from Dirk Ehnts, Econoblog101
Some comments on Zygmunt Bauman’s “A Chronicle of Crisis”
I recently read the book by the UK sociologist Zygmunt Bauman and want to comment on a few things that I really like and a few I did not. The book starts with interesting chapters (originally, articles) on, among other things, Amartya Sen’s Theory of Justice.
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Bauman writes on page 22 (source):
“Just society” is a society permanently sensitive and vigilant to all cases of injustice and undertaking to take action to rectify them without waiting for the search of the universal model of justice to be completed”. In somewhat different and perhaps simpler terms, a society up in arms to promote the well-being of the underdog; the “well-being” including in this case the capacity of making real the formal human right to decent life – recasting “freedom de jure” into “freedom de facto”.
This is very interesting, almost revolutionary in today’s Western societies. Yet I think that the societies we live have largely been built by people promoting the well-being of the many, assaults on the welfare state and the public sector in general in the last few decades notwithstanding. I believe there is today a very large gap between what we think is how societies (and with it economies) work and the way they actually work. Financial crises, trade wars, polarization and inequality do not spring up from out of nowhere. They are symptoms of underlying processes. Bauman picks up this topic on page 50 (source):
There were, in other words, “natural” limits to inequality and “natural” barriers to social exclusion; the main causes of Karl Marx’s prophecy of the “proletariat’s absolute pauperisation” turning self-refuting and getting sour, and the main reasons for the introduction of the social state, a state taking care of keeping labour in a condition of readiness for employment, to become a “beyond left and right”: a non-partisan issue. Also the reasons for the state needing to protect the capitalist order against the suicidal consequences of leaving unbridled the capitalists’ morbid predilections, their fast-profit-seeking rapacity – and acting on that need by introducing minimal wages or time limits to the working day and week, as well as by legal protection of labour unions and other weapons of workers’ self-defence.
This should not be disputed, but probably it is by the mainstream view of today, at least not in Germany and those countries in Europe that were left relatively unscarred by the last economic crisis.
Now we come to the main issue that I do not agree with, written on p. 76 (source):
Watching the already exorbitant yet still fast rising federal debt of the US, one may feel excused if wondering whether Bin Laden and his successors might have managed to take a hint and learn the lesson, and are set to repeat Reagan’s feat.
The idea that the federal debt of the US is a problem is moot. The US is issuer of its own sovereign currency and hence faces no budget constraint. Stephanie Kelton wrote as much in her LA Times article last year:
In other words, the government spends money and then collects some money back as people pay their taxes and buy bonds. Spending precedes taxing and borrowing – STAB. It takes votes and vocal interest groups, not tax revenue, to start the ball rolling.
If you need proof that STAB is the law of the land, look no further than the Senate’s recent $700-billion defense authorization. Without raising a dime from the rest of us, the Senate quietly approved an $80-billion annual increase, or more than enough money to make 4-year public colleges and universities tuition-free. And just where did the government get the money to do that? It authorized it into existence.
Whoa, cowboy! Are you telling me that the government can just make money appear out of nowhere, like magic? Absolutely. Congress has special powers: It’s the patent-holder on the U.S. dollar. No one else is legally allowed to create it. This means that Congress can always afford the pony because it can always create the money to pay for it.
Now, that doesn’t mean the government can buy absolutely anything it wants in absolutely any quantity at absolutely any speed. (Say, a pony for each of the 320 million men, women and children in the United States, by tomorrow.) That’s because our economy has internal limits. If the government tries to buy too much of something, it will drive up prices as the economy struggles to keep up with the demand. Inflation can spiral out of control. There are plenty of ways for the government to get a handle on inflation, though. For example, it can take money outof the economy through taxation.
So, if you want to create a “just society” as Zygmunt Bauman envisioned it, there is no financial problem of “running out of money” or “rocketing public debt”. There are internal limits – you can only use the resources that government can buy for its money – and there is inflation, which can be handled by taxing people (which we already do).
Those reading Zygmunt Bauman should be warned. I applaud Bauman the sociologist for his clear thought and ideas. However, I would not recommend Bauman the economist who seems to believe that national governments like that of the US can be driven into bankruptcy by “over-spending”.
