Friday, November 28, 2014

Peter Radford — Economics And Civil Society

I have been subject to quite a bit of push back on my repeated critique of the anti-democratic nature of orthodox/classical/neoclassical economics. 
So I am going to double down on the basis that when you’ve hit a nerve and produce a knee-jerk reaction it is wise to hammer away. 
Allow me to restate my opinion in brief: economics in the general tradition of Smith’s invisible hand up to and including the notions of Hayek, Friedman, and their disciples is, at its core, an attempt to conceive of a society stripped of politics. By this I mean it is an attempt to argue that passivity in the face of overwhelming “forces” that are “objective”, “decentralized”, and “systemic” will allow for an optimal distribution of wealth, and the attainment of the maximum possible total wealth compatible with that optimum. All that is needed is a goodly dose of rational decision making, a hopelessly large level of cognitive ability, enormous foresight, and an unobstructed view of absolutely everything.   
Oh, and under no circumstances ought there be any active interference in the economy to adjust the perfect outcomes. It is a perfect-in-perfect-out wonderland in which no one need concern themselves as to the ethics of the outcome. It is, after all, perfect. It cannot be improved upon. Free markets rule! 
This wonderland system, so constructed, will, we are assured, give back to everyone a return justified by their so-called marginal productivity. Mucking around in the system, no matter how well intentioned that activity might be, can only move society away from the optimum. It is, therefore, not possible for government action to improve the distribution of wealth. We all simply have to bow before the system and accept whatever it gives us. Hence the utter passivity of the vision. 
And hence the elimination of politics, since it is through politics of various kinds that humans arbitrate life, with economic outcomes merely being one aspect of that life.
I attribute the desire to eliminate politics to an early age in modernity when the world was still cluttered with arbitrary forms of government. The rising bourgeois class needed theoretical justification for a change in the power structure of the economy, and, in particular, it needed a way of neutering the tendency of autocrats, monarchs, and their ilk to get in the way of the accumulation of private wealth. 
Thus the success of Smith and his heirs....
This was the intention of the classical political liberalism of Locke and the economic liberalism of Adam Smith and devoid Ricardo. Marx called them out on what their agenda was.

Neoclassical economics can be viewed as the subsequent classical response to Marx, and also Henry George, who objected to the substation of one oligarchy, that of the haute bourgeoisie or "capitalists," for the old oligarchy of feudal aristocracy.

This transition was taking place at the time that Marx was writing and it was far from complete. That did not happen until after WWI. Neoclassical economics was already ready to step in as the paradigm for a capitalistic socio-economic paradigm, and it became the dominant political paradigm as neoliberalism.
To this day economists working in that tradition begin with a bias that all government is arbitrary at worst, or misguided at best. No matter what form of government. It is my contention such economists never took on board the arrival on the scene of democracy. Hayek et al are still fending off the evils of autocracy. They are living deeply entrenched in a past era. They have not adjusted to the reality of representative government when there is almost a one for one overlap between “we the people” as represented actively on the political system, and the so-called agents inhabiting the economic system.
I don't think that this is the case. The natural form of government under popular democracy as government of the people, by the people and for the people is some form of socialism, in which distribution is as significant as production. Mises and Hayek were minor aristocrats who were disturbed by the prospect of democracy overshadowing the better aspect of humanity by imposing a tendency toward the average man if not actually captured by an alliance of the worse. They were not alone. Those who are heavily influenced by neoclassical economics and neoliberal political theory tend to be conservatives in the sense of favoring the traditional social hierarchy in which the men are ruled by their betters. In time gone by, the criterion of being better lay in the use of arms whereas under the new organizational mode the criteria would be the ability to accumulate capital.

As the first Chief Justice of the newly established United States of America, John Jay, put it, "Those who own the country ought to govern it."
"By this constitution [NY State 1777] the right of suffrage was, in several instances, restricted to freeholders; it being a favourite maxim with Mr. Jay, that those who own the country ought to govern it."
Son William Jay in Life and Opinions of John Jay (1833).
This is clearly quite different from Abraham Lincoln's "government of the people, by the people, and for the people" in the Gettyburg Address, and it is much closer to the intent of neoliberalism and its foundation in neoclassical economics, which provides the rationale for meritocracy and distribution according to "just deserts" based on marginalism.

Under the rule of the capitalists, production and therefore capital formation was regarded as primary and distribution was assumed to follow "natural" market forces if individuals were left free to pursue self-interest and there was no limit on accumulation. There needed to be no limit on accumulation in order to facilitate capital formation as the primary driver of economic progress. Influenced heavily by pseudo-Darwinist Herbert Spencer, who was perhaps the leading intellectual of that time, the late 19th century was all about progress and that has carried over to present times. Neoclassical economics and neoliberal political theory are products of that ideology.

In essence this was an attack on popular democracy.

Radford realizes this.
In a democratic system the people who comprise the market are those who comprise the government. To criticize one ought to be to criticize the other. To idolize one ought to be to idolize the other. You cannot have it both ways. 
Unless, of course, you disagree with the outcomes of one of the systems. 
And since economists working in the Smith through to Hayek/Friedman tradition are unrelenting in their criticism of all things governmental, I can only deduce that they disrespect if not despise democracy. Which, perhaps it escaped their notice, is our current form of government.
Well, there are different forms of democracy. There is popular democracy as opposed to representative democracy, that is actual democracy rather than republicanism, which favors the elite. There is a difference between participatory democracy and being present with limited slates of preselected candidates for office. Actual democracy as the rule of the people (demos) is quite different from oligarchic "democracy" of plutonomy, in which the ownership class selects the candidates, dictates the laws and regulations, and places its minions and cronies in positions of power through the revolving door.

Radford is correct in saying that classical economics arose at a time when the issue was autocracy and feudalism, so that early liberalism was oriented against "government" in this sense. However, neoclassical economic and neoliberalism as a politics theory continued in this vein even after the triumph of liberalism and the transition to democratic government. Then the objective became to bridle popular democracy by introducing the "natural" oligarchy of plutonomy where the "makers" would rule the "takers."
By being so in the thrall of so-called invisible hands, so-called free markets, so-called equilibria, so-called marginal productivity and the other paraphernalia of the Smith-Hayek/Friedman tradition, they simply reveal themselves to be anti-democratic.
The Radford Free Press
Economics And Civil SocietyPeter Radford


NeilW said...

Not just neo-classicals.

Those who propose open borders, citizens incomes, anarchy, etc. all rely on this idea that things will naturally reach an equilibrium and all will be well.

I've no doubt at all they believe that if you just set up a nuclear reactor properly it will never melt down.

Newtonian clockwork fallacy. The system is chaotic and has to be carefully managed. Yes as automatic as possible, but beyond that you still have to have hands on the tiller.

And that needs a solid democratic system to make the necessary decisions.

Matt Franko said...

Tom why do you term Spencer a "psuedo-Darwinist"?

Spencer was the one who coined the phrase "survival of the fittest" of which Darwin agreed.

All the leadership of Capitalism agreed with Darwin and Spencer and looked upon their theories as justification of their exploitation.... imo these people still do..

I dont see Spencer as pseudo-Darwinist he looks to me like one of the ring leaders.


Tom Hickey said...

Social Darwinism owed more to Herbert Spencer's ideas, together with genetics and a Protestant Nonconformist tradition with roots in Hobbes and Malthus, than to Charles Darwin's research.[7] While most scholars recognize some historical links between the popularisation of Darwin's theory and forms of social Darwinism, they also maintain that social Darwinism is not a necessary consequence of the principles of biological evolution.[8]

Scholars debate the extent to which the various social Darwinist ideologies reflect Charles Darwin's own views on human social and economic issues. His writings have passages that can be interpreted as opposing aggressive individualism, while other passages appear to promote it.[9] Some scholars argue that Darwin's view gradually changed and came to incorporate views from the leading social interpreters of his theory such as Spencer,[10] but Spencer's Lamarckian evolutionary ideas about society were published before Darwin first published his theory, and both promoted their own conceptions of moral values. Spencer supported laissez-faire capitalism on the basis of his Lamarckian belief that struggle for survival spurred self-improvement which could be inherited.[11]

Wkipedia - Social Darwinism