ECON

How is gender situated within the sequential conditions of accumulation? Does this make sense? 

Read Chapter 37 

35 Economy and Environment
How does the economy interact with the physical environment?

Can capitalism be made compatible with ecologically sustainable

development?

How does a political economy of the environment differ from free-market
‘environmental fine-tuning’?

Analysis of the relationship between the natural world and the economic system is of

central importance in modern political economy. Indeed, it is of central importance to the

future of humankind, not to mention the future of other species threatened by the

effects of

further environmental degradation. Political economists have to take seriously the growing

concerns about the impact of economic activity on environmental quality and the prospects

for ecologically sustainable development. They have a responsibility to contribute to an

understanding of the economic causes of environmental decay and of what changes in political

economic structures and policies might contribute to effective solutions.

This chapter considers how to cope with these challenges. Attention is given to proposals

for extending neoclassical economic reasoning to the study of environmental issues, since

this has been a major element in the drive towards ‘environmental fine-tuning’. This is

contrasted with the view that the embrace of market principles is part of the problem, rather

than part of the solution. Henry George’s ideas about land are revived and integrated with

broader environmental concerns. AU this is intended to contribute to a better understanding

of economy-environment interactions and the requirements for sustainability.

The nature of environmental problems
Environmental stresses take various forms and are manifest on various spatial scales . Some

affect the planet in its entirety while others are more localised in their immediate impacts.

What are the common elements? One useful classification has been suggested by David

Attenborough, whose television documentaries have consistently emphasised the need to

325

326 PART VIII : CONTE M PO RARY CO NC E RNS

care for the natural environment more effectively. Attenborough distinguishes between the

effects of

overharvesting, which takes resources from forests, seas, and nature in general at a rate
faster than that at which they are replenished

introduction of alien species, which relocates plants and animals, deliberately or

accidentally, thereby upsetting the local ecological balance and causing the loss of other

species of flora and/ or fauna

destruction of habitat, which converts wilderness into agricultural or urban land, thereby
reducing biodiversity and also often causing species loss

islandisation, the process whereby patches of natural habitat become cut off from one
another by degraded environments, such as those converted from natural to agricultural

or urban land uses

pollution, which uses the physical environment as a receptacle for waste products, with
damaging consequences for the quality of the environment and its capacity for renewal. 1

All five processes are currently happening at an unprecedented rate. They are not all of

recent origin, but there is a strong general correlation, in the last half-century in particular,

between their intensification and the relentless growth of population and economic activity.

There are echoes here of the warning about the unsustainability of demographic and

economic trends issued four decades ago by the team of scientists sponsored by the Club

of Rome. 1 There has been incessant debate about the nature of the causal connections in

the intervening years . 3 The role of population growth has been the subject of particularly

intense controversy. 4 It has a direct connection with the severity of the pressures on finite

environmental resources. However, distributional elements have to be considered too. An

extra body in one of the affluent nations , for instanc e, adds many times more to demands

on natural resources than an extra body in one of the poorer nations-although there, too,

the increased pressure on the physical environment may be intense. Economic growth has

yet more fundamental consequences for environmental quality. It is directly implicated in at

least the first and last of Attenborough’s five factors. However, the extent of environmental

damage depends on the form the economic growth takes , the technology on which it is based,

the spatial distribution of the growth, whether it uses renewable or non-renewable resources,

and the extent to which materials are recycled. All these factors have a major bearing on

how economic activities affect environmental quality. A principal task for modern political

economy is to contribute to analysing these connections .

Ecologically sustainable development
Figure 3 5.1 presents a simple schematic representation of the principal economy-environment

interactions. It contrasts a throughput economy with a spaceship economy. In the former,

the economy has a rapacious relationship with the environment, treating natural resources

CHAPTER 35: ECONOMY AND ENVIRONMENT 327

as inputs, and using the physical environment as a receptacle for outputs, including waste

products. In the latter, the nature of economic activity, the type of resources used, and the

emphasis on theirreuse reduces, if not eliminates, the damaging consequences for the physical

environment. The inference is that the latter economic arrangement would be more conducive

to ecologically sustainable development. 5

FIGURE 35.1 ECONOMY-ENVIRONMENT INTERACTIONS

(a) A ‘throughput’ economy

Inputs into the
processes of
production,
consumption,
and transportation

Outputs of goods,
services, and
waste by-products

(b) Dual impact of a ‘throughput’ economy on the environment

BIOPHYS ICAL SYSTEM

Depletion due
to use of
non-renewable –
natural resources

Pollution due
to output of waste
by-products

(c) A ‘spaceship’ economy more in harmony with the environment

Use of
renewable
resources

BIOPHYSICAL SYSTEM

Economic Recycling

~of output’

Ecologically sustainable development-ESD for short-has been one of the buzz phrases

of the last two decades (perhaps surpassed in popular political economic discourse only by

‘globalisation’). Its meaning is not always clear. One way of defining it is in terms of its four

essential principles, two of which are fundamentally biophysical and two of which are more

socioeconomic in character. 6 These are set out on the following page.

328 PART V I II: CONTEMPORARY CONCERNS

Biodiversity
ESD requires, first and foremost, that destruction of species be avoided and biodiversity thereby

maintained. This requirement has a moral dimension that emphasises the responsibility of

humans to ensure that their domination over nature is not at the expense of the survival of

other species: fauna and flora. A supplementary economic rationale exists, too, because any

reduction in the gene pool associated with loss of species destroys an asset with significant

economic value: in medical applications, for example.

Ecological integrity
ESD requires that the health and resilience of natural life-support systems be maintained.

This does not rule out all temporary environmental damage, for ecological systems have

natural mechanisms for self-repair. Winds, waves, and water currents are effective dispersal

mechanisms; and waste materials that are organic eventually biodegrade. However, beyond

threshold levels ofpollution orresource depletion (‘tipping points’), irreversible environmental

changes may be precipitated. Ecological integrity requires that these levels not be surpassed.

lntergenerational equity
ESD also requires that each generation bequeaths to the next a physical environment in no

worse state than when it was inherited. In other words, we should not live at the expense

of future generations. This is a key socioeconomic principle, although its interpretation is

somewhat ambiguous. Whether improvements in the quantity or quality of some resources

constitute adequate compensation for the damage to others is a debatable point. How we deal

with this issue is linked to the fourth ESD principle, which emphasises how we value nature.

Constant natural capital
ESD requires that there be no depletion of the total stock of productive soils, fresh water, and

other available natural resources. It is a tall order, since current patterns of economic growth

commonly use non-renewable resources, or use renewable resources more rapidly than nature

can replenish them. A commitment to maintaining constant natural capital requires a means of

regulating the use of resources (whether through the price mechanism or through more direct

control over the exploitation of resources) and a mechanism for natural resource accounting

(a stocktaking of assets).

The latter requirement, natural resource accounting, has immediate political economic

implications. Our current framework for national economic accounting-based on Keynesian

concepts-has no place for such measurement. This contrasts with normal business accounting

practices. Businesses annually calculate (normally, as a legal requirement) a profit and loss

statement and a balance sheet (now officially called the ‘statement of financial performance’

and ‘statement of financial position’). 7 The former shows incomes and expenditures over the

year; the latter shows assets and liabilities at the end of each year. No business would consider

CHAPTER 35 : ECONOMY AND ENV IRONMENT 329

a profit (shown in the profit and loss account) that has been generated solely by running down

its assets (shown in the balance sheet) to be sustainable in the longer term. However, because

there is currently no equivalent to the balance sheet in our national income accounting, we

cannot tell whether our income, as a nation, has a sustainable character. Some economic

activities may generate income without depleting the stock of natural capital, but others

clearly do not. The proceeds from the export of minerals, for example, are matched by the

reduction in the value of the nation’s natural capital.

Here is an obvious gap in current national accounting practices. To fill it, a system of

stock accounting (including natural resource stocks) needs to be developed to supplement

the existing flow measures of national income. If this were done, we would be in a position to

see whether we are indeed living at the expense of nature and of future generations. However,

seeing is one thing; acting is another. The key issue is to consider what policy measures could

actually achieve a transition to ESD .

Environmental fine-tuning
The usual response of orthodox economists to the problem of environmental decay is to

interpret it in terms of markets and to propose environmental pricing . 8 The key underlying

concepts are ‘market failure’ and ‘externalities’, which derive from neoclassical theory,

discussed in Chapter 23. Market failure is said to exist because no price normally applies to the

use of environmental goods such as clean air and rivers, so consequently they are overused;

for example, as receptacles for the waste products of economic activity. Even where prices do

apply, as in the case of fos sil fuels used for energy, the prices do not reflect the full social costs,

because the consumption of these items has negative spillover effects, such as atmospheric

and water pollution. These negative spillovers are said to be the externalities of an imperfect

market

economy.

The policy implication is to make adjustments to the price system so that these

environmentally damaging effects do not occur. In effect, the environmental improvement

comes through changing the economic incentives. Putting prices on environmental goods-

by imposing taxes on their use , for example-provides an incentive to limit the demand for

them . It also creates an incentive to develop alternative technologies that do not require the

(now more expensive) resources . Internalising the externalities brings the prices consumers

must pay for environmental goods into line with the social costs arising from their use. The

consumers can still exercise their freedom of choice, but the changed price structure applying

to environmental goods aligns the equilibrium market outcome more closely with the optimum

environmental outcome.

This is impeccable neoclassical economic reasoning. It can be extended with greater

theoretical sophistication and more practical examples. The basic message is that the

resolution of environmental problems requires more, and more effective , markets. It is

a message with obvious appeal to those who are attracted by the prospect of having both

330 PART VIII: CO NTE M PORARY CONCERNS

individual market freedoms and better environmental outcomes. Politically, it has become

increasingly influential within individual nation states and in international forums where

responses to the global challenge of climate change are discussed.

The necessary policy instruments are readily at hand. Tradable pollution permits, for

instance, giving the right to pollute up to a specified levet are issued by governments. 9

Bought and sold in the market, these permits go to the highest bidders. Tho se who cannot

afford to buy them have to cease their polluting activities . Carbon taxes can also be used .

Levied on commodities according to the quantity of fossil fuels that go, directly and indirectly,

into their making, a carbon tax could be expected to discourage the consumption of those

commodities. 10 Aluminium products , notoriously energy-intensive to make , would become

much more expensive, for example, thereby providing an economic incentive to switch to the

production and consumption of substitute products that are less environmentally damaging.

Raising existing petrol taxes should, in principle, also provide an incentive to switch from cars

to other modes of transport that make fe wer demands on the depleting stock of fossil fuels.

In practice, switching of this sort is impeded by the lack of good quality public transport in

many suburban and rural areas, which causes demand for car travel to be quite price inelastic.

However, the incentive to switch to more fuel-efficient vehicles is potentially a significant

contributor to reducing environmental stress.

Pragmatically, such ecological taxes appeal to governments because they also generate

revenues. Therein lies a conundrum: the more inelastic the demand for the product causing

the environmental damage , the greater the revenues from environmental taxes, but the

smaller the reduction in environmentally damaging activities. Of course, even where demand

is inelastic there may be indirect environmental benefits if the extra revenues generated by

the taxes are spent by the governments on repair of environmental damage. There are political

constraints on this, though. Governments usually feel it necessary to compensate motorists

for having to pay higher petrol prices, for example, by promising to allocate the additional

tax revenues to expenditure on roads . A process of circular and cumulative causation results .

Perverse effects can also result from raising the prices of scarce environmental goods. As

the populations of ‘big cats’ and rhinos dwindle in Africa, the market prices for skins and rhino

horns rises, which, in turn, provides an extra incentive for hunters, acting illegally, to capture

and slaughter more animals. Without extreme vigilance by regulatory authoritie s, the rate of

depletion increases. In such a case, the process of circular and cumulative causation, working

through the price mechanism, produces an equilibrium of ecological catastrophe .

The distributional consequences of environmental policies are also a fundamental

problem. AU market-based approaches to environmental concerns tend to have adverse

impacts on equity. Because environmental taxes add to the prices of scarce environmental

goods, they push them increasingly beyond the reach of the poor. Access to the environmental

requirements for a healthy life-in the extreme, for life itself-becomes increasingly restricted

to the wealthy.

Structural constraints also recur. The neoclassical case for environmental fine-tuning

assumes ease of substitution in the patterns of production and consumption. In practice,

CHAPTER 35: ECONOMY AND ENVIRONMENT 331

this is not necessarily the case. Inertia commonly arises from the spatial forms of urban and

regional development, the distribution of employment opportunities, and the existing state

of technology. These constraints limit the capacity of production and consumption patterns to

adjust in response to price changes. In the longer term, all these factors become variable, one

might reasonably argue, but resistance from existing political economic interests still has to

be countered. Opposition from the powerful institutions of corporate capital to policies that

undermine consumerism may be anticipated, for example. Such considerations suggest the

need for an analysis of the causes of environmental decay that has a more political economic

character.

BOX 35.1 PUTTING A PRICE ON CARBON

A principa l cause of human-created climate change is the burning of fossil fuels (oil, coal,

and gas) and the resulting emissions of carbon into the atmosphere. Recognising this, it

is not surprising that the major focus of debates about remedial policies responses has

been on how to reduce this ecologically unsustainable process. Of course, there are many

possibilities: reducing the production of goods, changing energy technologies to less

damaging forms, trying to find other places to dispose of carbon deposits, and so forth.

Not surprisingly, during a period when neoclassical economics and neoliberal politics have

been dominant in policy-making circles, the primary government focus has been on using

the price mechanism to drive change.

In practice, the choice of pricing policy mechanisms comes down to two options: carbon

trading and carbon taxation. The former is usually called an emissions trading system (ETS)

or a ‘cap and trade’ system. The government decides on the ‘cap’ on carbon emissions that

will be allowed and sells the corresponding number of permits to pollute. Those permits

can then be traded, on normal market princ iples, among businesses seeking to continue

their polluting activities . If the cost of those permits is significantly above zero, the cost

of production is raised. That higher cost is norma lly passed on as a higher price charged to

consumers. For the other alternative, the carbon tax, the add itional cost is more directly

imposed; for example, through the tax levied on the use of coal or gas used for energy

production. In both cases, the market is the mechanism for transmitting the signal to

producers and consumers to switch production and consumption. They have an incentive to

switch to other products and processes that are now relatively cheaper since they are less

carbon emitting.

Which policy is preferable? According to neoclassical economics, both operate similarly

according to the principles of supply and demand. With an ETS, the government controls

the output-by setting an upper limit on permits to pollute-and allows the price to be set

in the market. With a carbon tax, the price is directly set-by the amount of the tax above

the price that would otherwise prevail – and the market determines the output. It all seems

symmetrical; either policy can produce the same result. On balance, a preference for the

ETS may be inferred, purely because that policy option produces the more directly assured

332 PART VIII: CONTEMPORARY C ONCERNS

reduction in output of pollutants. With a carbon tax , the rate of tax might need quite a few

adjustments before that targeted change in output could be achieved.

This neoclassical reasoning ignores some issues that, once taken into account, make

the carbon tax the better option . Consider just two such concerns. One relates to property

rights and ethics. An ETS effectively confers rights to pollute: once a permit has been

purchased its owner has a complete right-and the economic incentive-to continue with

the environmentally degrading activity. With a carbon tax, by contrast , the economics

and ethics are better aligned from an ecological perspective. The tax is both an economic

incentive to desist from the environmentally degrading activity and a signal that the society

deems the activity to be antisocial. Like a tax on cigarettes or other activities that the society

wishes to discourage, a carbon tax may not eradicate the antisocial activity altogether, but

there is no ambiguity about the signal or intent

A second advantage of a carbon tax is that it is less prone than an ETS to generate

speculative markets. With an ETS, new markets are created for the buying and selling

of pollution permits, but secondary markets-trading in futures and other derivatives-

also inevitably develop. Much activity predictably goes into market creation and

manipulation, with a view to financial gain through trading in the market For those who

regard environmental decay as the product of overreliance on a market economy, this

consequence would be a great irony indeed. For those fearful that more speculative

markets add to the instability of modern capitalism, there is a double whammy. The goal

of environmental protection becomes interlinked with the development of volatile markets

based on the further extension of private property rights to nature.

Green critics of both approaches to putting a price on carbon usually conclude that,

while a carbon tax is preferable to an emissions trading system, neither is sufficient to stop

the economy having adverse climate change effects. Prohibition, regulation, and public

investment are also part of the more comprehensive policy package that is necessary.

The political economy of environmental
decay

Corporate power may systematically limit the range of technologies and consumer choices,

effectively ruling out more ecologically sustainable options. An obvious example is transport,

which is central to the problem of environmental damage, both as an energy user and as a

pollution generator. The major automobile manufacturers, oil companies, highway construction

companies, and suppliers of motor vehicle components and accessories collectively comprise a

‘roads lobby’, which has a well-documented track record of suppressing innovations that might

threaten its economic interests and of pressuring governments to pursue policies consistent

with those interests. 11

The wielding of this corporate power was significant in the effective destruction of the

public transport system in many American cities, for example. The classic case is Los Angeles. In

the late 1930s, National City Lines, a holding company formed by General Motors in conjunction

with the Firestone Tyre and Rubber company and Standard Oil of California, bought the light

CHAPTER 35: ECO NO M Y AND ENV IR ON MENT 333

rail systems that served the scattered communities of the southern California region. It ripped

up the tracks and replaced the rail service with buses (built by General Motors, running on

Firestone tyres, and fuelled by Standard Oil). The deteriorating quality of service effectively

forced most citizens to turn to private cars in order to move around the area . This, of course,

was a transport option immensely more lucrative for General Motors , Firestone, and Standard

Oil. The state responded by building more and more freeways to accommodate the cumulative

growth in vehicle use. A region of fragrant orange groves and clean air was thereby converted

into a sprawling metropolis with chronic problems of traffic congestion and atmospheric

pollution levels regularly exceeding safe health limits. No doubt, rising incomes would have

led to growth in private car ownership, anyway; however, the process was accelerated by the

corporations restructuring the transport options to serve their own purposes , irrespective of

the environmental damage this caused. National City Lines was responsible for the removal

of light rail operations in more than a hundred other cities around the USA. A conspiracy

against the public interest? Under antitrust legislation a federal grand jury ruled it to be so.

The corporations involved were fined $5000, a sum that, even allowing for the higher value of

the dollar then, was almost laughably small in relation to the damage caused. 12

A sad endnote to the story is that the city of Los Angeles, recognising the need to restore

better public transport, has since rebuilt some of the light rail system at enormous public

expense. However, it is having difficulty making it economically viable because, as residential

and commercial activities have developed the sprawling, low-density suburban patterns

characteristic of car-orientated cities, fixed-route public transport systems have become a less

effective means of serving people’s transport needs . 13

This example of corporate power is by no means exceptional. In Australia, for example,

the influence of mining companies is a significant obstacle to more sustainable energy

policies. Given the nation’s reliance on exporting coal, iron ore, and other minerals, it is not

surprising that these mining businesses have relentlessly sought to frustrate any climate

change abatement policies that would work against their corporate interests.14

Expanding corporate power and profits through consciously violating ecological

sustainability is common in many industries throughout capitalist economies. 15 Producing

goods with built-in obsolescence is a case in point. This involves making products with

working lives that are shorter than necessary, or making frequent style changes to products

to render earlier lines unfashionable or redundant. It enhances producers’ profitability, but at

the expense of two forms of environmental damage: the greater use of resources to make the

larger outputs of products, and the disposal of the discarded products. These are the familiar

features of a junk economy based on the production of disposable products. The profligate

use of packaging, an integral part of many firms’ marketing strategies today, accentuates the

problem.

Consumers come to be complicit-sometimes reluctantly, sometimes enthusiastically-

in these processes. Indeed, this is the essence of consumerism. Fostered by relentless sales

promotion, the high levels of consumption on which the modern capitalist economy depend

come to be regarded as normal, desirable, even laudable. Consumerist ideology is central

334 PART VIII: CONTEMPORARY CONCERN S

to the process of environmental decay, while the related ideology of individualism has the

concurrent effect of eschewing collective responsibility for finding solutions. As the economist

Ken Boulding put it, ‘The presence of pollution is a symptom of the absence of community.’ 16

Homo economicus, it seems, is not the ideal candidate for the job of securing a harmonious

relationship with nature.

These various considerations lead to the conclusion, contrary to the claims of free-market

environmentalism, that the capitalist market economy is the problem, not the solution. In its

modern form, shaped by corporate power, consumerist practices, and the prevailing ethos of

individualism, it stands as the antithesis of ecological sustainability.

What is to be done? Change the ownership and/ or control of economic activities in order

to sever the nexus between corporate interests and environmental damage? Instigate a values

revolution to shift consumer behaviour to more environmentally conscious practices? Lower

consumption levels, at least in the more affluent nations, in order to live within the ecological

limits set by spaceship earth? These are revolutionary prospects indeed. Perhaps a useful

pragmatic start can be made through the promotion of ‘green jobs’.

BOX 35.2 GREEN JOBS

It is commonly argued that there is an inherent tension between the economy and nature.

An inescapable trade-off is implied: jobs versus the environment. Certainly, there are

circumstances where environmental protection threatens existing jobs; in logging old-

growth forests and coa l mining, for example. However, environmenta lism can be job creating

too, generating jobs in renewab le energy production, energy effic iency, waste management,

recycling, and many other industries. Identifying ways in which progress can be made

towards a more sustainable economy wh il e simultaneously creating more employment

opportunities is an attractive ‘win-win’ strategy. This is the ‘green jobs’ approach to the

environmental challenge.

Green jobs may emerge through market mechanisms when a price is put on carbon

emissions, because-depending on the price-it may then become more profitable to use

solar or wind power, for example, rather than coal-fired power stations. However, a more

comprehensive green jobs strategy requires economic planning . It requires identification

of the indu stries whose expansion is to be encouraged because of their relatively attractive

environmental impacts, such as energy effic iency, public transport, retro-fitting buildings

with co-generation heating and cooling systems, and other ‘green buildings’ features. 17

A green jobs development strategy also requires complex economic-environmental

modelling, including appl ications of input-output analysis, to work out what w ill be the

secondary changes having an impact on output and employment in other industries. To put

the plans into practice requires the cooperation of businesses and trade unions to manage

the employment changes. It requires the educational institutions-technical and further

educational colleges in particular-to be geared up for providing the necessary workforce

skilling and retraining programs. Such processes are often best managed at the urban and

regional scale, where there is a directly perceived local commona lity of interests.

CH A PTER 35: ECONOM Y AND ENV IRONMENT 335

A green jobs strat egy is not unproblematic, howeve r. Even defin ing a green job is not

easy. If a st ee lworks switc hes fro m producin g steel for ca rs to produc ing st ee l for bicycles

or wind tu rbi nes, for examp le, does t hat change t he fo undry workers’ jobs f rom ‘brown’ to

‘gree n’? Just as mu ch coking coa l and iron ore may be mined, and the producti on process

may be equa lly poll uti ng in eit her case, even thoug h the products t hat are made may be more

compat ibl e w it h enviro nmental ly respo nsibl e co nsumption behaviou rs. Sim ilarly, a recyc ling

plant, des igned to red uce wastage of materia ls, may be ca rbon emitt ing. Indeed, it is rare

for any job to have a zero carbon fo otprint. Ev id ently, t here is a spectrum of poss ibil ities,

such that, while we may say one j ob is ‘g reene r’ than another, taking account of all aspect s

of both inputs and outp uts, the re is not a sharp division betwee n j obs that are green and

t hose th at are not.

A f urt her co mpli cat ion ar ises w here labou r organi sat ions require t hat green jobs be wel l

pa id and secure as we ll as environme nta ll y responsi bl e18 Such concerns about t he nature

of work are appropri ate, of course, but sett ing them as a necessary co nditio n fo r defining

green j obs predicta bly re duces busi ness ent husiasm for green jobs projects. In other

words, class interests are not eradicated, and can f rustrate t ransitio ns. So too can reg ional

inte rests: w here new green jobs are located in areas distant from disappearing j obs in

exist ing industr ies (as in mining regions), prob lems of labour migration and resettle ment may

be daunting. Evide ntl y, maki ng a transiti on to a sustainab le economy is a huge challenge.

While a ‘green jobs’ strategy prov id es no panacea for dealin g w it h envi ron mental stress, it

does ra ise f und amental issues that nee d to be add ressed in meeti ng t hat chall enge. It signals

t he need to consider econom ic and environmenta l goa ls si multaneous ly. It signa ls t he need

for econom ic pla nning to be linked t o a po li cy process in wh ich all sections of t he community

are represent ed. It can dr ive cha nge t o a more eco log ica lly susta inabl e economic fut ure.

Land, natural capital, ecological balance
Radical reforms may not be sufficient to achieve sustainability on a global scale, unless they

embrace the spiritual and moral issues at the heart of the environmental crisis. Our relationship

with land, to nature generally, has an inherently spiritual dimension. Consider the Abo riginal

peoples of Australia, who lived in harmony with nature for more than 40 000 years before the

European invasion of the continent. Their relationship wit h the land was integral to their

culture, to their very being . Of course, it is difficult to reconcile that sort of relationship with

nature with a modern, affluent, urbanised, industrial society. However, policy changes can

render nature less vulnerable to exploitation for personal economic gain.

Henry George’s ideas warrant revisiting in this context. George was concerned (as

described in Chapter 11) with the effects of private land ownership and t he potential for land

taxation to redress economic inefficiencies and socioeconomic inequities. The type of analysis

he developed can be extended from land to nature in general. Such an analysis recognises that

the privatisation of natural assets allows a rent to be appropriated, and that therein lies the

root of a range of economic, social, and environmental problems.

336 PART V III: CONTEMPORARY CONCERNS

Incomes from rent derive from the economic surplus generated by the application of

capital and labour to nature. The owners of privatised environmental assets derive that income

not through productive effort but solely as a result of their ownership of the resources. As

economic growth proceeds, they usually capture an increasingly large share of the fruits

of growth. If urban development, for example, raises the price of urban land-as it usually

does-that increases the rental income of existing landowners. Landowners also stand to make

unearned income from capital gains on the sale of their property. Not surprisingly in these

circumstances, land is commonly held for speculative purposes. Henry George argued that the

site rents (based on the unimproved capital value of the land) should be taken as tax, and used

to finance social expenditures by government. Resource rent taxation constitutes a broader

application of the same principle, capturing for public purposes the economic surplus that

would otherwise go to the owners of scarce environmental resources.

A case can be made for extending a similar policy to all environmental assets. These

include land, minerals, and other natural resources, and’ common heritage capital’. 19 The latter

includes human-made as well as natural assets whose value derives from their uniqueness

or social significance. The use of bandwidth for radio, television, mobile phone, and other

communications purposes is also relevant in this connection. Media and telecommunications

companies currently derive enormous rents from their use. More extensive application of

resource rental taxation can be of great value as a means of constraining the use of, and

generating public revenues from, all these resources. No problem of trade-off between revenue-

raising and environmental effectiveness need arise, as it does with taxes on the consumption

of goods with environmentally damaging consequences, because the tax is on rent. Therein

lies the advantage of a policy designed to capture an economic surplus.

There is a moral, as well as an economic, element in this analysis and policy. The key

principle is that nature is not to be exploited for financial gain. More extensive land and

resource rent taxation stops short of the comprehensive socialisation of natural assets , and it

is no panacea for environmental problems that are deeply embedded in existing institutional

practices, power structures, and prevailing ideologies. However, it could effectively capture

for public purposes the economic surplus arising from the use of environmental assets . These

public revenues can then be used in ways that enhance environmental quality; for example,

investment in renewable energy technologies. Whether, in the longer term, any such reformist

measures can trigger the broader values revolution required for the achievement of ecological

sustainability remains an open question.

Conclusion
Political economic analysis is enriched by recognising the embeddedness of the economy in

nature. AU economic activity occurs in a biophysical context, using land and other natural

resources, and generating products, including waste products, that have an impact on the

environment. To neglect such connections is not only to limit the potential contribution of

CHAPTER 3 5: ECONOMY AND E NVIRONMENT 337

political economic analysis to environmental concerns, but also to impoverish the study of the

economy.

Consideration of environmental problems and policies paves the way for the construction

of an alternative ecological economics. 20 It indicates, albeit tentatively, how the general

principles of modern political economy outlined in the preceding chapter can be applied

to environmental analysis and policies. The focus on an economic surplus draws attention

to land, and nature generally, as a source of unearned income. It signals the potential role

of resource-based taxation, as well as environmental regulation and public investment, as

potentially effective means of limiting environmental damage from the exploitation of the

environment. A focus on capital, labour, and the state also puts the significance of corporate

power into the spotlight, including its impact on transport options and the production of goods

with built-in obsolescence. The concern with evolution is manifest in the analysis of how the

economic system can be restructured to satisfy the requirements for ecologically sustainable

development. The process of circular and cumulative causation is illustrated by the vicious

cycle of environmental decay that occurs in the absence of such remedial measures. Finally,

the political economic emphasis on long-term processes of resource creation and destruction

contrasts with the typical neoclassical economic focus on how markets allocate a given set of

resources goods.

In a world experiencing accelerating resource depletion and environmental stresses,

escape from the straitjacket of conventional market economic principles and the development

of an ecological political economy may be necessary conditions for survival.

KEY POINTS

• Analysing the socioeconomic roots of environmental problems and contributing to
policies for ecologically sustainable development is a major challenge for modern political
economy.

• Neoclassical economists interpret environmental problems as caused by externalities and
capable of being resolved by policies of ‘environmental fine-tuning’.

• An alternative political economic perspective shows the need for a more holistic view of the
environment, the influence of prevailing ideologies and power structures, and the need for
more radical policy responses.

350

37 Class, Gender, Ethnicity
Is class relevant in modern capitalism?

What shapes the gender dimension of economic inequalities?

Does capitalism eradicate or foster racism?

Analysis of socioeconomic inequalities has always been a central concern of political economy.

Recall Ricardo’s description of the study of distribution between classes as ‘the principal

problem of political economy’. 1 For Marx, the study of the capital-labour relationship was the

key to understanding the capitalist system, linking distribution with production, growth,

and economic crises. Keynes, whose primary concern was with macroeconomic aggregates,

recognised the importance of income distribution as an influence on the state of the economy

and a legitimate focus for public policy. Prominent figures in the institutional and post-

Keynesian traditions, including Galbraith, Myrdal, Kalecki, and Robinson, have also made the

study of economic inequality part of their political economic analyses. Other modern scholars

concerned with the problems of economic development and underdevelopment, such as

Amartya Sen, place the issue of inequality at the forefront of their studies. 2

Neoclassical economics is the exception. As noted in Chapter 22, some pioneers, such as

J. B. Clark, sought to use marginal productivity theory as an explicit justification of the

economic inequalities generated in free-market economies. In the last century, systematic

concern with economic inequality has usually dropped out of the picture, the existing

distribution of income and wealth being taken as given for the purposes of constructing

models of resource allocation. Thus, the neoclassical focus on efficiency has virtually eclipsed

the concern with equity, which is often labelled ‘political’ and hence not properly a matter for

economic enquiry. To the extent that equity issues enter the analysis at all, it is usually with

reference to a trade-off between efficiency and equity, implying that the pursuit of distributive

justice necessarily comes at an economic cost. 3

The marginalisation of concern about economic inequality in mainstream economics is

an imbalance that warrants redress. Economic inequalities, their causes, consequences, and

possible reduction, are among the key issues of the present time. Understanding the causes

CHAPTER 37: CLASS, GENDER , ETHN ICITY 351

of economic inequalities and formulating possible remedies is a major challenge requiring

reconsideration of some key concepts in political economic analysis. Whether the longstanding

concern with class is still relevant, and how class relates to inequalities associated with gender

and ethnicity, are issues requiring particular attention .

Reconsidering class
The obvious starting point for a reconsideration of class in political economy-its definition,

its interpretation, and its usefulness-is Marx . It was with Marx’s analysis that the concept

of class took on its radical character. Marx and Engels began the Manifesto of the Communist
Party with the words: ‘The history of aU hitherto existing societies is the history of class

struggles .’ Class was also an important concept in Marx’s theoretical works, such as Capital,
and historical works, where it is employed as a means of explaining economic, social, and

political change. Of course, class has always been central to the characteristic Marxist political

prescription that workers should recognise their collective interest in transforming capitalism

into socialism.

How relevant are these ideas today? At first, they sound somewhat archaic . Many people

are uncomfortable about even using the word ‘class’, perhaps because of its association

with the political program of Marxism and its exhortation to class struggle. Even talking

about class is regarded by some as a source of unnecessary social division. It is a perspective

that reflects the absence of a prevailing class consciousness. It does not necessarily refute

the relevance of class as an analytical tool.

How is the concept of class actually used in Marxist political economy? It is not a

matter of social pigeonholing, of putting people into categories according to their personal

characteristics, or their perceptions of their own social status. The characteristic Marxist

concern is with class relationships rather than class positions. It is the posited asymmetry
of these class relationships that is distinctive. Not that there is anything particularly novel

about that. As Marx and Engels emphasised, in every form of society a dominant class has

been able to organise systematically the extraction of surplus labour from another class. This

was quite blatant under slavery and feudalism. Under capitalism, it continues-albeit in a less

immediately visible form-in the relationship between capital and wage labour. As argued

in Chapter 14, because workers in general are not paid wages equivalent to the full value of

the commodities that their labour creates, there is an economic surplus that takes its most

immediately obvious form in the profits of business enterprises. Despite aU the changes to

capitalism that have occurred since Marx’s time, as long as profits continue to be generated in

this way, the economic basis for class division remains .

From this perspective, it is largely immaterial whether capitalist employers are nice or

nasty people, whether they have extravagant or frugal lifestyles, or whether they exhibit

snobbish personal manners. Class derives from the structural relationship of capital to labour

as the basis on which a capitalist economy functions.

352 PART VIII: CON T EMPORARY CONCERNS

According to Marxist political economy, this capital-labour relationship is essentially

contradictory: it requires cooperation between classes who have fundamental conflicts

of interest. Cooperation is necessary to keep the wheels of industry turning, whether in

transnational corporations or small businesses, whether in extractive, manufacturing,

or service industries, and whether unionised or not. Without this cooperation, both the

owners of capital and the workers lose income. However, there is a simultaneous conflict of

interest under capitalism, manifest in the continual contest over the distribution of the total

income generated, managerial prerogatives, and other aspects of industrial and workplace

relations. This uncomfortable nexus between cooperation and conflict is the essence of

the capital-labour class relationship.

Certain things follow from this way of conceptualising class. The focus on relationships to the

means of production gives the definition of class a distinct economic character, which contrasts

with sociological views of class. The Marxian approach does not define class according to income:

capitalists can be rich or poor. It is the source of their income that differentiates them from

workers. By the same reasoning, people’s different consumption patterns do not define their

class position: capitalists may ride bicycles rather than drive expensive cars; workers may go to

work in overalls or suits. Of course, people’s income levels and patterns of consumption, insofar

as they correlate with their ownership of the means of production, may be useful secondary

indicators of class position, but they are not themselves primary, defining features.

Nor need class consciousness be a defining feature. Individual workers sometimes

perceive themselves to have common interests with other workers in the same firm, in other

firms, or in distant lands, but they often do not. Indeed, they may perceive themselves to have

more interests in common with their employers. That will have a significant bearing on their

behaviour, including their political inclinations, but it does not refute their class position as

workers. The definition of class is based on objective rather than subjective characteristics.

These are bold assertions. For those who feel uncomfortable about using the term ‘class’

at all, such reasoning may reinforce the discomfort. So be it. The point is an analytical one, to

establish a clear starting point for class analysis, quite different from popular perceptions of

what class might mean. We then have a basis for considering how class analysis may be adapted

to deal with an array of contemporary concerns: the significance of the middle class, the effect

of spreading share ownership, the general lack of class consciousness, the effect of intra-class

inequalities, and how class interacts with other dimensions of economic and social inequality.

These concerns impart more subtlety to the consideration of class and reflect the complexities

of class in the real world.

The question of the middle class is particularly important in considering the contemporary

relevance and meaning of class. The Marxist analysis begins with what is essentially a two-

class model: bourgeoisie and proletariat, or capitalist class and working class. Marx conceded

that reality was more complex-that self-employed artisans and a petit bourgeoisie existed

alongside these two major classes, for example-but the expectation, forcefully argued in

the Communist Manifesto, was that capitalist development would tend increasingly to

polarise society. 4 Has it done so? The prominence of a middle class in modern capitalist

CHAPTER 37: CLASS, GEND ER, ETHN ICITY 353

societies would suggest not. People commonly talk nowadays about this middle class as the

largest social group, and, in surveys of personal class identification, the majority of people

almost invariably describe themselves as ‘middle class’. The traditional Marxist response

is to describe this as evidence of their false consciousness, of a subjective misreading of

the objective realityoftheir class position. According to this reasoning, while self-identification

as middle class may serve people ‘s social and psychological needs, the majority of them derive

their income principally from the sale of their labour power and, in so doing, they are working

class.

On this reasoning, class is not determined by whether you work in white-collar or blue-

collar jobs, whether you are employed in mental or manual labour, in hi-tech or smokestack

industries, or whether your remuneration is called a wage or salary. It is a matter of whether

you own the means of production. This is not to say that the false consciousness of people

describing themselves as middle class is irrelevant. On the contrary, it is a powerful explanation

for their failure to act in the unified manner that Marx advocated and predicted: to form a class

for itself rather than be merely a class in itself. The political inference is clear: these workers

need to be persuaded to abandon their false consciousness. Much of the political activity of

far-left political groups continues to be based, explicitly or implicitly, on this presumption.

A rather different response to the question of the middle class recognises that changing

economic conditions have indeed changed the class structure. One aspect is the spread

of share ownership. In countries where there has been substantial privatisation of public

enterprises and where there has been a vigorous political promotion of ‘people’s capitalism’,

many workers have bought shares in private sector businesses. The overall distribution of share

ownership usually remains sharply concentrated, and the dividend payments for ‘mum-and-

dad’ shareholders are usually small relative to their wage incomes. 5 However, the recipients

feel themselves to have some stake in both capital and labour-as indeed they have. Many

other workers with savings in superannuation funds, which are partly invested in capitalist

businesses, may also feel themselves to have a similar dual interest. Ascription to the middle

class looks a more reasonable response in these conditions.

The effect of economic inequalities with in classes also needs to be considered. Those who

derive their income principally from the sale of their labour power have income differentials

that have been accentuated by recent technological and structural economic changes. Workers

with key specialist knowhow often command quite impressive wage incomes. Others in more

traditional ‘blue-collar’ occupations have been fighting a rearguard action, many being forced

into casual and part-time work in the secondary labour market or into the reserve army of

labour. Some have been permanently excluded from the waged workforce. This range of

economic circumstances sits uncomfortably with a notion of common working-class interests.

Meanwhile, there is blurring of the boundaries of the capitalist class. Senior executives

in large corporations often receive massive remuneration packages, sometimes including

shares in the companies that employ them. They are employees, but their incomes are many

times bigger than those who own and control their own small- or medium-sized business ,

even though the class position of the latter, formally, is more unambiguously capitalistic. 6

354 PART VIII: CON T EMPORARY CON C E RNS

The tension between ownership and control in the modern corporation, a central concern

of institutional economists , underpins this difficulty of imposing a clear definition on the

capitalist class. The resulting fuzziness in class delineation is problematic.

Three principal types of response are possible. One is to take the traditional position that

the capital-labour relationship is a functional relationship independent of the identity of the

capitalists and the workers, of the degree of inequality in the distribution of income, and

of people’s perceptions of how they relate to the socioeconomic system. It is a position that

separates economic analysis (of the distributional shares of capital and labour) from social

analysis (of the extent of personal inequalities) and from political analysis (of how people

respond to economic and social inequalities). This disciplinary fragmentation of class analysis

sits awkwardly with a holistic political economy perspective.

A second response is to recognise that contemporary capitalist economic and social

developments call for a more flexible approach to the interpretation of class. This means

modifying , if not scrapping altogether, the traditional Marxist dual-class thesis and the

concept of false consciousness. The model from some of the early work by sociologist Erik Olin

Wright, reproduced in Box 37.1, illustrates one step in this direction . Six categories, rather

than two, are identified. This recognises that supervisors, managers , semi-autonomous wage

earners, and self-employed businesspeople may, indeed, have distinct class characteristics

that are not reducible to the working-clas s-capitalist-class dichotomy.

BOX 37.1 CLASS IN CONTEMPORARY CAPITALISM

The fol low ing mode l, develope d by Erik Ol in Wri ght, shows a sim ple way of reconci ling class

analys is in t he Marxist tra diti on wit h a recognition that t he economic conditions of modern

capitali sm do not produ ce a simple di chot omy of ca pital versus labour.

FIGURE 37.1 A MODEL OF CLASS RELATIONSHIPS 7

CAPITALI ST MODE OF
PRODUCTION

Capitalist class

Managers and
supervisors

Small empl oyers
L _________ __J

Semi-autonomous
w age earners

L _________ _J

SIMPLE COMMODITY
PRODUCTION

Petit bourgeoisie

CHAPTER 37: CLASS, GENDER, ETHNIC IT Y 355

Wright’s mode l shows the cap italist class and the working class as key groups within
the capitalist mode of production. Neither is homogeneous, however. Workers differ in
terms of how much control they have over their work . Capitalists differ in economic power
according to the size of the businesses they control . And between these classes are
managers and supervisors in contradictory class locations. Meanwhile, a sector of s impl e
commodity production, not eradicated by the forward march of cap italism, ensures the
contin ued significance of a self-emp loyed class, or petit bourgeoisie. Small employers

and semi -autonomous wage ea rn ers are represented as intermediate groups between the
main categories, having hybrid characteristics in terms of
• their ownership and control of property and investment

• their control over the phys ical means of production
• the ir contro l over the labou r power of others and over the sale of their own labour.

The model illustrates how class analys is can be developed. It provides a basis for
emp irica l measurement (such as the relative size of each of the groups in diffe rent nations)
and for political analysis (of class consciousness or electoral behaviour, for instance).
Wright’s more recent work shows other ways in which sociological analys is can be blended

with the concerns of political economy, but the basic model here remains useful as a means
of illu strat in g the comp lex ity of class structures 7

How the members of the intermediate socioeconomic categories (or contradictory class

locations) align politically is crucial to the functioning and stability of capitalism. If they see

themselves as having common cause with the working class, their combination produces a

powerful force that is potentially challenging to the prevailing political economic order.

The late twentieth century experience of people ‘s power toppling tyrannical and corrupt

governments in, for example, the Philippines and Indonesia comes to mind in this context;

these broad, cross-class coalitions successfully challenged t he prevailing political order. If,

as is more usually the case, those in contradictory class locations see their interests aligned

with the capitalist class in maintaining the present political economic arrangements, a more

conservative scenario prevails. If some of the working class share that perception too, as is

also often the case, the conservatism is yet more pervasive.

Italian writer and politician Antonio Gramsci’s notion of hegemony warrants consideration

in this context. Hegemony entails the widespread acceptance of beliefs supportive of a

particular political economic system. 8 The hegemony of bourgeois values is partly a product

of people’s conditioning (through institutions such as the media, the churches , and the

education system) and partly a product of their practical need to fit in with the existing

socioeconomic arrangements. 9 The dominant ideologies are commonly accepted by those

whose objective class position might otherwise lead to a more dissident political stance.

Therein lies an explanation for the coexistence of class inequality and widespread political

conservatism. Its political implications are far-reaching . Instead of trying to exhort workers

to see the error of their ways by exposing the true nature of capitalist class relations, the

356 PART VIII: CONTEMPORARY CONCERNS

emphasis switches to challenging the institutional arrangements whereby capitalist ideology

is perpetuated. It is a theme to which we return in the penultimate chapter.

A third approach to the interpretation of class imparts yet more fluidity by emphasising

distributional struggles rather than structural class relationships. This is what its

proponents call ‘postmodern Marxism’. 10 The emphasis is on replacing an essentially dualistic

conception of class with a more complex and nuanced analysis of class relationships that

emphasises the processes of class formation operating at specific times in particular places.

The analysis retains a Marxist character, in that it stresses the existence of an economic

surplus . However, there is no presumption that the surplus goes directly as income to the

capitalist class. Rather, the surplus is regarded as the focus of numerous distributional

struggles. Environmental movements, for example, can be effective in acquiring some of the

surplus for cleaning up hazardous wastes or restoring environments degraded by capitalist

enterprises. These struggles over the surplus are treated as being of comparable importance

to the struggles between capital and labour within the capitalist mode of production-the

traditional Marxian focus. The relationship of class with gender and ethnicity also comes into

the spotlight, since gender and ethnicity can be significant seams of socioeconomic inequality

and conflict.

Recognising gender
Gender divisions in society are more visible than class divisions because there is less ambiguity

about the basis of classification; with very few exceptions, people are either female or male.

The term ‘gender’, however, refers specifically to the socially constructed roles for men and

women. Gender inequalities are not necessarily based on biological differences. Often, the

fact that men and women do different jobs is not attributable to their different physical

capabilities. Women and men may face a different array of economic opportunities, and their

average income levels are characteristically uneven. Any analysis of the political economy of

inequality needs to take account of this gender dimension of the way in which the economy

functions, as well as the class dimension. Then, we are in a better position to consider strategies

for change. 11

Gender and class dimensions of inequality are not synonymous, of course. One way of

conceptualising them is in terms of the relationship between patriarchy and capitalism. 11

Put simply, patriarchy is the power structure in which men dominate women, and capitalism

is the power structure in which capital dominates labour. Analytically, the task is to examine

the relationship between these two structures. One way of doing so is in terms of the Marxist

model of the circuit of capital, introduced in Chapter 16, which situates gender within the

sequential conditions for accumulation. The three conditions that are directly relevant in

this context are the reproduction of labour power, the production of surplus value, and the

realisation of surplus value. In each case, gender inequalities can be seen as functional for

capital in the sense of helping to ensure that the requirements necessary for its expansion

are met.

CHAPTER 37: CLASS, GENDE R, ET HNI CI TY 357

The reproduction of labour power is the fundamental precondition for the continued

functioning of the economic system. First and foremost, it means producing and raising

children. This is characteristically women’s work. Men play only a small part in biological

reproduction, often a very small part indeed. Notwithstanding the fact that more men

are involved in childrearing today than in the past, women remain the principal carers for

children. In the advanced capitalist nations at least, it is also common for mothers to combine

their role as childrearers with participation in waged work Y Yet domestic labour still tends

to be done disproportionately by women. Sustaining the existing workforce-by maintaining

health, providing adequate nutrition, and creating leisure activities conducive to physical

and emotional well-being-is an important aspect of economic and social reproduction that is

based in the household.

Not surprisingly, the study of domestic labour and the associated gender inequalities

has been a primary focus of feminist political economic analyses. The household is commonly

said to constitute a private sphere, subordinate to the public sphere of paid employment and

the political and economic institutions usually dominated by men. 14 It is typically excluded

from the gaze of orthodox economics because the economy, from a neoclassical perspective,

is defined in terms of production for market exchange. Yet, according to various estimates,

the value of domestic economic production carried out in the household-disproportionately

by women-amounts to about half of the gross national product. 15 The neglect of this crucial

economic contribution of domestic production constitutes a significant gender bias in

orthodox economics. 16

How to situate the household sector in a reconstructed modern political economy is a

contentious matter. At first sight, much, if not all, household production seems to have

a non-capitalist character. Useful goods and services are produced, but usually for direct

consumption rather than for market exchange, and intra-household income transfers are

more typical than direct wage labour. Some families, in which both men and women have

paid jobs, purchase domestic services (such as cleaning, ironing, cooking, even dog walking)

rather than do all their own domestic labour, but most is still done by members of the

household. The provision of these services in the household is crucial to the functioning of

capitalism. Capitalist employers need new generations of workers who are fed and reasonably

well educated-job ready, so to speak. Schools and hospitals also have a role to play in the

functions of social reproduction, but the nurturing capacity of the household is fundamental

to the requirements of the economy.

The labour expended on these tasks within the household is also provided typically

at no direct cost to capital. There may be an indirect contribution, to the extent that firms

pay taxes that go partly to family support payments, child allowances, and other transfer

payments to households. However, unpaid domestic labour is an effective means whereby

the cost of reproduction of labour power is shifted from firms onto the state and onto

households themselves. Looked at from this viewpoint, it suits the class interests of capital

to retain the household-and its typically gendered division of labour-as a subordinate,

non-capitalist sector of the economy and society. One might draw a parallel with the

358 PART VIII: CONTEMPORARY CONCERNS

advantages the advanced capitalist nations derive from poorer developing nations that serve

as sources of cheap labour.

The production of surplus value is the second requirement for capital accumulation. The

gendered character of waged work is the central feature here. Marxists have sought to apply the

concept of the reserve army of labour in this context, because many women have had a more

marginal attachment to the waged workforce than have men. A striking historical example

of this reserve army characteristic was the sudden entry of women into paid jobs during the

Second World War (to support the war effort) and their subsequent return to unpaid domestic

duties after the war (resuming ‘their proper place in the home’ ) Y However, the growing

proportion of women who have become permanent members of the waged workforce in recent

decades sits uncomfortably with the view of women as a reserve army. Far from being marginal

to wage labour, more and more women have become direct and regular contributors to the

production of surplus value.

The more persistent problem is the gendered division of labour in waged work. Labour-

market segmentation entails distinctive concentrations of men and women in different

industries and occupations; that is, in different labour-market segments. Women have been

disproportionately represented in occupations that are perceived to be extensions of their

traditional household work: nursing, cleaning, primary education, the preparation of food,

clothing manufacture, and clerical work, for example. 18 The patterns are not static; in the

nineteenth century, for example, secretaries were usually male, the occupation becoming

characteristically female only in the early twentieth century. Later in the twentieth century,

the gender composition of bank tellers underwent a similar shift. In other fields, such as

nursing and clothing manufacture, the gendered character of work remains striking . In

the modern economy, the services sector has a range of occupations in which face-to-face

interactions are crucial and client emotions have to be managed; these are occupations where

women are concentrated, too .J9

Labour-market segmentation has a strong association with gender-biased wage

inequalities. Insofar as average wages tend to be lower for characteristically female jobs, it is

not surprising that a gendered inequality in the overall distribution of wage incomes persists .

The higher incidence of part-time work among women also biases the distributional outcomes.

Even after accounting for that factor, women’s average full-time wage incomes tend to average

only about 80 per cent of men’s. 20 Recognising the importance of redressing such systemic

economic discrimination according to gender, governments have sought to prevent employers

paying different wages to men and women doing similar jobs. Where men and women are doing

different jobs, however, a requirement of equal pay for equal work does not eliminate gendered

wage inequalities. The principle of equal pay for work of comparable worth needs to be applied

to wage-setting in those circumstances. 21 But in unregulated labour markets no such principle

applies, and wage relativities are shaped by market power.

The problem of differential promotion prospects is a further source of gender bias.

Ensuring wage parity for people in different occupations, even breaking down the labour-

market segmentation process , does not ensure equality of gender outcomes if there is gender

CHAPTER 37 : CLASS , GENDER , ETHNICITY 359

bias in promotion processes. The problem is sometimes ascribed to women interrupting their

career for childbirth. Claims about a ‘glass ceiling’ setting a definite but invisible limit on

women’s career progress, including the progress of women who do not have children, suggest a

more profoundly discriminatory process. This glass ceiling may work against business interests

in the long term, for failure to take full advantage of the potential leadership roles of women

constitutes a waste of talent. Its persistence implies that, in this respect, patriarchal influences

dominate over the interests of capital.

A gendered division oflabour is seldom absolute. Glass ceilings may have cracks. Women

may become chief executive officers of large corporations, high court judges, even prime

ministers. Some do. Their statistical underrepresentation at those levels is well documented,

however, and shows little sign of dramatic change, notwithstanding conspicuously successful

individuals. 11 And, to the extent that women remain disproportionately concentrated in

more lowly paid occupations, the gendered division of labour in waged work serves capitalist

interests. It facilitates the production of surplus value by keeping down wage costs. This is

the result, directly, of women’s wages being lower than men’s, on average. It is the result,

indirectly, of gendered divisions among workers undermining their collective bargaining

power: this is the divide-and-rule process at work.

What about the realisation of surplus value? This third requirement for capital accumulation

has a less obvious link with gender divisions in the economy and society. For the capitalist

system as a whole, the realisation ofsurplusvalue in a monetary form as profit depends primarily

on the maintenance of a high level of demand for goods and services. Both women and men

are consumers and, as such, both contribute to meeting this particular systemic requirement.

However, women have usually managed a larger share of the consumption process, especially

in the purchasing of clothing and day-to-day food and household items, rather than big-ticket

items such as cars. The advertisers certainly seem to think women are the key consumer group,

judging from the way they target commercials at them. These commercials commonly play on

presumed fears and aspirations; to be the perfect mother who feeds her children the right

breakfast cereal and washes their clothes in the most effective laundry detergent, for example.

The role of women in the management of consumption is thereby linked with the perpetuation

of sexist stereotypes. This reasoning suggests that women as shoppers, as well as housewives

and workers, are crucial to the functioning of the capitalist economy. This is the sense in which

Galbraith wryly described women as comprising ‘a crypto-servant class’. 13

The distinctive economic positions of women and men can be analysed in various ways.

The political economic perspective presented here has a distinctly Marxist feminist angle,

emphasising how the gender division of labour helps capitalism meet its own systemic

requirements for reproduction and growth . 24 This is not to deny some fluidity in patterns of

gender inequality, or that government policies to limit discrimination and promote affirmative

action can make a difference. Certainly, it does not imply passivity in the face of structural

disadvantage. Indeed, it is a chain of reasoning with a politically powerful punchline. It

indicates that the movement for gender equality, if it is to be fully successful, also involves a

struggle against the prevailing structures and interests of capital.

360 PART VIII: CONT E MP ORA RY CON C ERN S

Emphasising ethnicity
Economic inequalities based on ethnicity parallel gender inequalities in some respects. People

of different ethnic origin are often clustered in different types of occupations. They may

face an unequal array of economic opportunities. Their average income levels are sometimes

markedly uneven.

The nature and extent of those inequalities varies from country to country. In the USA, for

example, the relative economic disadvantage of African-Americans is notorious; even after a

century and a half of freedom from slavery, and even after having elected Barack Obama as the

first African-American president of the USA, economic disadvantage remains entrenched. The

relative economic disadvantage of people from Central and South America and the Caribbean

islands is equally striking. In England, immigrants from India, Pakistan, and, again, the

Caribbean have been the major groups to experience economic and social disadvantage . In

Australia, the most disadvantaged groups are the Aboriginal peoples; but recently arrived

immigrants from non-English-speaking backgrounds commonly face particular problems in

establishing socioeconomic equality. Immigrants to any nation usually do it tough before they

establish themselves; in societies where racism is pervasive, a further impediment exists to

achieving parity in economic opportunities. 25

Is there a connection between racially discriminatory practices and the operations of

capitalism? Since racism predated capitalism, it would be facile to suggest a simple or direct

causal connection. One view is that it is quite independent of the economic system. From

this perspective, racism, and the associated processes of discrimination and socioeconomic

disadvantage, are not attributable to capitalism, and are equally likely to characterise any

other socioeconomic system that might succeed it. Its roots are not economic-or, at least, not

systemically so. The solution, accordingly, is independent of the economic arrangements of

society. It is a matter of changing personal attitudes through public education or of developing

institutions that foster greater mutual understanding among different ethnic groups.

Yet the economic dimension of racism cannot reasonably be ignored. How does it

operate? Among social scientists, there are sharply divided views about whether capitalism

ameliorates or accentuates the problem. In the former camp are neoclassical theorists, such

as Gary Becker, who received the 1992 Nobel Prize in Economic Sciences for his application of

orthodox economic reasoning to social phenomena. Becker’s analysis emphasises the exercise

of individual choice in competitive markets. It generally takes the tastes informing those

choices as given. So, in respect ofracial discrimination, it assumes that some employers have a

preference for white employees over black employees; that is, that they have some sort ofracist

inclination. That being so, white workers will be in greater demand. In a market economy,

that will cause the prevailing wage rates for white workers to be above those of black workers.

So, racially discriminating employers must pay bigger wage bills than non-discriminating

employers. The former will have higher costs of production and therefore lower profits. In a

competitive market economy, they will eventually be driven out of business. Only the non-

discriminating employers will remain. 26

CHAPTER 37: CLASS, GENDER, ET HN I C ITY 361

Milton Friedman, taking a similar view, has argued: ‘A businessman or entrepreneur who

expresses preferences in his business activities that are not related to productive efficiency

is in effect imposing higher costs on himself than are other individuals who do not have

such preferences. Hence, in a free market they will tend to drive him out.’27 Thus , capitalism

eliminates racism. Indeed, on neoclassical reasoning, it would be best for the government to

refrain from trying to prohibit discrimination. The neoclassical analysis predicts that such

regulations would cause higher rates of unemployment among the less-favoured ethnic

groups: in other words, enforced wage parity would benefit those fortunate to be employed,

but at the expense of those who now find it harder to get work at all.

Like neoclassical economics in general, the preceding arguments rest on some

distinctive assumptions. The origin of the original preference for white over black (or

whatever is the relevant racist inclination) is unquestioned. The analysis is ahistorical. Both

labour and commodity markets are assumed to operate in a competitive manner. Rejecting

these assumptions, political economists regard the problem of racial discrimination quite

differently. Racism is seen not as a matter of individual preference but as a feature of the

normal functioning of institutions. It is a systemic rather than personal phenomenon. The

origins of the discriminatory preferences and the institutional mechanisms by which they are

reproduced come under more critical scrutiny. So do the economic interests with a stake in

their perpetuation.

This political economic analysis of racism imparts an historical dimension to the analysis .

It also puts capitalism back in the dock. If, for example, the perpetuation of racism results

in divisions among workers that undermine their ability to achieve higher wages through

collective action, then one may judge that to be in the general interests of capital, irrespective

of individual employers’ racist or non-racist preferences . The divide-and-rule strategy, while

not necessarily causing the racism, may perpetuate it to the advantage of employers. 28 The

political implications of this view are strikingly different from those of the neoclassical

analysis. The inference is that, like the movement for gender inequality, the movement against

racism must challenge the prevailing power structures of capitalism as a necessary, albeit not

sufficient, precondition for eradicating economic disadvantage.

The principle of circular and cumulative causation-introduced in Chapter 25 in the context

of the study of institutional economics-has particular relevance to the explanation of racism

and its perpetuation. It helps to explain why a disadvantaged minority group, identifiable by its

skin colour, for example, may face a vicious cycle of discrimination and material disadvantage .

Being relatively poor, its members are likely to be poorly educated, poorly dressed , and more

inclined to antisocial behaviour, such as crimes against property. That fuels the belief that the

minority group is inherently different, unworthy of a helping hand , and probably best avoided,

if not actively suppressed. In effect, the legacy of past discrimination becomes a justification

for further discrimination.

The spatial dimension of racial inequality compounds the problem. This is most obviously
the case in ghettoes , where disadvantaged minority groups are geographically concentrated.

The possibility of an individual achieving upward economic and social mobility is thereby made

362 PART VIII: CONTEMPORARY CONCERNS

more remote. However, spatially targeted policies can play a significant role in the redress of

economic inequalities in these circumst ances. The same applies to inequality between classes;

spatial segregation accentuates the differences of access to economic opportunities, but also

provides a basis for targeting policies to ameliorate, if not eradicate, the inequalities. In both

cases, however, the precondition for the redress of inequalities is a government with a strong

commitment to using vigorous policies for social reform.

If the market will not eradicate discrimination-if, indeed , the most powerful participants

in the market profit from it-then it necessarily becomes a concern for the state. Proponents

of purposive intervention, sometimes drawing on the principle of circular and cumulative

causation, contend that policies of affirmative action are needed. The victims of discrimination

must be given explicit preference (in education and employment, for example) for a period of

time before equality of opportunity can eventually be established. Not surprisingly, opponents

of such a policy call it ‘reverse discrimination’, and emphasise its apparent incompatibility with

efficiency in the use of human resources during the period of transition. 29 A level playing field

is an admirable goal, but the path towards it is fraught with conflicting economic interests and

difficult political judgments.

Conclusion
The analysis of economic inequalities according to class, gender, and ethnicity is central to

modern political economy. This chapter has merely touched on some of the major concerns,

and indicated some lines of fruitful enquiry. Further analysis would emphasise the

interconnections between these three dimensions of socioeconomic inequality, recognising

that the socioeconomic conditions of disadvantaged groups are multidimensional. The

different economic positions of black, female employees, and white, male employers, for

example, are attributable to differences ofrace, gender, and class that are multiplicative rather

than additive. Integrating considerations of class, gender, and ethnicity also illuminates the

dynamics of capital accumulation as well as the distribution of income, wealth, and economic

opportunities. In other words, it is of fundamental economic, as well as social, significance.

Equally important are the politics. The complexity of class, gender, and ethnicity

as dimensions of ‘who gets what’ in the modern economy is matched by the complexity of

struggles to make a difference . The drive to eradicate exploitation, discrimination, and

oppression takes many forms, generating more diverse social movements than a traditional

focus on the binary opposition of capital and labour would suggest. Focusing on the study

of these inequalities and the social movements to which they give rise is the source of much

dynamism in modern politics.

What are the appropriate policy responses to inequalities associated with class, gender,

and ethnicity? This too is a contentious matter. The traditional focus of those committed to

the eradication of unjustifiable inequalities has been the politics of redistribution, seeking

to create greater equality through the redistribution of income and social expenditures.

CHAPTER 37 : CLASS , GENDER , ETHN ICITY 363

A different approach is the politics of recognition, which emphasises the distinctiveness of

minority groups and the desirability of maintaining the cultural differences, while at the same

time reducing economic inequalities. 30 This entails an official commitment to multiculturalism

and the recognition of the special rights of indigenous peoples in respect ofland, for example.

The two approaches do not always sit comfortably together. Can public policy move on both

fronts simultaneously? It is a big challenge for the institutio ns of the state.

Thus, concerns about economic inequality, as with other contemporary concerns about

environmental decay, technology, industry, and work, lead us to reflect on the potential for

political control over market processes in the pursuit of broader social goals. It seems that all

roads lead to the state.

KEY POINTS

• Class analysis is central to modern political economy. It raises complex issues about the
nature of the capital-labour relationship, the middle class, class consciousness, and class
struggles.

• Gender inequalities associated with patriarchal power structures are pervasive and
persistent, interacting with class inequalities under capitalism.

• Racism, as a pervasive social phenomenon, adds a further dimension to economic
inequalities. Its eradication calls for policies that recognise the sources of discriminatory
practices as well as redistributing economic opportunities.