Chris Harman

Economics of the Madhouse


We are continually told that capitalism is the only economic system that can work. The reality for most of the world’s five billion people today is that it is not working in our interests.

The World Health Organisation reports that the biggest killer in the world today is not coronary thrombosis or cancer, but ‘deep poverty’ in which a thousand million people live. Such poverty is a growing feature of life even in the industrially advanced countries, where there are more than 30 million people wholly unemployed and another 15 million in insecure temporary and part time jobs according to the latest figures from the Organisation for Economic Cooperation and Development. In the United States – the richest society in the whole of human history – 32 million people were living below the poverty line in 1988 (at the height of the 1980s boom) and nearly one in five children were born into poverty. In Britain a third of children grow up in poverty.

People with jobs face greater insecurity and stress than at any time in the last half century. ‘Work is the major cause of stress, according to a survey of more than 5,000 office workers in 16 countries’, reports the Financial Times. ‘More than half the respondents said stress levels had risen over the past two years’.

There is relentless pressure on the mass of people to work more and accept less pay than in the past. This is shown most vividly in the United States, where real wages have been falling for 20 years. According to the Los Angeles Times, The US Department of Commerce notes:

From 1973 real wages fell at an annual compound rate of 0.7 percent. This trend continues. In the three months up to June 1974, the purchasing power of US workers fell by 0.7 percent.

A study by Juliet Schor called The Overworked American speaks of the ‘unexpected decline of leisure’:

Americans now work an average of 164 hours more annually than 20 years ago. This amounts to about a month more at work per year.

In Britain, Germany and most of the rest of Western Europe real wages were rising until recently. But here too the pressure is now on. In Britain there has been an attempt at a complete public sector wage freeze. In Germany new taxes are due to cut the living standards of working class families. And in both countries Tory politicians are telling us we’ve had it too good for too long.

Thus German prime minster Helmut Kohl says West Germany must ‘adapt to profound changes in its way of life with longer working hours’, while British employment minster Michael Portillo claims, ‘Europeans pay themselves too much’ and have holidays that are ‘too long’ and working weeks that are ‘too short’. Politicians tell us that we have to stop expecting to have ‘jobs for life’ and that we have to look at ways to cut down on the ‘economic burden’ of paying pensions to a growing number of old people.

This is now all part of the conventional economic wisdom preached by major governments. It is reinforced by the growing influence of what used to be ideas confined to the lunatic fringe of the right. In the US people like Charles Murray have gained a huge hearing for their contention that if growing numbers of people are living in poverty, this is the fault of welfare provision which has created an ‘underclass’ of feckless people unable to seize the opportunities open to them. The only answer, the ‘new right’ claim, is to abolish welfare provision for unmarried mothers who insist on having more children. In Britain too there is growing talk of the danger of ‘welfare dependency’ – talk which is beginning to be heard in the Labour Party as well as Tory circles.

If there are pools of poverty in the industrially advanced countries, there are huge seas of it in much of the rest of the world. The continents of Africa and Latin America actually got poorer in the 1970s and 1980s, with average income per head falling. While the poor have to scrimp and save to get by in Europe and the US, they starve by the millions in parts of Africa.

There is little hope either in much of the former Eastern bloc. In 1989 people were promised that the market would bring them a new ‘economic miracle’. Five years later people were even worse off materially than under the old dictatorships, with living standards cut by 40 or 50 percent.

Yet not everybody is poor. The very rich are better off than ever before. In 1980 the top managers of the 300 biggest US companies had incomes 29 times larger than that of the average manufacturing worker; by 1990 their incomes were 93 times greater. While two billion people live on or below the breadline in ‘third world’ countries, a thin upper layer live increasingly luxurious lives. The Financial Times could report in February 1995 on how private banks catering for such people were flourishing: ‘Rich people in Europe and the Middle East are estimated by Chase Manhattan ... to have some 1,000 billion pounds in cash or liquid assets ... Latin America and Asia account for a further 1,000 billion of private wealth, a figure which is growing fast.’

In the US highly paid ‘experts’ want an end to welfare payments to ease the burden on the rich of keeping the poor alive; in Brazil the rich pay death squads to kill teenagers who sleep in the streets.

In the midst of this poverty and squalor a hundred and one other evils have flourished. Old diseases like TB, cholera and even bubonic plague – Black Death – have reappeared. Addiction to hard drugs has spread as people see them as the only way to escape, however temporarily, from their suffering. Suicide rates have soared. Crime has grown as a minority of the poor see in it the only hope of matching the luxury lives of the rich flaunted before them by the advertising agencies. On top of all this there has been the horrific scourge of war, with the United Nations Human Development Report warning that ‘persistent threats from hunger, violence and illness are the root cause of the increasing number of internal conflicts worldwide ...’ and noting that states, big and small, would rather spend billions on modern weapons systems than cater for people’s desperate needs.

Poverty and disease, hunger and pain, hopelessness and desperation are not, of course, something new in human society. They have existed throughout most of recorded history.

But the poverty in the world today is different. For it exists alongside wealth on a scale easily sufficient to banish poverty for ever. In 1992 the total economic output of the whole world was five times what it was in 1950, according to the United Nations Human Development Report. Yet poverty, in many parts of the world is as bad today, if not worse than 45 years ago. Hunger exists alongside huge stockpiles of food – witness the European Union’s food mountains – while governments in America and Europe pay farmers not to plant their land. People are told there is not enough wealth to go round while firms close factories and sack people who could be producing more wealth. The mass of people are told they cannot have jobs unless they work longer and harder for lower wages, while in every country a small minority at the top live it up as never before. In 1950 the richest fifth of the world’s population took 30 percent of its incomes; today they take 60 percent. Meanwhile, the poorest fifth of humanity are left to share a mere 1.4 percent of total world output.

Few of those who support the present organisation of society expect things to get better. In many countries there are parties, like the Labour Party in Britain, that once promised to improve the condition of the poor with full employment, greater spending on welfare and a redistribution of income from the rich to the poor. Today they tell us these ideas are ‘old fashioned’.

A huge conundrum confronts us which none of the established political parties can come to terms with. More wealth is being produced than ever before in history. There are inventions for increasing the output of all sorts of things, including the basic foods denied to generations of humanity. Human beings can conquer outer space and explore the depths of the oceans. They can use machines to do backbreaking toil or send information from one side of the world to the other in a fraction of a second. Yet far from the burden of securing a livelihood getting lighter it is often getting heavier. Instead of people looking forward to living more prosperous and comfortable lives, often they can only live in fear of things getting worse. Far from poverty disappearing, it grows.


Last updated on 15 November 2009