Notes for another economic and social system

Notes for another economic and social system

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By Umberto Mazzei

The socialist version of the Soviet Union began to go bad when the government of Leonid Brezhnev (1968–1982) increased the budget for military industries at the expense of the rest of the economy and social welfare. Then he took on an Afghan war that he couldn't win. The adversary was equipped, trained and financed by the United States, which was out of reach, unless incurring an atomic war.

With the death of Brezhev, Mihail Gorvachev came, a delusional, if not something else, who gave up his allies without guarantees, opened himself up to neo-liberalism and Russia sold state companies at a low price to Wall Street frontmen.

In England and the United States, politics has been directed by financial interests since the end of the 18th century and the role of the Central Bank is exercised by private banks. In Great Britain the Bank of England has exercised it since 1844 (Bank Charter Act). In Washington, a group of large private banks, called the Federal Reserve, usurped that function from the Treasury Secretariat in 1913. In both, the so-called “Lobbies” dictate the economic policy and the arms industry stands out, which guides it towards the increase. incessant military spending. Both sectors take resources away from the rest of the real economy to maintain two fantastic worlds: that of fabulous virtual fortunes and that of imaginary threats.

In the post-war period, the presence of Marxism-Leninism as an ideology in power raised wages and institutionalized the social protection of workers, mainly in Europe, where the Soviet Union was close and there were powerful communist parties. This potential threat oriented the State's policy towards reconciling labor and business interests. The demise of the Soviet bloc triggered greed. In Britain and the United States that produced hallucinations that led to the socio-economic cliff. The tale that total freedom to personal greed leads to collective prosperity is false.

The real economy eroded and has been in artificial life since 2008. It is a case of schizophrenia: people of real goods and services (99%) are experiencing a recession, but the owners (1%) of companies in finance and defense receive juicy bonds and dividends. It happens that with public debt, money was given to the banks (“quantitative easing”) to re-inflate the stock exchanges and the payment was charged to taxpayers. That may have been a new beginning if practices and policies had changed, but they remain the same and lead inexorably to terminal crisis.

There is still no public awareness that we are experiencing a massive failure of the economic and political system imposed by Wall Street and the City of London, with their victory in 1945. However, the symptoms of the collapse are clear and the most serious is labor, because the wages maintain consumption. In the US, official unemployment is 8%, but its statistics hide a lot of data (1) and real unemployment is at 18%, and growing. In Great Britain the official figure is 8.4%, but it excludes 3 million under-employed, with few hours a week, and 4 million of the so-called “precariat”: people in casual self-employment, who could be defined as self-unemployed (2).

Since 2008, the rescue of the banks cost the US more than 19 trillion (3) - a figure higher than a third of its GDP - which was used in new bets of the financial sector and not to mobilize the economy. Homes lost $ 1.1 trillion of their value, plus another trillion lost in investments and pension funds. Now, former middle-class families eat soups at charity kitchens. These innocents pay the absurd risks incurred by the greed of the bankers and the military-industrial complex.

Socio-economic ethics

The social responsibility of the economy is an ethical issue that already separated Adam Smith from David Ricardo. Smith speaks of an “excessive profit”, contrary to the social and parasitic interest; Ricardo sees it as an economic goal and it is the focus of Milton Friedman's neo-liberalism; it is what they teach in Business Schools as Economics. It is an ethical issue. Gregory Bateson (Mind and Nature) has already said that "The ethics of the optimum and the ethics of the maximum are two totally different ethics." The best ethic emphasizes quality and is expressed with satisfaction.

The maximal ethic is addictive and has only one rule: more is better.

Excesses are always toxic and this is what kills the American economy and the current economic system. "The maximization of a single variable - Bateson tells us - typically ends in pathology." A healthy economy maintains balance in the prosperity of the different sectors; when the growth of only a couple of them is favored, there is a parasitic situation. This is the case of the financial sector and the arms industry that demand, on the one hand, economic-social austerity and, on the other, create wasteful, unnecessary wars.

In its death throes the system dismantles the economy of the European welfare state. The European banks ask for more funds to maintain the value of their bad bets and impose their people on governments. Jobs are eliminated, employment is precarious and public services are privatized.

As Boaventura de Sousa says in his History of Austerity: "The objective is to return to the politics of pure and hard class, that is, to the 19th century", to that of Ricardian liberalism, to the England described by Charles Dickens.

There are other doctrines

In the nineteenth century an approach to economics as a science prevailed whose primary objective is not the profits of work, but those of invested capital ... and still, only that of some. But there were also those who thought about the profits of the workers and those ideas were applied - timidly - in Europe before the collapse of the Soviet Union.

Now they are being ignored and today their works are difficult to find in university libraries. Their fault is that they regard national prosperity as a goal superior to individual gain; an objectionable criterion for stateless companies that fund academic centers and whose economic vision focuses on quarterly earnings.

The first was Jean Charles de Sismondi, from Geneva, who published "New Principles of Political Economy" in 1818. There he coined the term proletarian -which Marx later used- to designate who with his offspring guarantees labor. He criticized Ricardo and pointed out that profit at the expense of wages is a shortsighted policy, because good wages are needed for production to be consumed; He was also the first to ask for state intervention to prevent capitalist abuses and to speak of class struggle (4).

Sismondi predicted the crisis that afflicts the United States and other countries today, thanks to complicit governments. He spoke of overproduction that leads to imperialism and to squeeze consumption with debt on future wages. Now it's called "Supply Economy" and it's Debt Economy. Sismondi blamed the overproduction of the gap between the useful value of the good and its exchange value, which drives consumption on credit that creates an enslaving debt. Something that happened in England and the United States since the first half of the 19th century. At that time it was debt in the employer's store, now they are credit cards. That tragedy is described in the futuristic novel "The Iron Heel" (1906), by Jack London.

Since then, the congenital and visible excesses of capitalism and the role of the State to correct them have inspired concrete proposals, which can be classified into two basic theses.

The group of Karl Marx and his followers, considers capitalism irredeemable and immersed in a fatal dialectical process that leads to its own violent destruction. It is replaced by a society without individual property.

I believe that Marx and his followers are utopian when they base their violent thesis on proletarian solidarity. Solidarity is precarious among people who struggle to survive, especially if they are denied the aspiration to the security of having their own home. Class solidarity exists, but among the very rich. Despite this, Marxism is valid as a method of socio-economic study and has basic contributions for a proposal that replaces pure ricardism or neoliberalism.

The other group thinks that capitalism is usable for the benefit of society with control policies; In addition to Sismondi, Friederich List, Werner Sombart, Max Weber, Wilfredo Pareto, John Maynard Keynes and in reverse Deng Xiaoping, in China stand out.

We believe that this second group is more realistic and coincides with a postulate of political science, mentioned before by Sismondi, Iturbide, Sarmiento and others: In matters of State the jumps are ephemeral.

Progress is made through evolution, as in nature, and the institutions that endure reflect the circumstances, culture, and ideas of its citizens.

This group of authors was also influential. List promoted the industrialization of Germany; John Maynard Keynes developed the economic function of the wage; Weber and Pareto still guide the social economy.

Sombart (5) coined the term capitalism (Marx does not use it) and the concept of creative destruction, which his student Joseph Schumpeter used. His most famous work does not exist in English, because Princeton University has the exclusive right (6) and it does not.

There are other important authors that we can study: Vasili Leontief, Nicolai Kondratieff, Joseph Schumpeter, Jon Elster, John Roemer and the Venezuelan Carlota Pérez whose book "Technological Revolutions and Financial Capital" (7) covers 250 years of history and shows that Changes and technical revolutions have a remarkable regularity and force the social and political institutional redesign. We live one of those moments

- Umberto Mazzei is a Doctor in Political Science from the University of Florence. He is Director of the Institute for International Economic Relations in Geneva.


(1) Unemployed people who stop receiving their unemployment insurance even if they are still out of work are not counted. Unemployed persons who work a few hours a week on a piece-rate basis are counted as employees. There are about 50 million in the US who live below the qualified poverty line.

Morris Berman, Why America Failed.

(2) The Guardian, John Philipott: We need employment statistics that confront political spin. 16 January 2013.

(3) It is the international and Spanish term; Anglo-Saxons call them trillions (that is, millions of millions).

(4) Economie politique (1815), Nouveaux principes d’économie politique (1819).

(5) Modern Capitalism (Der Moderne Kapitalismus), 1902 and its latest version in 1927.

(6) Source: Sombart

(7) Carlota Perez and Chris Freeman, "Technological Revolutions and Financial Capital: the Dynamics of Bubbles and Golden Ages." Edward Elvin Publishing Limited, Glensanda House, Cheltenham, UK. 2002.


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