The Left needs to start talking about the long chain economy

Lindy Edwards

Thursday, 5 December 2019 republished from Chifley Research Centre

As Labor picks over the entrails of its defeat, many are slamming their failure to weave their multitude of initiatives into a simple story people could relate to. But this isn’t a failure of marketing but a much deeper intellectual failure of the movement.

Labor’s crisis is occurring on two fronts. Firstly Labor don’t have a coherent view of the economy that enables the celebration of productive elements of capitalism while deriding the exploitative elements. It struggles to articulate support for a productive strong economy at the same time as giving voice to many ordinary people’s day to day experiences of feeling squeezed or powerless. 

Secondly they don’t have a story that links together all the various social justice causes around gender, race and the environment. They lack a narrative about the modern world that acts as connective tissue between all these concerns. 

However, despite claims to the contrary, this crisis is not due to an impossibly fragmented world made up of competing and incommensurate issues and fragmented constituencies. This disconnect is an intellectual failure rather than a feature of the world. 

Anyone looking at the reality of worker exploitation in this country knows it is not a separate issue to gender equality and racial equality. The most vulnerable workers in our economy are non-English speaking women.

The issues of economic exploitation are equally interwoven with the forces damaging our environment. The forces that are driving the exploitation of farm workers and fruit pickers are the same forces driving the destruction of the Murray Darling Basin.  

The crisis of the left is an intellectual failure to have its own account of how the economy works which links up these various manifestations of power and exploitation.

So where do we begin in addressing such an intellectual failure? 

I think that a powerful first step is that progressives need to change the visual we use to imagine the economy. The simple visuals we have of complex systems are incredibly important. The visuals we use focus our attention on some aspects of complex phenomena and obfuscate others. They shine a spotlight on some issues, and throw other issues into darkness.

I want to argue that the image that progressives discussions of the economy need to focus on visuals of long production and supply chains, rather than the common vision of markets as intersecting demand and supply curves.

The benefits of the visual of the long production and supply chains is that it enables us to visualize the best and worst of capitalism in one image. 

The great strength of capitalism is the way it  encourages entrepreneurs to construct chains that meet consumer wants.

The pursuit of profit provides a powerful co-ordinating mechanism that makes modern economies work. The wealth of modern economies is built on the productivity that comes from us all being incredibly specialized. The economic challenge is how to co-ordinate all these specialized people into producing the goods and services we value.

The pursuit of profit provides a genius solution to this problem. We all signal what we value by what we are prepared to pay for. The entrepreneur hunts around looking for opportunities where the price we are prepared to pay is greater than the costs of bringing together all the specialized people needed to produce it. 

It is the most effective decentralized mass social co-ordination mechanism human beings have found. Its highly decentralized character has also made it an important bulwak against tyranny.

However, the great weakness of capitalism is that while it takes great creativity, insight and luck to create new chains that meet new demands. A much easier way of making a profit is to take an existing chain and to simply redistribute wealth along it to yourself. Taking wealth from the weak in the chain doesn’t require any talent, it just requires power.

The reason we are seeing the rise of the one percent and growing inequality, is because neoliberal reforms have made it easier for the powerful to strip the wealth out of their production and supply chains and to redistribute the money to themselves.

We see this happening in production chains within companies as Chief Executives grant themselves enormous payrises while at the same time eroding the pay and conditions of their most vulnerable staff. As an academic, my favourite example is ballooning Vice Chancellor salaries and the rampant exploitation of junior casual teaching staff.

We also see it happening in supply chains.  We see it in the impacts of Coles and Woolworths on the food and agriculture supply chains, its flow through to the treatment of casual workers on farms, and to its impacts on environmental problems like the Murray Darling Basin.

We see it in the construction companies treat their subbies. We see it in the treatment of franchisees. We see it in the Labor hire companies and the growth of the gig economy.

We see it when we stop to notice that low status groups are victims in this process. The female and non-white links in the chain are paid less than others.

This image of the long chain enables us to cluster all these issues and problems around the same central question. How do we encourage productive profit making and discourage exploitative profit making? How do we create fairness, justice in long chain economies?

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