Michael Roberts – Resetting the Economy – for Social Need not Profit

Progress for equality and the environment is only possible with public ownership of the major financial institutions and multi-nationals so that the world can be planned through democratic organisations for social objectives, not for profit of the few owners of capital.

Michael Roberts is an Economist in the City of London and prolific blogger

Cross-posted from Michael Roberts Blog

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In a recent World Economic Forum (WEF) virtual meeting, the ageing heir to the British monarchy, Prince Charles spoke with IMF chief Kristalina Georgieva. Charles’s speech was part of a launch event for The Great Reset, a project involving the WEF and the Prince of Wales’s Sustainable Markets Initiative, aimed at rebuilding the economic and social system to be more ‘sustainable’. Charles called for a resetting of the world economy after the COVID pandemic subsides.

I think this is the first time that I have agreed with a member of any ‘royal family’ on anything. But Charles is right, we need to reset the world economy after the pandemic has shown all its failings in stark reality.

Of course, Charles did not have in mind replacing the capitalist mode of production but simply making capitalism work better, more fairly and put on what he called a path of ‘sustainable development’. He outlined a ‘five point plan’ written for him by his advisers. First, he said, we must recognise “the interdependence of all living things”.  In other words, there was a breakdown in the link between humanity and nature.  Here Charles agreed with Marx and Engels’ analysis of over 150 years ago that, with the development of the capitalist mode of production, a ‘metabolic rift’ had been cleaved open between humans and nature.

The drive for profit under capitalism had spread uncontrolled industrialisation and urbanisation globally.  The productivity of labour had rocketed along with the world population, but with no regard to the environment, nature and in particular wildlife species, whether flora or fauna.  Localised farming had been replaced by globalised industrial farming’; forests were being decimated through logging and the exploration for minerals and fossil fuels for the world economy. This had brought humans into formerly remote areas and close to pathogens which have been in wildlife for thousands of years.  These pathogens have now jumped across into industrial farmed animals and into food markets, infecting humans who have no immunity.  COVID-19 is just one of these new pathogens as ‘nature strikes back’.

Charles wants the strategic leaders of the global capitalist economy to recognise this ‘rift’ and find ways to bring humanity back into harmony with nature on a ‘sustainable path’. But he ignored the question of whether that was possible under a mode of production for profit and accumulation of capital without restraint. Indeed, Charles “emphasised that the private sector would be the engine of recovery and was heartened by the pledges from business leaders to recognise the damage to the environment that would result from an unfettered dash for growth.”

In his five points, Charles noted that the uncontrolled industrialisation of the world using fossil fuels for energy had led to a rise in global warming that was changing the climate of the planet at a disastrously rapid pace.  He said that the world economy had to be reset to advance ‘net zero emissions’ as soon as possible. But how was this to be done?  According to Charles: by the market. “Carbon pricing can provide a critical pathway to a sustainable market.” The fact that carbon pricing: the market solution for controlling emissions had clearly failed – as many studies show – was ignored.  If this were the only solution to global warming and climate change, then the planet is doomed.

However, Charles did offer another solution. One of his five points was that “Investment must be rebalanced. Accelerating green investments can offer job opportunities in green energy, the circular and bio-economy, eco-tourism and green public infrastructure.” But again, he did not explain where this investment was going to come from – the capitalist sector, the fossil fuel industry?  There was no mention of taking over the fossil fuel industry and phasing it out. Instead, we had to rely on ‘green investment’ becoming more profitable and creating jobs.

And in the last of his points, he placed his hopes on the science, technology and innovation. He claimed that the reset of the world capitalist economy on a sustainable path’ could be achieved because “humanity is on the verge of catalytic breakthroughs that will alter our view of what it possible and profitable in the framework of a sustainable future.” “Possible and profitable.” So that’s all right then.

The recent movie, Planet of the Humans by Jeff Gibbs and Michael Moore, has been roundly condemned for its inaccuracies and its implied Malthusian approach that the problem is’ too many people’. But what the movie does do well is show that ‘green capitalism’ ie relying on the fossil fuel industry and other capitalist companies to develop technologies that will save the planet, is a sham, a colossal pipe dream. The fossil fuel industry is the main generator of greenhouse gas emissions and indeed the global military is the main user.  Charles offered no solutions here.

Capitalism is going to do little or nothing to save the planet from climate disaster or bring humanity back into harmony with nature. That requires global planning and public control of energy and food production.  Mariana Mazzucato, the celebrated ‘scariest economist in the world’, has pointed out thatGiven the global nature of the economy, without a truly global recovery plan, a rest of the world economy on a sustainable basis will not be possible. We need policies that are not only reactive but also strategic, bringing us closer to an investment-led global Green New Deal. Bold plans to create carbon neutral cities and regions could foster creativity and innovation”.

Mazzucato argues that we should “remember 2020 as the year we rediscovered the need for strong global health systems and the world avoided a new Depression with a Green New Deal and an investment-led recovery.”  Unfortunately Mazzucato, having promoted the need for the state to take a lead and not just leave it to the market, offers a solution based on ‘partnerships’ with the capitalist sector. But any Green New Deal based on partnership with the fossil fuel industry will fail.

Establishing a strong health system that prevents humanity dying from future pandemics and protects those infected, by going into ‘partnership’ with profit-making big pharma companies and outsourcing services and medical supplies to private contractors, has already proven a failure in this pandemic.

Take the example of big pharma. Several years ago, the EU Commission decided to set up a partnership body, IMI, made up of commission officials and representatives of the European Federation of Pharmaceutical Industries (EFPIA), whose members include some of the biggest names in the sector, among them GlaxoSmithKline, Novartis, Pfizer, Lilly and Johnson & Johnson. The IMI had a budget of €5bn (£4.5bn), half public money and half from the pharma companies. But the pharma companies controlled those research projects. They rejected an EU plan to fast-track vaccines in preventing the pandemic.  They decided against funding projects with the Coalition for Epidemic Preparedness Innovations, a foundation seeking to tackle so-called blueprint priority diseases such as Mers and Sars, both of them coronaviruses.

Instead, the IMI did projects that made profits for the companies, not for social need. As one report concluded, rather than “compensating for market failures” by speeding up the development of innovative medicines, as per its remit, the IMI has been “more about business-as-usual market priorities”. So much for public-private partnership.

The world’s 20 largest pharmaceutical companies undertook around 400 new research projects in the past year, according to Bloomberg Intelligence. Around half were focused on treating cancer, compared with 65 on infectious diseases. It’s just not profitable to find drugs to deal with diseases that affect the wider population particularly on poor countries.  But don’t worry, the EU now plans to spend more billions in advanced purchased deals with pharmaceutical companies for promising drugs and vaccines to fight COVID-19.  So the companies will now be paid yet more big bucks by the taxpayer to make profits.

Surely, what the pandemic has shown is the market and investment for profit cannot deliver an effective global health system.  What is needed in any resetting is public ownership of the major pharma companies and increased public investment in fully publicly-owned health services.

Reacting to Prince Charles, IMF chief Georgieva wrote down some ideas for “promoting a more inclusive recovery”. But as usual it was the same old message of “increasing people’s access to opportunities”. So people should have more opportunities to make money but not have any control over the planning of resources for social need and the protection of the planet. That task remains as before in the hands of big capital.

Yes, says Georgieva, we need to “scale up public investment in health care to protect the most vulnerable and minimize the risks from future epidemics. It also means strengthening social safety nets; expanding access to quality education, clean water, and sanitation; and investing in climate-smart infrastructure. Some countries could also expand access to high-quality childcare, which can boost female labor force participation and long-term growth.”  But how is that to be done?  Well, by “improving the efficiency of spending and to mobilize higher public revenue…through “tax reform: for example, by raising the top rate of income tax” and “there should be a concerted effort to combat illicit flows and close tax loopholes, both domestically and internationally.” But no takeover of the big tax-avoiding multi-nationals, of course.

Georgieva says we need “more investment in educationnot just spending more on schools and distance-learning capacity, but also improving the quality of education and the access to life-long learning and re-skilling.”  But how is that to be achieved without massive increases in public spending and the ending of subsidies to private education for the rich?

Georgieva says we need to “harness of the power of financial technology” for everybody. She means banking mostly.  But technology can also be applied to ensuring everybody has access to the internet free at the point of use.  How is that to be achieved, without public ownership of the major telecoms and social media companies, as well as the banks themselves?

The leader of the IMF talked about world coordination of this resetting of the economy.  But such coordination has been sadly lacking in dealing with the pandemic. That’s because it depends on national governments tied to the interests of their own capitalist sectors and because coordination has depended on the market, not on social need.

Big capital is getting ready to try and ‘return to normal’ by boosting the profitability of capital by sackings, lowering wages and introducing robots and automation to replace living labour.  But any resetting of the world economy cannot be achieved by ‘returning to normal’ ie with private profit as the driver of investment, production, employment, health and protection of the planet.

What would a resetting of the economy based on social need involve?  Here are a few suggestions.

We need a global plan for full employment, with jobs for all at a living wage. Pensions and benefits for those who cannot work must be raised to at least two-thirds of the average wage.

We need substantial public investment in infrastructure and public services like health, education, housing and communications. Such a re-direction of investment could soon establish much of these services as free at the point of use globally.

And it must be investment that is in harmony with nature and the planet.  The fossil fuel industry must be phased out, just as the tobacco and military should be. The technology is there to do it, what is lacking is the economic and political power in the hands of democratic institutions rather than in big capital and its representatives, who prattle on about ‘inclusion’ and ‘sustainable growth’.

Yes, we must cancel the debts of the poorest countries exploited by the multl-nationals of the imperialist countries.  Yes, we must end the tax havens for the rich and powerful.  Yes, we must re-introduce proper progressive taxation (one of the first demands of the Communist Manifesto back in 1848) to reduce inequality.

But none of this will be possible without public ownership of the major financial institutions and multi-nationals so that the world can be planned through democratic organisations for social objectives, not for profit of the few owners of capital.

That’s what resetting the economy should mean.

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