I've noticed that my posts on economic theory get no comments. This is understandable: when most people hear the words "economic" and "theory", they run screaming. Put together, they're a linguistic sleeping pill.

However, I'd argue that economic theory is important, and not just because I'm taking a course on it. Economics is always presented as hard, a bunch of concepts that don't apply to our everyday life, and way too complicated except for the experts.

Economics is a lie...

This is true and false. Economics is not a science of everyday life. It's an ideology: a false vision of how our world works. It reduces our material life to abstract ideas. For example, one of its most common phrases is "everything else being given". Economists create a model of how reality works, fixate on a particular aspect, and assume everything else stays the same. For example, the economy is supposed to work on the basis of people's preferences. We want certain products, so we buy them at a certain price. 'Everything else being given', there'll be enough products available at that price.

But this is nonsense. 'Preferences' may shape consumer behaviour, but those preferences are shaped by other factors: social, cultural, historical, political. And not just between people, but between times. There's a reason in 1993 I wanted a plaid flannel shirt, and in 2005 I wanted a hair straightener. Everything else is not given; and if economics can't explain that, what good is it?

My preferences don't explain this, thank god

... with some truth to it

Here's the 'truth' of economics: it's a capitalist worldview. A member of the bourgeoisie has the capital to make choices: to impose his preferences on others. 'You can have any colour car as long as it's black', as Henry Ford said. Meanwhile, our preferences are shaped by our class position i.e. the amount of power we have in society. The 800 million people who don't know where their next meal is coming from, don't want iPods. They want food and clean water. To compare them with a Henry Ford - or a Bill Gates or Richard Branson - is absolutely ridiculous. Yet that's what economics does. That peasant chooses to walk 10 miles for water every day; Richard Branson chooses to start a space tourist industry. Economics neutralizes the idea that capitalism is unfair, that it contains and hides inequality.


"Could we switch for a while?"
"Uh... I think I'll choose not to."

Do you want frites with that?

Yes, economics is boring. It can't be any other way, because it doesn't describe reality for most people. Yet it does describe it for some - and those people happen to be in power. Which is why we need to understand it and debunk it. Here's an example from the Guardian's business page, in which David Gow, a particularly noxious capitalist peon whines that the French don't accept labour insecurity. French prime minister de Villepin calls for gutting job security. Employers would have the right to hire someone for two years, and fire them at any point, without recourse. What might a boss fire a worker for? How about someone complaining of low wages, sexual harassment, or trying to organize a union? Unions are promising a massive mobilization in response.

According to economic theory, the market must be free of constraints. Otherwise our preferences are constrained by someone else. Unions impose 'rigidity'. In response, de Villepin is bantering about 'flexicurity' - I wonder how much the consultants got paid to come up with that abomination. It's based on the Dutch model:

Danish ministers have called them a "golden triangle" of labour market flexibility - easy hire and fire, high social security and active employment policies including education and training.

But no amount of social security replaces a decent full-time job; no amount of training prepares you for a job that doesn't exist. This is a power grab by the employers, what the unions call "an assault on long-standing collective rights in favour of 'a fools' market'."

Quick! Get them a football match to watch! - French demonstration against privatization, Nov. 2005

And yet, how does Gow characterize union resistance? He says it's a reaction to "an alien "Anglo-Saxon" concept" - playing up the old French-English rivalry, as if the issue was baguettes vs. biscuits rather than a standard of living. He says that "France, a home of revolution, is being offered a timid reform, and its [sic] running scared." Capitalists hate change when it means more social services and better wages - i.e. collective rights that cut into their profits. But make it easier to exploit workers, and the capitalists become revolutionaries.

However, Gow's distasteful cringing under the shiny spats of the capitalists reveals something. The plan is "to tackle persistently high levels of unemployment, currently at just under 10%". After the recent riots by unemployed youth, it's obvious "the great evil of unemployment can generate hatred and fear". And he says that "the labour market reforms undertaken in Denmark in the 1990s... halved unemployment in five years."

Unemployment threatens social order - the capitalists learned that lesson after the 1930s. What's striking is that the solution is only on their terms. The capitalists have more money than they know what to do with, and yet they'll only create more jobs if the workforce can be compliant and afraid, and cost less. The French solution was to limit the rights of capitalists in favour of workers. This no longer applies, because of "the flexibility required by businesses under globalisation."

Globalization may affect everyone, but not equally

But who's saying that? Why, it's the capitalists: the very same people who are pushing for insecurity in the first place. Unemployment could be solved in an instant if wealth was distributed democratically. This is a socialist revolution. Under capitalism, labour market controls are a way to curb capitalist power. In response, the capitalists have found a neat way around it: blaming globalization which, by the way, they created.

The ideology of economics strips these questions of history and power. Yet as anyone who's ever temped, worked in a kitchen, a factory or other menial job knows, how much power you have matters a lot. 'Flexibility' on the part of capitalists is 'inflexibility' for workers. You have to stay and put up with chemicals in the air, repetitive strain injury or the manager's hand on your ass because you need the money. Economics denies all these realities. The fight against capitalist globalization, and labour insecurity, is also a fight against economics. That fight, called class struggle, is our reality.