by 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
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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.