Learning Political Economy

Learning Change Project: 8 Blogs, 6775 Readings

Affluence and Influence: Economic Inequality and Political Power in America

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Can a country be a democracy if its government only responds to the preferences of the rich? In an ideal democracy, all citizens should have equal influence on government policy–but as this book demonstrates, America’s policymakers respond almost exclusively to the preferences of the economically advantaged. Affluence and Influence definitively explores how political inequality in the United States has evolved over the last several decades and how this growing disparity has been shaped by interest groups, parties, and elections. With sharp analysis and an impressive range of data, Martin Gilens looks at thousands of proposed policy changes, and the degree of support for each among poor, middle-class, and affluent Americans. His findings are staggering: when preferences of low- or middle-income Americans diverge from those of the affluent, there is virtually no relationship between policy outcomes and the desires of less advantaged groups. In contrast, affluent Americans’ preferences exhibit a substantial relationship with policy outcomes whether their preferences are shared by lower-income groups or not. Gilens shows that representational inequality is spread widely across different policy domains and time periods. Yet Gilens also shows that under specific circumstances the preferences of the middle class and, to a lesser extent, the poor, do seem to matter. In particular, impending elections–especially presidential elections–and an even partisan division in Congress mitigate representational inequality and boost responsiveness to the preferences of the broader public. At a time when economic and political inequality in the United States only continues to rise, Affluence and Influence raises important questions about whether American democracy is truly responding to the needs of all its citizens.

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Read also: Income Inequality: Economic Disparities and the Middle Class in Affluent Countries

Written by Giorgio Bertini

August 28, 2014 at 12:14 pm

Posted in Inequality, Politics, Wealth

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Economics 2.0 – The Natural Step Towards a Self-Regulating, Participatory Market Society

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Despite all our great advances in science, technology and financial innovations, many societies today are struggling with a financial, economic and public spending crisis, over-regulation, and mass unemployment, as well as lack of sustainability and innovation. Can we still rely on conventional economic thinking or do we need a new approach? Is our economic system undergoing a fundamental transformation? Are our theories still doing a good job with just a few exceptions, or do they work only for “good weather” but not for “market storms”? Can we fix existing theories by adapting them a bit, or do we need a fundamentally different approach? These are the kind of questions that will be addressed in this paper. I argue that, as the complexity of socio-economic systems increases, networked decision-making and bottom-up self-regulation will be more and more important features. It will be explained why, besides the “homo economicus” with strictly self-regarding preferences, natural selection has also created a “homo socialis” with other-regarding preferences. While the “homo economicus” optimizes the own prospects in separation, the decisions of the “homo socialis” are self-determined, but interconnected, a fact that may be characterized by the term “networked minds.” Notably, the “homo socialis” manages to earn higher payoffs than the “homo economicus.” I show that the “homo economicus” and the “homo socialis” imply a different kind of dynamics and distinct aggregate outcomes. Therefore, next to the traditional economics for the “homo economicus” (“economics 1.0”), a complementary theory must be developed for the “homo socialis.” This economic theory might be called “economics 2.0” or “socionomics.” The names are justified, because the Web 2.0 is currently promoting a transition to a new market organization, which benefits from social media platforms and could be characterized as “participatory market society.” To thrive, the “homo socialis” requires suitable institutional settings such a particular kinds of reputation systems, which will be sketched in this paper. I also propose a new kind of money, so-called “qualified money,” which may overcome some of the problems of our current financial system. In summary, I discuss the economic literature from a new perspective and argue that this offers the basis for a different theoretical framework. This opens the door for a new economic thinking and a novel research field, which focuses on the effects, implications, and institutional requirements for  global-scale network interactions and highly interdependent decisions.

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Our Obsolete Market Mentality – Civilization Must Find a New Thought Pattern

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Karl Polanyi: “The market mechanism moreover created the delusion of economic determinism as a general law for all human society.. To attempt to apply economic determinism to all human societies is little short of fantastic. Nothing is more obvious to the student of social anthropology than the variety of institutions found to be compatible with practically identical instruments of production. Only since the market was permitted to grind the human fabric into the featureless uniformity of selenic erosion has man’s institutional creativeness been in abeyance.”

Karl Polanyi considers this article to represent his first significant advance over the thesis presented in The Great Transformation, which attracted international attention as an original analysis of the dilemma of free enterprise capitalism as it affects our entire Western society. Dr Polanyi was born in Vienna in 1886, and was from 1924 to 1934 on the staff of the Oesterreichische Volkswirt, a leading financial weekly. When the clerical dictatorship was established, he emigrated to England, where he lectured at Oxford and the University of London, co-edited Christianity and Social Revolution, and wrote The Essence of Fascism. He was at Bennington College from 1940 to 1943, and will return to the United States this month as visiting professor at Columbia University. This article is twelfth in the series, “The Crisis of the Individual“.

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Written by Giorgio Bertini

June 30, 2014 at 9:28 am

Posted in Capitalism, Polanyi

Tagged with ,

The Power of Market Fundamentalism – Karl Polanyi’s Critique

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What is it about free-market ideas that give them tenacious staying power in the face of such manifest failures as persistent unemployment, widening inequality, and the severe financial crises that have stressed Western economies over the past forty years? Fred Block and Margaret Somers extend the work of the great political economist Karl Polanyi to explain why these ideas have revived from disrepute in the wake of the Great Depression and World War II, to become the dominant economic ideology of our time.

Polanyi contends that the free market championed by market liberals never actually existed. While markets are essential to enable individual choice, they cannot be self-regulating because they require ongoing state action. Furthermore, they cannot by themselves provide such necessities of social existence as education, health care, social and personal security, and the right to earn a livelihood. When these public goods are subjected to market principles, social life is threatened and major crises ensue.

Despite these theoretical flaws, market principles are powerfully seductive because they promise to diminish the role of politics in civic and social life. Because politics entails coercion and unsatisfying compromises among groups with deep conflicts, the wish to narrow its scope is understandable. But like Marx’s theory that communism will lead to a “withering away of the State,” the ideology that free markets can replace government is just as utopian and dangerous.

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Written by Giorgio Bertini

June 30, 2014 at 9:01 am

Posted in Capitalism, Polanyi

Tagged with ,

The Limits of Neoliberalism: Sovereignty, Authority & the Logic of Competition

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Widening economic inequality is the academic topic du jour, but the trend of growing wealth and income disparity has been underway for several decades. How did mounting inequality succeed in proving culturally and politically attractive for as long as it did? Will Davies writes that rather than speak in terms of generating more inequality, policy-makers have always favoured another term, which effectively comes to the same thing: competitiveness. In this article, and in a new book, The Limits of Neoliberalism: Sovereignty, Authority & the Logic of Competition, he attempts to understand the ways in which political authority has been reconfigured in terms of the promotion of competitiveness. The years since the banking meltdown of 2008 have witnessed a dawning awareness, that our model of capitalism is not simply producing widening inequality, but is governed by the interests of a tiny minority of the population. The post-crisis period has spawned its own sociological category – ‘the 1%’ – and recently delivered its first work of grand economic theory, in Thomas Piketty’s Capital in the Twenty-first Century, a book dedicated to understanding why inequality keeps on growing.

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Read also: The Limits of Neoliberalism: Sovereignty, Authority & the Logic of Competition

Oligarchy – Elites, Interest Groups , and Average Citizens

Why is Thomas Piketty’s Capital In The 21st Century such a Success?

Written by Giorgio Bertini

June 2, 2014 at 9:30 pm

The Killing Fields of Inequality

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Inequality is not just about the size of our wallets. It is a socio-cultural order which, for most of us, reduces our capabilities to function as human beings, our health, our dignity, our sense of self, as well as our resources to act and participate in the world. This book shows that inequality is literally a killing field, with millions of people dying premature deaths because of it. These lethal effects of inequality operate not only in the poor world, but also, and increasingly, in rich countries, as Therborn demonstrates with data ranging from the US, the UK, Finland and elsewhere. Even when they survive inequality, millions of human lives are stunted by the humiliations and degradations of inequality linked to gender, race and ethnicity, and class. But this book is about experiences of equalization too, highlighting moments and processes of equalization in different parts of the world – from India and other parts of Asia, from the Americas, as well as from Europe. South Africa illustrates the toughest challenges. The killing fields of inequality can be avoided: this book shows how. Clear, succinct, wide-ranging in scope and empirical in its approach, this timely book by one of the world’s leading social scientists will appeal to a wide readership.

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Written by Giorgio Bertini

May 30, 2014 at 10:57 am

Inequality and Post-neoliberal Globalisation

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Having people believe that massive inequality is the fair outcome of a competitive process that is ultimately good for all is the ideological foundation of the current regime. The crisis has put an end to this fairy tale as free competition in financial markets created financial weapons of mass destruction instead of shared prosperity. For individual diversity to flourish and for democratic societies to function, economic inequality has to be limited and private capital’s controlling power over media, political parties, academic expertise and research must be broken. Freedom and democracy cannot survive where plutocratic power abuse is rampant. Closing tax havens, setting minimum tax floors, taxing wealth, inheritance and windfall profits from rising real estate prices or other asset bubbles are policy option fully in the range of the possible. Taxing the rich is necessary not only for funding inclusive societies, but also for defending democracy. The rich have an exclusive concept of freedom: they want the freedom to buy themselves all kinds of privileges. Real freedom means, as the most famous German social democratic intellectual, Karl Marx, put it, to change all circumstances were human beings are oppressed. Combating inequality is about development as freedom, it is about real democracy, it is about opening up the world for everybody and it is about help and solidarity for all in need.

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Written by Giorgio Bertini

May 30, 2014 at 10:38 am

Reforming Taxation to Promote Growth and Equity

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Nobel-winning economist Joseph Stiglitz argues that tax reform is the key to addressing inequality. This white paper outlines concrete policy measures that can restore equitable and sustainable economic growth in the United States, in the context of the country’s recurring budgetary crises. Effective policies are within our grasp because these budgetary crises are the result of political and not economic failings. Tax reform in particular offers a path toward both resolving budgetary impasses and making the kinds of public investments that will strengthen the fundamentals of the economy. The most obvious reform is an increase in the top marginal income tax rates – this would both raise needed revenues and soften America’s extreme and harmful inequality. But there are also a variety of other effective possible reforms related to corporate taxation, the estate and inheritance tax, environmental taxes, and ensuring that the government gets full value when it sells public assets. This white paper describes the gravity of the economic situation in the United States, but also shows that there is a way out.

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Read also: The Stiglitz Code: How Taxing Capital Can Counter Inequality

Written by Giorgio Bertini

May 30, 2014 at 10:19 am