Economics for the many not the few

We need a new economic model, one that does not perpetuate inequality and ignore the productive work of women, says Jess Berentson-Shaw.

People do love to bag an economist. And not without good reason. The economy is like a railway network.  We use laws and policies to build it and take people to particular places. The economic tracks that policy makers, economists, business people have laid, have given us a singular focus on profit. It is causing some significant problems.

But, there is a group of economists talking about laying different economic tracks.

Ann Pettifor, Kate Raworth, Mariana Mazzucato, Prue Hyman, Marilyn Waring and many others before them such as Julie Graham and Katherine Gibson. These economists want economics to respond to the impacts of our extractive means of growth and the unequal distribution of benefits in society. Problems that have resulted from a narrow and excluding economic model.  

We need new ways of thinking about and talking about economics in the mainstream. If people continue to muddle about talking about individual choice and market solutions, people become more alienated from our private and public institutions.

It is well understood that income and wealth inequality occurs between genders, especially between men and women who have children. For example women in New Zealand experience a 4 percent pay penalty in the 10 years after they have a child. Men increase their earning power over the same period. Women retire with less, and have fewer assets. Most women are also the primary caregivers of children, the elderly and those with disabilities.

The economic model we have favoured in the west explains the resulting economic inequality women experience as the inevitable result of individuals choice’s and market forces. Yet, it is people - policy makers, people in industry, financial institutions, and other groups in society - who have made choices to lay down particular economic tracks. Tracks that mean we are on a journey to maximise profit from market based work, and minimize or ignore non-market based work, much of it done by women.

Women give birth to children, raise them, run families, care for elderly parents when they become ill etc. This work is a productive good, a basic building block of a healthy society. We are, after all, all dependent at various stages of our lives and need care to survive and thrive. This sector is as important as the more formally constituted public sector and the market.

Without this work done by women neither the public sector or the market could function. These institutions are profoundly interdependent. Despite that, this labour, is largely unrecognised in economics and in policy making, and results in an income and wealth differential between men and women. The choice policymakers make is to treat caring work as a subsidy to others’ financial wellbeing.

There is also an imbalance in income and wealth between Māori and Pākehā in New Zealand, at all ages and stages of life.

In the 1840’s politicians, persuaded by business men, made laws that allowed mass confiscation of Māori land (the economic base of Māori), and put it into the hands of the European. Today much of New Zealand’s better off people invest in property and land, investments that are not taxed in the same way as other investments. Wealth inequality between Māori and non Māori is neither natural nor inevitable, rather it results from the laws and policies that people have made and continue to make. Sure, individual choice comes into these things, but they do not have nearly the power of policy and business practice to shape people’s lives and deliver imbalances between groups.

Out of touch

People in power (and economists) do love to quibble over the details of these imbalances: “is income inequality worse than it should be?”; “women are not really paid less they just do less paid work”; and “wealth differentials are just about housing costs, so it doesn't count”.  

For families struggling to find homes to rent, or money to pay power bills, or women who work at home, out of home, and all the time, such discussions are oblivious to the reality of their lives. It cements a widespread belief that people in politics and business have rigged the economy against most people in favour of those already benefiting the most. And arguing whether inequality is really any worse than it was 10 years ago, or whether pay imbalances are about choice, hardly counters the view that economists act in the interest of the few and not the many.

A genuine commitment to a more inclusive economics profession is different from including a few ladies in your staff.

The result is that too many people feel alienated, despondent, and disengaged from the decision making systems which they are equally a part of. They start to distrust economists, economics, politics and ALL governments. And that is a problem for democracy.

And who can blame them? People in power have emboldened a economic track that values the individual over the collective, the market over the role of Government, and money over other issues like equity, well-being, and environmental health.

So, how do we ensure that the economic tracks laid down are more inclusive ones? Ones that will ensure that we have a good society, and a strong and durable economy for the longer term?

We are not short of ideas…..though perhaps people in politics, business and economics lack the motivation to act on them.

First, senior economists and employers need to commit to an inclusive profession.

While the face of economics has changed somewhat in recent years, it is still dominated by one group. Especially at senior levels. You only need to lift the lid of No 1 The Terrace to confirm this. Being a woman, being Pacific, or having a disability does not inevitably make a person a better economist (though it is a hypothesis we should put to the test!), but real-life experience is a great teacher.

A genuine commitment to a more inclusive economics profession is different from including a few ladies in your staff. It embraces a practice where people don't shy away from exploring the built in inequity for certain groups. Rather they seek solutions.  In research on economists, the concerns of women economists were found to be significantly different from men's, and the solutions they explored differed considerable, with a great focus on Government solutions.

Second, people in schools and universities should take a pluralistic approach to economics.

Economics is a socially driven field. Classical economics has given us a lot that is of use. Yet politicians, policy makers, business people, and economists have used it to the exclusion of all other ways of understanding and valuing people, their activities and the world. And people tend to teach it as if it is the only system. Public, ecological, community, feminist economics are fundamental. But at the moment they are a nice to have. Nothing says “not important chaps” like consigning the discussion of an entire sector of our productive economy to a 400 level optional paper.

Third, economists commit to assessing impacts on equity.

A key aim for New Zealand is to improve our productivity, and there are many ways to do that. We could for example invest in roading and construction. That will allow some people to live the lives they want, drive to work more quickly, get goods to market in trucks and improve productivity. Yet who drives more, who uses roading transport, who gets hurt when roads not public transport get built? Who works in construction? The means by which we choose to try and improve productivity creates and cements imbalances between people.

We can also grow people and their wellbeing to grow productivity. For example mentally well, flourishing, educated people improve productivity. The tracks we lay will determine who benefits and who does not from the economy.

Fourth we can all talk about economics differently.

As a non-economist, I have to steel myself to step into discussions about economics. Yet it is critical everyone feels they can be part of the conversation. Technocratic jargon and a focus on money alone mean nothing to most people. People are the economy, we shape it and create it. The Labour-led Government's wellbeing economics is an attempt to talk about economics differently. To get to grips with what actually matters in people’s lives, to label it and measure it.  We can applaud that. But wellbeing economics will get stuck if the assumptions that inform the work come from our existing economic models, and the people in the profession don't reflect the change in focus.

Money is a tool, not the destination. We use it to help achieve happiness and fulfilment. The money itself doesn't give us that. It even erodes it. If people have unstable jobs, or wages, cannot afford to live in a place they call a home,  need to work away from their families for so many hours to strip all the joy from life, or feel that the system is rigged, then that is a system not working for us.

Creating a good society means laying down economic tracks that enable everyone to arrive at a meaningful life, rather than keeping us all on a train whose only destination is profit. Those tracks start with changing the way people practice and talk about economics.

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