Date: Tue, 1 May 2001 23:30:52 +0100
Subject: Happy Labour Day !



                     "The Limits of Economic Conservatism"
                               by Immmanuel Wallerstein


What we mean by economic conservatism is a political position favoring state
action that enhances the ability of capitalists to make maximum profit from
their economic activities. What enhances this ability? Two things,
essentially. One is reducing the costs of production. The second is
increasing profits by limiting competition. Reducing the costs of production
means capitalists obtain a greater surplus at the current market prices of
their products. Limiting competition means they are able to increase market
prices for their products. Whenever a so-called conservative party obtains
state power, they immediately move to do both of these things. The question
is how far can they go? This is not a moral question but a political one:
what are the political limits of economic conservatism? Let us look at how
this works today, especially in the wealthier countries which have
multiparty systems.

We start with reducing the costs of production. Capitalist entrepreneurs
have three types of costs: payment of employees, payment for the inputs they
need to produce their products, and taxes. Economic conservatives move most
dramatically when they come into power having defeated governments with
"social-democratic" leanings. The so-called neo-liberal governments of the
last 25 years are good instances of such regimes: Mrs. Thatcher in Great
Britain, Ronald Reagan and now again George W. Bush in the United States,
Silvio Berlusconi in Italy, and of course there are many others.

Governments reduce the costs of paying employees in two ways: resisting
increases in minimum wages, and weakening of union structures. Mrs. Thatcher
waged long battles with trade unions. One of the first thing Ronald Reagan
did was to break the strike of air controllers. George W. Bush moved quickly
to keep workers for an airline from striking. In addition, economic
conservatives seek to pass measures limiting the ability of trade unions
from political participation.

Similarly, economic conservatives seek to keep down the cost of inputs. They
do this primarily by favoring the externalization of costs. That is, they
permit the producers not to pay their bills in three ways: allowing them to
dump waste, notably toxic waste; not requiring them to pay the costs of
renewing basic resources they have used; contributing essential parts of the
costs via the construction of "infrastructure" necessary for the marketing
of the products as well to obtain necessary inputs. However, in the last
several decades, there has been a widespread social movement to curtail
these practices. It is called the ecology movement, which essentially asks
the government to force the internalization of costs. One of the first
things economic conservative governments do is remove or water down
environmental legislation on the grounds that this increases the costs of
production (which is true). George W. Bush has undertaken a number of
spectacular measures along these lines - killing the Kyoto treaty, undoing
measures to reduce arsenic in water, etc.

And, of course, economic conservatives make tax reduction their great
symbolic issue. George W. Bush ran on this issue more than on any other, and
has called for tax reduction as his number one priority.

The question is, how successful are these moves in reducing the costs of
production? It is unquestionably true that they succeed in reducing the
costs somewhat, and that they thereby increase the profits of capitalists in
general, and of large capitalists in their own countries in particular. But
of course, these moves stimulate resistance by all those who are hurt by
such measures. The parties of economic conservatives regularly lose
elections, particularly after a long bout of such cost-cutting. But they are
often forced to retreat even while in office. It has often been noted that
the conservative parties in France and Germany were afraid to push such
measures strenuously, even when in power. But even aggressively conservative
regimes, like that of George W. Bush, pull back. Bush kept the first airline
strike from happening, but when the second one came along, he declined to
intervene. His actions on Kyoto and on arsenic aroused so much furor that
his government annulled further measures they were about to take. And, quite
notably, the U.S. Congress is not going to give Bush the size of tax cut he
wanted, nor permit as much budget cutting as he wanted.

So, one has to stand back and assess what is happening, what has been
happening over the last 25 years, over the last 200 years.

The long-term curve is essentially an upward ratchet. The costs of labor,
the costs of inputs due to internalization, the level of taxation has been
going up continuously, but not steadily. It goes up every 25 years or so,
then down again for 25 years. But it never goes down as much as it goes up.
The political counterpressure is too great. This is what we mean by
democratization.

So, behind the huffing and puffing on all sides, in the long run,
capitalists are in trouble in terms of maintaining levels of profitability.
That is why they seek to do an end run around the issue of costs in order to
do something about prices. Capitalists say they believe in a free market. It
isn't true. A totally competitive market is one in which no producer can
ever make any profit whatsoever. In a totally competitive market, the buyer
can always force the seller to reduce his price to pennies over the cost of
production. Profit requires restricting the freedom of the market by some
degree of monopolization. The fewer the producers the higher the profit.

However, no producer likes a monopoly if it's someone else's monopoly. They
especially dislike a monopoly if it's legal, and the worst legal monopoly
from their point of view is that of a state-owned enterprise. So, economic
conservatives move in two seemingly contradictory directions. On the one
hand, they seek to end legal monopolies. This is called "privatization" -
and we have seen a lot of it across the world in the last 25 years,
following the period between 1945-1970, when we saw the largest amount of
"nationalization" of enterprises the modern world-system has ever known.

But privatization is only the beginning of the story. "Deregulation" is
equally important, but for exactly the opposite reason. Once state-owned or
state-backed monopolies are eliminated, what capitalists need is the
possibility of constructing privately-owned monopolies. State measures that
prevent this or limit this ("regulation") are anathema. There is no point
having private enterprise if it's going to be a truly free market. In all
the major arenas of profit, the last 25 years have seen an increased
concentration of ownership, not merely at a national level, but at a world
level. See communications, pharmaceuticals, computer technology, airplane
construction, for a start.

Economic conservatives have been much more successful in increasing sales
prices than in reducing the costs of production. This is largely because the
majority of the population perceives almost immediately how it is being hurt
by the drive to reduce costs of production and mobilizes against it. They
find it more difficult to perceive the process of increased monopolization,
at least until the costs suddenly skyrocket, as happened with the cost of
energy in the 1970's and is happening again today. And when it does happen,
the ordinary person finds it a bit more difficult to know who is doing what,
and who should be blamed. A tax bill or dangerous toxicity permitted by
government inaction is easy to spot. A corporate merger is reported on the
inside pages of the major newspapers and not at all in the rest of the
media.

The bottom line is that economic conservatives try to roll the clock back.
They succeed partially, but never as much as they wish. And reducing
corporate monopolies is at least as urgent as increasing the share employees
receive of surplus, forcing the internalization of costs, and maintaining a
progressive tax system.

Immmanuel Wallerstein
 http://fbc.binghamton.edu/commentr.htm
Comment No. 63, May 1, 2001

[These commentaries may be downloaded, forwarded electronically or e-mailed
to others, but may not be reproduced in any print medium without permission
of copyright holder (iwaller-AT-binghamton.edu).

These commentaries, published twice monthly, are intended to be reflections
on the contemporary world scene, as seen from the perspective not of the
immediate headlines but of the long term.]

______________________________________________





     --- from list heidegger-AT-lists.village.virginia.edu ---