To Reflect and Rebirth

What is the economy for?

The key to understanding responses to Covid-19 is the question of what the economy is for. Currently, the primary aim of the global economy is to facilitate exchanges of money. This is what economists call “exchange value”.

The dominant idea of the current system we live in is that “exchange value” is the same thing as “use value”. Basically, people will spend money on the things that they want or need, and this act of spending money tells us something about how much they value its “use”. This is why markets are seen as the best way to run society.

First, it is quite hard to make money from many of the most essential societal services. This is in part because a major driver of profits is labour productivity growth: doing more with fewer people. People are a big cost factor in many businesses, especially those that rely on personal interactions, like healthcare. Consequently, productivity growth in the healthcare sector tends to be lower than the rest of the economy, so its costs go up faster than average.

Second, jobs in many critical services aren’t those that tend to be highest valued in society. Many of the best paid jobs only exist to facilitate exchanges: to make money. They serve no wider purpose to society. Meanwhile, we have a crisis in health and social care, where people are often forced out of useful jobs because the jobs don't pay them enough to have a standard life.

Pointless jobs People are compelled to work pointless jobs because in a society where exchange value is the guiding principle of the economy, the basic goods of life are mainly available through markets. This means you have to buy them, and to buy them you need an income, which comes from a job.

Our economic imaginations There has been a broad economic consensus for 40 years. This has limited the ability of politicians and their advisers to see cracks in the system, or imagine alternatives. This mindset is driven by two linked beliefs: In the May issue we will have our last series article for this topic, if you haven't read our last article on this please kindly check out our last issue!