Towards a Global Comprehensive Context-Driven and Decision-Focused Theory and Method for a New Political Economy

There is currently significant dissatisfaction with conventional economic theory. The unreliability of conventional theory as a predictor of future economic possibilities of catastrophes emphasizes the need for a new paradigm of political economy. This paper provides a capsule of some of the important limitations and consequences of the “old” paradigm. It proposes the necessary elements of a new paradigm and it seeks to locate the new paradigm of political economy in terms of its global reach. This requires a richer contextual approach, with the tools of contextual mapping. It has as well a focus on the global process of effective power and the emerging rule of law based constitutive processes. This is a key to the role of decision and the architecture of decision-making in political economy. We conclude with the global to local implications of the Vicos Experiment in Peru. Finally, we stress the wider lens of focus to identify the real and not the illusory generation of value. The implications here facilitate real global democratization.

1. Introduction
In giving this presentation, we start with certain trepidation. Both my coauthor and I are specialists in legal academic culture. Our interest in economics is incidental to that professional focus. However, in exploring the role of law in global society it has become more apparent that we need a better economics as a coequal partner in the central challenge that confronts the global rule of law. That challenge is how to improve the human prospect in securing peace, security, human well-being, and ultimately a global culture gravitating toward the universal ideals of human dignity. In exploring the ideals and possible promise of a new paradigm of both law and political economy, we must readily concede that there are many insights in the discipline of political economy that may have escaped our focus of concern. However, we hope to bring some perspectives and methods of advances in law that may enrich the promise of a new political economy for a new world order. Conventional economics has rarely shed itself of the label that it is a dismal science. It has earned this label because its central weakness seems to be the continuing diminished expectation that it may provide perspectives and methods that produce reliable predictions. In short, it is an unreliable enterprise that occupies space of major global importance to the well-being of humanity.1It would be useful to provide an overview of the problem of radical inequality as an outcome of conventional economic theory and practice.

2. Overview of the Crisis of Economic Inequality: The Political Economy of the Drive to the Bottom
The most notorious fact about the American economy is that for decades we have experienced an inexorable drive to move the overwhelming majority of American citizens to the bottom of the economic system. In short, the expansion of inequality has been an extraordinary fact of the politically inspired economic policies of the Republican right wing.2

Let us start at the top. Reputable economists tell us that one percent of our popula­tion takes one quarter of our nation’s income. One percent of our population controls forty percent of our nation’s wealth. One percent of our population has seen their incomes rise by over eighteen percent.

The central political question is whether this kind of outcome is desirable and in the nation­al interest of the nation. If this is desirable, is there a sound reason to justify it? There have been marginal economic theories, which suggest that the one percent who have benefited so mightily are simply better than the rest of us.

Many people whom we consider talented and who have made enormous contributions and inventions to modern society have not necessarily benefited from this. The financial wizards who almost destroyed our economy were in fact rewarded with performance bonuses. Although to their credit, they saw the irony in this and changed the label to retention bonuses. Meanwhile, those at the bottom of the economic ladder were not candidates for any form of retention. They were candidates for pink slips.

One of the assumptions of right wing Republicans is that if we have a bigger economic pie there will be more to go around. Unfortunately, the arithmetic is the other way around. The bigger the pie, the less the American citizens share in its bounty. It would seem that our economic growth is essentially a growth that is downwards in the direction of inequality. This means we have an exponential growth in lost opportunity for the American people.

The extinction of opportunity for our people is a major social and economic loss because the success and the genius of American civilization has been its belief in human capacity and the critical importance of human resources for national prosperity.3 This means that when we depreciate human resources we are attacking the recipe, which was at the heart of American genius. There is of course enough blame here for everyone. However, I think most of the blame must lie with the Republicans. They have historically been the most frenetic defenders of economic monopoly. Additionally, they have been successful in hijacking rational tax policy debate. No new taxes means that the weaker members of the body politic still pay while the special interests, which fund the Republicans, the well-healed financial oligarchs prevail with outrageous tax holidays. Indeed, a recent survey about the fairness of the tax system showed only twelve percent believing it was fair and eighty eight percent believing it was unfair.

The consequence of these outrageous benefits to those who already have an excess of resources is that they also promote the idea that national investment in education and human resources, investment in technical innovation and sound infrastructure are a waste of scarce resources. Their version of appropriate national incentives is driven by an intense desire to discourage investment in the future based on basic research and the central importance of our transportation and infrastructure system. Essentially, Republican policies have hugely empowered the financial oligarchs while undermining the participation of the overwhelming majority of citizen stakeholders in the process. They promote no version of a national common interest and see only the vista of narrow special selfish interests.

Greed is king. They attack labor unions, promote the replacement of labor with technol­ogy and export jobs abroad because foreign labor is cheap. American labor is a liability. It is too expensive for the oligarchs. Hence, their mantra about jobs is “send jobs abroad.” The role of government in seeking to moderate the concentration of wealth and power in the few was well expressed by the political genius of the last century, Ronald Reagan. The government is the problem, is the enemy because it is the critical restraint on the unfettered power of economic oligarchs. Now at present the agenda appears to be clearer: do what we need to do to keep our wealth and get more of it. Demonize the government as a moderator between extremism and the people; extinguish the opposition such as the labor unions and the independent media and most critical of all, no taxes on the rich.

Probably the most impressive victory of the financial oligarchs was their promotion of the economic theories of neo-liberalism. The center point of this approach was to oppose any and all government regulation. The great success was the deregulation of the financial sector. With the financial benefits, which they acquired through a non-regulatory state, they could use their bounty of wealth as a base of power to control a good deal of law making, and they did. Their successes have permitted a huge scale of financial manipulation in a no-financial rules context – the context they in effect purchased. This was a good financial investment.

After the Citizens United case, a major Supreme Court blunder, the corporate sector could now begin the process of purchasing the government without spending limits. In short, the Supreme Court solidified the nexus between wealth concentration and its capacity to control the government in an almost complete form. One illustration of many will suffice. Big Pharma was able to squeeze a trillion dollar boondoggle out of the government by the Republican drive to block the government from bargaining with Pharma about the price of drugs. The Republicans have their eyes on other temptations such as Medicare, Medicaid and Social Security. What is it that drives the Republicans to destroy highly popular social safety nets?

The answer to the above question is to be found in the longstanding Republican nightmare called the New Deal. The New Deal produced popular policies and its political success was reflected in Roosevelt being elected four times. After his death Republicans considered that the New Deal was popular and an important base of power for the Democrats. The problem they confronted was that the New Deal programs were popular and could not be directly attacked. Their agenda focused on foreign fears and anti-communism. However, the lingering fear of New Deal institutions was finally frontally assaulted by the brilliant Ronald Reagan. Reagan had the insight that the New Deal worked only so long as the government could pay for it. The critical Republican strategy would now be to run up huge deficits so that there would be no funds to pay for New Deal programs.

Moreover, if the Democrats came back to power, they would find that there is no money in the state bank to fund their programs. So fiscal conservatives like Reagan and Bush ran up huge deficits, and borrowed billions, which they could now distribute as governmental socialism to Republican business and defense interests. This left us with a deficit nightmare and a mighty recession.

With a great deal of political amnesia Republicans now proclaim the morality of living within our economic means. You can’t spend funds if your bank account has no funds in it. They are the architects of this approach and the creators of the monumental deficit. Few heard from the deficit hawks during the Bush spending spree, fueled with money borrowed from China. We still do not hear the Republican leadership willing to acknowledge their budgetary scam. Meanwhile, our nation is in a spiral towards radical inequality and a diminishing of our national values. Perhaps our economic oligarchs should be reminded of the wisdom of Alexis de Tocqueville who saw the key idea behind the American genius as “self-interest properly understood.” By this he meant that by taking care of your own self interests you simultaneously express a concern for the other person’s self interest as well.

Winston P. Nagan: Chair of the Board, World Academy of Art and Science; Samuel T. Dell Research Scholar Professor of Law, Levin College of Law, University of Florida
Valeen Arena: Junior Fellow, Institute for Human Rights, Peace and Development, Levin College of Law, University of Florida
1. Ian Johnson, “The Perfect Storm: Economics, Finance and Socio-ecology,” Cadmus 1, no. 2 (2011): 19-24.
2. Joseph E. Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future (New York: W.W. Norton & Co., 2013).
3. On the issue of political economy, human rights values, and the idea of justice, see, Winston P. Nagan, “Human Rights, Liberty & Socio-Economic Justice: Economic Theory and the Ascent of Private Property Values,” Cadmus 1, no. 2(2011): 35-54.

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