Progressive Economics for Debating Purposes

Let’s begin with a story.

Way back in 1995, when I set up my first – and only – campaign committee, I held a “mixer” that was not terribly well attended, but a few people showed up. At the “mixer” was a guy named Carl Clark, who is the “computer guy” for the local Democratic Party. Probably still is, but I haven’t seen him in years.

He said that my message was great, but I needed to “get it down to a bumper sticker”. That was in 1995, and I’m still working on it. One of the problems that I have discovered is that some of the more basic ideas – which you eventually get to in debate – are obscure, because most people never sit down and think about it. Here are the most basic of those ideas – boiled down to a bumper sticker.

The main thing to understand – everything else flows from it – is that demand is the engine that drives our industrial capitalist economy. Once you understand that, it is all actually fairly straightforward. Policies that put money in people’s pocket stimulate the economy. Generally speaking, the further down the ladder the beneficiaries of those policies, the better the economic stimulus. In other words, it does more good to help out the little guy. That’s the claim, but you will need the proof. So lets take a look at the some “bumper sticker” principles. [They're not really very pithy. But they are short.]

  1. “All economic enterprise boils down to the organization of labor.” That is the starting place. Every good that is produced, every service that is offered involves somebody doing some work. The car you drive started out as a mountainside of iron ore. Somebody blasted the ore out of the mountain. Somebody loaded the ore onto railroad cars. Somebody ran the blast furnace. Somebody ran the lathes and presses. Somebody assembled the car. Somebody transported it to the car lot. And for each of these steps, somebody built the machines that were used – each of those machines had the same steps. Even your bank has somebody running the machinery that processes your cancelled checks.

  2. “Money, Capital, Property Rights, Contract Rights, Corporations, and a host of other ideas are abstract concepts used to organize labor”. These ideas are human inventions – they are conventions – that determine how to distribute what labor produces. Going back to our mountainside, someone blasts the ore loose, someone loads it up, but they don’t “own” what they work on. The mountainside and everything in it is the “property” of a “corporation”. These legal concepts – and concepts is all they are – give control over that pile of rocks to some guy in a suit who doesn’t even know how to get to that mountainside. This leads to a really obscure question, that is really in the realm metaphysics, when it gets down to it. Are these concepts “real”? [I use the word "tangible" to describe labor and materials, to avoid the metaphysical question.]
  3. “However useful these organizing concepts may be, they are just concepts, and they can be modified.” “Capitalism” is a unified system of legal concepts. Which means that capitalism is created by a legal infrastructure – one that evolved over several hundred years. First was basic property rights. Then those property rights were modified – by the English Parliament in the 17th century – to emphasize “exclusive” rights. “Corporations” grew out of shipping in the seventeenth century – as a means to syndicate risk. Our banking system grew up at the same time. The problem is that this unified system called “capitalism” produces some very ugly problems, including poverty, wage slavery, and environmental destruction. Some say that capitalism must be entirely replaced in order to eliminate these problems. I disagree, because I see that the problems do not grow out of big mistakes, but little ones. [I will not get into details of this, right now. If you are one those who thinks capitalism is "evil", and must be destroyed, that's fine with me. It's mighty big, and we won't be destroying it any time soon. I'll happy if we can manage a few less homeless, hungry and ignorant.]
  4. “Since labor is the driving force behind all economic production – in any social or economic system – it is necessary to secure a labor supply in order for the system to operate.” When people quit working, things don’t get made, services don’t get performed. This is the very heart of the matter. Every conservative instinctively understands this – though it is painfully difficult to get them to admit it. This is the truth behind all of the “mean spirited” policies of conservatives. Wages must be kept low, to keep people hungry. Social services must be minimized, to keep people hungry. Education must be limited, to maintain a supply of unskilled “grunts” – who are hungry. The only alternative is to provide labor with more civilized incentives than hunger and destitution.
  5. “The difference between left and right: the Right believes in conferring the obligations and benefits of society on different ‘classes’ of people. The left believes in ‘equality’ which means that the benefits and obligations of industrial society should be more evenly distributed.” This suggests a difference in tactics. The right believes in using hunger and destitution to drive people to work. The left believes – at a minimum – in using incentives and participation to motivate people to work.
  6. “Motivation and incentives are more effective than poverty and destitution to drive our industrial economy”. Here’s where we get to Keynes and the “New Deal”. You have to stick with me here, since this is where it gets a little complicated. The good news is, once you understand this, the rest of it is simple. The question is where is wealth generated – keeping in mind that “wealth” is a set of concepts that organize distribution. But really, the question is what is the physical source of production. In the Middle Ages, that source was the land. The soil itself was the “machine” that produced everything, and it produced the ultimate consumable – food. It produced everything else as well, from timber, to wool, to animal hides. Very small scale smelting and metallurgy was also practiced. If you had land, and serfs bound to work it, you had a never ending supply of goods. Industrial capitalism changed the “physical plant” of wealth. Now, the “locus of production” – the place where things get made – is industrial machinery. Capital investment is an abstract term for paying to build machines that make things. Just like the land, you want your machines to continually produce goods, for sale on the market. But industrial machines tend to produce “durable” goods, instead of consumables. Furthermore, they produce prodigious amounts of goods. In other words, “wealth” under industrial capitalism means control over the machinery of production – that must continually produce in order to continue to generate a “return” on your investment in those machines. Also, the more you produce, the richer you get. Thus capitalism depends on one very simple economic concept.
  7. “Demand is the ultimate engine that drives industrial capitalism.” This is all you really need to know. In order for your “investment” in machinery and production capacity to generate any “return”, there has to be demand for what you are making. Not only does there have to be simple demand – producing something people want,at least in the abstract. There has to be “effective demand”. “Effective demand” is both the desire for a product, and the money to buy it. The demand for Jaguar’s is great, but the effective demand is much smaller, because few people can afford one. They buy Taurus’ instead.
  8. “If demand is the engine, then capitalism must keep demand going, if it is to survive.” The problem with industrial production of goods, is that sooner or later everybody has everything they need. Then what do you do? You have all of the machinery, equipment and production capacity, and no customers. In fact, a whole industry – advertising – has sprung up to continually spur demand. Also, while the technology of production is incredibly sophisticated [I don't how many of you work in manufacturing], the technology of durability of products themselves is pitiful. They call it “planned obsolescence”. It is the reason automobiles have a service life of 80,000 miles, when we have the technology to produce vehicles that will last for half a million.
  9. “Maintaining demand includes prosperity for the workforce.” The spur for capitalist accumulation is mass production. The more you can make, the more you can sell, the more you can accumulate. But mass production implies mass consumption – and that implies a workforce with disposable income. Accordingly, the labor market must deliver sufficient disposable income to maintain production/consumption, but not sufficient savings to allow people to stop working. Thus, are you chained to what I call the “debt treadmill”. [The way off of this treadmill, and toward a more decentralized, but still technologically sophisticated economy, is beyond the scope of this summary. See a web page called, Laissez-faire socialism, if you want to explore this.]
  10. “A society divided into a small number of haves, and huge majority of have nots will inevitably stagnate, strangling capitalism.” That’s what happened in 1929. Capitalism had enriched a tiny elite, and then when depression came, nobody on the bottom had any money. Therefore, there was no demand. Therefore, there was no supply, as factories stood empty. It was a vicious spiral until 25% of the workforce was unemployed, banks were failing, farmers were losing their land.
  11. “The way out of depression – and the way to maintain economic prosperity – is by mechanisms that constantly recirculate money to the workforce.” This is classic Keynes. The classic way to do this is deficit spending – where the government essentially prints money, and puts it in people’s pockets. The WPA, farm subsidies, and even Social Security are methods for doing this. Basically, give a poor man a dollar, and he’ll spend it – spurring production as he does so. These government based “redistribution” efforts are inefficient and don’t work very well, IMHO. But . . .
  12. “There are many public and legal initiatives that empower the wage earner to command higher wages – stimulating the economy.” The most important of these is the labor union – which is to the wage earner what the corporation is to the capitalist. Other public infraastructure includes education of all kinds, from primary education to graduate school. This is where the “middle class” comes from. Add to the list, rural electrification, interstate highways, communications infrastructure, FHA mortgages, Medicare and you have a whole world of different ways of getting money into the pockets of the people most likely to spend it.
  13. “‘Supply side’ economics works on the wrong side of economic equation.” First of all, tax cuts can stimulate the economy. You don’t need to run and hide when a conservative says this. But the theory of “supply side” economics is that tax cuts to rich people will stimulate the economy by spurring investment. There are a number of problems with this. First of all, without demand, there is no reason to invest in new equipment, new products or new businesses in general. In fact, investment never leads the way out of recession. During recessions, all of this investment stops, because demand is down. But more interesting is the fact that very little “investment” actually goes into production and new businesses. Things like stocks, mutual funds, treasury bonds, etc.are mostly “aftrermarkets” – what Greenrage, another “Green Democrat” calls “side bets”. Only a minority of investment ever goes into “new issue” stocks. Thus, in the Reagan administration, there was investment alright. It was investment in speculation, mergers and acquisitions, and other investments that never actually built any new production capacity, or new business enterprises.

Those are the basics. Once you understand these basics, you should be able to hold your own in any economic debate with a conservative. If you need to know more, I suggest you consult an actual economist. I’m just a political hack who knows to how win an argument. or Brad Delong’s website are a couple of good places to start.

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