Of All Things: A Splendid Econ Text!
by Doug Dowd

Hugh Stretton. Economics: A New Introduction (London: Pluto Press, 1999), 862 pp.

Capitalism was first firmly established in Britain in the eighteenth century; and it was then and there that economics was born, in Adam Smith's Wealth of Nations (1776). Economists have served capitalism ever since; but only in the past quarter century has capitalism needed—and gotten—so much from them. That "need" consisted primarily of two sides as the twentieth century began: 1) given the intrinsic inequalities of capitalism, the existence of political democracy in almost all capitalist nations constituted an ongoing threat to capital's rule, a threat intensified by 2) the intrinsic tendency toward intermittent economic crisis and socioeconomic weakness. For much of the nineteenth century, economics had 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 century the crises were so pervasive and became so deep there was nothing economists could propose to avoid or alleviate them—or when something was proposed, as with Keynes (et al.) in the depression of the 1930s, neither capital nor most economists took heed—except in Nazi Germany, which adapted Keynesian policies to what became our "military Keynesianism" of the Cold War (and since).

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 bad egg before the war, as had mainstream ("neoclassical") economics. For related reasons a substantial group of "new economists" had 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 can be. Not for nothing were the two decades or so after the war called those of "cold war liberalism." 

Global economic expansion took hold as the 1950s proceeded, and the following decade was the most expansive ever—much aided and abetted by the Cold War and its carrots and sticks. But superstate or no, "the economic laws of motion" had only been modified, not repealed. 

In the early 1970s a unique and deep crisis began to show its head; by 1974 it had become global: simultaneous, severe, and sustained increases in both unemployment and prices. Capital soon realized it had been caught with its pants down: it could tolerate a bit of shared power and costs and taxes of the "warfare-welfare state" so long as their sales and profits kept kept them ahead of the game. But the global excess capacities of the 'seventies ended that particular honeymoon. 

Thus began what Richard Du Boff 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 either the private or public sphere: to return to the raw capitalism of yore. 

Corporations neither could nor did fight that battle alone: they assiduously and successfully increased their efforts to influence public opinion in the media and it was then that their political "contributions" began their quantum leap toward their present levels. And they achieved the key victory of placing Reagan in the White House. Reagonomics was initially seen as analytically 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 Ten Commandments. 

It is that ruling and virtually unchallenged economics Hugh Stretton effectively demolishes in this 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 seem (as indeed they are) both absurd and pretentious. 

Stratton's economics answers the two big questions that serious people have been led to believe economists do answer, but which they 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?" Mainstream economics, far from answering such questions provides capitalism's Big Lie—which is then delivered daily by the media and politicians. 

Stretton is too polite to it that way; polite, but firm. And he puts another economics in its place; one that we can understand, that we need, and that we can use. Stretton is an Aussie who studied there and in England and in the United States and who has done a stint in government. He knows what he's talking about; he also knows that such experience itself does not guarantee good sense. Here a few excerpts in which he comments both on the importance and the wrongheadedness of today's economics : 
 

The resort to deregulation, privatization and smaller government since the 1970s proves to have been a mistaken response to the new troubles [of "stagflation"], and an active cause of some of them. Economists share responsibility for that "right turn" in economic policy. Without their expert authority it is hard to believe that the various political and business groups who drove the new strategy could have persuaded majorities to support it, or tolerate it, for so long. (ix)

He goes on to say that "bad economic theory can cause as much suffering and death as bad medicine or engineering can," and lists some of the dangerous beliefs that fill textbooks and serve as an ongoing rationale for public policies. Here are a few : 

• Monetary restraint alone will stop inflation and then revive employment—in conditions in which it won't do either. 
• Reducing public investment will increase private investment —when in fact it will reduce private investment. 
• Free trade and exchange will make our manufacturers efficient—when in our particular circumstances it will put too many of them out of business, increase long-term unemployment, and wreck our balance of payments. 
• Cutting wages would increase employment—when it would not. 
• Shifting taxes off the rich onto the poor will induce the rich to employ more of the poor—which it will not. (63, his emphasis) 

Globalization…is a program to create private corporate rights to trade, invest, lend or borrow money and buy and own property anywhere in the world without much hindrance by national governments. It would bar governments from most of the common methods of helping or protecting their national industries and employment. It is a winners' program promoted chiefly by some business interests, governments and neoclassical economists in Europe and the United States. One of its purposes is to intensify international competition for jobs. Together with other Right policies it is likely to maintain some unemployment in the rich countries and reduce the wage rates of their lower-paid workers, and reduce the proportion of secure employment. (179-80) 

MR readers already take the positions of those quotations and many others like them. So why work through such a long book? Because if people like us are to be politically effective we must be able to gain a firm grip on why the ruling ideology is not only rotten but wrong, in general and in particular details. But, as Gramsci put it in another context, long ago, it is equally essential to offer an alternative set of analyses and connected policies—in this case, another economics that supports a much different and much better society. 

Ah! it may reasonably be said, but we have Marx, and Baran and Sweezy, and not a few others. True. It is also true that the powerful critique of capitalism provided by Marxian political economy, necessary though it is, is not sufficient for the political movement we require. 

In our own time and place, capitalism controls not only the means of production and thus the conditions of work but also, through formal and informal "education" (known as propaganda when others do it) has come to control "the hearts and minds" of the people—or those of most of us, even of those who sense in both their "hearts and their minds" that something is terribly wrong. But their has never been a time when "the ruling ideas of the ruling class" have saturated popular opinion as much as today. 

Those few who have been able to resist much or all of that must, however, know better what they already know—must learn as much as can be learned and help both themselves and others unlearn. The great Italian Marxist Gramsci was speaking to this need in his own country, in his own time—a time capital's hold was much weaker than now, but powerful enough to conquer one of the strongest socialist movements in the world; and to put fascism in its place (and Gramsci in prison). 

Those who work through this book carefully—and any serious person can do so—will know more about the economy than is presently being "learned" by a full economics major. And will also be able to refute the arguments of such "majors." It is to be hoped that many econ teachers will adopt this book for their classes. But this book is unique in that an individual or, better, a small group reading responsibly and meeting regularly can work through it well—and go on to work with others to the same end as, in a real sense, teachers themselves. 

What would be learned/unlearned, studying what? 1) The first 200 pages or so of Stretton are an introductory critique of conventional economics, for what it is and what it lacks—studies of change and growth, in terms of institutions and history, technology, needs and wants, threatened social capital and natural resources, and much more, usually given a passing glance, if that. 2) The next 400 pages or so present a substantial critique of the theoretical core of economics—"demand and supply" and "distribution"—and offer systematic alternative analyses the realities of consumption and productive institutions (households, businesses, and governmental), along with an excellent analysis of the distribution of income and wealth. How Stretton treats mainstream theory is represented by this appraisal of "models," the main fix of economists : 
 

The only activities [mainstream economics] models are people trading their individual endowments, in equal exchanges, for the private market goods they individually want. (220)…it is fair to call the simple model a capitalists' or property-owners' model.…It chooses to equate passive ownership and active work as similar "endowments," similarly productive. It accepts the unequal distribution of capital ownership as "given," it puts no value on the productivity that is lost when households can't get adequate household capital, or use public capital. It chooses criteria of economic inefficiency which are indifferent to unlimited inequalities. The criteria are also based in favor of what people want as consumers rather than what they want as paid and unpaid producers. It encourages a systematic preference for privately profitable production over other modes. And many of the economists and others who use the model are unconscious of the values which shape it, and believe—wrongly —that it is an objective, value-free representation of economic activity. (225)

Like most who read this, I believe we need a democratic socialist society. But we have no significant socialist movement now. What we do have is a growing if not yet unified movement of protest against what is and for something much better. All the elements of that movement are comprehended by this book, both in analysis and in policy. Surely it is arguable that working for and achieving such linked reforms could—even must—serve as the prerequisite for the achievement of such an effective socialist movement?

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