This Week:

Sorry about the Spam

The Context Club and Kosovo

Democracy and the Free Market

Greetings,

I keep trying to write about economics, and I hope you are interested in it. It's not some dull textbook thing, although I admit that I came to think of the economics classes I took as very effective insomnia cures. Economics basically dictates how we are going to spend most of our time, so it's pretty important. If we understand a little bit about how it works, we will be able to see that it has all been created by us, so it can all be changed by us. Watch out, though: if you learn too much, you might start thinking like an economist!

It is well-known that readers of Nygaard Notes are members of a very exclusive club. More evidence arrived this week, in the form of the latest issue of Z Magazine. A major article about Social Security "reform" appears therein, written by yours truly, but Nygaard Notes readers already saw the darned thing months ago. [Nygaard Notes #6 and #11] You are so cool.

See ya next week,

Nygaard

The Context Club and Kosovo:

For years now my friends and I have discussed starting a group called The Context Club. The members of this club would be united in their belief that it is impossible to understand anything without understanding the context in which it exists. As with any club, we would want some rituals, rules, dues (hmm, dues, that sounds good...) and so forth. But the reason I think it may be time to officially inaugurate this club is the U.S. bombing in Yugoslavia and nearby areas.

Rule Number 1 for Context Club members is this: If you do not have at least a working knowledge of the history, religion, economy, demographics, geography, and culture of a region that the U.S. is attacking gleaned from a source that you know to share your values YOU MUST NOT READ THE NEWSPAPER OR WATCH TELEVISION! Without the necessary background to allow you to decode the mainstream reporting on the region, you may become hopelessly confused and permanently unable to make sense of U.S. foreign policy. In extreme cases, the careless breach of this rule has led would-be radicals into the realm of Liberalism.

Propaganda is a powerful thing, at it is at its most powerful and dangerous when the U.S. government decides to go to war. Kosovo is a fantastic example, but ask yourself what you really know about any number of other countries that we have attacked in the past twenty years.

I write this in a light-hearted vein, but I am quite serious when I say that, if you have gotten your information about Kosovo from the "mainstream" press and nowhere else, you are almost guaranteed to be seriously misinformed on some crucial points. I'll say more about this in a future Nygaard Notes, but for the meantime, I recommend going to this site for some useful background on the current situation: www.zmag.org

Democracy and the Free Market:

Last week I pointed out that a money-based Market excludes those with no money. This is a not-insignificant point since, in the dry language of a 1998 Report from the United Nations Development Programme, "well over a billion people [worldwide] are deprived of basic consumption needs." I argued that this is neither an accident nor a conspiracy; it's just built into the nature of the Free Market.

Increasingly, the values of the Free Market are becoming the values of our society as a whole, with frightening implications.In a marketplace, the primary relationship is between buyers and sellers. It's so primary, in fact, that it becomes just about the only relationship there is. This is a very dangerous and corrupting model upon which to build a society.

As the ideology of the Free Market spreads, all sorts of things must be adapted to fit into the framework of that Market. That is, everything must be made into something that can be bought or sold. This process is called commodification. That is, everything must become a commodity, or a thing, so that it can be sold.

Here's what this means in the real world: Unless you have recently won the lottery or have the right kind of parents (i.e. the wealthy kind), you spend most of your time neither buying nor selling. You spend most of your time working. You work to produce something, or you work to make something happen. But you don't get to sell it.

In the world of the Free Market, your work is not seen as an expression of your creativity, nor as your contribution to the common welfare, nor as your ethical response to living, although you may see it as all of this and more. No, the Market sees your work as a cost, as an expense. And expenses must be kept low so that prices can be kept low. Consumers demand it.

When the world is seen as a giant Marketplace and nothing more, the primary goal for everyone is to get more for less. The Market takes for granted that buyers are seeking, and will buy, the cheapest possible goods and services. Sellers (that is, the owners of goods and services) are assumed to be trying to increase the difference between what it costs to produce something and what it can be sold for, as this means higher profits. The missing link? Workers.

Although everybody is both a producer and a consumer, the Market responds primarily to you as a consumer. As far as your life and my life are concerned, what this means is that we will end up working for less.

Let's look at three very current items in the news:

1. The globalized economy. We have to be "competitive," which means we have to pay our workers as little as the next country.
2. Privatization. The pitch here is that private business does things more "efficiently." This means cheaper, which means lower taxes, which ultimately means fewer people working for lower wages.
3. Health care. Competition is held out as the way to reduce spiraling costs. HMOs have been doing this by reducing the numbers and the wages of nurses, doctors, and staff at clinics and hospitals.

In each case, workers take the hit. Profits go up, wages go down, and we read in the papers that this is the "dream economy." But whose dream is it?

A fourth item in the news illustrates the point even more vividly. If Social Security were to be transformed into a system in which all of us were holders of individual accounts, as is proposed by Senator Rod Grams and many others, then our welfare in retirement would depend to a large extent on the performance of our stock market holdings. Readers may recall that the last decade has seen numerous announcements of massive layoffs by Fortune 500 companies, always for reasons of "increased competitiveness." Almost invariably, the value of a company's stock goes up when such layoffs are announced.

Now, suppose that a good share of your retirement funds are invested in General Motors. And suppose, further, that your sister works for General Motors. General Motors announces layoffs. The value of your stock, and thus the comfort of your retirement, goes up. You cheer. Then your sister calls. She will be among those laid off. She's not cheering.

The marketplace serves consumers and owners. Consumers need to earn wages to use for buying. Those same wages, however, are costing the owners money. Owners want people to have money to spend, but they also want to pay their workers as little as possible. This is a very fundamental contradiction within capitalism, and the system can basically resolve this contradiction in one of two ways.

One way is to "race to the top." In a system like this, the welfare of workers is primary, meaning that wages are high and consumption levels are consequently also high. Often quality is elevated, as well, since well-paid workers tend to make high-quality things, plus they make enough money to actually buy those things. The economy of post-War Europe was like this relative to the United States. When I was a kid, Italian shoes, Danish furniture, and German cars were all understood to be of high quality, but we couldn't afford them. How did the Italians, Danish, and Germans manage to afford them? We never knew.

The other way to orient a capitalist economy is engage in a "race to the bottom." This is the American way, and increasingly the global way, the way that I have been describing. Prices must be kept low, so wages must be kept low, so prices must be still lower, and so it goes. Again, this is not a conspiracy. We all participate in it. As people get paid less, they must demand ever-cheaper stuff. Eventually, we have a situation in which we have to get 12-year-old kids in Indonesia to make stuff for us. It shouldn't surprise anyone. It's a totally predictable outcome of the Free Market.

The Marketplace puts a premium on things, on property. People are valuable because of what they buy. A democratic society puts a premium on people. People are valuable because of what they are. Democracy and Free Markets? If you are working for one, you are working against the other. You can't have both.