Never count on economists to defend the public interest

This is something that should always be kept in mind in economic policy discussions: most economists are pro-Market, not pro-Public Interest.

It is especially important to keep this in mind when we read commentary such as this, in which an economist from one of Canada’s smaller economics departments conflates being pro-market with being in the public interest.

This point is sometimes hard to see, especially since many economists hold to the deeply ingrained syllogism that being pro-market is straightforwardly being in the public interest.

But they are a lobby group like any other, and cannot be relied upon to defend the general public interest.*

Economists, particularly academic economists (and like all academics), rely on, for their social status, research funding and a quiet concious, having the public view them as working in the public interest. And given the majority of economists are true believers in the “market” that inevitably gets conflated with being in the public interest

Cloaking oneself as being in the public interest is of course one of the oldest rhetorical stances to take since like wearing the national flag it clearly puts the speaker in the role of the hero and casts those being spoken against in the role of the villains. This is all the more easy to to do when the terms of conversation are being articulated in fuzzy, ill defined concepts such as the “public interest” and “pro-market”. When an economist uses those terms they have very exotic definitions in mind that most lay people would not readily grasp. Perhaps I am being too charitable: I can’t, in fact, find a definition of the public interest in any my economics text-books.

The public interest is a rather fuzzy notion. We can perhaps all agree that it has something to do with public goods but that just raises the thorny issue of what is and what is not a public good. In any case the argument at least has to be made that a specific policy is in the public good and why. Just standing around hands waiving in the air mindlessly chanting pro-market rhetoric like “free trade” or deregulation does not really cut the mustard.

Indeed after a generation of pro-market policies like financial liberalization and deregulation with cascading financial crises of increasingly damaging intensity culminating in the Great Financial Crisis that was 2007 and from which no advanced capitalist economy has yet to emerge; in which whole nations like Iceland, Greece and Ireland were raised; in which untold millions of workers were put and remain out of work; and as a consequence a massive hole was blown in public finances around the world, it should be clear that pro-market policies are not always or even in the majority of cases un-problematically in the public good to say the very least.

Notice that even if you are want to argue that it was bad government regulation in the US which caused the Great Financial Crisis the fact is that decades of financial liberalization and deregulation (pro-market policies) directly led to the formation of global investment and insurance markets which made sure that a “made in the USA” problem had serious global consequences. And it is not just that economists did not foresee these negative consequences they actually argued in favour of these policies on the grounds that such a crisis was less likely to occur and that the consequences would be less severe in the event that it did occur because these pro-market policies allowed risk to be more evenly spread. So much for theory.

That a pro-market economist is given a national soap-box on which to conflate being Pro-market with being in the Public Interest does not bode well for the Public Interest.

* The first four paragraphs are an inverted paraphrase of the linked commentary. I apologize to my readers for reproducing a very clichéd prose style.

The right of the community to know and love one another

Guest Post By Elleni Centime Zeleke

Hot on the the heels of my last post on romance and because I am still high from celebrating international women’s day I want to add a few more discussion points to the topic of love and capitalism.
I will start by restating some basic premises and then posing a question.

So, in the context of advanced capitalist societies self-interest is the only form of subjectivity that we are allowed to have access to. We believe that we can overcome the experience of being self-interested humans within the context of a romantic love relationship, but in fact the structure of our society is such that we can really never reconcile self-interest with the reproduction of longer-term cycles of community and collective life.

If we are rich or middle class enough,sometimes we survive as a couple and suffer the illusion that the needs of the individual have been reconciled with the needs of the collective (society). After all money can buy you love, houses, and comforts that keep the couple together and so it reconciles the couples desires with the needs of a consumer based society to reproduce itself.

So, to be sure in order to eat decent food coupling might in fact be a necessary institutional requirement of our time. But that is the point, it is a very historically specific institution, and as a social practice it is more akin to visiting the toilet than any real creative ambition.

Now, to be sure humans are also animals and so we make pragmatic choices in order to survive. It is better to piss in a toilet than to piss randomly and wherever the wind takes you.

But in this sense romance turns us into animals driven by instinct rather than self-critical thought.

Interestingly, we like to gaze at backward women in other countries and feel sorry for them because we see them as passive victims of patriarchy. But romantic coupling is a social arrangement produced in the context where we are all passive victims to narrowly defined goals that are motivated by self-interest rather than self-critical and collectively defined activity. And yet, as we have been saying, to act as a self-interested human being is not natural, it is a political project that we all accept in the advanced capitalist countries as nature and so we fashion our love and our behaviour accordingly.
In my previous post I told the story of the prisoner because he offered a different way of being in the world. His confidence in loving me came from the fact that he did not doubt for a moment that we shared the same world. As a loving man he insisted that the collective be the front and centre of any decision making, even if his body suffered to some degree because of that. His act of love was a sign of maturity that moves us beyond the animality that most romantic partners indulge in for the entirety of their lives.

Marx asked us to rethink whether it was possible to reconcile the right of poor people to survive with a regime of private property rights. I do think that a corollary to that question is whether it is possible to reconcile romantic love with the right of the community to know and love the world that we all have already made and need to remake together?

Public Investment, Insitutions and the Boomer Greed Hypothesis

That would seem to be the policy advice emanating from both New Keynesian and Post Keynesian economists. With capacity under-utilization and insufficient private investment there is neither an argument about inflation or crowding out to be made. Yet the discourse on fiscal consolidation is not really a mystery. Thirty years of the Sky is falling, the Sky is falling from the usual suspects has a way of becoming common (read median voter) sense. Now they want an adult conversation after having given succour to Victorian nonsense about fiscal chastity and “less is more.” My sense is the horse is out of the barn and it will take a generation before we can have an adult conversation.

There is a generational element to this. We can call this the Greedy Boomer Hypothesis (GBH). The boomers made off like bandits. Their parents received steady real increases in wages in step with productivity; near full employment in the labour markets; when they left the house they got to take advantage of the universal programs that were created by their parents and previous generations (and here I include unions); and later universal programs that they would create. Yet as soon as they started moving through their best earning years and into retirement they began supporting the dismantling of the public supports they took advantage of. That public health care is something they still support is more than a little telling. There are of course class dynamics at play here that I will not bother elaborate on. Class like the occupation of Palestine is something serious academics do not talk about.

What seems evident is the boomers are not going to go for increased public investment because in their median brain the basic equalities are: increased public investment = increased taxes = lower standard of living in retirement. I could read back the arguments over CITs and capital gains in this light: where for example, are retirement savings parked? The reaction over trusts is rather telling in this regard too. And the list goes on: Unions negotiating for protecting the integrity of pensions while agreeing to a 25% pay cut for surviving workers. Want a national securities regulator? All you have to do is convince the boomers it will secure their investments.

Do not get me wrong I am all for solidarity (indeed I think it is a great idea and an even better practice). I spent my 15-28 with my cohorts in the labour market with the reality of a 19 -25% unemployment rate. And when I did make the choice to retrain what did I get? The trebling of my tuition and a 40,000$ student loan. Apparently higher education had magically become a private good once the boomers were done with it. You can in fact take the greedy boomer hypothesis pretty far.

We could characterize neoliberalism as a system—partly—designed to ensure that the younger generation works harder for less in order to ensure the living standard of the last generation in their retirement. This analysis is of course as highly flawed as the median boomer thinking that austerity in the progeny is the key to the satisfaction of the needs of the progenitor. But Not unlike the peasant response to have more children the more scarce food becomes. But the boomer greed hypothesis is limited: there are poor boomers who will go from poor to impoverished in their old age—and it must be added never took advantage of the Glorious Welfare State that temporally was. There is also the fact that the successful upper middle class boomers have done a great job of making in family generational transfers to their children in order to make up for the savaging of public institutions: just where do you think couples in their late twenties and thirties get those down payments for buying a house? So try as we like the question of class cannot really be suppressed. Neoliberalism then is partly about protectionism; about freezing the opportunities for vertical betterment. The upper class—you know those people you do not know and never will—are perfectly happy with the median boomer mind set. They sit on top of the pyramid and by definition do not really need public institutions outside of courts to settle contract disputes. Everything else from roads, to police through to health care and education they can afford on their own: and increasingly the more so inequality grows.

I am not going to conclude with some perfunctory paragraph on the limits to the median boomer mind and the consequences of its myopic vision. It is pointless.

Reform of the Century? US Health Care

To my mind the most interesting aspect of the health care debate south of the border is just how far off the actual legislation was from the rhetorical flourishes and hubris.

Paul Krugman thinks the fact that Markets Yawned is evidence of just how crazy those to the right of him are. What he misses of course is that the Yawn betrays just how little was really accomplished. Between the hyperbolic claims of Stalinistic socialism and the hubris of “Reform of the Century” what the actual legislation would seemingly indicate is just how impossible it is to get good coherent legislation drafted in the US. The markets yawned because they seem pretty convinced it is more or less business as usual in US health care.

The over the top rhetoric may produce good sound bites for the coming elections but they really do serve to mask the degree to which the US political system is almost completely captured by big, especially myopic and above all rich private interests. That all the political actors want to engage in theatrical spectacle is more than a little telling.

Why increasing tuition fees is not the solution to adequately funding university education in Quebec

Quebec need not go down the same ideological road to policy making as English Canada. It is quite nearly always the same plaint: low tuition = low quality university education. With the implicit or explicit always being higher tuition = high quality university education. Indeed this is the form that Lucien Bouchard’s recent pronouncement on tuition fees takes. It is reported that Mr. Bouchard opined:

“Quebec universities are dangerously underfunded compared with those in Canada and North America.…. These precarious finances have now reached a critical stage. If nothing is done, it is students themselves who will suffer first. And surely, inevitably, so will all of Quebec society.”

Pretty ominous stuff. Luckily I have had the pleasure of teaching in universities from British Columbia to Ontario and now Quebec. And luckily, or unfortunately, I was in each province both as a student and then as a professor. So I can attest to the before and after of tuition hikes (well not yet in Quebec). Here is what I observed. While the need for tuition increases was always cloaked in the garb of quality education it has rarely resulted in higher quality university education. In both the cases of British Columbia and Ontario I observed the following:

(1) There was not an increase in professorial pay beyond the CPI (although some funds were made available to attract Stars).

(2) There was not a decrease in class sizes. They either remained the same or were scaled up so that the professor to student ratio was decreased; that is, more students per professor. And this has been at all levels from the bachelors through to the Ph.D.

(3) There was not an increase in the number of tenured faculty. In fact tuition increases were accompanied by an increase in a reliance on sessional faculty. And this is directly related quality. Sessionals get paid much less than their tenured counter-parts they must therefore take on a greater teaching load to make up for the difference; often teaching at two and sometimes different universities during the same semester. How much time do you think they can spend on quality education? Couple this with the increase in class sizes and the picture is less than high definition quality.

(4) Nor did I notice an increase in expenditure on support staff. The consequence of which is that for both students and faculty the level of administrative services is approaching that of Rogers or Bell: that is one level above Kafkaesque.

Nowhere in Mr. Bouchard’s comments was there any indication of what he meant by quality of education save for some vague reference to competitiveness. My suspicion is that what he really was talking about is a move towards greater cost recovery via user fees. That is, he thinks Quebec should be moving towards full cost recovery of the expense of running universities through raising tuition fees. That this much is a standard liberal economists preference is beyond doubt. Indeed, they have been the protagonists of this position across English Canada. And I have no doubt there is a cavalcade of liberal economists earning publicly subsidised salaries ready to throw in on Mr. Bouchard’s side.

Yet that Mr. Bouchard is little confused is evident by the fact that full cost recovery is predicated on the idea that the value of a post-secondary education accrues solely to the individual student (that is education is a private good) and not at all to society in general. Oddly at the same time he wants to maintain that the underfunding of Quebec universities, owing to low tuition, will eventually cost Quebec society in general (re-read the quote above). Either education is a public good with significant benefits flowing to society from an increase in the average age of the citizenry or it is private good in which the individual student captures most or all of the benefits. Mr. Bouchard wants it to be both. This is indeed a circle that is hard to square, although Bob Rae made a valiant effort at such double speak in his commission into tuition fees in Ontario.

Let us however leave the question as to the quality of higher education and the question over its public and private goods nature to one side. Let us assume all benefits of higher education solely accrue to the individual student. Let us further concede that university thus ought to be self financing: i.e., total cost recovery. There still remains the question of how to raise the money to do this.

Mr. Bouchard’s preference is apparently for front end financing a.k.a. tuition increases. But can this position be justified within the framework of a private goods approach to higher education. Normally yes. But the problem is that in Quebec and in the English Canada university education was previously heavily subsidised by the general citizen regardless of whether or not they went to university.

Let us Assume Mr. Bouchard gets his way and the liberals raise tuition next year three fold. On what basis, that is sense of justice, should it be that those who received their university degree this year and years past not be subject to any cost recovery? That is, if I received my degree three years ago I have the benefit of a high subsidy but those graduating three years from now must absorb a much higher percentage of the cost of their higher education. Simply put, I received a benefit the next generation of students will not. There is simply no way to justify this generational inequality of treatment.

However if the cost of higher education were to be financed through higher marginal tax rates then this disparity could be fully mitigated through a general tax increase on professional incomes (say above 70,000). To simply increase tuition amounts to an inter-temporal (intergenerational) transfer of wealth. Using the progressive tax system however would ensure that those who most benefit(ed) from a university education pay a proportionate share.

This also has two added benefits. First, those students who choose to go into lower paying professional jobs like k-12 education, social services, etc., are not unduly burdened by student debt. And second that the prospect of arduous student debt does not deter those from lower income families from pursuing higher education. Well it may be true well targeted bursaries for lower income families could ameliorate this problem to some degree. However in practice the calculation of lower income is not so easily defined and when coupled with the first point the raft of bursary programs necessary to compensate is unduly complex when compared to the relatively simple instrument of progressive marginal tax rates. That Mr. Bouchard has only thought the matter through to the extent of increasing tuition rates suggests that he, like the liberal economists he appears to be taking his crib notes from, is unduly burdened by a simplistic ideology when what is really called for is a pragmatic and realistic approach to policy making.

If we take both of these points together we can conclude that the demand for higher tuition fees has little to do with higher quality post-secondary education and everything to do with cost recovery. This being the case it stands to reason that all the generations which benefited from a higher education degree should shoulder the burden and not just the future crop of university students.

Quebec need not go down the same ideological road to policy making as English Canada.