What would a good alternative, to the current system, look like?
It follows that the solution is to break the money link between economic power and political governance any way we can!
The first step is to spread the awareness of the nature of the problem. The specifics of the solution will vary from country to country.
It will be objected that political power cannot direct the economy. The response is that neither can economic powers alone acceptably direct political power. Nor should political power over economic interests be total. But we now have a system where the economic actors have the vast preponderance of political power.
The second step is to publicly critique what currently passes for the official economic theory. None of the theories commonly taught in universities acceptably explain the functioning of the existing system. There are better approaches available. They are not being pursued because the existing theory has been found to be useful as propaganda for the existing economic elites. This has to be drilled into the popular mind.
The third step is to build popular support for political change. This will require electing enough legislators to, first, block the kinds of economic interventions that are keeping the existing system on life support. Then it will require a governing majority. Fundamental change should be created by legislating and, as likely will be necessary, embedding in constitutional amendments, public and transparent means of financing elections. We must insure that political power serves all of the people, not just the wealthy. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
There are better approaches available. They are not being pursued because the existing theory has been found to be useful as propaganda for the existing economic elites. This has to be drilled into the popular mind.
What are these better approaches? I think that would be also important to spread - if they know and understand more about these other/better approaches the more they will demand them and also vote for those people who will most likely implement them.
Much of the nature of contemporary economics derives from the circumstances of its creation. The best single work I know on this subject is Karl Polanyi's The Great Transformation which I am currently re-reading. It was written in 1944 and is simultaneously an economic history of Europe from the Renaissance to 1944 focusing strongly on England, site of the first industrial revolution and the first social transformation from a traditional society to a market driven industrial society. Polanyi emphasizes the inherent nature of economies being embedded in the social structure of the society in which they operate and he illuminates the history of economic thought by illustrating the social and economic history that was the context for the development of that thought.
Polanyi has been studiously ignored by those in the academic mainstream of economics and political science, though he is well respected by sociologists and anthropologists, though many would quibble about the dated nature of the work he cites. I found him to be eminently readable, though my re-reading is going slowly. This is because I have learned so much more about economics and economic history since my first reading that I am pausing after each page or paragraph to let another of his continuing profound insights sink in and find its place amongst all I have subsequently learned. I am considering a diary on Polanyi, the classical economists and the historical and social context of their work.
Steve Keen is the most interesting contemporary economist of whom I know. He is producing work that is a distinct improvement over the existing version of Mainstream Economics. Amazingly, mainstream economics does not include time in their calculations, which are based on equilibrium analysis. So, if it is necessary to consider developments over a period of time, the approach is to do an equilibrium analysis of conditions at two different times. The only economic model for which research monies are provided in the USA is the Dynamic Stochastic General Equilibrium Model, or DSGE, which, despite the term "Dynamic" in the title, is an equilibrium model which analyzes all economic decisions as though they are made by a single rational actor. Keen, on the other hand, has developed models that are based on ordinary differential equations which include time as a variable. Further, his models include multiple sectors, such as a labor sector, a banking sector and a business sector. Keen also published a book, Debunking Economics, which is available for $10.00 in electronic form, though it might be preferable not to start with the debunking before having a rudimentary idea of what is being debunked.
Some of my diaries on Henry George and Neo-Classical Economics, on Steve Keen and his work, and on other critiques of Mainstream Economics might be of some use to one who has not previously delved into what is, in its current form, truly "The Dismal Science."
Another single work which puts the development of economic thought into perspective, but which goes into more detail is Nitzan and Bichler's Capital as Power. They come out of a Neo-Marxist background but base this work on the insights of Thorsten Veblen and Lewis Mumford. Mumford describes the "social machine" that has existed since the first river based civilizations and that has enabled rulers to organize the population for production. Veblin was a sociologist who had basic insights into social and economic organization in the USA, including The Theory of the Leisure Class, The Theory of Business Enterprise and Absentee Ownership and Business Enterprise in Recent Times. Veblen stresses the role of "strategic sabotage" both of you own company's production and that of competitors so as to maximize profits and the agency problem that arises when businesses are not run by their owners, among other factors. Capital as Power is a recent work and brings the reader up to the present while also surveying the history of economic thought as it pertains to the reorganization of society in terms of the requirements of capital.
I will try to put together a list of links to short articles that illuminate important aspects of economics in a general manner over the next few days and weeks. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
I know I'm being a bit of a bore about this. It is vitally¹ important to "grok in fullness."
¹ "vitally" isn't the Standard American use of a superlative!²
² Although that exclamation point is. ;-)
