http://www.monthlyreview.org/301dowd.htm
Refuting the Big Lie
by Doug Dowd
Hugh Stretton, Economics: A New Introduction (Pluto Press, 1999), 864 pages, $90
hardcover, $35 paper.
Capitalism was first firmly established in Britain in the eighteenth century and
it was then and there that economics was born, in Adam Smiths Wealth of Nations
(1776). Economists have served capitalism ever since, but only in the past
quarter-century has capitalism neededand gottenso much from them.
As the twentieth century began, given the intrinsic inequalities of capitalism,
the existence of political democracy in almost all capitalist nations
constituted an ongoing threat to capitals rule, a threat intensified by
capitalisms tendency toward intermittent economic crisis and socioeconomic
weakness.
For much of the nineteenth century, economics tended toward ideology; by its
end, it was pure ideology. But ideology alone was no match for the challenges of
the new century.
In the first half of the twentieth century, the crises were so pervasive and
became so deep that economists could propose nothing to avoid or alleviate them.
When something was proposed, as with Keynes during the depression of the 1930s,
neither capital nor most economists took heed before the Second World Warexcept
in Nazi Germany, which invented the military Keynesianism that undergirded
capitalism in the decades of the Cold War.
And what about economics? The years after the war were also the years in which
business had lost its unchallenged power and prestige, having laid a very large
and rotten egg before the war, as had mainstream (neoclassical) economics. A
substantial group of new economists had also come into being, educated by
the depression, the New Deal, and the war, aware and supportive of the need for
socioeconomic reforms. Their ideas and policies were effectively shaped by the
then-relatively powerful labor movement and a liberalized public, with
significant support from those in big business who had learned from the war just
how useful governmental (especially military) expenditures could be. Not for
nothing were the two decades or so after the war called Cold-War liberalism.
Global economic expansion took hold as the 1950s proceeded, and the following
decade was the most expansive ever, aided and abetted by the Cold War. But
superstate or no, capitalisms laws of motion had only been modified, not
repealed.
In the early 1970s a unique and deep crisiscalled stagflationbegan to surface;
by 1974, it had become global. Simultaneous, severe, and sustained increases in
both unemployment and prices occurred. Capital had realized in the fifties and
sixties that it could tolerate a bit of shared power and the costs and taxes of
the warfare-welfare state, only so long as their sales and profits kept them
ahead of the game. But the global excess capacities of the seventies ended that
particular honeymoon.
Thus began what Richard DuBoff has aptly termed the corporate counter-attack.
It was an attack whose main aims were to weaken unions and get rid of the social
wage in both the private and public spheres: to return to the raw capitalism of
yore.
Corporations could not and did not fight that battle alone. They assiduously and
successfully increased their efforts to influence public opinion through the
media, and it was then that their political contributions began their quantum
leap toward present levels, and achieved the key victory of placing Ronald
Reagan in the White House. Reaganomics was initially seen as laughable and its
policies as some combination of stupid and cruel. Now the policies are taken as
common sense, and the economics as the new gospel.
It is that virtually unchallenged economics that Hugh Stretton effectively
demolishes in his superb book. He is a great teacher; he writes clearly and
without the priestly air so common to economists. His scope is extraordinary in
its combination of breadth and depth; by comparison, other texts rightly seem
both absurd and pretentious.
Strettons economics answers the two big questions that serious people have been
led to believe economists do answer, but which they really do not: What do we
need to know about how the economy functions? and What can and must we do to
make it meet human, social, and environmental needs? Rather than answering such
questions, mainstream economics spreads capitalisms big lie: Whats good for
business is good for everyone, everything, everywhere: which is then delivered
daily by the media and politicians.
Stretton puts another economics in the place of the big lie: an economics that
we need and can understand and use. Stretton is an Australian who studied in his
own country, in England, and in the United States and who did a stint in
government. He knows what hes talking about; he also knows that experience
itself does not guarantee good sense. Here a few excerpts in which he comments
both on the importance and the wrongheadedness of
