from Peter Radford and the WEA Newsletter
I have become so enmeshed in political activity here that I rarely have time to reflect on the strangeness of it all. Why Trump? Why now? But I was prompted to think a little harder about it when I re-read the following in Karl Polanyi’s “The Great Transformation”:
“Market society was born in England – yet it was on the Continent that its weaknesses engendered the most tragic complications. In order to comprehend German fascism, we must revert to Ricardian England.”
Now I don’t want to plunge into a detailed re-capitulation of inter-war history – that is not my point. I want to focus our attention on the analogy Polanyi brings to mind, and especially how deeply ideas can scar a society when they are applied with religious ferocity without regard to their flaws.
Nor do I want to re-litigate the entire argument about neoclassical economics. Frankly I am tired of wasting my time. If the preponderance of economists want to disconnect from reality, then who am I to argue? Let them. And ignore them. Their ignorance of the real world is both willful and necessary for the alternative world in which they think to cohere. So be it.
For those of us who value economics as an understanding of a critical part of social reality we must insist that those inhabiting that alternative world take full responsibility for the outcome of their ideas if, and when, those ideas are allowed to seep into actual policy making. They must be blamed. And we ought to demand an explanation as to why the imposition of fanciful ideas onto an unsuspecting world, with the core consequences now becoming apparent, is at all ethical.
You see, Polanyi was right. At least in so far as he projects the blame for extreme politics, in a major part, onto the shoulders of those who advocate policy based upon theories that stand not so much on solid foundations but in midair.
It is not possible now, nor has it ever been, to extract economics from its socio-political context. It is not possible to remove history. Nor is it possible to remove the panoply of institutional, cultural, geographic, intellectual, or technological frameworks within which economic activity takes place. Those things frame every single transaction. They channel them. They constrain them. And they create the pathway along which an economy travels. If we ignore such things then the consequent study is a sterile amoral technical exercise of little practical value.
Yet that limited small thing, centered around the mathematics of allocation within scarcity, has been presented to the world as the theoretical structure upon which we ought to rely if we wish to prosper. It has become the most important part of the meta-structure we know as neoliberalism, and it is neoliberalism and its hollowing out of the socio-economic environment in which we live that has produced the combustible political context within which Trump has emerged as a viable candidate.
I have often suggested here that a key characteristic of mainstream economics is its fundamental distaste for democracy. We read it in the way in which economics pours scorn on government – even democratic government – as an automatic and inevitable problem in the achievement of efficiency, whatever that is. The anti-social bias is palpable.
Economics with its relentless attention to individual liberties and the freedom to exchange personal property in various markets, has forgotten, or neglected, the other half of the liberty bequeathed us by modernity: that of being equal amongst our peers. It is this second half of freedom that manifests itself as democracy. And it is this second half that presses back against the excesses of the first. This must be, for to preserve the freedoms expressed within economics we must mitigate the tendency, inherent within it, to accentuate differences in the terrain of society. Too much inequality undermines the willingness of the least equal to accept the workings of the market upon which modern economics is built. At some point rationality requires limitation of that freedom. It is only by accepting both halves of liberty – of individuality and of equality – that we can protect them both. They must be balanced. Neither survives alone.
Yet most economists scoff at this thought. Indeed they have deliberately stricken from their domain any reference to equality, and they, instead, sneer at any effort to smooth the differences their allocative mechanism might amplify.
So, at best, modern economics is a half-truth. It can only ever be a partial defense of social or economic freedom. Its deliberate blindness to the other half makes it inapplicable as a complete social theory. Its contempt for democracy makes it irrelevant in modern societies. Perhaps most economists don’t realize this, they are too caught up in the wonders of the mechanics of their dangerous half-truth.
But say it often enough, say it loudly enough, and, especially, say it with the authority of a scholarly background and the damage can be awful.
You might just make a Trump legitimate.
Ideas matter. We all acknowledge that. From where I sit economics has a lot to answer for. Polanyi was right, and that really matters.
From: pp.2-3 of World Economics Association Newsletter 6(2), April 2016