The real mystery here is the arrogance of the economists in the face of a catastrophic situation. I would have thought that in a profession dominated by neoclassical and increasingly neoliberal theory these last thirty years, that there might have appeared at least some sliver of humility. They have collectively provided us with no guidance on how to avoid the current mess and now, when faced with a crisis, they can only say, as Marx long ago presciently noted, that things would not be so if the economy only performed according to their textbooks. Maybe it is time to revise if not change the textbooks.
No David, no humility. I think the closest we saw was when Alan Greenspan suggested his model might have some issues. Regardless of that, and maybe comments by fringe dwellers like Nouriel Roubini or NN Taleb, we're a long way from any sort of abondonment of the neoclassical model. I admit I got all excited for a while at the beginning of this crisis, and thought that just maybe enough economists would start to publicly question their model that some difference would be made, but I'm no longer hopeful.
I hold a degree in a field that, from the perspectives from which I was taught, partly amounted to a sustained four year lecture on the damage variations of neoclassicism has done to the vulnerable, North and South. Watching this crisis unfold, and having had more than a few recent conversations with economists, I don't think I understood just how embedded this worldview is. I have been shocked at discovering how much poverty and inequality it induces, but I think on some level I'd hoped that most advocates were more or less trying to make it work, uh, fairly. Now I deeply sense notions of fairness or openess to criticisms really have nothing to do with it. This neoclassical extends far beyond one (dominant) perspective in a field of many; it is THE perspective. Comments I've heard lately from economists include, "sure, I've lost a chunk on my investments, but things will turn around in few months", to (heh) the utterly oblivious rantings of one former ProgCon cabinet minister against the totally unfair and way not cool protectionist policies of a particular Asian country, and how we must keep focused on the American market (they still have a market?). Economists that challenge neoclassical foundations and not just subtheories, do not find employment in economics departments in government or academia. The knowledge system is structured to reproduce the economic system.
There's talk of Keynes and nationalisation (after a fashion) but in practice all these amount to so far are corporate welfare policies aimed at supporting the very institutions that brought us into this mess. There remains no real direct investment in job creation schemes for the millions of growing unemployed, only cash injections into the failing and flailing companies that brought us here. Social policy mostly seems to be aimed at loosening up EI access restrictions and cushioning GM or Ford. This will have some benefit for sure, but if it not coupled with some means of putting people back to work, I fear it is a dead end. Especially considering the lack of demand for the products the derelict corporations make. No demand equals a bunch of workers in a car factory making stuff no one will buy, and that's not sustainable.
There's an argument (Weir and Skocpol, ch 4) that suggests part of the reason for Sweden's relative success during the Great Depression was a result of a concentration of policy and direct investment in job creation, not so much social welfare which hobbled the UK and US responses. A key element, according the authors, was Sweden's apparent lack of deep ideological influence in the response and very strong civil service. Governments came and went frequently but the institutions of state held steady. What do we have now? In Canada I think we're intensely focused on negotiating [with] a government whose ideological reach extends deep into the civil service social and economic policy in general. They want their recession allowance to be spent in camera and we should all just shut up about it. Yeah, that will inspire confidence in our institutional handling of things to come. Sweden we are not.
Back to the economists. What strikes me even more than the statements I get from them, is the fact that they seem to be at least 20-50% behind the curve on their monthly and quarterly projections. I can't track how many news reports like this I've read since last autumn:
Canada's unemployment rate rose to 7.7 per cent in February, when 82,600 jobs were lost, the fourth consecutive month of declines. The February drop pushed the national unemployment rate up half a percentage point, from 7.2 per cent in January, Statistics Canada reported Friday. The jobless rate has not been this high since it was eight per cent back in August 2003. Economists had been expecting February jobs losses to come in around 55,000, and for the overall unemployment to rise to 7.4 per cent. All the February employment losses were in full-time work, with 110,900 jobs disappearing, while part-time employment edged up slightly.And yet these people still get listened to, and their data are used for planning. I don't suspect so much this is about Black Magic as much as it is a geeks' club for applied mathematics run amok. The notion that model has flaws (catastrophic ones, perhaps) do not induce a model abondonment in these types: just the incredulous notion that there might be some other variable they can build into the equations and publish in the journals. No doubt in some foppishly named business school or econ department there's a Phd student or 20 starting work on a proposal that would factor collateralised debt obligations (the subprime mortgages sold bulk that started this recent crash) into the neoclassical model. The term 'regime functionary' comes to mind.
Perhaps, like the schools that train them, it is difficult to escape the model because it assumes infinite cyclicity. There will always be market boom and busts, and therefore there can be no theoretical challenge to this. Challengers, like an ontological god, are not conceiving of the neoclassicism correctly if they can problematise the paradigm.
Of course, letting the math club run the show would not have occurred without the collusion of a very large number of yous and Is. Collusion according to the Investment Dictionary:
"Collusion involves people cooperating or working together when they should be competing. In the stock market, collusion can take many forms. Traders participating in accommodation trading, where goods are exchanged for non-competitive prices, are involved in collusion."What better way to describe our relationship to our economic overlords then as articulated by Thwap?
We signed free trade deal after free trade deal, making it easier for manufacturing to relocate to where labour was cheaper (due to democracy being necessarily weaker), regulations were lighter, taxes were lower. The labour movement (both in Canada and the USA) is a tamed beast. We've surrendered job security, pay increases, all to be more efficient and competitive and flexible. The wealthy, the "wealth creators" according to the fiction, and the corporations (other sources of dynamic job creation) have received enormous tax-cuts over the years. We've privatized many public services, reduced many others, and social programs have been re-tooled to encourage scrambling after any shitty job that comes along.Even by the market's own rule set, we should not cooperate with those whose business it is to profit from the market. Like so much of our docility with things that are meant to serve us but instead dominate, we have forgotten, abandoned or outright sold the point of it all. How do we get it back? How much does it have to hurt before we take a stand?
And what did we get? Come on, really, what did we get? We find ourself in the greatest economic crisis since the 1930s. Not "NOT relative economic stability." Not a bump in the road. But total massive failure.