A DEAR FRIEND WHO WAS TRAINED IN MATHEMATICS AND WHO IS A MAINSTREAM ECONOMIST (IN THE SENSE THAT HE IS NOT RADICAL OR A CRITICAL THEORIST) LET ME KNOW A COUPLE OF DAYS AGO THAT THIS POST WAS “A RANT”… SO, THIS IS A RANT
(HE IS CORRECT, IT IS NOT “SCIENTIFIC”)
WE HAVE EXCHANGED PRIVATE COMMUNICATOIN ON THE SUBJECT
I SHOULD POINT OUT WHAT I WROTE WHEN FIRST PUBLISHING THIS POST:
THIS IS A DISCUSSION DRAFT. IT IS RAW AND UNEDITED. AS USUAL, ANY AND ALL COMMENTS ARE WELCOME…
Alan Greenspan, former Federal Reserve chairman, with John Snow, former Secretary of the Treasury, at a hearing on Capitol Hill.
One of the greater tragedies of late capitalism – from mainstream scholarship in the sciences to the hegemonic forces that reproduce the status quo – is the unspoken belief that “the market” cannot be wrong, nor can it be criticized. Part of this tragedy is what appears to be permissible injustice; a type of belief that in cases where policies proposed by economists resulted in iniquity and unspeakable hardship, “guilt” or responsibility is deferred to “the market”. Most recently a trio of economists were identified by non-mainstream body as being responsible for the current crisis in the global political economy. The Real World Economics Review Blog
reported:
Alan Greenspan has been judged the economist most responsible for causing the Global Financial Crisis. He and 2nd and 3rd place finishers Milton Friedman and Larry Summers, have won the first – and hopefully last—Dynamite Prize in Economics. They have been judged to be the three economists most responsible for the Global Financial Crisis… [more] than 7,500 people voted – most of whom were economists themselves… With a maximum of three votes per voter, a total of 18,531 votes were cast. The poll was conducted by Poll Daddy. Cookies were used to prevent repeat voting.[1]
Mainstream Economists would, no doubt, dismiss the poll and report on the basis that it is was not “scholarly”, that it is “unscientific,” that it lacked mathematical formalism and especially that it was not produced by one of their colleagues and fellow travelers. In this respect, the Nobel Laureate for Economics, Paul Krugman comes to mind. Krugman has been admirably consistent in dismissing non-economists, or poor people who protest against cheap/child labour. We shall get to this later. What is important is that Greenspan admitted that he played a role in shaping and maintaining the orthodoxy that shaped the export of “the American model” to poor countries around the world, especially Africa. He admitted that he had put too much faith in self-correcting markets – probably THE canon of the fundamentalism that shapes mainstream Economics. In October 2008, Greenspan was questioned in the US House of Representatives Committee on Oversight and Government Reform about his role in the economic crisis that result in bank closures and defaults, all of which contributed to tipping the US into recession:
“You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, who chaired the committee. ‘Do you feel that your ideology pushed you to make decisions that you wish you had not made?’ Mr. Greenspan conceded: ‘Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.’[3]
If Greenspan were distressed, imagine the predicament of millions of people around the world who have been forced, by various means of coercion and consent, to implement “the American model” – usually at the behest or recommendation of the World Bank and the International Monetary Fund (IMF). I want to suggest that the world will wait a damn long time for an apology from mainstream economists – especially those in the US who seem to have applied the crudest and most callous of Western Economic Rationalism to justify inequality, poverty and even child/cheap labour. It is, after all, these individuals who have shaped the policies of the World Bank and IMF which, in turn, exported the “American model” to the poor of the world – in some instances to the direct benefit of the US, as the World Bank’s former Chief Economist, Lawrence Summers has said. What stands out from mainstream discourse on economics is the justification of poverty, inequality and misery as an inevitable outcome of “market forces” as if human beings have no say (well dark-skinned human beings) in their own lives.
The Permissibility of Injustice.
What is indeed distressing, to use Greenspan’s expression, is the way that iniquities - by iniquity I refer to conditions that are immoral, unjust, injurious and iniquitous [4] – of liberal capitalism or market fundamentalism are somehow consider to be at least permissible. Consider the liberal Economics gospel according to Adam Smith. Actually, if I were to use a Marxist explanation for the way in which capitalism reproduced inequality, the people at the World Bank, Nobel Laureates in Economics and New York Times columnists would reach for invective and other means of character assault … so, I remind them of what Adam Smith said:
“In the progress of the division of labour… [a human being] generally becomes as stupid and ignorant as it is possible for a human creature to become.”
The point here, being, that it appears as if liberal economists/capitalists have no compunction about inequality or injustice and simply defer to “the market” or “laws” as the ultimate arbiter in human affairs – as if markets do not involve human relations or as if laws spring from the ether without any purposeful human intervention. This obeisance to Western Economic Rationalism, and deference of responsibility or guilt to the market, is actually quite disingenuous – especially since it is human beings (those economists at the World Bank and along the Wall Street-Washington Axis) who make economic policies. It is of course quite despicable, when one considers the fact that a murderer in, say, the US may be placed on an express line to the gallows for killing single human being – clearly a grave deed – but an economist whose policies may cause severe damage and unspeakable hardship to tens of thousands of people in Africa, may end up receiving a Nobel Prize and his work celebrated by millions. Consider this apparently iniquitous situation in the context of Paul Krugman’s justification of child/poor labour in Africa or Asian squatter communities or garbage dumps around the world of dark-skinned people. Such is the arrogance, audacity, the sanctimony and self-righteousness of Krugman, that he has dismissed people who criticised child/cheap labour as unqualified to do so and suggested that they had not thought through their own arguments – as if to suggest that if everyone in the world thought long and hard enough we would all think like Paul Krugman.[5] This type of egregiousness and arrogance was most pithily summed by the English philosopher, Thomas Hobbes in the following manner
For such is the nature of men that howsoever they may acknowledge many others to be more witty, or more eloquent or more learned, yet they will hardly believe there be many so wise as themselves; for they see their own wit at hand, and other men’s at a distance.[6]
In fact, Krugman seems vehemently opposed to non-economists expressing concern, or criticising the theories, methodologies or the actual policies of economists. He usually admits into the encircled wagons only those persons whom he (Krugman) considers to be “knowledgeable insiders” (economists), and is generally dismissive of outsiders (non-economists) some of whom he described as “political crusaders”.[7] In other words nobody can possibly disagree with him, intellectually, and when anyone dares to do so, he (Krugman) dismisses them as “political crusaders” or as having not thought long and hard enough – as he has. Like Krugman, economists feel perfectly justified in criticising all and everything from their disciplinary perspective. They have an especially powerful tendency to view theirs as the only or the best discipline in the social sciences to explain the social world. They apparently have no compunction over their justification of the most odious policies and outcomes by deferring to “market forces” – or for supporting some of the shadiest characters in the world. This extension of their particular framework is achieved by what is described as “economic imperialism” – a practice that is rationalised and defended by some of the most prominent global public policy-makers in the crudest, most callous ways. One of the better expressions on economic imperialism and its ties (at least in the US) with Christian Fundamentalism is provided by Gary Becker – another Nobel Laureate for Economics. Becker’s admission was made in a Q&A with the Christian and Market Fundamentalist, Acton Institute[8] whose desideratum, according to Sourcewatch is: “Together, empowered by faith in God and belief in human freedom, we truly can make a difference.”[9] The Acton Institute’s founder, Robert Sirico, identified what seems to be an umbilical connection between the two fundamentalisms in the expression of the institution’s purpose as being “to familiarise the religious community, particularly students and seminarians, with the moral dimensions of liberty and the free market system.”[10] Of course, economists like Krugman (whom liberal the establishment in the US would have us believe cannot ever be wrong) would circle the wagons in defence against the brutes and savages who dare to even suggest that economists are wrong (and not express their arguments in mathematical formalism!). Why would they be in solidarity with the fundamentalists like Sirico (the Christian), and Becker (the Economist)? For an answer, we may turn to that other celebrity of the liberal capitalist elite, another Nobel Prize for Economics laureate, Joseph Stiglitz. (See the explanatory note at the foot of this post) It is difficult to take seriously any criticism that Stiglitz makes of his contemporaries on the basis that they might well be rather Shakespearean protestations. Indeed, Stiglitz may criticise the likes of Lawrence Summers or the economists of the World Bank and IMF for their policies, but buried in one of his best-seller text books, Stiglitz makes the claim that whatever their preferences, stripe, pedigree or caliber all economists are loyal to the “basic competitive model”.[11] This suggests that economists belong to an elite cabal with their own in-jokes and loyal criticisms and which completes an internal balance for liberal capitalist hegemony. Indeed, this competitive model to which Stiglitz refers finds much of its intellectual basis in key aspects of Adam Smith’s oeuvre. Disciplinary divergence or doubts about human abilities, economists “without fail” swear by “the algorithm of utility maximization” as the “uniform” basis for (individual) human decision-making. This approach denies prima facie the social relations of class, and in a sense confirms the assumption of an atomist individual that is fundamental to liberal and mainstream economics thought, and which renders any form of community obsolete.[12] This apparent obsolescence of community and focus on the individual is, of course, a defining feature of the Acton Institute (and of the competitive model to which mainstream economists confess their faith), to whom Becker confessed his faith in economics imperialism. The point I am making is that any division or differences between economists who promote liberal capitalist orthodoxy is necessarily false because, as Stiglitz explained in his text book, they are all loyal to the core principles of the competitive model which includes permissibility of iniquity – especially of inequality.
Global Public Policy-makers and the Permissibility of Inequality
As a former Chief Economist of the World Bank, and former Chairman of President Bill Clinton’s Counsel of Economic Advisors, Stiglitz has played an important and prominent role in global public policy-making and in the historical bloc that props up liberal capitalist hegemony. In this sense he is, of course, not alone. The pervasiveness of what Bryan Barry described as the ideology that justifies inequality,[13] as a set of beliefs and values, is most pronounced among global public policy-makers associated with organizations like the World Bank and the IMF and ancillary institutions – like think tanks and academic institutions – that share ideological solidarities with the institutions and avatars of liberal capitalist orthodoxy. Among the individuals most are figures like Nancy Birdsall, who explained the permissibility of inequality in the following made the following statement
“Not all inequality is a bad thing. Some inequality represents the healthy outcome of differences across individuals in ambition motivation and willingness to work. This constructive inequality is the hallmark of the equal opportunity society, the US symbolises. Increases in this constructive inequality may simply reflect faster growth in income for the rich than the poor – but with all sharing in some growth.”[14]
Among global public policy makers and Washington think tanks, Birdsall is regarded as a specialist on inequality. The fact that she linked “constructive inequality” to the US is, actually, quite telling precisely because World Bank policies on Africa have been so directly influenced by Washington and by the “American model” consistently praised by liberal (Robert Gilpin) and right-wing scholars (Samuel Huntington). It is very same model which has now apparently collapsed[15] and/or being questioned[16] – and for which Greenspan assumed some responsibility.
Some Remarks in Conclusion
The fact that Greenspan has admitted that he was wrong; that Krugman will not accept the criticisms or the appeal of parents whose children may work in sweatshops; that Birdsall considers equality to be constructive and that this is the ethic which made the US a great country; that fact that the “American model” seems to have failed; that nobody seems to take responsibility for the misery sowed across the developing world by the economic policies of these people suggests that liberal/capitalists economists have no regrets or feel no compunction over their mistakes – that capitalism really means never having to say you’re sorry. Let me close with two brief observations… The architect of apartheid, Hendrik Verwoerd once remarked that black people should not be educated beyond a certain level, because all they were expected to be, were hewers of wood and drawers of water. It seem ironic (perhaps not, since black people seem to be dispensable) that Paul Krugman used more or less the same justification for child/cheap labour.Verwoerd’s reference should convince economists that unemployment or under-employment may well have its roots in actual policies made by actual human beings – and the outcome of so-called market forces – but I doubt that any economist would dare imagine human agency as more powerful than “the market”. Nonetheless, this is what Krugman said:
“You may say that the wretched of the earth should not be forced to serve as hewers of wood, drawers of water, and sewers of sneakers for the affluent. But what is the alternative?”
This is of course one passage in the entire article; so he has room for obfuscation and hiding behind the “out of context” figleaf. The irony of his channelling the architect of apartheid is most telling. It is clear that Krugman’s economic rationalism holds naught for the comfort of the weak, the poor and the marginalised. If that is not sufficient evidence of the cold-hearted callous nature of economic rationalism, consider the following statement made in the autumn of 1999 by another Nobel Prize laureate for Economics, who is also located along the Washington-Wall Street Axis. (See my ten year gardening leave reference at the foot of this post)
“If we improved the living conditions of slum dwellers they would not be able to continue living there; they would not afford it and have to move on and create new slums. Of course, that statement does not leave this room.”
I would suggest that this is what/how almost every single economists thinks. It was Stiglitz, himself, who said that all economists were loyal to the basic competitive model. It was Krugman who suggested that only economists had a right and the intellectual tools to discuss and/or comment on poverty, inequality and especially on child/cheap labour. It was Nancy Birdsall (also a former high-ranking official at the World Bank and now head of a think tank in Washington, DC) who said that inequality was constructive and what made the United States a great country. These are the economists who have played/who continue to play such an important role in making global public policy; among them is Greenspan. What is apparent, amid all this, and to put it quite simply: We should not expect an apology from any of these people. Somewhere in his protestations, Stiglitz made a particularly apposite remark; he suggested that economists in Washington would not dare to prescribe hardship measures on the US – but felt no compunction about prescribing it to societies in the developing world…. Fully aware that inequality and justice may be considered out of reach, I want to paraphrase Elie Wiesel (on justice): We may never have equality, but that does not mean we have to stop fighting for it.
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NOTES AND REFERENCES
EXPLANATORY NOTE.
Two points are important at this juncture, both of which must be considered in the context of full disclosure. First, references to Stiglitz (and any others whom I refer to in this brief article) are not directed at him, personally. He merely represents what Marx described as “the personification of economic categories, the bearers [Träger] of particular class-relations and interests”. In Gramscian terms he gives “homogeneity and an awareness of [his] own function not only in the economic, but also in the social and political fields” in the sense that in various incarnations he has served significant roles in the historical bloc that dominates the orthodoxy that shapes global public policy-making. The second point is this: Between 1999 and 2001 spent some time working very closely with Stiglitz at the World Bank. I left the Bank in 2001 to complete a doctorate in International Political Economy, and today, about 10 years later, I have no problems with criticising his policies, theories or general disposition as a global public policy-maker and an economist with a very high profile along the Washington-Wall Street Axis. A 10-year period of gardening leave is perfectly acceptable. There are very serious reasons for making these points; whatever discussion that emerges from what is written in this blog post/essay/commentary should, ideally, remain at the level of ideas, policies and political conduct. It is in the interest of all parties – especially the powerful – to ensure that this discussion does not become personal.
[1] Greenspan, Friedman and Summers win Dynamite Prize in Economics. Published on 22 February 2010. See the blog:
http://rwer.wordpress.com/. Retrieved on 22 February 2010.
[3] Andrews, Edmund (2008). “Greenspan Concedes Error in Regulation.”
The New York Times. 23 October 2010. Available at
http://www.nytimes.com/2008/10/24/business/economy/24panel.html?_r=2. Retrieved on 22 February 2010.
[4] Hari, John. (2006) “Inequality Is Iniquity: An Enquiry into Inequity and Health.” pp 1 – 5. Tubingen, Germany: Difäm: für Gesundheit in der Einen Welt, 2006. For an appreciation of the concerns voiced over the reproduction of iniquity, see: See the paper by Anete Brito Ivo of the Federal University of Bahia, in Brazil,
O Controle da Iniqüidade: Novo Paradigma Estatal de Focalização das Políticas Sociais de Combate à Pobreza na América Latina “The Control of Iniquity: A New State Paradigm to Focus Social Policies for Fighting Poverty in Latin America”. Presented at the conference,
The Role of the State in the Struggle against Poverty. Recife, Pernambuco, Brazil, 18-21 March, 2003.
http://www.fundaj.gov.br/docs/eventos/propeng.pdf. Retrieved on 22 February 2010. See, also, the reference to an UNCTAD report which made a direct connection between iniquity and poverty, in a report on the impact of Genetically Modified Organisms on the environment published on the website of the Environmental Health Sciences department at the University of Minnesota,
http://enhs.umn.edu/5103/gm/fate.html. Retrieved on 22 February 2010. Poole, Nigel. (2005) “Poverty, Inequality and Ethnicity: A Note to Policy Makers on Latin America.”
Eurochoices 4, no. 3: 44 – 49.
[5] See Krugman’s column, “In Praise of Cheap Labour: Bad jobs at bad wages are better than no jobs at all.”
The Dismal Science, available at
http://web.mit.edu/krugman/www/smokey.html. Retrieved on 22 February 2010.
[6] This passage is from Hobbes’s work, Leviathan. An electronic version of the book may be found on the website of the Carnegie Melon University’s Online Guide to Ethics and Moral Philosophy. See, Of The Natural Condition of Mankind as Concerning Their Felicity, and Misery, available at:
http://caae.phil.cmu.edu/Cavalier/80130/part1/sect4/texts/Levi13.htm. Retrieved on 22 February 2010.
[7] Krugman, Paul (1998). “Two Cheers for Formalism.”
The Economic Journal 108: 1829 – 36, p 1829.
[8] See, Gary Becker’s defence of “Economic Imperialism” in a Q& A with the Right-wing Christian Fundamentalist organisation, the Acton Institute in 2009. Available at,
http://www.acton.org/publications/randl/rl_interview_76.php. Retrieved on 22 February 2010. See, also, his 1976 book,
The Economic Approach to Human Behaviour. Chicago: The University of Chicago Press.
[9] Sourcewatch’s entry on the Acton Institute, available at:
http://www.sourcewatch.org/index.php?title=Acton_Institute. Retrieved on 22 February 2010.
[10] See “Lord-ing it over others: Local Think Tank Feels Right at Home. 3 January 1994. Reprinted from The FUNdamentalist (March 1994) by Media Mouse at
http://www.mediamouse.org/underground/1994/01/lord-ing-it-over-others-local-think-tank-feels-right-at-home.php. Retrieved on 22 February 2010.
[11] Stiglitz, Joseph (1997).
Economics. Second Edition. New York City: WW Norton. (pp 29 – 30)
[12] Witzum, Amos (2005) “Social Circumstances and Rationality: Some Lessons from Adam Smith Why We May Not All Be Equally Sovereign.”
The American Journal of Economics and Sociology 64, no. 4: 1025 – 47 (p 1025). Bonefield, Werner (2002). “Review of Feindanalysen. Über Die Deutschen.”
Capital & Class 77: 152 – 56 (p 152). Sartre, Jean-Paul (2004).
Critique of Dialectical Reasoning. Translated by Alan Sheridan-Smith. Vol. Volume 1. London: Verso. (p 409)
[13] Barry, Brian (2005).
Why Social Justice Matters. Cambridge: Polity Press (p viii).
[14] The passage was taken from a Remarks at Overseas Development Council Conference, “Making Globalization Work”, International Trade Center, Washington, D.C., March 18, 1999. A copy of her speech can be found at:
http://www.econ.yale.edu/alumni/reunion99/birdsall.htm. Retrieved on 22 February 2010.
[15] “America’s failed model for the world: Europeans keep asking me, has America lost its mind? From healthcare to its economy, the US is looking merely average”. The Guardian. 16 September 2009.
http://www.guardian.co.uk/commentisfree/cifamerica/2009/sep/15/europe-us-healthcare-economy. Retrieved on 22 February 2010.
[16] Layne, Christopher (2009) “The Waning of U.S. Hegemony – Myth or Reality?: A Review Essay”
International Security – Volume 34, Number 1, Summer 2009, pp. 147-172.
