How Do We Build a Family-Centered Economy?

By BA Santamaria

In 1902 Lenin published one of his more significant works, to which he gave the title "What Is to Be Done?" For fully 15 years the answers he gave to that question remained purely theoretical. In 1917 the October Revolution enabled Lenin and his comrades to take control of Russia. The practical—as distinct from the theoretical—answer which he and his successors gave after1917 proved to be a historical catastrophe, which, in the Soviet Union, China, and other Communist countries cost the lives of more than a hundred million human beings. The answer may have been catastrophic. Nevertheless the question "What is to be done?" remains central to every great national and international question, among which the disintegration of the family is among the most important.

That it is also extremely urgent is driven home by the paradoxical history of the family during the last 50 years. On the one hand, in Western societies the family has been in a state of progressive dissolution over the whole of that period. On the other hand, during the same period there have been numerous pro-family movements of varying strengths in many Western countries attempting to turn the tide. Despite their work, the results have been overwhelmingly negative, and never more so than in the past 20 years. The tide is still running strongly against the family, and there is no sign whatsoever that it is likely to be reversed. Hence the question "What is to be done?" remains both central and urgent.

The underlying thesis of this short talk may be quickly summed up. While piecemea1 reforms, like family allowances, taxation concessions for the family, and so on—although always won with great difficulty—are always to be pursued and welcomed, these concessions alone will not avail against the continuing process of internal disintegration. It will, I suggest, prove impossible to restore the basic structure of the family unless we can change the basic social and economic principles by which the majority of Western states are run today in the aftermath of the triumph of globalization and deregulation. A practical strategy aiming at the recovery of the family demands therefore a complementary strategy aiming at a reform of the State. That is more than a tall order. Apart from ideological currents like militant feminism and the moral chaos engendered by the triumph of the utilitarian philosophy throughout the West, enormous financial interests stand behind the present economic and financial structures of the modern State. They will not easily abandon their position of control.

B.

To evaluate the respective weights of the economic and noneconomic factors which have contributed to the disintegration of the family is not an easy task. As we have already seen at this conference, the noneconomic factors range from the social and cultural to the moral and religious. If one could conceive of a situation—which I recognize as purely hypothetical—in which the economic factors did not exist, the family would still be faced with the threat of dissolution in the Western world simply because the economic structures of Western societies are organized against it.

The conflict has now reached the point of no return, with mass unemployment apparently beyond the capacity of governments to control. Unemployment has been perhaps the worst of the purely material enemies of the family. In Europe alone there is a solid mass of some 20 m. unemployed. If we abstract the regional factors which prevail, for instance, in some Mediterranean countries, this unemployment is the consequence of the crisis to which the ideology of globalization has finally brought Western capitalism. The policy of international deflation, which is the current orthodoxy propagated with all the zeal of a religious revelation—"downsizing," cutting wages, reducing social services—will merely aggravate the problem.

This thesis is often denied by those who point to the favorable statistics of increasing employment which are produced, especially in relation to the U.S. These figures depend however on substantial reductions in real wages—below the level required for the maintenance of a family—and on the fact that more of these new jobs are part-time rather than full-time jobs. In Australia the Commonwealth Statistician has reported that of the 1.8 m. jobs created in the last 10 years, over 1 m. have been part-time. These jobs are held principally by married women. Millions of married women have been absorbed into the industrial and commercial workforce, some obviously voluntarily and by choice, some simply "conscripted" to make up family income. For the child, the child-care center has increasingly been substituted for the attention of its parents. These radical changes in the basic functions and circumstances of husbands, wives, and children have simply torn the family apart.

C.

If one is to canvass solutions, it is first necessary to explore causes.

The conflict between the two "regimes"—of the family and of modern industrial societies—goes back at least 50 years. It appears to fall into three well-defined phases which need to be understood if we are to produce solutions which will actually work.

(i) The first organized political act in the campaign to draw mothers into the workforce may be regarded as having been taken in the United States in 1955 with the conference on "The Effective Use of Woman Power," which was held at Columbia University with the informal support of the Eisenhower Administration. Before the days of television, it usually took up to 10 years for American cultural trends to reach Australia. This occurred in 1966 when similar conferences were held but under the formal aegis of the then Australian government. There was no pretense in either country that the object in view was the moral or political "liberation" of women. The basis was a relatively new but strongly asserted employer view that women constituted a vast source of cheap and hitherto largely unexploited labor which should be transformed into the magic factor of lower labor costs. That this might diminish the purely economic value of the labor of women in the home did not arise for consideration, since the gross domestic product did not—and still does not—measure the financial value of the work of women in the home. Yet the most recent research indicates that it is almost equal to the added value of industrial and commercial production. With government policy not in favor of the new view, there was an immediate acceleration of the entry of married women into the full-time and part-time workforce. Whereas some 25 to 30 percent of married women were in the Australian workforce at the end ot the fifties—mainly young marrieds who had not yet begun their families but who intended to do so—by the end of the seventies the figure had grown to some 50 percent and over.

(ii) The second stage may be dated as beginning in 1973, the year of the Middle East oil crisis.

The quadrupling in the price of oil for Western industries led to a major rise in industrial costs. Fortuitously perhaps, 1973 was the year in which, in the U.S., real wages began to fall.

This represented a major change from the situation which had prevailed since the end of the Second World War.

From 1945 to 1973 in all Western societies the standard of living of the average family had risen modestly but regularly, basically because the real wage of the production workers slowly but surely increased. The real wage earned by the family breadwinner had proved the foundation of the solidity of the family. In 1973, perhaps to compensate for the "oil shock" of that year, real wages began to decline. In 1985 Paul Volcker, the former chairman of the U.S. Federal Reserve, in his book Changing Fortunes, admitted that "the real hourly and weekly earnings of the average production workers in the U.S. are lower today than they were 25 years ago." At first, American families, apparently believing that this was only a temporary phenomenon, adapted. High consumption levels were maintained. This was possible because family income was "stretched," on the one part, by the depletion of savings, by the increase in borrowing, particularly through the growth of consumer credit, and partly by the de facto conscription of married women into the workforce. Marriages were postponed. Birth rates were lower. Household savings declined. Families went into debt.

(iii) The third period began with the worldwide deregulation of the financial system in the early eighties as part of a system conceived in the interests of the multinationals, which rapidly developed its concomitant ideology .

The deregulation of the international financial system has been the direct cause of the present speculative frenzy throughout the West, which, under some circumstances, might easily result in a parallel to 1929. But here we are concerned exclusively with its consequences for families.

For them, the impact of the financial revolution has been an astronomical rise in consumer debt, as with the reduction of real wages, family savings disappeared. The number of U.S. families with savings accounts fell from 62 percent in 1983 to 44 percent in 1989 and has undoubtedly fallen even more rapidly since. In 1969 American consumers owed just under $US3 billion in credit card debt. By 1994 credit card debt, measured in 1969 dollar values, had risen from $US3 billion to $US74 billion. Repayments on total consumer debt, including that on mortgages--together with fixed outlays like food, rent, and taxes—rose from 77 percent of family income in 1992 to 82 percent in 1995. Hence the almost total disappearance of family savings on which to a large extent stability of the family had depended as much as the maintenance of the levels of real wages.

The rapid rise in personal, corporate, and government debt naturally resulted in a rapid increase in interest rates.

The great increase in the level of interest rates which has accompanied this revolution has served to siphon much of the money which once went into the accumulated savings of ordinary families to the relatively small financial class whose investments are handled largely by the major banks and funds. Interest rates, by and large, have come to constitute one of the central mechanisms which transfer assets from one class to another.

Nobody has better understood and more greatly profited from the domination of Western societies by laissez-faire economics than the celebrated Hungarian speculator, George Soros. His Quantum Fund reputedly handles investments totaling $10 billion. He was strong enough in 1992 to force the devaluation of the British pound. Yet in his article in the February issue of the Atlantic Monthly he had this to say:

Although I have made a fortune in the financial markets, I now fear that the untrammelled intensification of laissez-faire capitalism and the spread of market values into all areas of life is endangering our open society. The main enemy of the open society, I believe, is no longer the communist but the capitalist threat.

Its main thrust is the general growth of unemployment throughout the Western world.

Unemployment, in my view, has become the greatest single factor in family breakdown in modern industrial societies. For that reason, unless some kind of concerted action is taken to bring the pressures and abuses ot this system to an end, any work we do to restore the family will yield only comparatively meager results and not turn the tide of events.

D.

The question "What is to be done?" therefore resolves itself into asking how, in what has become a highly unstable economic situation, we can lay the foundations of a national economic structure which permits a family-centered economy to operate.

I am chary of recommending models. I remember the ill-considered enthusiasm with which the greater percentage of modern intellectuals—Western and Eastern—fell for the Soviet model. No model can be readily adapted to a different country with different traditions. Unless one has oneself lived in a country for 10 years—known its language, its traditions, its people—one cannot be sure that whatever descriptions are given in the textbooks are, in fact, accurate.

Subject to all of those qualifications, and to all of the recent excesses of its so-called "bubble economy," in part a product of the highly complicated interplay between the Japanese yen and the American dollar, there is a great deal which is worthy of study in the institutional foundations of the Japanese economy. Such knowledge depends on the accuracy of such sources as Chalmers Johnson, James Fallows, and, more recently, R. Taggart Murphy in his The Real Price of Japanese Money, which I strongly commend.

In brief, what I find attractive in the institutional framework of the Japanese economy, as I understand it, is a set of underlying principles:

1. The insistence on maintaining real national sovereignty. This is not even primarily a matter of arms and war. Whether or not the Japanese actually needed the warning said to have been given to them by Bismarck in 1872—that to permit foreign interests to invest in any key part of the financial system from banks to insurance companies or even basic industries would ultimately destroy sovereignty, as would borrowing from them— Bismarck’s warning retains its relevance today.

2. The interlocking arrangements by which the Japanese authorities established some unity of purpose between government, the banks, the major corporations, the international trading companies, and their network of thousands of small suppliers which, to date, at least have permitted the maintenance of whole-of-life employment at least for a section of the working population.

3. Exceedingly low interest rates. The Japanese discount rate is approximately .5 of 1 percent. It is only if interest rates are low that housing, farming, small businesses, public works, and infrastructure in general can flourish.

4. The effective methods utilized by the Japanese economy by which consumption is taxed and domestic savings and investment ensured.

5. The multitude of informal arrangements which Japanese society has developed ensure a productive existence for the elderly, instead of throwing them on to the scrap-heap of all-but-complete dependence on government handouts.

The family wage and the widespread distribution of productive property are fundamental to the economic health of the family, but unless the political economy of the States is such as to sustain them, we will enjoy neither the one nor the other. If we wish to create a family-centered economy, we will have to alter the economic principles of laissez-faire capitalism by which modern Western states are run and work for a new and different structure of the State.

That was my meaning when I said at the beginning of this paper that a program for the family must rest on a complementary theory of the State, and that unless and until we can win this last battle, we will not win the war.

The Honorable B.A. Santamaria, philosopher and labor movement leader, is the president of the National Civic Council, of which the Australian Family Association is an affiliate body. He is the editor of News Weekly and AD 2000. He contributes a weekly column to the Australian. His most recent books include Against the Tide, Australia at the Crossroads, and Santamaria: A Memoir.