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Economic Disequilibrium: a Philosophical Analysis of Economic Inequality, Property Rights and the Future of Democracy

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Economic Disequilibrium: a Philosophical Analysis of Economic Inequality, Property Rights and the Future of Democracy Economic Disequilibrium: A Philosophical Analysis of Economic Inequality, Property Rights and the Future of Democracy Submitted to the School of Conflict Studies in partial fulfillment of the requirements of the Doctorate in Conflict Studies Saint Paul University, Ottawa Date: September 15, 2019 By: Marie Constance Morley Supervisor: Professor Vern Neufeld Redekop Committee Members: Professors Francis Peddle, Dominican University College, Rajesh Shukla, Saint Paul University & Malcolm Sawyer, Leeds University, Hélène Tessier, (4th Examiner), Saint Paul University, © Marie Constance Morley, Ottawa, Canada, 2019 Acknowledgement The acknowledgements for this thesis reflect a journey through university courses followed-up with questioning, research and communications over many years. Thank you to professors at the University of Alberta who endured my endless musings about economics and epistemological problems and encouraged my work, including Linda Trimble and Michael Percy. I am extremely grateful that Professor Vern Neufeld Redekop accepted my PhD proposal and the challenge of being my thesis Supervisor. Professor Redekop persevered through long discussions, offering insights, resources and supporting my work through all the stages and demands required of completing PhD coursework and a thesis. I thank Professor Malcolm Sawyer whom I met by chance at a Social Economics Conference, and who introduced me to the work of Michal Kalecki. Professor Sawyer kindly provided generous support in research and critique of my work on economic matters; all errors or gaps in my discussions of economics are my responsibility. I also thank my PhD committee members, Professors Francis Peddle and Raj Shukla for their thoughtful questions and reports. Thank you to Professor Gregory J. Walters for introducing me to the work of Alan Gewirth and for helping through discussions on the nuanced meanings of his concepts and framework. As well, Professor Walters’ generous editorial advice on two earlier versions of the thesis is much appreciated; I accept responsibility for all errors or omissions in discussions or applications Gewirth’s theory of human rights. I thank my colleagues and Faculty and Staff in the Conflict Studies PhD program and my classmate Dr. Sylvie Lemieux for support and friendship. Thank you very much to Bill Redekop for a Scholarship. A big thank you goes to Kaleb, Cassie, Austin, Cails, Ted, Madeleine, Nathan, Dave and Justine who all supported my journey. I thank Gary Sealey (who left us in August 2019) and Hugh Nelson who gave me material and moral support in countless ways over the past three years, including special dinners and philosophical discussions on the state of our precious world. Finally, my journey could not have happened without the support of Rita and Gordon Morley who are no longer with us but whose love remains encompassing. II ABSTRACT The problem of extreme economic inequality, publicly recognized since the 2007 – 2009 Financial Crisis, gives rise to divided political and economic ideological views often leading to conflicts. Analysis of inequality in the Post-World War II era reveals that the historical process of financialization is due to market deregulation, technological changes, innovation of financial instruments, increased investment activities and bundles of claim rights traded around the world. Orthodox economics treats rights and conflicts as exogenous to the traditional equilibrium model that collapses a property right into a choice and market determined prices. Without explicit justifications, laws can favour traditional property rights for large corporations and investors over rights of labour, as seen in corporate bankruptcy settlements paying-off investors before pensioners. This thesis draws from literature bases in economics, conflict studies and philosophy. This thesis argues that Alan Gewirth’s theory of rights and epistemological foundation in generic rights to freedom and well-being required for action, offer a framework to explain how degrees of need and risks of self-contradiction are involved in economic and political decisions and actions. Human rights require that needs be met in conditions of possibility for productive agency required for purposeful action-taking in everyday life. Our economic literature review describes struggles explaining historical cycles. Post-Keynesian and Kaleckian economists rely on disequilibrium to explain reality whereas in orthodox economics market equilibrium assumes reconciliation of all conflicts over rights, and cycles are caused by unexpected exogenous shocks. Another economic review reveals foundational problems and difficulties in public policy-making to manage liquidity, interest rates, currency values, and unemployment. All these factors can negatively affect real-life situations for the least developed and indebted nations and all humans struggling to meet basic needs. The prevalence of social choice theory supports the use of orthodox equilibrium models that lead to devastating austerity policies based on preferences. Potential for devaluation of labour raises questions of the relations between money, humans and property rights and claims to wealth. An evaluation of research findings using Gewirth’s epistemology reveals how a range of different economic approaches remain tied to traditional economic equilibrium, property rights and the competitive individual that sustains conflictual relations between rights and community. The antecedentalist and consequentialist justifications of property rights form the bases of Gewirth’s analytical framework. Gewirth’s two justificatory bases of rights are used to gain insights into conflicting economic approaches. Gewirth’s philosophy and conceptual framework are used to explain inequality and describe economic disequilibrium dividing wealthy and poor, yielding social space for conflicts that can spiral out-of-control. Gewirth’s generic rights to freedom and well-being are needed for mental equilibrium, and form the bases of political democracy and economic democracy. Historical evidence of financialization and mounting inequality along with theoretical evidence problems related to market fundamentalism rooted traditional rights, shows that capitalism is threatening democracy which can be usurped by totalitarian or fascist leaders. We conclude that Gewirth offers an alternative ideal in social relations built upon mutuality of actions and rights, leading us to a concept of equilibrium based on political and economic democracy. III Table of Contents 0. Introduction ……………………………………………………………. 1 0.1 Statement of the Problem …………………………………….. 1 0.2 Purpose of the Study ………………………………………….. 14 0.3 Hypothesis and Guiding Research Questions ……………….. 25 0.4 Methodology ……………………………………………………. 29 0.5 Outline of the Thesis …………………………………………… 35 1. Economic Inequality, Conflicts and Theoretical Foundations ……… 40 1.1 Historical Background …………………………………………. 42 1.2 Conflict Theories: The Greed – Grievance Debate …………... 67 1.3 Foundational Concepts in Economics …………………………. 77 2. Economic Approaches and Historical Long Waves ………………….. 91 2.1 Keynesian Macroeconomics: Problems and Debates…………. 92 2.2 History and Economic Cycles …………………………………. 98 2.3 Michal Kalecki’s Economics and Long Waves …..…………... 105 2.4 Struggles of Post-Keynesians and Monetarism ………………. 110 2.5 Marxist Views of Long Waves ………………………………….119 2.6 System Dynamics and Chaos Approaches ……………………. 125 2.7 Environmental Crisis and Long Wave Cycles ………………... 127 3. Claims, Conflicts and Property Rights ………………………………… 140 IV 3.1 Conflicts in Economics …………………………………………. 141 3.2 Ordo-liberalism and Democracy ………………………………. 157 3.3 Monetary Policy-Making ……………………………………….. 164 3.4 Social Choice Theory: Preferences and Property Rights ……... 174 3.5 Problems with Money and Value ……………………………….. 181 4. Alan Gewirth’s Philosophy of Human Rights…………………..……..... 191 4.1 Literature Review to Situate Alan Gewirth …………………..... 191 4.2 Human Rights and Morality in Action………………………….. 198 4.3 The Principle of Generic Consistency ……………………………200 4.4 Community of Rights …………………………………………….. 205 4.5 Property Rights and Inegalitarian Harm ……………………….. 209 4.6 Economic and Political Democracy ……………………………… 215 4.7 Gewirth’s Separatist Thesis ……………………………………… 218 5. Economics and Human Rights: An Evaluation ………………………… 224 5.1 Evaluation of Historical Evidence ……………………………… 225 5.2 Evaluation of Theoretical Evidence ……………………………. 232 5.3 Evaluation of Economic Policies ……………………………….. 243 5.4 Evaluating Degrees of Need and Risk ………………………….. 255 6. Political and Economic Democracy: Rights and Equilibrium ....……...260 6.1 Actions, Human Experiences and Economic Biographies ……. 262 6.2 Mental Disequilibrium, Actions and Economic Cycles ……….. 268 V 6.3 Aggregative Consequentialism and Disequilibrium ................... 270 6.4 Political and Economic Democracy and Conflicts …………….. 275 Conclusion ….. ……………………………………………………………….. 280 Appendix I ……………………………………………………………………..288 Appendix II …………………………………………………………………… 289 Appendix III ………………………………………………………………….. 290 References …………………………………………………………………….. 291 VI List of Abbreviations ABCP Asset backed commercial paper AFP Americans for Prosperity AI Artifical Intelligence BCBS Basel Committee on Banking Supervision CDOR Canadian Dollar Offered Rate CFPB Consumer Financial Protection Bureau CFTC US Commodity Future Trading Commission CMHC Canadian Mortgage and Housing Corporation CGFS Committee on the Global Financial System CDO Collateralized debt obligation
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