The world is in trouble.
My generation can’t afford to do things like buy homes and start families. In the United States, birth rates have declined steadily since the last financial crisis.
And we’re not out of the woods yet. As births hit a thirty year low, economists wonder if this signals yet another recession. As would-be parents lose confidence in their ability to generate the income necessary sustain a family, they logically cut back on their conception plans.
Meanwhile, even without an explicit crisis, we’re living in difficult times. The share of national income going to working- and middle-class Americans continues to drop. Adjusting for inflation, workers are making less on average than they did in 1988. Meanwhile, profits soar:
Why is this happening? Why is the economy leaving so many people behind? How can we have so much profit, but so little going to everyday people?
The answers are complex. Finance is a system that’s almost as complicated as modeling global weather patterns. The shape of today’s world is dictated by the goals of financiers, political elites, and ultra-rich business leaders. Their incentives are shaped by complex financial instruments, tax codes, and most of all, a deep and gnawing fear—central to the lives of every human—that no amount of money will ever be enough.
Understanding our place in this system is the only chance we have of healing its sicknesses. But how can we make sense of something with such global complexity?
We need to learn how the economy actually works. Unfortunately, our economics classes didn’t offer us nearly enough tools for this job.
Here are some books that can help.
Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century
Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century
This widely acclaimed book, first published in 1974, was a classic from its first day in print. Written in a direct…amzn.to
Have you ever felt that something is wrong about work? Ever get to Sunday evening with a feeling of dread, knowing your week is about to start and you’re not in control of your everyday life? Even with jobs we like, with coworkers we love, work can feel so disempowering and frustrating.
In Labor and Monopoly Capital, Harry Braverman tries to explain:
The reduction of the worker to the level of an instrument in the production process is by no means exclusively associated with machinery. We must also note the attempt, either in the absence of machinery or in conjunction with individually operated machines, to treat the workers themselves as machines.
It’s profitable to codify the process of creation as a series of repeatable, scalable, discrete steps. Production is an enormous mechanism, of which workers are individual parts. The more fungible the workers, the more control and flexibility the business has over the production process.
Being a cog in the machine doesn’t always feel great. Why do people continue doing it?
First, workers are separated from the means with which production is carried on, and can gain access to them only by selling their labor power to others.
The worker enters into the employment agreement because social conditions leave him or her no other way to gain a livelihood.
Labor and Monopoly Capital is, in other words, an introduction to class relations, who has power in the workplace, and what goals shape the structure and management of our jobs.
There’s a reason I put this book first. The powerful fiction of the American dream discourages us from fully considering class. The deal for Americans is that, with hard work, we should be able to determine our own class. Wherever we are today, we can be somewhere better tomorrow.
Meanwhile, class—the economic resources we have, the opportunities open to us, and the goals we pursue based on these assets—is essential to understanding why the world works as it does. To ignore it, or to pretend it’s irrelevant, is to blind ourselves to reality.
Debt: The First 5000 Years
Debt shapes the world we live in perhaps more than any other social construct. Debt determines our individual opportunities. Debt creates reins for foreigners to set the paths and policies of entire nations, without ever loading a single gun. It was debt that created the tangle of financial instruments that led to the 2008 financial crisis.
In Debt: The First 5,000 Years, David Graeber explores its past and present.
I could have begun by explaining how these loans had originally been taken out by unelected dictators who placed most of it directly in their Swiss bank accounts, and ask her to contemplate the justice of insisting that the lenders be repaid, not by the dictator, or even by his cronies, but by literally taking food from the mouths of hungry children. Or to think about how many of these poor countries had actually already paid back what they’d borrowed three or four times now, but that through the miracle of compound interest, it still hadn’t made a significant dent in the principal.
Graeber’s perspective is as much critic as anthropologist, and he works to explain the history of debt better than what we were given in school:
In fact, our standard account of monetary history is precisely backwards. We did not begin with barter, discover money, and then eventually develop credit systems. It happened precisely the other way around. What we now call virtual money came first. Coins came much later, and their use spread only unevenly, never completely replacing credit systems.
Economics: The User’s Guide & 23 Things They Don’t Tell You About Capitalism
Both of these are by economist Ha-Joon Chang. They provide a strong foundation for understanding economics, by explaining how broad concepts fit together, and demystifying common issues in current events. I enjoy Chang’s style: it’s approachable and compelling, while deeply respectful of the reader’s time and intelligence.
In 23 Things They Don’t Tell You About Capitalism, Chang explains the cult of shareholder value, tying its impact back to real events:
Shareholders may be the owners of corporations but, as the most mobile of the ‘stakeholders’, they often care the least about the long-term future of the company
William Lazonick, the American business economist, estimates that, had GM not spent the $20.4 billion that it did in share buybacks between 1986 and 2002 and put it in the bank (with a 2.5 per cent after-tax annual return), it would have had no problem finding the $35 billion that it needed to stave off bankruptcy in 2009.
Chang is also a critic of the thinking that suggests the “the market” is some natural space, where interference from government regulators does damage to its workings. From Economics: The User’s Guide:
Once you know that lots of things that cannot be bought and sold today — human beings (slaves), child labour, government offices — used to be perfectly marketable, you will stop thinking that the boundary of the ‘free market’ is drawn by some timeless law of science and begin to see that it can be redrawn.
Chang is a believer in capitalism, yet a sharp critic of its irresponsible stewards. In his recap of capitalist industry, he gives appropriate attention to the costs borne by colonized peoples:
There is a long-running debate on whether capitalism could have developed without the colonial resources of the sixteenth–eighteenth centuries — precious metal to be used as money, extra food sources such as potato and sugar and industrial inputs such as cotton.While there is no question that the colonizers greatly benefited from those resources, those countries would probably have developed capitalism even without them. There is no question, however, that colonialism devastated colonized societies.
Principles is a victory lap by hedge fund billionaire Ray Dalio. I find a lot to be frustrated by in his analysis of wealth inequality, but I still recommend the book because it reveals much about how the arcane workings of high finance translate to real-world impact.
…in economic terms a chicken can be seen as a simple machine consisting of a chick plus its feed. The most volatile cost that the chicken producer needed to worry about was feed prices. I showed Lane how to use a mix of corn and soymeal futures to lock in costs so they could quote a fixed price to McDonald’s. Having greatly reduced its price risk, McDonald’s introduced the McNugget in 1983. I felt great about helping make that happen.
It’s weird to feel pride about creating an unhealthy fast food staple, but I can’t help but find the process fascinating. Dalio’s tale is one of systems thinking and automated analysis as a path to wealth.
Principles also shows how wealth creates opportunities to protect yourself from economic downturn, in ways that aren’t available or practical to the working and middle classes:
Making a handful of good uncorrelated bets that are balanced and leveraged well is the surest way of having a lot of upside without being exposed to unacceptable downside.
When your resources are limited, so are the bets you’re able to place.
Postcapitalism has an ambitious goal: to describe what comes after capitalism, and to provide an alternative to the looming, ongoing boom and bust crises created by the financial system.
Most compelling about this work is that, while it places its conclusions in rigorous historical and academic context, it has some new conclusions.
While the critics of capitalism have, for a century, clung to the fantasy of its eventual demise, it continues to define our economic reality. Why? Journalist Paul Mason insists it’s because capitalism is an emergent system that adapts to preserve itself:
Kondratieff gave us a way of understanding mutations within capitalism. Left-wing economics had been looking for a process that led only to breakdown. Kondratieff showed how the threat of breakdown usually leads to adaptation and survival.
Intriguingly, it is Mason’s view that information technology is fundamentally incompatible with our existing market premises:
…information goods are corroding the market’s ability to form prices correctly. That is because markets are based on scarcity while information is abundant. The system’s defence mechanism is to form monopolies on a scale not seen in the past 200 years — yet these cannot last.
Tip of the iceberg
Of course, economics is a tradition that spans thousands of years. Six books can’t be more than the barest starting point. Still, if you’re anything like me, your economics education in school did little to prepare you for the complex, messy, unequal world we inhabit today. Hopefully these books give you a starting toolset for making sense of the world as it is, and for imagining a more just and equitable world that could be.