Many economists like to think of the markets as a place where equals negotiate and bargain to find mutually beneficial deals. Employers and workers need each other and so come to a deal that benefits them both. As these agreements are reached voluntarily, there can be no injustice in the system, as otherwise why would they have agreed to it? There is therefore no need for government intervention as people are well able to look after themselves. Unfortunately, in the real world, things are very different. In the real world, employers have market power over workers that prevent the market reaching a fair balance. It is for this reason that strong unions and government intervention is needed. Continue reading “The Power Of Employers”
One of the most glaring omissions from modern economics is the complete absence of any mention of power. Textbooks describe a world where everyone is equal and no one has power to influence others to benefit themselves. Norbert Haring and Niall Douglas make a huge contribution to correcting this omission by discussing the importance of power relations in economics and during the financial crash in their brilliant book, Economists And The Powerful. They show how power got removed from the economics discourse for ideological reasons, the power and influence of the financial industry, the corporate elite, how the economy is best described as monopolistic competition, how the money supply is controlled by banks, how the labour force is shaped by market power and how the government is manipulated by corporate interests for their own gain. It is a superb book that I highly recommend.
On this blog I have been very critical of mainstream economics, to the point that I feel most of it should be thrown out. I believe the orthodox theory of demand, supply, labour theory, wages, recessions, competition and information are fundamentally flawed. The obvious question is, if we are to ditch these unrealistic and useless theories, what do we replace them with? I cannot only criticise and knock down, I also have to create. I believe we should replace the current theory based on graphs of supply and demand with one based on power. The economy is not governed by unseen and unchangeable impersonal forces but by the competition of different sources for power. I believe neo-classical economics has outlived its usefulness and instead should be replaced with “The Theory of Power”. Continue reading “A New Economic Theory”