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November, 1995

THE EMERGING SOCIAL WRECK

By Robert Theobald

Economists have managed to convince politicians and citizens that the central challenge is to determine how production can be increased. The real issue of the last one hundred and fifty years has been achieving sufficient demand to absorb available production so depressions could be prevented. Several different patterns have been used over time.

Ever since the beginning of the high industrial era, the question has always been how to enable people to afford the ever-growing flow of goods and services. First, Europe made credit available to the industrialized countries, including the United States. By the beginning of World War II, huge amounts of money were owed to Britain, Germany, France and others. This solution was quite effective throughout the nineteenth century, although severe economic depressions developed from time to time as production temporarily outran demand.

Second, Ford invented the five dollar day. For the first time, manual workers were able to buy more than necessities: the pattern provided enough demand through the end of the 1920s. The thirties saw the worst depression only ended by war production. At the end of the war, Western democracies saw unemployment as an evil to be avoided at almost all costs.

Third, personal credit was made broadly available after the second world war. Saving was no longer seen as culturally desirable: rather it threatened the economy by keeping consumption down. This new pattern kept demand high up through the end of the seventies. The most recent technique for supporting demand is seldom acknowledged as such. Most countries now run significant annual deficits: this has prevented a major global recession.

Despite this latest pattern, the world-wide economic situation remains fragile. Japan's economy has hardly grown for several years. Unemployment rates in Europe hover around 10%. The percentage of national income going to wages in the United States continues to fall and those at the bottom of the income ladder are in worse and worse shape. Unemployment and underemployment in the developing countries exceeds 25, 40 and even 50%.

Bleak as this picture is, problems will inevitably worsen in the next few years because countries are committed to reducing their governmental deficits. In addition, many people have decided to change their priorities away from consumption. Ecological feedback loops also require us to do more with less. These three emerging realities will reduce demand still further and worsen job losses dramatically. In addition, the impacts of technology will hasten and broaden the emerging crisis.

Republican policies are therefore disastrously wrong-headed. Welfare reform, medicaid changes and alterations in policies toward the poor all assume that good jobs will be available if only people are educated and willing to seek them. All the evidence is to the contrary. On the other hand, we do know that Democratic strategies were no longer acceptable or really effective. Sweeping them away was perhaps inevitable.

Is it possible that only the social catastrophe we are so clearly bringing on ourselves will wake us up to our dangers? Is this the only way that we can force ourselves to see that old models must be abandoned and that a totally new economic system is required? Can't we recognize the obsolescence of our current systems using our brains: do we have to be convinced by unnecessary disasters?

We should urgently create a coalition which will think beyond the conventional wisdom. We must take as our text, the words that John Maynard Keynes wrote in a 1930s essay entitled "Economic Possibilities for our Grandchildren." He wrote with extraordinary prescience: "We shall be able to rid ourselves of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to dare to assess the money motive at its true value."

The answer is not to be found in a continuation of past ideas. We must see that increases in production and productivity provide the potential for less work and strain rather than more as has been the case throughout the developed world in the last decades. We must think about new ways of allocating resources, dramatically changed life-cycles rather than just reduced hours of work as well as rewarding new types of work such as parenting.

Politicians see the current moment as a crisis. We need to turn our thinking around so we recognize our incredible opportunity. We need to break the grip of obsolete economic theory and realize the freedoms which can be created by our ever-growing capacity to produce. No longer need we be constrained by the ancient biblical curse that "In the sweat of thy brow, shalt thou eat thy bread."