Sunday 25 May 2014

A new economics?

This week I bought an excellent book by economist Ha-Joon Chang  called "Bad Samaritans: Rich Nations, Poor Policies and The Threat to the Developing World". I'm looking forward to reading it, as his other book "23 Things They Don't Tell You About Capitalism" is one of my favourites. On the other hand, I'm feeling somewhat jaded by the effusive comments on the back cover about these new and compelling ideas. I don't want to knock the ideas themselves, but I would contest the concept that they are new.
In fact, for the past 15 years I have campaigned about global injustice based on the evidence through which Christian Aid, WDM and many others have prominently and repeatedly demonstrated that the free market policies and privatisation forced onto poor countries by richer ones damage the countries forced to adopt them.
This much was obvious in 2000 when I first got involved in the Jubilee Debt Campaign, which focused on how the IMF and World Bank who were supposed to administrate help to developing countries were making the problem much worse by making such policies were as a condition of receiving any help whatsoever (be it debt relief, aid or foreign investment in trade).
So why is it still regarded as revolutionary that we should review economic models based upon the evidence of whether they work or not? Why is there such an alarming homogeneity about the varieties of economics that are permitted to be mainstream? Paul Samuelson wrote that: “I don’t care who writes a nation’s laws, or crafts its treatises, if I can write its economics textbooks.” He had a point: globalisation is very much the result of the economics favoured by the powerful being replicated around the world with little regard for truth, morality or justice.
So I have been glad to read recently of the move by economics students in Manchester to reject the monoculture provided by their lecturers and require that their studies should include the best of recent research into sociology, psychology and human behaviour:
Economics education is monopolised by a single school of thought commonly referred to as neoclassical economics. Crucially, very few economists working within this mainstream predicted the Financial Crisis. Afterwards many concluded that the best predictions came from those economists that had been marginalised by the mainstream. Despite this alternative perspectives are still close to non-existent in undergraduate programmes. We demonstrate this through a detailed analysis of Manchester’s syllabus, which itself is representative of economics syllabuses around the UK. This lack of competing thought stifles innovation, damages creativity and suppresses the constructive criticisms that are so vital for economic understanding and advancement. There is also a distinct lack of real-world application of economic ideas, with the focus being on abstract modelling that often seems devoid from reality. Finally, the study of ethics, politics and history are almost completely absent from the syllabus.
I feel that when even the Bank of England thinks that "It is time to rethink some of the basic building blocks of economics” (Andrew Haldane, Executive Director for Financial Stability), it's probably time to start listening to the voices who have been crying out at the margins for decades and change the way we think about money.
Rather than adopting patently false assumptions that people base all their economic decisions on perfect information (never available) and self interest (which usually ignores the environmental and social costs of thinking only at an individual level), maybe we can relegate the damage done to the poorest people in our world to the history books with the economic theories that justified it.

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