John Weeks, Guest Blogger

John Weeks is author of Economics of the 1%: How mainstream economics serves the rich, obscures reality and distorts policy, Anthem Press.

Some older readers might recall that during 2010-2013 politicians and the media manifested great anxiety over the unmanageable level of the deficit and a disastrously high public debt. Prominent among the deficit/debt Cassandras were a Republican Congressman by the name of Paul Ryan and neo-Ayn-Randian Senator Rand Paul. (Paul Ryan, Rand Paul—could they be the same person cleverly occupying the House and the Senate simultaneously? The possibility cannot be ruled out.)

Representative Ryan contemplates the fiscal cliff in 2012? (Detail from the painting “Wanderer above a sea of fog.”) Turns out there was nothing for him to see.

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Ali Kadri

This is the final installment of a five-part series by regular Triple Crisis contributor Ali Kadri, Senior Research Fellow at the Middle East Institute, National University of Singapore, and author of Arab Development Denied: Dynamics of Accumulation by Wars of Encroachment (Anthem Press).

The series is based on an interview he granted to the Center for the Study of Human Rights at the London School of Economics (LSE). The original interview is available here. The previous parts as they appeared on Triple Crisis, with Dr. Kadri’s revisions and additions, are available here, here, here, and here.

The Laboratory for Advanced Research on the Global Economy [part of the Centre for the Study of Human Rights, London School of Economics] has as its objectives to provide a hub for creative work across disciplines and [to proceed] from theory to practice on issues central to concerns about justice under conditions of globalisation. How might the Lab’s mandate help inform your research?

The Lab anchors studies of development in the necessity to observe human rights as part of the broader picture to which societies may aspire in their day to day existence. The observance of human rights is not a luxury, but rather an obligation that states ‘must’ adhere to under international law. The overwhelming majority of states have ratified the international covenants on economic and social rights and the right to development. Yet, international law is the treaty attendant on the sovereignty of states. Sovereignty in turn is the rule and security of a dominant social class. Nations, such as those of the Arab world, whose working class security and sovereignty are voided by an alliance of international capital and their own merchant-bourgeoisie, can neither join a community of nations nor observe the application of the right to development in their favour.

Under the rule of international financial capital, a community of nations, its international law, human rights and rights to development become the cant behind which rights are trampled. In actuality, the principles of human rights and the right to development are wrought from the struggles of working classes as they weaken the rule of international financial capital everywhere, particularly, in the imperialist centres. So seen from a reality which is process-wise a heap of contradictions, analysis and policies cannot depart from the compass of human rights, which in political terms means boosting the ideological power of working classes and, which, in distributional terms means, strict observance of the historically determined subsistence needs of the working class.

Unsurprisingly, therefore, the current mainstream approach purposefully departs from and overlooks the right to development. It places its emphasis on the right of an abstract individual to have choices but skips the right of social individuals to have a decent minimum level of subsistence wrought by the struggle of the working class. Under the guise of neutrality, it tends to omit power and class relations from its analysis and, as such, science becomes anything but neutral. Why? Because as I mentioned earlier (in part 2 of this interview), it abstracts selectively from reality to show and support only the points that advance its own vision, which is in the final analysis the vision of the ruling class.

For instance, consider some aspects of neoclassical economics. The idea that there is an unadulterated price mechanism that pre-exists outside historical social and power structures, which, if need be would clear all markets and allocate resources efficiently, tends to omit the simple fact that such a price system cannot exist even hypothetically as a centripetal point to which reality would gravitate by equilibrium forces. Any price system culminates a social process that involved a production process that began with the bombing of the colonies to wrest the raw material and the busting of the unions – in the more obvious manifestations of it that is. The only way the organised dimension of capital (the Keynesians of the world) averts severe crisis is by saving the market from itself and its supposed divine price system, or better yet, to foment war, dislocate and re-engage cheapened resources anew.

The delusion of the free market is yet more ludicrous, not only because it begins with a subject who lives in a trans-historical world in which he produces, trades, and consumes, but also because it adds up all the actions of the individualised subjects to emulate history. History is not sort of “I do, she does, and the sum of what we do” at different intervals, projected as slides on a wall. The majority have no effective political say whatsoever. Historical agency is not the adding up together of the trans-historical psychological traits and inclinations of every individual. The abstract or isolated subject does not exist. The individual is a social relationship reflecting the many social relationships of the social order in which he or she resides, of which only the relationships organised to produce a political impact by means of organised political action count as agency. That is all the more reason why collective rights do not negate and still hold primacy over individual rights.

Political agency is that social relationship which mutates within the intermediated space provided by the power of the social class in the world of politics. States and defence structures, the UN Security Council, and the International Financial institutions exemplify some of the forms of social organisations mediating the agencies of dominant social classes. Only the ruling classes have choices and it is delusional for the majority of the working classes to perceive themselves as agents of history outside working-class forms of resistance. In actuality, history happens against the wishes of the working classes; at least that much we know for sure. However, when working people are bamboozled by capital’s ideological power and ballot-box democracy (boxocracy or the rule of a box over people) into thinking that each is an embodiment of the nation state and a maker of history, there will only be an occasional divergence between what people want and historical outcome. History happens as people please despite the displeasure of the outcome.

In such a mass-psychosis, the social science that investigates the reality of why history happens against people’s wishes would not only stand corrected, but its raison d’être as an investigative tool of why fundamental changes happen would also cease to exist. History becomes a series of systematic but not systemic mistakes, which could be dealt with by an appropriate accounting framework. There is no reason to explore the laws of development that necessarily, but not exclusively, breed the repetitiveness of undesired outcomes in war, poverty and austerity. The social metabolic order in which the heights of prosperity meet the depth of poverty becomes just a ‘given’. But the power structure, including ideological power, driving any social metabolic order is antecedent to price. So even for positive science, omitting power from the ‘given’ picture is short-sightedness. Introducing power as a symbolic variable to complete the picture is sloppiness. Power is class power and class is the objective social process and the forms of social organisation, including class history and symbolism realised in the relationship with other classes.

The signification of value, which is the price system, is primarily a product of class power. Countries whose working classes lack power and sovereignty also lose their right to a dignified existence via liberalising policies, exchange prices, trade treaties and, foremost, by outright wars of aggression. The bamboozled masses, embodying the zeal of the nationalist state, whose advanced formations aggress and exact tribute from already insecure non-sovereign countries (via liberalisation and the dismantling of peripheral industry), would also find themselves on a historical trajectory that requires them to crank up their reified nationalisms into ultra-nationalisms in order to raise their shares of imperialist spoils. The nationality guise drives the divide in the international division of labour, and as such, it becomes the foremost resource allocation mechanism, wrapping class power in national power. The fictitious national boundary and bourgeois traditions mystify the real channels for the usurpation of wealth from the disempowered countries or classes.

Insofar as the symbols and traditions of classes go, when the bourgeoisie fakes the traditions of progressiveness as in democratic governance, gender equality and pseudo-feminism, it also erects cultural modes of differentiation that ‘other’ the resisting working classes everywhere. The ruling classes become different in the way the way dress and behave. They also become hated for their behaviour. Resisting working people abhor the insignia of the richer classes and those of their own bourgeoisie as it mimics the customs and consumption patterns of the richer classes elsewhere. Their own history is re-fantasised to bolster resistance, but in absence of strong internationalist ties, it bolsters the wrong resistance. In the case of the Arab world, for instance, the Hijab (veil), which was the select dress code of the few medieval merchants who could afford it and, which signified concubinage, re-emerges in modern days of mass-produced cotton-cloth as the symbol with which Muslim women oppose Western decadence. This psychological alienation issues from historical and material alienation (Frantz Fanon). The Arab working classes transmute historical myths into symbols of resistance, which, as international socialism ebbs, their symbols and fantasies from the past redirect the struggle away from imperialism.

The fanning of the Sunni/Shiite war, which never existed as such in histroy, is one such manifestation of socialist ideological retreat. By refocusing the struggle away from imperialism, this form of Islamic resistance acts as an asset to repression and capital everywhere. There is little room for the human rights agenda in a resource allocation process, which is determined simultaneously by militarisation, and working class differentiation by nationalist or identity politics to flourish. When the veneers of nationalism and the ‘pseudo-liberal’ traditions that have come justify war on cultural bases are demystified, capital, the social relationship would also be exposed as foundationally opposed to human rights.

The mainstream and its canon of orthodoxy only flirt with the idea of human rights and rights-based subsistence; it cannot integrate rights within its hypotheses because it is neither un-ideological nor neutral as is professed. It would be straightforward to model mathematically an economy with unemployed persons—or persons residing below subsistence—as receiving state incomes to meet their basic needs, or wages to engage in socially rewarding activity. That equality of condition, as opposed to equality of opportunity, should come first is a right. The mass of unemployed people are so because the market economy itself cannot provide full and decent employment and, hence, society and the international community owe people who are forced into poverty a decent minimum subsistence. The solution to mathematical models that incorporate a hypothesis of needs-based rights to the unemployed and/or people working at below poverty wages in their analysis would still be “rigorous,” since rigor itself is a convention and not an objective criterion. However, by overlooking needs-based rights, power, and interrelated forms of social organisation, the discipline of economics overlooks the objective and impersonal forces of history. It has to, because its constructed history is personal and subjective. It begins with a trans-historical individual possessing a megalomaniacal agency and ends with a history which is the sum of these subjective tastes and inclinations, taken at successive intervals in chronological time. Nothing could go wrong when the world is conceived as such, every point is Pareto optimal and all resources are efficiently allocated within a given level of technology. Social disaster, unemployment, and wars are ascribed to choice or cultural reasons. A few decades ago, they were attributed to race.

The question why the mainstream’s canon of orthodoxy cannot be superseded when addressing the ferment of social conditions, can be answered under the rubric of the subordination of science to power. But in social science generally, and in economics particularly, the continued departure of theory from its empirical referents on the one hand and/or the narrowly empirical nature of addressing concrete social problems on the other, had sacrificed theory altogether. Theory is either too general and explains everything across all times despite their concrete historical content or too narrow and empirical addressing only particular cases that cannot explain the historically specific mode of development. The latter is a case of theoretical nihilism. Of course, the solution to what is adequate in theory is not to choose a level of abstraction which is halfway between the theoretically vacuous and the empirically ludicrous. Adequacy would also not transpire from interpersonal comparisons as Oskar Lange had indicated half a century ago. So many economists rely on the same set of assumptions and think alike such that the historian Eric Hobsbawm facetiously noted that hundreds of thousands of economists discuss irrelevant issues. No relevant advances arise from like-minded folk.

Adequacy rests on interpersonal comparisons arising from the conflict of different methods of thought. Adequacy begins in the reconstruction of the concept itself, not as a standalone abstract idea, but as a historical condition co-determined in its interrelatedness to other real conditions. For example, it is absurd to see wage labour negotiating its wage outside the ideological forces of labour and capital everywhere. Because the mainstream supposedly did not want to be biased, it omitted the identification of the historical forces and their forms of organisation from its scope of enquiry. In any case, it cannot point the finger to its funding bodies.

The sycophancy of science is worst of all in economics. The schism between the real and ideal is apparent in the formal (one-sided) choice of assumptions, as in for instance, scarcity and perfect competition, which on their own, cannot be manifest as historical phenomena. Apart from the historically transcendent fact that a human being enjoys consuming food up to a point, none of the mainstream assumptions mean anything other than facilitating quantifications up to the level of mathematics that we know. Scarcity is only possible as an idea because a state of plenty represents its diametrical opposite: also one ought to underline that it is just a formal idea and not a current fact. Reality is not yoyo oscillating between two extreme ideas. There is scarcity, but only in relation to existing wealth distribution as exercised by the historical agency, and so on for other categories. The universal law is the dynamic of social contradictions and the not the similarities of things sharing the same qualities by virtue of overgeneralisation. The way social agency relays its decisions across real time to further the interests of the dominant classes cannot be replaced by the platitude of time incoherence. When time has a life of its own, every fact is distorted and every mainstream concept becomes an ideological tool to adumbrate real processes.

The more flagrant examples of how social science trumps reality is in how it presents capitalism as an absolutely progressive stage in history, which behind the scenes, may be made to justify the genocide in the colonies. Capitalism is said to be the evil one cannot do without. Colonisation was peddled as a civilising mission and the so-called humanitarian bombing of Iraq would bring democracy to it. Historically determined phenomena, such as power, social classes and their corresponding forms of social organisation—which frame the uncertainty of socially-built time and history—are rejected. So there is no hypothesis for a man or woman as a social relationship, intermediated in the complex power structure in a way that may void individual political agency altogether, or in a way such that history happens against his or her wishes. Homo economicus, the dominant subject of all the social sciences, is never helpless and his or her rights to decent living standards are accrued ex-post from the perfection of the market whose assumptions cannot exist. A market, nonetheless, that cannot materialise without famines, wars, slavery and the genocide of aborigines everywhere. So, for reasons of ideological bias, the mainstream incorporates the idea of rights in its frame of thought only as an unwelcome price distortion or as a moralising standpoint. In doing so, it forfeits the idea of rights as a concrete possibility accompanying redistribution and social forms of ownership.

Removing class and power structures and needs-based working-class rights from the analysis of social structures is a falsification of fact pretending to be theory. Some sort of ideological orientation is implicit in every empirical study, and even the most abstract theoretical concepts presumably have empirical referents. By omitting working-class rights and power and, as the late sociologist Arthur K. Davis had said, by deflecting scientific attention into harmless areas, such as abstruse theory or a surface view of social problems mainstream social science may or may not actively serve the dominant vested interests, but at least it does not challenge them. Mainstream social science is neither neutral nor non-ideological. By highlighting rights, the Lab may bring back into theory that part of reality which is assumed away by the mainstream. That is a very useful endeavour.

Triple Crisis welcomes your comments. Please share your thoughts below.

Edward B. Barbier

This summer, I completed with a graduate student of mine a major report for the Economics of Land Degradation Initiative, which is entitled Land Degradation, Less Favored Lands and the Rural Poor: A Spatial and Economic Analysis.  This study had three objectives:

  • To determine the spatial distribution of global rural populations on less favoured agricultural land and in less favoured agricultural areas from 2000 to 2010;
  • To determine the spatial distribution of global rural populations on degrading and improving agricultural land from 2000 to 2010;
  • To analyse how these spatial distributions affect poverty in developing countries.

The table below summarizes our findings over 2000 to 2010 for the distribution of rural populations on less favoured agricultural land (LFAL), in less favoured agricultural areas (LFAA), degrading agricultural land and improving agricultural land.

A sizable proportion of the rural population in developing countries is concentrated on LFAL, which are subject to low productivity and degradation due to steep slopes, poor soil quality or limited rainfall.   In 2000, over 1.3 billion rural people in developing countries, representing almost 36 per cent of the rural population, were located on these lands, and their numbers increased to 1.5 billion in 2010 (35% of the rural population).

Summary of spatial distribution of global rural population, 2000 to 2010

Developing countries are all low and middle-income economies with 2012 per capita income of US$12,615 or less (World Bank 2014).

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Robin Broad, It’s Time for Congress to Investigate Corporations, Again, The Hill.

C.P. Chandrasekhar, The State and Indian Planning, Frontline.

Jayati Ghosh, Why Asia is Probably Poorer Than We Think, The Guardian.

Jayati Ghosh, The Global Laggard, Frontline.

Sara Hsu, Financial Crises, 1929 to the Present, Edward Elgar (2013).

Jianjun Li, Sara Hsu, and Yanhzi Qin, Shadow Banking in China: Institutional Risks, China Economic Review.

Bodo Ellmers, Guest Blogger

Bodo Ellmers is a Policy and Advocacy Manager at the European Network on Debt and Development (Eurodad).

The UN General Assembly has passed a landmark resolution that mandates the UN to create a “multilateral legal framework for sovereign debt restructuring.” Promoted by the G77 countries and triggered by the aggressive “vulture funds” lawsuits against Argentina, this resolution could be a game changer for the way future debt crises are managed. First and foremost, it has shifted the forum for political debate away from the International Monetary Fund (IMF) towards the UN.  However, shamefully, the EU’s vote was split over this crucial decision.

The path towards a real debt restructuring regime

It is certainly not news that the lack of a legal framework for sovereign debt restructuring—a state insolvency regime—has been a gaping hole in the international financial architecture. Prominent economists such as Joseph Stiglitz, senior officials such as the IMF’s former Deputy Director Anne O. Krueger, and civil society campaigners have pointed again and again to this lack.

However, governments from both debtor and creditor countries have so far been reluctant to put their political weight behind any meaningful initiative. The most relevant political commitment is probably the Monterrey Consensus’ vague commitment to “consider” new debt-workout mechanisms. The most relevant practical work, on the other hand, was the IMF’s concept for a Sovereign Debt Restructuring Mechanism, which was shelved 11 years ago when it faced a political deadlock in the U.S.- and EU-dominated IMF Executive Board.

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Sunita Narain

Environmentalists are rightly alarmed that the National Democratic Alliance (NDA) government is busy dismantling the environmental regulatory system in the country. Over the past two months, the media has reported that clearances for projects, from mining to roads, have been fast-tracked. While the website of the Ministry of Environment and Forests (MOEF) has not been updated in August, in the two months till July end, forest clearance was granted to over 92 projects, which will divert some 1,600 hectares of forest. More recently, it was reported that the National Board for Wildlife has processed many projects located near or in sanctuaries and national parks.

Additionally, rules are being changed, purportedly to speed up the process. This is being done in mainly two ways. One, as much as possible, MOEF is pushing decision-making to the states in the name of streamlining the process. The Environmental Impact Assessment (EIA) notification has been amended to delegate powers to clear certain projects to the state-level EIA authorities. This is being done with the full knowledge that the state agencies lack capacity and accountability. So, the effort is not to take informed decisions about adverse impacts of projects. The effort is to get rid of the clearance system or at least to push it as far away as possible.

Two, wherever possible the provision of holding public hearings or taking gram sabhas’ [village meeting] consent is being diluted or even removed. For example, small coal mines—classified as producing 8 million tonnes annually—have been allowed to double their capacity without holding the mandatory public hearing. Other changes are also in the offing that will further chip away at this condition, which makes it necessary to get the consent of the affected communities or at least to hear and heed their concerns. Clearly, listening to people is not convenient for industry.

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Deepankar Basu and Debarshi Das, Guest Bloggers

Deepankar Basu is Assistant Professor in the Department of Economics, University of Massachusetts-Amherst. Debarshi Das is Associate Professor in the Department of Humanities & Social Sciences, Indian Institute of Technology, Guwahati. A slightly different version of this article appeared in The Hindu on Sept. 4, 2014.

Two important items  adopted at the Ninth World Trade Organization (WTO) Ministerial Conference in Bali in December 2013 are the decisions on the Agreement on Trade Facilitation (TF) and on Public Stock Holding for Food Security Purposes. The former relates to the reduction of administrative barriers to trade—like dealing with custom barriers, documentation and transparency. The latter concerns the procurement and storage of food grains by state agencies for public distribution.

The attention of the world was recently focused on these two items as India, in a statement to the General Council of the WTO on July 25, argued that the adoption of the protocol on trade facilitation be postponed until a permanent solution on public stock holding for food security had been worked out. Despite intense pressure from developed countries, including the United States, India maintained its stance even as the deadline for adopting the protocol on TF approached and passed (on July 31).

Even though developing countries have generally supported measures to enhance food security, support for India’s position was not easy to come by this time around. Only three countries—Cuba, Bolivia and Venezuela—stood with India at the WTO. Later, the UN’s International Fund for Agricultural Development came out in support of India’s position. Not only were most members of the G-33 not with India, but even the other members of the BRICS group looked askance. Many countries have openly criticized India for intransigence. Is India’s stand unreasonable?

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Martin Khor

Independence has been achieved, yet has to be constantly defended, continuously renewed and expanded as the process of de-colonisation is on-going and new threats arise.

This week marks the beginning of our 58th year of Independence [in Malaysia]. Much has been done to entrench sovereignty and independence on our land. But much more needs to be done.

Colonialism did a comprehensive uprooting of traditional systems and replanted them with new ways, methods and systems to produce a chaotic and confusing amalgam of people, social patterns and economic modes. We are still shaking off the vestiges of that colonialism, whose shadows still fall large. We are still in the process of building independent policies, structures and systems. This is so in post-colonial developing countries in general. As the leaders of the Group of 77 and China stated in their summit held in Bolivia recently, the process of de-colonisation is incomplete and on-going, even decades af­ter the winning of Independence.

That is a good reminder. In particular, the structures and levers of the global economy are still under the domination of the rich developed countries. The former colonial masters may have let go of formal control of the colonies but they made sure to set up a system in which they could continue to control the important components of world finance, trade and economy.

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Frank Ackerman, Richard Tol on Climate Policy: A Critical View of an Overview

Edward B. Barbier and Jacob P. Hochard, Land Degradation, Less Favored Lands, and the Rural Poor

C.P. Chandrasekhar and Jayati Ghosh, India’s High Technology Deficit

Gerald Epstein, Fed Chair Signals Possible Policy Shift on Unemployment

Robin Broad and John Cavanagh

On September 15, in a tribunal that few know exists, the fate of millions of people and hundreds of millions of dollars will be debated and decided in the next six months.

The tribunal is the World Bank Group’s International Centre for Settlement of Investment Disputes (ICSID). It sits in downtown Washington, D.C., behind security guards at the World Bank. At issue is the future of El Salvador, some 2,000 miles away, where a global mining company—Pacific Rim, now owned by Australian/Canadian corporation OceanaGold—wants to mine gold in ways that could well poison the river system serving over half the Salvadoran population.

The crime alleged by the mining company is that the government of El Salvador has not approved a mining license for it. But the real crime is that a foreign corporation is trying to stifle democracy in a country where a small landed oligarchy and U.S. intervention stifled it for so long.

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