Economics as if people matter

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Credit: Truth Ultimate

Yesterday marked the 71st anniversary of the founding of the People’s Republic of China. It was founded on October 1, 1949. Upon that occasion, one of my Chinese friends in China asked me to comment on the idea and practice of socialism.

I think it is a timely request. The world’s economy has been undergoing tremendous hardship even before the emergence of the Coronavirus pandemic. The main reason for such hardship for the vast majority of the people has to do with the idea of Neoliberalism. Neoliberalism can be understood as the revival of the old capitalist thinking, prior to Marx and prior to the advent of progressivism and reform movements. The Oxford Dictionary defines Neoliberalism as the ideology “favoring policies that promote free-market capitalism, deregulation, and reduction in government spending.” It is an extreme form of laissez-faire ideology that discourages government intervention and regulation. To put it bluntly, Neoliberalism is economics as if the common people don’t matter. Profits for the capitalists are the top priority. Needless to say, this ideology contradicts the core principles of every major religion — Buddhism, Christianity, Islam, etc. It would not be a stretch to say that Neoliberalism is anti-human in its spirit. What is a mystery to me is why so many people in the Western world have embraced it.

Certainty, because Neoliberalism concentrates the power in the hands of the rich and the capitalists, the common people cannot thrive. With political leaders siding with business interests in policymaking (due to corporate lobbying and corruption), the common people simply don’t have a chance. In the meantime, due to the globalization of the labor market, capitalists are free to move production to the places with the lowest labor cost. The cost of living for workers varies widely from country to country. It is definitely much higher for workers in the US compared to the cost of living in developing countries such as India or Bangladesh. The global wage arbitrage means that low-skilled workers in developed countries have seen their quality of life deteriorated substantially due to such global competition. This has caused widespread resentment among the low-skilled working class. Such resentment accounts for part of the support for President Trump who adopts an isolationist and anti-immigrant policy which he calls America First.

Due to many decades of Red Scare and Cold War propaganda, “socialism” has become a dirty word in America. It is probably better to drop the “socialism” label. Socialism-phobia has led the DNC to block the advance of progressive politicians such as Bernie Sanders. It is most unfortunate. Socialism, defined as social and economic policies that are designed to serve the interest of the common people (and not the top 1%) is exactly what we need right now. Democracy cannot survive without a robust middle class. Without government intervention and/or regulation, the capitalist class will simply squeeze the lifeblood out of the common people to benefit themselves. This will not even serve the long-term interest of the American economy, which is consumer-driven. We have to note that the workers are also consumers. The rich capitalists actually consume very little — they already have what they need. If the common workers are wounded, they will not have the consumption power to support the economy. In economics, there is something called The Paradox of Thrift. On the surface, it seems that it is good for the economic agents (various players in the economy) to save money. But we must not ignore the chain effects of thrift. If everybody is saving and nobody is willing to spend, there will be no consumption! The way the economy works is actually totally consistent with the Buddhist teaching of Dependent Origination, which says that everything and everybody is linked to the rest. Each economic agent is an integral part of this economic ecosystem. If the workers are hurt, there is a ripple effect that will reverberate throughout the entire system.

Thus, some form of socialism in which the workers’ interest is taken care of by the system is an absolute necessity. It is vital for the economy. It is also necessary for capitalism to survive. Many people think that capitalism and socialism are mutually exclusive. They are not. If socialism is defined as an equitable system in which the interests of all the stakeholders are fairly addressed and there is a reasonable amount of social and economic justice, then such socialism can support the capitalist system. The capitalists should not be so greedy as to kill off the goose who lays the golden eggs. When that happens, everybody loses. Socialism does not have to be some form of radicalism or extremism. It is possible to bring in a form of socialism, even just to support the market system.

Many people have the idea that socialism is an economic system invented by Karl Marx. In reality, primitive forms of socialism and communism have always existed. The Sangha of early Buddhism and the early church of Christianity practiced a kind of communism — there were very few items of private property. Many things were shared among members of the community. We must also note that there is also a socialist ideal in Confucianism, called Great Unity. Great Unity is a social and political system where the entire country belongs to the public. Employment and other use of human resources are based on personal virtue and ability. The economy and the government are run as a meritocracy. Trust and social harmony are valued. Everybody has his or her place. The people have a strong public spirit. They care about the common good. Everybody contributes, based on his or her ability. Such a social ideal is very old, dating back to prehistoric China. This is understandable. Living conditions during prehistoric times were harsh. Our early ancestors had to cooperate and collaborate just to survive.

It should also be mentioned that socialism does not contradict Buddhist principles. One of the key links of the Eightfold Path is Right Livelihood. The practice of Right Livelihood means that the way we consume, eat, work, travel, and participate in the economy should not cause harm to other beings. It is a non-violent way of living. On the contrary, modern capitalism, which is based on greed and the maximization of self-interest, is totally against Buddha’s teaching. Buddha calls ignorance, greed, and anger the Three Poisons. Extreme capitalism is an expression of ignorance because it does not see the interdependence of all the economic agents in the economy. The demise of the workers is not good for the capitalists. The capitalists need healthy and happy workers to produce products. The capitalists also need the workers to be consumers with robust consumption power. In the long run, consumption power cannot be preserved if the workers are constantly being exploited and not paid a living wage. Adam Smith thinks that self-interest is a good thing for society. But capitalist greed can be so excessive that it destroys the whole economic system. Extreme capitalism self-destructs.

Finally, socialism is also good for the environment and the planet. Extreme capitalism, without due respect for the long-term well-being of the planet and its natural resources, is literally suicidal. Earth is our common home. But without proper government intervention and regulation, corporate interests can easily pollute and ruin the environment, threaten the diversity of the species, and deplete natural resources in their pursuit of profit. There is no question that corporations cannot police and regulate themselves. We need proper government regulation and oversight. This typically comes from a socialist ideal that places the common good above private interests.

We live in an age where socialism is the big boogeyman. Proper education is urgently needed to inform the public and correct the misinformation about the nature of capitalism and socialism. Essentially, socialism is totally compatible with democracy. But extreme capitalism, in creating gross social and economic injustice, is by nature anti-democratic. We have reached a critical juncture in history that we need to right the balance. We have already seen many troubling signs of the ill effects of the reckless Neoliberal economic thinking. A major election is coming up soon. May our votes be for Right Livelihood.

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