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Godard Chapter 1 IDEOLOGIES AND PERSPECTIVES (1) Neoconservative/neoclassical perspective 18th Century philosopher, George Berkeley, challenged the philosophy of materialism by maintaining that so called “real” things are only ideas of those perceiving them. While the weight of philosophical opinion was and remains contrary to Berkeley’s ideas, his work highlights the importance of human ideas and action in shaping the world in which we live. *For more on Berkeley, see http://plato.stanford.edu/entries/berkeley/* The relevance of this to labour relations and the role of trade unions in contemporary Canadian society is that ideas and belief of reality play a crucial part in influencing human action. The lenses through which human beings perceive the “real” world affect greatly, if not exclusively, the nature and evolution of human action. In Chapter 1, Godard identifies various paradigms of belief systems. Their importance is that people’s ideologies and beliefs affect their values and actions. The paradigms considered by Godard are: Neoconservative/neoclassical; Managerialist; Pluralist; Liberal Reformist; Radical. The neoclassical perspective is now considered below. Other perspectives will be considered and posted later. Neoconservative/neoclassical Classical economic theory emerged in the late 18th Century. It criticized the system of patronage in which the government created business and trading monopolies which shared part of their profits with the government. Economist Adam Smith in 1776 produce his work The Wealth of Nations where he argued that economic efficiency is best maximized for the public good by competition among small producers and service providers. No actor in the 1 economic system should have the ability to control prices and quantities produced. Nor should there be collusion among economic actors to control prices and quantities produced. In pursuing their own self-interest producers etc. would also contribute to the public interest by competing to provide products and services at prices and of quality most attractive to consumers. The most competitive producers would be most successful. Producers charging too much or failing to deliver good quality would fail in the market. If firms made high profits new producers would enter the market and sell at lower prices. This would prevent exploitation of consumers. Monopoly profits would be competed away by an “invisible hand” that is by the sum total of individual decisions made by countless consumers and producers. Smith’s model was democratic as it placed in the hands of consumers the power to decide what would be bought and sold. See the concept of “consumer sovereignty”. There was no need for government manipulation of the system. Indeed, that would be harmful. Smith saw the main danger to his system to be the presence of large producers who could dominate price fixing and volume of output to avoid competition. Neoclassical economics emerged in the mid to late 19th Century as capitalism emerged as a significant economic force. It remains a force today. The main concern of its proponents is efficiency of production and minimization of costs of production in order to beat competitors. The focus is on labour markets – higher wages are viewed as meaning higher prices and therefore a threat to efficiency and competition. It is seen as necessary to keep government out of the market because of the anti-competitive practices of patronage, subsidies, restrictions of trade etc. Deregulation and the removal of governments from the market are goals of today’s big business. Trade agreements between and among countries (e.g. NAFTA) typically reduce the role of governments and courts in regulating action by large corporations. This raises the question of the appropriate balance of power between corporations and elected governments. In the neoclassical tradition, power is seen as operating through the market. If one cannot compete on price and quality etc. one has the power to either improve competitiveness or exit the market. This theory applies also to labour. If a worker 2 considers she is paid inadequately for her work, she can seek to negotiate better terms or exit her employment and seek work elsewhere. Conflict is seen as minimal if market forces are allowed to operate freely. Unions are seen as having negative economic and social consequences. The prescription of neoclassicals is to reduce govt. and union interference with the competitive market. It also favours privatization of public services, in keeping with the norm that governments should not . Positives of the neoclassical perspective are that it highlights the importance of markets. It seeks to avoid the command economy with controlled markets such as occurred in the old Soviet Union. This perspective promotes incentives to produce; it can contribute to the power of consumers in the market; it may facilitate the potential for competition and the avoidance of state patronage and highly centralized decision making by the state. The negatives are that the neoclassical perspective ignores the imperfections in the market. Today there are many monopolies, oligopolies, cartels etc. Many undermine the fundamentals of classical perfect competition theory through price collusion, and buying out competitors. Also the free market does not allocate resources well in essential services such as health care education, affordable housing, childcare, seniors care. Success in the market is measured by profit margins. Accordingly, wealthy people and their families will fare well in buying quality health care, education etc. However, those who cannot afford prices dictated by the market lose access to healthcare, education etc. to their own, and society’s benefit. While elements of consumer sovereignty remain plausible, contemporary marketing can lead to perverse outcomes. For example, the pharmaceutical industry advertises drugs for consumption for both sick and well people. Arguably this does not respond to consumer needs, as neoclassical theory requires, but creates unnecessary wants and needs, and fulfill only the profit goals of the industry. It is true that trickle-down theory predicts that profits and income reaped by the wealthy will trickle down to all levels of society to the general benefit of society. While there may be some trickle-down effect, Statistics Canada evidence indicates that wealth and income are increasingly concentrated within the already wealthy. 3 While the neoclassical/neoconservative perspective rightly identifies the danger of state control and patronage, the things it promises have not emerged in practice. The economic depression of the late 1920s and the early/mid-1930s was a disaster for both rich and poor. The laissez-faire approach of government restraint failed and societies were rescued by Keynesian economics and government initiatives. Contrary to neoclassical theory, the system was not self-correcting. More perspectives to be discussed later. 4