dealing which in turn leads to escalating levels of addiction and mental illness. Globalised transport systems – aeroplanes and international travel – act as passports and vectors of disease and pandemics. These expose systemic problems for the many who have functioned as global reserves of low-paid, insecure, non-unionised and unskilled workers.

In the United States these outcomes are worsened by a costly, exclusive private healthcare system, lavish levels of public spending on the military; and a privatised prison-industrial complex, accompanied by extensive surveillance and policing. With the constitution and democracy corrupted by corporate power, elites mimic their French predecessors. Like Norman noblemen, they appear largely unaware of the social and political stresses unleashed by the privatised economic system. While the rentier class have made extraordinary capital gains, many US workers in employment can only function by drawing on high levels of debt. In the bottom half of US income distribution, Americans have experienced essentially no income growth since the late 1970s after accounting for taxes, inflation, and cash benefits from the government.  read more

1 Director, Policy Research in Macroeconomics (PRIME), www.primeeconomics.org, @AnnPettifor

2 Anne Case, Angus Deaton, Jun 15, 2020, Project Syndicate. United States of Despair.

  1. Edward Ross
    August 15, 2020 at 11:31 pm

    from my experience in the real world i find it incomprehensible that so far no one has congratulated Ann Pettifor on her realistic excellent article that describes the present malfunction of the economy that promotes inequality. Ted.

  2. Ikonoclast
    August 16, 2020 at 3:08 am

    Yes, Ann Pettifor’s essay is so brilliant, so lucid and so concisely objective and comprehensive that there is little to nothing of essential substance that one can add to it by way of agreement, corroboration or accolade.This relative silence is simply that of the stunned and astounded minds of many of us, primed in internal sympathetic vibrations of “furious agreement”. The people’s righteous ethical fury is now being reserved for deployment against the cruelly oppressive and exploitative elites; hopefully by peaceful and democratic means so overwhelming in number, complexity, creativity and expression that any thought of violent reactionary resistance is expunged from even the dim minds and inaccessible cold, cold hearts of the “elites”: the so-called “elites” who are actually the moral and pathological dregs of contemporary humanity. It’s high time we stopped enabling them. The final power and responsibility are ours.

  3. Craig
    August 16, 2020 at 9:36 am

    Pettifor has correctly identified the main problems, namely money, finance and the lack of actual ethics in the current system. Now all she needs to do is recognize the specific new monetary and financial paradigm concept and discover the best temporal universe place and time (retail sale) for a digital price and asset monetary policy that reflects and aligns with the debit-credit nature of accounting as such is both the most basic nature of money and is also the infrastructure that the entirety of the economy and the money system are inextricably embedded in.

  4. Ikonoclast
    August 17, 2020 at 3:34 am

    I am not a Christian. I am an agnostic. However, I still think these words have a powerful truth in them.

    “Tell me, do you really seek riches and financial gain from the destitute? If this person had the resources to make you even wealthier, why did he come begging to your door? He came seeking an ally but found an enemy. He came seeking medicine, and stumbled onto poison. Though you have an obligation to remedy the poverty of someone like this, instead you increase the need, seeking a harvest from the desert.” – Basil of Caesarea, “Against Those Who Lend at Interest”.

    Worth a read is this:

    https://www.currentaffairs.org/2020/06/capitalism-as-religion

    “Eugene McCarraher’s “The Enchantments of Mammon: How Capitalism Became the Religion of Modernity.”

    “In mistaking the laws of capital accumulation for fundamental laws of the world, we mistake something temporary and mutable for something eternal and unchanging, and set up for ourselves the impossible task of conforming our lives to these “objective” laws, rather than realizing that we can and should re-shape these temporary laws and institutions in the image of the basic and unchanging needs of human beings.” – Danial Walden

    “Economists bring glad tidings that the GDP continues to rise, which is supposed to reassure us that despite widespread poverty, crushing debt, and children caged on our border, the talismanic power of rising numbers will somehow see us through.” – Danial Walden

    To me it seems clear that capitalism is, among many other things, a modern religion. That does not exhaust all that it is of course. But capitalism has a strong religio-ideological hold on most modern minds. Among adherents, the issue of whether the “religio” or the “ideo” predominates depends on the level of intellectualism. Most adherents simply believe in capitalism. A few can enunciate the deeper theories of economics and of capitalist or mixed market economics. Those few who can enunciate the deeper theories often disagree on both essentials and details.

    There is no settled, irrefutable theory precisely because there are no empirical tests for it. Most people simply still believe in capitalism. The belief in its efficacy arises in the minds of many by other than logical argument or theoretical demonstration. The belief arises by enculteration and indoctrination. Some would cite empirical demonstration of the delivery of the cargo (really, capitalism as a cargo cult) as the clincher but where modern unfettered capitalism is unleashed, most recently as neoliberalism, it rapidly destroys both social and environmental systems now that it has the “mass” to do so. A pun on “mass” is intended. The raw mass of humans, affluence and technology, as in the formula I = P × A × T impacts on the environment. (The expression equates human impact on the environment (I) to the product of three factors: population (P), affluence (A) and technology (T). The pseudo-religious “mass” of capitalism is its “liturgy of numbers”, denominated in the nominal numéraire meaning money and measuring the social-fictive dimension of “value”.

    The coming global collapse of environment and (capitalist) civilization with it will comprehensively refute the rituals, sacraments and promises of capitalism. Only the system’s self-destruction will change minds. Logical arguments fail against blind faith reasoners. Empirical proofs as demonstrations from nature will change (some) old minds and certainly school new young minds in the coming new reality.

    “… the central depravity of capitalism is that it represents a perversion of human nature, a rupture between how we ought to be and how we are forced to behave. We are social creatures who flourish in community with other people, and yet capitalism has made physical and emotional suffering into a precondition for living in any kind of community at all. It has alternately promised an idyllic automated Eden free of labor or a futuristic utopia of unimaginable abundance, but always delivers instead a Pandæmonium, an infernal city of strife in which the nature that draws us together pits us against one another.” – Daniel Walden.

    Certainly, we see those infernal cities of strife across the USA right now in its apotheosis of unfettered capitalism in crisis and under the rule of a billionaire with tendencies to sociopathy and neo-fascism. The Postal Service is being gutted to prevent delivery of postal ballots which would enable a genuinely free election in a time of COVID-19 pandemic. Imagine that, sabotaging democracy, social well-being and the nation’s internal peace and security for personal power! Such is the extreme plutocracy, kleptocracy and kakistocracy towards which unfettered capitalism tends.

  5. yok
    August 18, 2020 at 5:25 am

    Excellent!

  6. Calgacus
    August 18, 2020 at 10:23 am

    Yes, fine paper, but on one point I believe she is confusing the cure and the disease. “marketisation of interest rates and exchange rates” Yes, marketizing interest rates is a Bad Thing. Do what Keynes wanted – Keep ’em low, always.

    But “Marketization of exchange rates” which I can only understand as post -1971 floating rates is a Good Thing, a cure. It makes the non-marketization of interest rates easy, while they could be hard under Bretton Woods. In the list at the conclusion of the paper, ” controls on international capital movements and foreign exchange transactions. ” – yes good things. But floating exchange rates / Marketization of exchange rates – are a control on international capital movements and foreign exchange transactions in and of themselves.

    Unfortunately, too many countries do not understand this – Brazil under Dilma Rousseff being an unbelievable example of a completely imaginary “debt crisis” that could have been solved by a few words if anyone in high places understood economics a tenth as well as Franklin Roosevelt did, Instead, she made herself vulnerable to a coup. Venezuela under Maduro, Greece under Tsipras are other sad examples.

  7. Ken Zimmerman
    August 23, 2020 at 3:29 pm

    Sapiens the species either survives or it does not. That result is determined by evolution. Both biological (genetic, e.g.) and cultural. Unlike what is depicted by some popular writings and in the founding documents of some groups, for example eugenicists, evolution for our species is not individual. Pitting the stronger and weaker within our species against one another. Such conflicts happen and can sometimes influence the direction our species moves, culturally and biologically. But are not the sources of the conflicts that determine the future of our species. Those conflicts are about physical and cultural adaptation to changing circumstances that enhance or lessen the likelihood that the species will survive to continue reproduction. Such challenges as climate change, shelter, agricultural success, wars and other conflicts, political organization, and failures, etc. Current dominant economic arrangements among our species are not wrong because they are an affront to human nature or violate the basics of human rights. Which, according to one version of human nature and human rights, they do. They are wrong because they endanger the survival of our species. They reduce the chance that our species will be able to continue to live. That is the evolutionary argument against financialized capitalism, in fact capitalism generally, in a nutshell.

    Some specifics. First, some consequences of capitalism create conflicts, sociological and physical within a society’s culture(s). These conflicts impede the adaptation capabilities of the culture(s). Thereby reducing the survival chances of the species. Second, capitalism endangers the resources for survival of the species. For example, drinkable water, breathable air, healthcare, sufficient arable land, and political stability. Third, capitalism skews the society toward authoritarian rule, with its associated incompetency, ineptness, and corruption.

    Capitalism is not the only danger to evolutionary survival of our species. And, it is unclear how we can avoid or alleviate its dangers. But compared with the other evolutionary hazards faced by Sapiens capitalism is hypothetically fixable.

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