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The Progressive Economics Forum

Do Economists Have a Country?

We do, but many of us, particularly of  the orthodox persuasion, do our best to hide it in our work. Where we live is “content” but the models we use, we insist, are universal. But that begs the question of where the models, which do not fall from the sky, come from. The answer is that they come from particular places in particular times. Which means they do have a nationality.

But we all know, if we bother to think about it, that most economics comes  from a very small number of countries who happen to run the world. The great economists of  the 19th century into the mid-20th were British. Since then they have been American.

Look at how most Nobelists in economics – more so than in science or medicine and certainly than in literature – are Americans. Is it because they have all the good ideas or  because they get to define what is a good idea?  And if you’re not lucky enough to have been born there, then move there; Robert Mundell was born in Canada but won his Nobel by rarely being here.

There is manifestly a deep symbiosis between economic thought and power, and power lies not with nations in general but with imperial powers in particular. Does this explain why economics today, in contrast to political economy, is so insistently apolitical because we would sooner not face up to who we emulate and serve?

We should not be surprised when we read Marion Fourcade’s  Economists and Societies: Discipline and Profession in the United States, Britain, and France 1890s to 1990s, to learn that in the U.S. there have been close ties between the econonics profession and business schools since the 1920s and that disproportionately American Nobelist are affiliated with a business school.

Business schools need economics because without it, she says, they lack an intellectual core but, it seems to me, economics, already too imbedded with power, needs business schools like a hole in the head.

Fourcade is a sociologist of knowledge at Berkeley with a thorough grasp of economics; her book was published last year by Princeton University Press. It is highly recommended. Someone here with similar credentials should do the Canadian discipline as a case study.

Since World War II, she writes, “economic growthmanship was coupled with different political projects across countries, the most salient of which were the building of industrial power in France, redistribution in England, and militay and economic supremacy in the United States.” 

Canada?  How about “tightening economic integration with the United States”? A neo-colonial  branch-plant-kind-of project. Oh, and add “federalism” which has kept so many of us gainfullyemployed over the years.

Fourcade’s choice of countries is fascinating in their own right and just  happen to be the relevant imperial centres for Canada over the centuries. I’n old enough to have been introduced to econmics at the University of Toronto by Brits, with the advantage, that I hadn’t realized till I read Fourcade, of  having imbibed a touch of Fabianism which has served me well.

Quebec economists have retained links with France. To read Fourcade is to sense that economics in France  has a heterodox flavour that has has its attractions to those of  the progressive persuasion. In the 19th century, in contrast to Britain, French economists “held on to a conception of political economy as a moral science.”  It is in France in 2000 that economics students railthed against “overuse of mathematics, hegemony of  neo-classical theory” in the name of autisme-economie.

Fourcade repeatedly tells us that it is to our U.S. colleagues that we owe the discipline’s obsession with markets, to the point where even the public sector is judged by market-based concepts of efficiency. So totally is the political drained out of what began as political economy that the corporation’s existence can be “explained” as an understandable alternative to the market, as by Coase and Hymer, but then ignored as an institution with market influence, to say nothing of political influnce.

Indeed, the imperfect competition revolution of the 1930s has been, with a little help from game theory and its rivalries, swept under the rug.  Hence the utter rejection of Galbraith, who could see the U.S. military-industrial complex, by American economists, whether Keynesian or Chicago School.

Writing before the present economic crisis cast doubt on what we economists know and do not know, Fourcade tells us that “The imperialism of American economicss is rooted in a deep moral belief  that no-one stands outside of economic rationality…”  But the financial crisis has cast the most serious doubts on the meaning of rationaity even within markets. The new behavioral economics, too new to be noted by Fourcade, with its links to psychology, is a breath of fresh air that is potentially deeply subversive of orthodoxy. But this writer fears that behavioral science, with its individualist bias, is a regression from social science, notwithstanding all of its limitations, and is hard put to believe that there will be a real revolution in economics until the political is put back in through the front door. There is no evidence that is about to happen.

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Comments

Comment from Paul Tulloch
Time: January 13, 2010, 1:48 pm

Hi Mel,

nice post.

I have to say that I have been feeling this unease in a very similar space.

As the world globalizes and spins around the sun- I do wonder quite loudly these days- what if the powers that be and their culturally centric notion of what an economy should be- have gotten it so, so wrong.

What if- given the crisis and what could be coming around the corner- is just so misaligned for social containment that no amount of tinkering currently being considered will fix the problems.

What if the problems start mushrooming, in a manner that no amount of debt will fix. Look at the current crisis, there has been a whole pile of money spent on containment of wall street, with the hopes that somehow that will leak throw and contain main street. But main street is in shambles and falling further. I would have thought the American Dream was Too big to fail, but I guess not.

What happens if those gate keeping problems cannot be bought, as you make reference to, under the current mindset. With utter disregard to reality, historically speaking, capitalism has not changed whole lot and evolved the way many have suggested. It is not quite the elastic, plastic many thought. For a tiny slice of time, it changed to make up for the failings of the great depression. Those social gains were slowly eroded over the past 30+ years, not quite back to where we were in previous times socially, but within a global economy that is much more integrated and the problems such as inequity and climate issues much larger, those small gains just do not add up to what is required for the new equations of containment.

I wonder what will become of this system that many say stands on the shoulder of giants and is robust, but more likely stands on a whole pile of the exploited humans and otherwise. This as another shipload of 50 varieties of lipstick and 60 channels of football pass me by and another PPM of carbon enters the first layer and then the second of the atmosphere to bounce those photons back onto the earth and provide me with more heat.

Is it really that much off the median these days to think that really big change is coming and it will not be contained by the orthodoxy. It cannot be because the capacity for containment is just not set-up in such a fashion.

Potentially, the question of who will lead the change in a Gramscian manner is not something to worry about. Potentially the big question will be, who can come in and provide solutions that allow for the best containment for both the real and the socially constructed needs and wants that will drive change.

So I do believe it will not be the politics coming in through the back door or the front, it will be the politics flattening the economic house and like a meteor the Nobel prize winners will not even see it coming- similar to this last crisis, but much worse.

Whew- that is scary isn’t it- but I have to admit over the holidays I have been feeling that. Must be that climate change course at Berkley doing me in economically.

But ultimately I am an optimist and I do believe people will not be contained and will seek alternatives- no matter how the constructs have to be bent- cut up and rewelded. So there will be change coming and it will be a struggle but the orthodoxy will change and so too will Nobel prizes be awarded to those outside of the USA, in fact I would predict the next to be awarded in Iceland!

Paul

Comment from Adam
Time: January 13, 2010, 4:40 pm

“behavioral economics, too new to be noted by Fourcade, with its links to psychology, is a breath of fresh air that is potentially deeply subversive of orthodoxy”

I think this is profound and novel at the same time. Until we agree that economics is grounded in universe of human behavior which goes beyond the invisible hand, we will replay current events over and over. Which begs the question how do you regulate behaviour?

amd
theinsurancestandard.blogspot.com

Comment from Brandon L
Time: January 16, 2010, 11:56 am

Paul T going after capitalism again. This article gravely misrepresents what capitalism is. Where ever capitalism is tried, technology, lasik eyes surgery, cosmetic surgery.

“Lasik as a model for health care reform” is the headline of the Carpe Diem post by economics professor Mark Perry, who notes that because consumers pay for laser eye surgery to correct their vision themselves rather than having it covered by insurance, prices for the procedure have dropped. As Mr. Perry puts it, “In one of the few truly market-based areas of health care that is actually consumer-driven (since it’s not covered by insurance and patients make direct cash payments) – LASIK eye surgery – there have been market-driven improvements in quality and dramatic reductions in cost, which could be a model for health care reform for other procedures.” Same reasons work for technology and cosmetic surgery.

People laugh but these are the least subsidized or intervened, markets anywhere. In china pc prices our higher to due hardware & software regulations. Cosmetic surgery is not provided by health-care and uses the many of the same equipment & medicine such as anesthesia but prices always come down and quality goes up. Second any true capitalist would go bankrupt before touching tax dollars and rebuild from scratch.

In the thirties there was sense capitalism failed in the face of such massive bankruptcies etc but then that does not equate to today where which companies went bankrupt? The big to fail instead of being nationalized and separate the healthy assets from toxic like previous banking crisis solved elsewhere, but bigger are just bigger? I’m confused, how is that capitalism fault? In the truest sense of the word a capitalist wold die before taking tax dollars.

I live in BC, low skilled worker, do not make above 30k and proud to be capitalist, I will never use our social programs willingly such as health care or social security. I don’t believe in using tax dollars on individuals who obviously do not need it , I don’t need it and i don’t even make over 30k . I like my life, I’m not biter and I act a the programs I pay into help someone else, I volunteer my money I’m not bitter, the whole capitalist are evil argument doesn’t fly. I grow my own food and rent mainly live with in my means.

Save accordingly waiting for interest rates to rise to promote saving for retirement and let interest build. I do not particularly take kind to being forced to speculate after returns in globalized markets which is a direct consequence of low rates because savings cant just sit there and not grow.

What your are identifying cant be quantified as capitalism. This corporatist system is not a result of capitalistic policies but fascist economic policies. Also fascism is gravely misunderstood and is a political, social, economic, militaristic systems.

This overarching unnerving unease described can be quantified with economic policies used in fascist Italy.

The fascists opposed both international socialism and liberal capitalism, arguing that their views represented a third way.

They claimed to provide a realistic economic alternative that was neither laissez-faire capitalism nor communism. They favoured corporatism and class collaboration, believing that the existence of inequality and separate social classes was beneficial (contrary to the views of progressive socialists). Fascists argued that the state had a role in mediating relations between these classes (contrary to the views of liberal capitalists).”

Historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because “the State pays for the blunders of private enterprise… Profit is private and individual. Loss is public and social…Fascist governments encouraged the pursuit of private profit and offered many benefits to large businesses, but they demanded in return that all economic activity should serve the national interest”

With all the economic pay czars, and the different committees that meet with the leaders of certain industries have in common with ” [fascist] [Italy] 1930 the National Council of Corporations was established, it was for representatives of all levels of the twenty-two key elements of the economy to meet and resolve problems, (such as compensation, hiring, tax reform)” It ended up being a bureaucracy, that while consolidating the potential powers of the state resulted wit no notable innovations. One consequence of the Council was that trade unions were removed from influence at all levels while the realities of private capital and ownership were, mostly, unaffected.

When one examines the similarities of americans bank bailout and financial crisis to the “[fascist] [Italy] financial crisis peaking in 1932 and major government intervention. After the bankruptcy of the Austrian Kredit Anstalt in May 1931, Italian banks followed, with the bankruptcy of the Banco di Milano, the Credito Italiano and the Banca Commerciale. To support them, the state created three institutions funded by the Italian Treasure: the Sofindit in October 1931 (with a capital of 500 million liras), which bought back all the industrial shares owned by the Banca Commerciale and others establishment in trouble. In November 1931 the Imi (capital of 500 million liras) was also created, and issued five and one-half billion liras in state obligations, reimbursables in a period of ten years. This new capital was lent to the private industry for a maximum period of ten years.”

Just because a man, corporation, government supports private property does not make them capitalist, capitalism comes hand in hand with rejection of spending wastefull tax dollars and massive bankruptcies. I do not know how more to stress that fact.

After Socialism, Fascism attacks the whole complex of democratic ideologies and rejects them both in their theoretical premises and in their applications or practical manifestations. Fascism denies that the majority, through the mere fact of being a majority, can rule human societies; it denies that this majority can govern by means of a periodical consultation; it affirms the irremediable, fruitful and beneficent inequality of men, who cannot be levelled by such a mechanical and extrinsic fact as universal suffrage. (p. 31)

State intervention in economic production arises only when private initiative is lacking or insufficient, or when the political interests of the State are involved. This intervention may take the form of control, assistance or direct management. (pp. 135-136)

Is that what not happened with auto and financial industry concerning ARMs and low interest rate loans and auto loans and auto purchases??? Wasn’t private demand declared not sufficient??

Fascism is therefore opposed to Socialism to which unity within the State (which amalgamates classes into a single economic and ethical reality) is unknown, and which sees in history nothing but the class struggle. Fascism is likewise opposed to trade unionism as a class weapon. But when brought within the orbit of the State, Fascism recognises the real needs which gave rise to socialism and trade-unionism, giving them due weight in the guild or cooperative system in which divergent interests are coordinated and harmonised in the unity of the State. (p.15)

How does one not look at the GM and Chrysler bailout with the above statement has economic fascist policy. GM and Chrysler are not socialist or communist state owned, they are not privately owned. You have US interest, Canadian interest and unions in the Us and Canada must be attended to. This is obvious that everyone’s individual interest cant be looked too a that is a statistical improbability with the relationships involved but a collective and harmonized interest that all parties agree on.

The Fascist State lays claim to rule in the economic field no less than in others; it makes its action felt throughout the length and breadth of the country by means of its corporate, social, and educational institutions, and all the political, economic, and spiritual forces of the nation, organised in their respective associations, circulate within the State. (p. 41).
—Benito Mussolini, 1935, “The Doctrine of Fascism

Mussolini stated “Fascist rule was not capitalist in the modern use of the term”. Mussolini called down capitalism for causing the “standardization of humankind” and for causing excessive consumption. Mussolini indicated that in stages at capitalism “[it] is then that a capitalist enterprise, when difficulties arise, throws itself like a dead weight into the state’s arms.(similar to what America now has done with many failing industries) It is then that state intervention begins and becomes more necessary. It is then that those who once ignored the state now seek it out anxiously.” He saw Fascism as the next logical step to solve the problems of capitalism and claimed that this step could be seen either as a form of capitalism which involved state intervention” saying “our path would lead inexorably into state capitalism, which is nothing more nor less than state socialism turned on its head. In either event, the result is the bureaucratization of the economic activities of the nation.”

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