By Joe Montero
There is always a lot of talk about the economy. The headline these days is the deepening cost of living crisis. A subscript is whether the Reserve Bank will put up interest rates or not. Then there are the unaffordable cost of housing and the rise of price gouging by retail monopolies. Sometimes we hear arguments about the budget deficit and productivity.
Few people really know a great deal about the big picture. This is how the economy works as a system of interdependent parts. If we consider Australia, for example, we live in an economy that is broadly defined as capitalist. There is no argument about this. But it’s not quite the textbook definition. Of lots of little producers and many customers operating to put resources together to maximise profit and consumption. Between these owners and those they employ to do the work. There is the role of government and interdependence across the whole of society. This is an environment that tells us an economy is complicated.
The positive side is that in certain circumstances, this priority has proved to by dynamic. It can lead to a great deal of innovation and economic growth.
Even so, the operation of a capitalist can be loosely defined this way. As an economy where the accumulation of profit for the investor is the priority. Everything else comes second. Everything else is sacrificed for this end. If we look about us, it’s obvious that priority is being applied even more thoroughly than at other times.
Why is this? The answer is because the capitalist economic system in place in Australia is not working so well anymore. This is no secret. Much of it functions on bubbles and debt not directly tied to creating the goods and services society needs. The engine is shifting money around. The priority of increasing profit for the investor depends on one thing. A combination of pushing down of wages, raiding public assets, creating more debt, and using monopoly power to manipulate prices.
For as long as an Australian government persists in honouring this priority, it neglects other needs. An explanation begins with defining what an economy is in its most basic terms. An economy exists when two or more individuals cooperate. They do this to use what nature provides to meet their shared and individual needs. All economic systems are based on this fundamental. In other words. There are the needs of society.
Prioritising profit for the investor comes with a serious drawback. The needs of society ate neglected. This is especially true when the economy is not going so well. It is this that explains why governments have downgraded these other needs of society. They do this because they are firmly committed to the above-mentioned priority.
The question is whether this is necessary. If it is, there can be no alternative approach. To go on. If there is no other way in a stagnant economy, and only one road ahead, and this isn’t good. Dependence on profit on circulation of money, depressed wages, public sector raiding, and manipulation prices, is counterproductive. It undermines the source of profit in the end, by further hampering its capacity to function.
Wrong policy is an outcome of the priority of individual interest over shared interest. This restricts the ability to work together, and immediate gain rules over what happens in the longer run.
The only substitute is a change in priorities. It the needs of society are put in the first place; the economy can shift towards servicing them. The economy can be returned into harmony with cooperating with what nature provides to meet shared and individual needs. Government policy will reflect this.
Such an approach does not necessarily have to deny the role of profit altogether. Its contribution to innovation and growth can be harnessed, in a manner that imposes restraints on its negative side. The best way of doing this is to compel the investor to pay attention to the shared needs of society. business decisions should be based on of both profit and meeting necessary social goals.
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