A Different Road

If the malaise that has gripped both the Canadian political system and our economy is quite deep, it is nevertheless not too late to fix it and put the country back on a sustainable and more equitable footing.  To do so, though, will require transformative change by new leaders prepared to embrace far-reaching reforms.

Most of our political class, the senior ranks of the public service, the greater part of the media, educators in our economics and business schools, and those whose incomes are dependent on the fortunes of large corporations or who are linked to the financial services economy have become either enthusiastic supporters or passive followers of the ideology of neoliberalism.  Contrary to what badly mistaken ideologues such as Friedrich Hayek, Milton Friedman and their acolytes in Canada have propagandized, a market-based society tethered to an unfettered corporatism is actually the real road to serfdom (and to ecological blight).  Environmental degradation & species loss; high levels of personal indebtedness; historically low rates of household savings; pronounced and worsening income inequality; a falling level of national economic complexity; depreciated public infrastructure; increasing incidence of chronic and preventable disease; and a growing sense of despair among the young – all of these trends attest to a deep underlying dysfunction in Canadian politics and society.  The two old line political parties which have alternated in government at the national level for 150 years, have presided over debt servitude for Canadian households and a Canadian economy overly reliant on carbon-based energy exports and residential real estate for wealth creation.

An economic thinker who predicted our current dystopia seventy years ago was, for a time, a colleague of Ludwig von Mises, a co-founder of the neoliberal Mont Pèlerin Society, the forerunner of many other pro-free market think tanks including the Fraser Institute in Canada.  Karl Kapp (http://www.kwilliam-kapp.de) was a German-American economist who many now regard as the father of modern ecological economics. Having completed a doctorate in economic planning and foreign trade at the Graduate Institute of International Studies in Geneva where he encountered von Mises, Kapp, in 1937, moved to the US to teach and research.  Kapp had a lifelong preoccupation with human needs, environmental degradation, and the critique of a market system based on so-called rational choice, self-regulating equilibrium, and exchange values.  Courageously, in the 1950s, Kapp signified his alarm at the emergence of the neoclassical (Chicago) and libertarian (Austrian) schools of economics by publishing a brilliant analysis of contemporary political economy entitled The Social Costs of Private Enterprise (1950).  The book makes the observation that large private businesses push the social and environmental impacts of their activities off their own books and on to third parties, future generations and society at large.  In hindsight, his book is a devastatingly accurate forewarning of where our current variant of laissez-faire economics, crony capitalism and neoliberal thinking would inevitably lead us.

Of Kapp’s many original contributions, two stand out.  The first is his conviction that human beings have no exchange value; instead, human life has an intrinsic value and all efforts to monetize it are in conflict with both reason and human conscience. Contemporary cost-benefit analysis is premised on the spurious notion that human existence, survival or quality of life can be put on an equivalent footing with considerations of cost, profit, technological advance or any other efficiency or convenience metric.  Second, Kapp repudiates the ruse by which neoclassical economics offers to alleviate health or environmental ‘externalities’ with ad hoc cash payments (compensation), privately purchased insurance products, or through recourse to tort law to address injury.

Kapp advanced a different idea, that of ‘social minima’ which are a set of universal, minimum and “inviolable standards of production and consumption” (Clive Spash in S. Berger, The Heterodox Theory of Social Costs, 2016), set out beforehand to guarantee basic human needs and maximum tolerance levels.  For Kapp, for example, social minima stipulate the maximum permissible depletion of soils or of ocean food sources (fisheries) or, alternatively, maximum permissible levels of exposure to concentrated pollutants.  Social minima can also be used to regulate, through reference to the latest bio-social research and empirical data, minimum standards of say housing or transportation.  This is very different from how such goods are currently allocated in a “free market” where ability to pay, which is a simple surrogate for wealth, or insider lobbying by elites, are often the decisive factors.  In sum, Kapp is associated with a ‘rational humanism’ that strives to adjudicate our limited resources and primary needs equitably, in stark contrast to the competitive, zero sum, and outcome-indifferent manner that the free market ordains.  Many Canadians, and especially the younger generations, can see the serious shortcomings of the latter approach and, I believe, recognize that the status quo is no longer viable.

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