The Flaw in the System
the economic system, that is to say
[This post is an almost verbatim copy of a Response to “Economist/Professor Dr. Richard Wolff assigns blame for inflation where it belongs, and it ain’t Biden,” by Egberto Willies, here in Medium.]
While our economy is dominated by capitalistic enterprises, it is a mistake to take ‘capitalism’ to be the economic system per se. Capitalism is best defined as ‘mass production for sales in geographically extended markets’ — which, as Marx pointed out, is necessary for everyone to be able to have enough.
The existing economic system is to say the least compatible with capitalism. I would agree that capitalistic enterprises routinely manipulate it for nefarious purpose. Still, to equate that system with capitalism is to put any analysis of the existing economic system on an inaccurate footing.
Mass production does generate its own set of issues for society, which issues I definitely take to be proper subjects to be addressed in the political process, but those exist as outcomes of the functioning of the economy. The economic system does not of itself generate those outcomes.
The idea of ‘free markets’ (or at least allowing markets to decide as much as possible — short of doing harm — within the economy) is an integral part of the existing economic system. While the idea of free markets can be abused in an attempt to argue on behalf of outcomes that are contrary to justice (as I and many people understand it), being market-based is not the flaw in the existing economic system per se, i.e., its institutional structure.
My studies have taught me that the flaw in the system is money. There are two aspects of money in the economy. It is the fuel of the economy and it is the means by which people satisfy our material needs and wants.
In that former aspect our extant approach to money is the primary source of the instability of the economy. The way money is supplied to the economy is at the core of the age-old cycle of booms/busts, inflation/recession-depression that have plagued this economic system from its earliest days to the present. [“Recession” was coined during the Great Depression to describe a fall in total output when it had been increasing but had not yet reached its pre-Depression level; it has since become a term of art to describe a fall in total output that pales in comparison to that of the Great Depression.]
The way money gets distributed in the economy goes to people’s ability to satisfy our needs, much less our wants. Currently, a few people have more money than any human being could possibly need while many if not most others have an insufficient amount of it for even a minimum level of material well-being that citizens working full-time jobs (and those who are retired from decades of such toil) in ‘the richest nation the world has ever known’ could reasonably expect — including literally no money for a sizable number of citizens.
The former circumstance is only a problem because of the existence of the latter circumstance. If all citizens were guaranteed a sufficient income in a stable economy, that there were people who had stupid amounts of money would be irrelevant.
I have developed a monetary paradigm that solves both of those problems simultaneously. It could be used at the same time to fund government (all government, from central to local) — at current levels of spending — without taxes or public debt. It can be thought of as a form of permanent ‘quantitative easing’, but with built-in safeguards against inflation.
Eliminating taxes would increase the effective amount of a sufficient minimum income by at least a third. If the minimum income were set today at, say, $15/hr.; $600/wk., with the absence of taxes it would be equivalent to at least $20/hr.; $800/wk.
People familiar with the idea of a UBI often mistake this proposal for a version of it, and people familiar with MMT often mistake this proposal for a version of that. Both of those, however, continue to involve taxes/public debt and ‘managing’ the economy. Some see MMT as a means of funding a UBI, but in even the most ‘generous’ versions of a UBI it is but a supplemental amount of money, not a sufficient income. In addition to offering a way to eliminate taxes/public debt while providing a guaranteed sufficient income for all (adult) citizens, this proposal would make the economy fully self-regulating.
If curious, there are “Same Economy, Way Better Outcomes for Society” and (primarily for economists) “Paradigm Shift.” For those who think (as I do) that we should go further in re-forming the system, there is “Finding One Way Forward” (by turning Marx — and Locke — around). All are here in Medium, but not behind the paywall.