What’s an Economy for?
If an economy is to improve people lives, we’re doing it wrong
A while ago Paul Krugman raised the rhetorical question “What’s an economy for?” and concluded it’s purpose was to improve people’s lives. But I wanted to consider some other options.
What’s an economy for, after all?
Warfare
Perhaps an economy is a technology to support a standing army. David Graeber’s book Debt, the First 5000 Years, outlines how such a thing might emerge.
Suppose you’re a king with an army occupying some remote country. How do you make sure your troops have provisions? You could gather goods in your own country and transport them to your soldiers, but that‘s complex and expensive. Fortunately there’s one weird trick you can use to make the occupied subjects support your troops.
Just pay your soldiers in coins that have your face on them, and task them to collect taxes from the populace using the same coin. That’s it — you’ve created an economy. The population need the coins to pay the taxes which they can only get by offering the soldiers things they want to exchange for the coins which the soldiers get as salary. This allows the soldiers to live off the land, but because it’s nominally an exchange it’s more sustainable than if the troops just looted the local population.
The best part is that if you run out of gold for coins you have an army ready to go invade new places to get more!
Generational Power
Perhaps an economy is a mechanism to maintain a power elite. Political power can be a slippery thing. Once a ruler has consolidated power for themselves by conquest or corruption or coincidence, how do they keep their grip on it over time? More importantly, how do they transfer their power so it benefits their children?
They could make up stories, like how god wants them and their progeny to rule. And this has worked. After all if someone is ruling now that proves it was god’s will, so it’s not much of a stretch to claim that it extends to their children as well. The problem is that there are often multiple siblings, nieces and nephews, scads of cousins — not to mention step-siblings, bastards and their extended families — all with ambitions for that power. When they form factions you get internecine conflict and when they ally with outside powers you get war.
How much easier it would be to just equate political power with wealth. People in power can use that influence to gather wealth to themselves, and they can then pass on that wealth to offspring of their choice to spawn a dynasty defined by the confluence of wealth and power. The story is basically the same, except that instead of god making someone king, god makes them wealthy so they can become king.
The only flaw in this system is that despite their best efforts sometimes the wrong types of people manage to get wealthy, and therefore come into a measure of political power. If only there was something that could be done about that…
Racism & Sexism
Perhaps an economy is a machine for oppression. Physical, top-down oppression has become less socially acceptable over time. The marginalization of convenient outgroups using violence, terror, forced relocations, war and genocide depends on the ability of societies to dehumanize its victims. Countering that is the equally human instinct for empathy, which —albeit too slowly — has cemented some important gains over time. The very concept of universal human rights is quite new, but it’s getting less cool to abuse people for who they are anymore.
We can blunt empathy if the oppression is done by an impersonal force, like an economy.
We make up a story about how everyone gets an equal chance to succeed and their economic status reflects their own skills and ambitions, and nothing else. We back it up by claiming that yes, that lazy scion of old money really did earn their inheritance — see what a genius he (always he) is? Meanwhile we quietly stack the deck against the traditional outgroups. We fund public schools with property taxes, which assures that schools have more funding where wealthy people live, at the same time redlining black neighborhoods to prevent their property values from growing. We’ll claim that SAT scores are meritocratic while ignoring the fact that those scores rise 1-to-1 with income. Even if those people manage to get a good education we’ll just “unintentionally” not hire kids with black-sounding names.
It goes without saying that we’ll just pay women less no matter what they do, pass them over for promotion, and make sure that the health needs of women in particular are unavailable or unaffordable.
Nothing personal, just business.
Big Picture
These outlines form a pattern: economies are for colonialism. Colonial nations use military force to occupy less powerful countries, brutally subjugating their people and exploiting their resources. Over time the force employed evolved from physical violence against individuals to the impersonal but no less horrific economic violence against populations. We’ve seen the pattern over and over again. First world countries support strongmen to topple nascent third world democracies (fighting communism, don’t you know), and then encourage the new leaders to take out loans. That money is intended for developing those countries own economies, but of course the strongmen spend it on themselves and the international authorities insist that it gets paid back anyway.
Whipping peons takes so much effort — it’s much cleaner just to consign entire nations to permanent debtor status.
Colonialism never stops. It doesn’t take long for even first-world countries to turn on their own people, consigning not just marginalized groups but everyone not in the power elite into legalized serfdom.
Common Wisdom
What, after all, is the economy for? The goal is to improve people’s lives.
I take Krugman at his word — he really believes that the purpose of the economy is to make people’s lives better. A lot of people do. Economic cheerleaders often claim that capitalism has raised more people out of poverty than any other system, to which we might wonder why there is still so much poverty but that’s for another time. The point is that this is a mainstream, even mundane belief.
In this mythology the economy isn’t something humans created; it’s more of a force of nature that humans unleashed. The economy is a totem for the idea of prosperity, and its self-appointed high priests tell us what we must do to keep the economy happy. If it’s too cold we must stimulate it by giving tax money to corporations; if it’s too hot we must sacrifice workers and raise unemployment. The economy is here to improve people’s lives, sure, but only the economy is allowed to do that. If anyone tries to improve lives directly, such as by increasing the minimum wage, or strengthening regulations, or breaking up monopolies — doing any of that would hurt the economy and then everyone would suffer. Even the possibility of extinction doesn’t move the needle enough to prioritize the climate catastrophe over the imagined wishes of the economy.
The economy is made up, as are the stories we tell about it. It’s time to change the story.
