May 4, 2019
from Peter Radford
Just a brief follow-on to my
recent comments on the role of economics and its relationship with power and/or
politics.
I pulled out my old copy of
Polanyi’s “The Great Transformation” to refresh my memory of his position on
the topic. Recall that he talked about the way in which economic activity
is embedded within the larger social and political fabric. Mainstream
economists must shudder at such a thought. Isn’t economics superior and
more “scientific” than politics?
In any case, in his
introduction to the edition I have, Joe Stiglitz made a very useful
comment that is worth repeating. His words are:
“… the very utopianism of
market liberalism is a source of its extraordinary intellectual resilience
… its theorists can always claim that any failures were not the
result of the design but of a lack of political will in its implementation.”
That is clearly true of all
utopian or faith-based arguments or theories. The purity necessary for
such arguments or theories to represent reality is unattainable. Reality
is riven through with all sorts of contradictions, uncertainties, and other
vagaries such that any utopian vision cannot be fully realized.
Thus, a utopian theory is
rendered immune to contradiction. How sneaky! The defenders of such
theories can hide behind a convenience of their own making. The radical
rationality of market liberalism is such a theory. Its proponents can
point to any number of so-called failures that prevent its pristine wonders
from occurring on earth. Inevitably those failures are described as being
a problem of governance or, rather, government interference.
The obvious retort to such
talk is simply to ask why it is that the theory describes a utopian world
and not the one we all observe. To that the utopian theorists have no answer.
Why?
Because to provide a theory
that accounts for the contradictions, uncertainties, and vagaries contradicts
their ideological intent. They set out to prove the superiority of
markets over other forms of resource allocation, and the only way of achieving
that goal is to abstract away reality with all its inconvenient facts.
However, markets, as Polanyi pointed out, are tainted by their continual
co-existence and co-mingling with other forms of allocation and social
activity. Telling the consequences of one set of causes from another
is difficult to say the least. Economics can describe monopolies or
rent seeking, but treats them as anomalies that sully the purity of a market.
In reality they are the norm. Elites make them that way.
It is trivial to argue that
perfect markets deliver perfect results. It is a great deal more
difficult to make a real economy tractable to analysis. And the argument
that we ought to compare the pure version with reality to see where we could
improve the real world is truly bizarre and pointless. Unless, of course,
your agenda is not study but dictation.
In the context of my recent
comments on power, the utopian nature of economics and its need to be
other-worldly in order to arrive at its core conclusions, often renders it
secondary or worse as a description of economic reality. The
ebb and flow of inequality throughout history is a good example.
Even though things like supply
and demand may exist as forces in the allocation of resources and hence the
level of inequality, they quite often are overwhelmed by other forces.
Like elitist control of power for instance. Utopians will, as
Stiglitz suggests, cry foul and argue that, “if only” such asymmetries as
concentrations of power did not exist, the world would comply with their
theory. But such asymmetries do exist.
They always have.
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