global inequality

Global (In)equality An iconoclast takes down neoclassical economics from the inside

Naming the System: Inequality and Work in the Global Economy by Michael D. Yates Monthly Review Press, 288 pp, $16.95 reviewed by Kanishk Tharoor

After deciding to hold early elections in April, India's then-ruling party, the Bharatiya Janta Party, received a rude shock. The BJP was voted out of power even when the party could boast of remarkable economic growth and impressive financial vital signs. In the run-up to the spring elections, the BJP conjured an image of an "India Shining," striding towards the Promised Land of greater market liberalization and privatization. Yet the election's unexpected result sounded the hollow ring of the BJP message, revealing the inadequacies of economic neoliberalism in India since the country opened its markets in 1991.

While globalization proponent Thomas Friedman explained the BJP loss in terms of inefficient "bad governance," others argued it was the opposition of India's poor that toppled the BJP government. Its free market reforms had only enriched certain sectors of the population. Far from improving the condition of India's numerous impoverished citizens, globalization had worsened their plight, accentuating financial discrepancies and distancing the middle and upper classes even further from the country's poorest. As labour analyst Michael D. Yates claims in his latest work of political economy Naming the System: Inequality and Work in the Global Economy, "India… is the world's largest democracy. Unfortunately, it is a democracy of misery." Many interpreted the Indian vote as one not simply against the BJP, but against the prevailing global economic order, making the domestic election yet another chapter in the debate over globalization.

Yates also notes how unrest in South America-particularly Argentina and Bolivia-and elsewhere in the last five years has increasingly brought into question the consequences of economic globalization, the role of international agencies like the International Monetary Fund (IMF) and the World Bank, and the policies of the wealthiest nations in the world, especially the United States. The famous protests of 1999 witnessed against the World Trade Organisation (WTO) in Seattle have since been repeated all across the world. But dissatisfaction with globalization is not limited to popular demonstrations or groups like the World Social Forum: the realms of hodge-podge activist coalitions and vociferous idealists.

Economists who formerly supported the expansion of free market policies have begun critiquing the very process they once advocated. Joseph Stiglitz, former senior vice president of the World Bank, attacks the World Bank, the IMF and the WTO in his well-known study Globalization and Its Discontents. Others like Nobel Prize-winner Amartya Sen have questioned the current trajectories and trends of globalization, emphasising the importance of education, healthcare, and social "welfare" in tandem with or even before market reforms. More and more economists seem to have long since cast aside their rosy glasses when examining globalization.

None of these critiques, however, satisfies Michael Yates, associate editor of the magazine Monthly Review. Nothing less than a dismantling of both the established global capitalist system and the academy's economist establishment is in order. Writer of Longer Hours, Fewer Jobs and Why Unions Matter, Yates enlarges his focus in Naming the System from the immediate struggle of workers to include a sweeping, macro-level analysis of globalization and the ideology of "neoclassical economics." Since the collapse of the Soviet Union, principles of neoclassical economics have driven what he claims are the misguided and ultimately exploitative policies of free market reformers all over the world. By opening up their economies, "poor countries" like India have only succeeded in fostering greater inequality, unemployment, and poverty.

More countries than India suffer such bleak circumstances. Using predominantly World Bank and UN statistics, Yates paints a picture of pervasive inequality and suffering of Dickensian proportions. Half of the world's population survives on less than two dollars a day. The richest one percent of the world receives as much income as the poorest 57 percent. Over one billion people in the world labour force are unemployed or underemployed. The funds generated by a tax of 4 percent on the world's 225 richest individuals would provide adequate healthcare, food, clean water, and safe sewers for every person on the planet.

As startling as some of these figures may be, it is difficult for anyone today to remain completely unaware of global wealth discrepancies, or of those wealth discrepancies within one's communities (Yale and New Haven's relationship comes immediately to mind). Thanks to the plethora of advertised charity groups and a media that readily broadcasts images of foreign poverty, every TV-watching Joe has at the very least seen shots of Brazilian shanty towns, distended brown stomachs, and sweatshop workers in overseas Nike factories. Yates' statistical exhibition of hardship doesn't intend to surprise the reader, but instead, reinforces the stark and uncompromising nature of his critique.

Though he attacks the contemporary economic status quo, Yates chooses a narrative familiar to those embroiled in the debate around globalization. His self-avowed "radical" perspective seems to stray little from the beaten path of left-wing protesters and the orthodoxy of leftist dissent around the world. According to Yates, the planet can be divided between "rich countries" (the usual Western suspects as well as Japan and Singapore) and "poor countries," or, in other words, everybody else. He argues that membership in either half of the dichotomy can in general be traced to histories of European and American imperialism. Substitute "colonizer" for "rich" and "colonized" for "poor" and global inequality makes sense.

Colonialism, in Yates' schema, is not merely a past experience, but a defining and ongoing relationship between the developed and developing world, the North and the South (four popular terms that he studiously ignores). The current period of unprecedented free market expansion follows a pattern of economic domination of the rich over the poor. Thus the construction of American-owned maquiladora sweatshop-like factories on the Mexican border or the coercion of an African country to shred its agricultural tariffs fit into a seemingly endless pattern of predominantly Western elites fleecing the poor of the world, with precious little variation.

As clearly delineated and polarised as Yates' worldview may be, Naming the System doesn't replace substance with ideological invective. Grounded in the methodical, mathematical language and perspective of an economist, Yates details both the conditions of the poor and the policies that keep them poor. His writing is accessible and relentlessly unorthodox. Contrary to conventional economic thought, free market reforms have rarely empowered or enriched the majority of a country. The average sweatshop labourer-whether in Mexico, Indonesia, or even New York City (there are at least ten thousand sweatshop workers in the city)-don't earn enough to provide even the most basic standard of living for themselves. Wage growth in the past decade has slowed considerably all over the world. The vast majority of workers in poor countries still struggle in unskilled professions, belying the significance of the outsourcing of hi-tech jobs. Instead, the supposed economic boom of the last decade has witnessed the dramatic rise of "informal employment," a sector which encompasses various types of work from child labour to prostitution. With a mountain of statistics and thorough documentation, Yates argues that the perpetuation and accentuation of gross inequality (within and between nations) is inherent to the functioning of capitalism.

Though Naming the System smacks of unapologetic old school Marxism, the study remains important in a time when those critical of globalization are often dismissed out of hand by the mainstream. Yates makes a serious and legitimate case against the current shape of free market expansion. He writes not from a lofty idealist cloud but as an economist very aware of the abnormality of his perspective within his discipline. Indeed, the academy is as much a target of his scorn as are voracious multinational corporations, American monetary policies, or nefarious stock market speculators.
Yates takes on what he calls "neoclassical economics," an approach that arose a century ago in Western Europe, much in reaction to the growth of labour movements and the works of Karl Marx and Frederick Engels, but still holds sway over the academic roost today. Though he distinguishes between the "libertarian neoclassical" (the dominant perspective of the last thirty years, particularly since the collapse of the Soviet Union) and "liberal neoclassical" (the branch inspired in great part by the work of John Maynard Keynes, for whom Yates expresses deep respect) halves of the academy, he is fundamentally dismissive of the entire field.

Chief in his objection is the importance neoclassical economics attributes to the individual. Neoclassical economics posits the individual at its most basic level of analysis, assuming that individuals are entirely free to make economic choices (thus unemployment can even be understood as a "choice"). Taken to its logical inference, this strain of thought models individuals as springing from some kind of tabula rasa. Unfortunately, the world is not so tidy. People function under many societal constraints, and such larger structural forces often govern or influence their actions. Yates insists that economics must grow to include an understanding of the reality of social context in the lives of all "individuals."

Through literally naming the system, Yates engineers a refreshing shift. He demystifies capitalism, calling into question the "magic of market forces" and the myth of trickle-down, and looks beyond often misleading abstract indexes and statistics. He refocuses an analytical economic lens on the struggles of people. Yates reminds us that though neoliberalism may have won the day and that vast discrepancies of wealth divide the world, there are cracks even in capitalism's walls.

Kanishk Tharoor is a junior in Davenport