US Power and International Finance

I was reading Stephen Walt's Taming American Power (published in 2005) and it spoke of the importance of other states replicating US financial practices in order to stabilise the international financial system and prevent shocks. 

This would be hilarious if it weren't so tragic. The US and its allies (both states and institutions such as the IMF and the World Bank) have pressed states around the world to adopt economic and financial policies which benefit US capital. 

What did this achieve? A mutually-beneficial financial stability? Far from it, as the 2007-9 'American crisis' (Leo Panitch and Sam Gindin's apt phrase) which resulted in considerable shocks worldwide demonstrates. 

All it has done is entrench structural global inequalities based on institutions and practices which overwhelming benefit the already-dominant United States.

It's time those of us who want a world based on equality of opportunity, human rights and democracy to recognise that Western governments are not the advocates of these principles except in rhetorical terms. That they talk about political freedoms as a means of obscuring us from the area where human rights and democracy are most important: in the socio-economic realm. 

The Importance of Economics

This morning I was watching last Thursday's edition of the BBC's Question Time. As with most times I watch a political programme on the television, I was overcome with the desire to throw my mug at the television.

The 'discussion' around the government's economic policy was entirely uneducated. The audience repeatedly made comments about how borrowing in order to solve our economic problems was 'illogical' which was faced with no challenge by the panel. This is basic economic knowledge. If the government were to borrow £10bn and invest it in infrastructure (for example, much-needed housebuilding) they would see a return on this money by way of taxes through the creation of jobs and boosting of economic growth. This is seriously basic and it is what is being recommended by the IMF and espoused by the Labour Party. This is especially advisable policy given the lack of economic growth and the very low interest rates on government borrowing.

That even the Labour representative on the panel didn't speak up about this demonstrates how far this government has framed the debate on economic policy to its own outdated dogma.

What the 2008-9 crisis demonstrated to us is the extent that states are fundamental to the economy. In fact, the whole category of 'the economy' is a false one. This categorisation (which goes back to the classical economists of the nineteenth century at least) presents 'the economy' as something natural, autonomous and somehow external to society. Through this, elites are able to present the economy as something which 'we' cannot control, only understand. Thus 'economics' is studied as though it were a natural science. In fact, it is highly political and highly social.

We need to challenge this alienation of the economic. We need to demonstrate how 'the market' and 'the economy' are neither irresistible forces nor immovable objects but fundamentally human creations. Because of this, they change all the time and are much more complicated than basic concepts such as 'balancing the books' suggest. Governments do not follow the logic of households: that if you spend less, you will have more. In fact, they are more like businesses in this sense: you need to spend money to make money and then you can use that money for the goods you want. For business leaders that may mean private jets and diamond rings, for the government it means healthcare, welfare and education.

All of this convinces me further that I want to pursue a career in the field of political economy. It is time we recognise the political and historically-contingent nature of 'the economy'. My dream would be to write a series of books on political economy aimed at children, teenagers and those without a formal education. Only through educating people about political economy can we hope for real progressive global change and a world where we are not at the mercy of the whims of international financial leaders.