And that crisis of faith is all around us. As I write this, it has emerged that a paper from two of the leading Cardinals of the economic priesthood used to defend "austerity" contained a number of sloppy mistakes, ruining their conclusions. Their research was accepted unquestioningly by the media and the establishment as revealed truth, but the error was uncovered by a 28 year old graduate student. One of the discredited economists is a member of the Harvard faculty and former IMF chief economist whose columns run in major publications. In other words, an ensconced member of the elite. Another elite economist recently declared that the financial system is increasingly run by sociopaths for their own benefit, while corrupting democratic politics. Another has been on a crusade to point out the debilitating effects of inequality. Numerous books are questioning the obsession with growth, various economists are questioning the orthodox versions of economic theory, and new organizations are talking about alternatives.
The analogy is often made to Thomas Kuhn's The Structures of Scientific Revolutions. Kuhn was mainly talking about revolutions in the natural sciences, but his thinking also holds for the pseudoscience of economics. His point is that a "paradigm shift" must occur in which the entire world view is upended before progress can occur. This often happens, as Niels Bohr put it, "one funeral at a time," as people who conservatively hold to old ideas die off and new people who accept the new ideas come in. The classic case Kuhn analyzes is the displacement of the geocentric model of the universe, accepted since Ptolemy if not earlier, with the heliocentric model developed by Copernicus and championed by Galileo.
And the signs are all around us. While being told how "free trade" would make us all better off, cheap goods from overseas have eliminated American manufacturing, leaving in its wake minimum wage service jobs, with the result of the the American heartland becoming benighted wasteland of abandoned factories, decaying houses, crumbling schools, and drug dens, mired in unemployment, poverty, crime and hopelessness. Real median incomes have not budged in forty years and in recent years have actually declined, even with corporate profits at all-time highs and the rich being richer than ever before, all while prices of necessities (gas, housing, education, health care) continue to skyrocket. The American public has been told they need "more education" to compete, yet even with the best-educated workforce in history, mass unemployment stalks the land. Unemployment sits side-by-side with overwork. Houses sit abandoned in a country mired with homelessness and child poverty. Military and police spending continues to increase,along with social dysfunction. Overall happiness levels have gone down, not up, with a larger economy. Goods become shoddier every year. Obesity levels, diabetes, mental illness and autism are all increasing. Austerity and shrinking government budgets have failed to bring back prosperity, nor have lower taxes. And we need not even discuss environmental destruction and pollution. Are we starting to lose our faith?
Over and over, the words of economists ring hollow, and they sit impotent as society crumbles around them. Meanwhile, the words of sociologists, who tell us how corrosive inequality is to society, and of natural scientists, who warn of an uninhabitable planet as we burn through non-renewable and irreplaceable resources, are ignored and marginalized. Protests have been ignited around the world against politicians who care more about balancing budgets and repaying bankers than citizens unable to find work, properly educate their children, heat their homes, run their businesses, access their medications, adequately feed themselves, or put a roof over their heads.
Is it time for a new paradigm? Maybe the Market is not infallible after all. Maybe enabling the rich does not bring about the best outcomes for all. Maybe the absence of regulations or protectionism is not the path to prosperity. Maybe free trade is not all it's cracked up to be. Maybe markets aren't naturally headed toward equilibrium and maximizing utility. Maybe the rich have not "earned" their outsize wealth. Maybe the rich just get richer and the poor get poorer, forever.
We now know:
Rather than a rational market headed towards equilibrium, the Market is a gambling parlour driven by emotions like greed and fear and subject to regular manias, bubbles, panics and crashes, not to mention outright manipulation.
Corporations instinctively seek monopolization and control of entire markets to increase efficiency and maximize profits through measures like the vertical and horizontal integration of markets.
Mergers, acquisitions, buyouts and business failures naturally lead to a small number of corporations controlling entire markets (banking and finance, automobiles, agricultural commodities, Internet and cell phone service, big-box retail, microchips, software, just to name a few). The big fish eat the little fish.
Humans are not rational, but emotional, and embedded in webs of reciprocity and mutual obligation.
Pecuniary gain is not the major, nor the sole, motivating factor for human effort and creativity. We want our work to be meaningful, fulfilling and helpful to others.
Monetary relationships are power relationships, and money influences and corrupts governments and undermines the regulatory atmosphere that we count on to manage the commons. All capitalism is "crony" capitalism, and "bad" capitalism always drives out "good." (Phillip's Law).
A rising tide does not lift all boats.
"Externalities" are the rule, not the exception; nearly every transaction in the economy affects other people who were not included in it, since everything is ultimately connected.
Rather than job creators, the wealthy are more often speculators, causing more destruction than creation. "Creative destruction" is often just a fancy economic term for looting.
Absent government controls, industries will engage in deceptive practices, collusion, price fixing, extortion, and rank profiteering. Rather than "free exchange," many businesses are predatory, such as the banking, healthcare and education cartels.
Debts always outgrow the "real" economy, since the real economy is constrained by the laws of thermodynamics, whereas debt grows exponentially forever. Market saturation and diminishing marginal returns means growth has to slow or end for most businesses.
More growth does not correlate to more happiness. Too much choice leads to dissatisfaction. Wants and needs are not the same, our appetites are not insatiable, and we quickly become accustomed and inured to any windfalls or setbacks.
Inequality is corrosive to a healthy, functioning society, a healthy, functioning democracy, and, increasingly, even a healthy, functioning economy.
Unregulated market activities are burning through resources at a unsustainable rate, and environmental destruction is increasingly undermining the very natural systems we depend upon for human survival.
Energy and material resource flows are the prime drivers of the economy and living standards, yet are completely ignored in economic theory, along with things like money creation, banking, debt, psychology, etc.
And then there is the fundamental value system that says productivism and maximizing wealth should be the only goal of society, that we are atomized rational utility maximizers, and that nature has no intrinsic value outside of human use. I think most people find these value judgements abhorrent, even as they implicitly accept them. I could go on, but I'll stop here.
No one knew what would came "after" the Catholic Church or the feudal system, or that anything could come after the Catholic Church and the feudal system. The supposedly hyperrationalist accounting regime that has managed the planet to date is failing, and I think even defenders of the system know it's no longer tenable. But, like the Church, they're fighting like hell to control the debate, to preserve their status, to marginalize their critics, and to make sure we believe that "there are no alternatives." As Adam Curtis put it:
One of the guiding beliefs of our consuming age is that we are all free and independent individuals. That we can choose to do pretty much what we want, and if we can't then it's bad.And David Graeber:
But at the same time, co-existing alongside this, there is a completely different, parallel universe where we all seem meekly to do what those in power tell us to do. Ever since the economic crisis in 2008, millions of people have accepted cuts in all sorts of things - from real wages and living standards to benefits and hospital care - without any real opposition.
The cuts may be right, or they may be stupid - but the astonishing thing is how no-one really challenges them.
I think that one of the reasons for this is because a lot of the power that shapes our lives today has become invisible - and so it is difficult to see how it really works and even more difficult to challenge it.
So much of the language that surrounds us - from things like economics, management theory and the algorithms built into computer systems - appears to be objective and neutral. But in fact it is loaded with powerful, and very debatable, political assumptions about how society should work, and what human beings are really like.
But it is very difficult to show this to people. Journalists, whose job is to pull back and tell dramatic stories that bring power into focus, find it impossible because things like economic theory are both incomprehensible and above all boring. The same is true of "management science". Mild-mannered men and women meet in glass-walled offices and decide the destinies of millions of people on the basis of "targets" and "measured outcomes".
Like economics it pretends to be neutral, but it isn't. Yet it's impossible to show this dramatically because nothing happens in those glass-walled offices except the click of a keystroke that brings up another powerpoint slide. It's boring - and it's impossible to turn it into stories that will grab peoples imaginations - yet hundreds of peoples' jobs may depend on what is written on that slide.
... under no conditions can alternatives, or anyone proposing alternatives, be seen to experience success. This helps explain the almost unimaginable investment in “security systems” of one sort or another: the fact that the United States, which lacks any major rival, spends more on its military and intelligence than it did during the Cold War, along with the almost dazzling accumulation of private security agencies, intelligence agencies, militarized police, guards, and mercenaries. Then there are the propaganda organs, including a massive media industry that did not even exist before the sixties, celebrating police. Mostly these systems do not so much attack dissidents directly as contribute to a pervasive climate of fear, jingoistic conformity, life insecurity, and simple despair that makes any thought of changing the world seem an idle fantasy. Yet these security systems are also extremely expensive. Some economists estimate that a quarter of the American population is now engaged in “guard labor” of one sort or another—defending property, supervising work, or otherwise keeping their fellow Americans in line. Economically, most of this disciplinary apparatus is pure deadweight.Maybe it's time for a new revolution. David Graeber, again:
In fact, most of the economic innovations of the last thirty years make more sense politically than economically. Eliminating guaranteed life employment for precarious contracts doesn’t really create a more effective workforce, but it is extraordinarily effective in destroying unions and otherwise depoliticizing labor. The same can be said of endlessly increasing working hours. No one has much time for political activity if they’re working sixty-hour weeks.
It does often seem that, whenever there is a choice between one option that makes capitalism seem the only possible economic system, and another that would actually make capitalism a more viable economic system, neoliberalism means always choosing the former. The combined result is a relentless campaign against the human imagination. Or, to be more precise: imagination, desire, individual creativity, all those things that were to be liberated in the last great world revolution, were to be contained strictly in the domain of consumerism, or perhaps in the virtual realities of the Internet. In all other realms they were to be strictly banished. We are talking about the murdering of dreams, the imposition of an apparatus of hopelessness, designed to squelch any sense of an alternative future. Yet as a result of putting virtually all their efforts in one political basket, we are left in the bizarre situation of watching the capitalist system crumbling before our very eyes, at just the moment everyone had finally concluded no other system would be possible.
Revolutions are thus planetary phenomena. But there is more. What they really do is transform basic assumptions about what politics is ultimately about. In the wake of a revolution, ideas that had been considered veritably lunatic fringe quickly become the accepted currency of debate. Before the French Revolution, the ideas that change is good, that government policy is the proper way to manage it, and that governments derive their authority from an entity called “the people” were considered the sorts of things one might hear from crackpots and demagogues, or at best a handful of freethinking intellectuals who spend their time debating in cafés. A generation later, even the stuffiest magistrates, priests, and headmasters had to at least pay lip service to these ideas. Before long, we had reached the situation we are in today: that it’s necessary to lay out the terms for anyone to even notice they are there. They’ve become common sense, the very grounds of political discussion.Perhaps it's time for a new revolution that incorporates what we know about economics, psychology, resources, and the like into rational systems of economics and governance that really will give the human race a fighting chance at survival and happiness. If it happened before, it can happen again. Just as the new system was not built in a day, neither can the alternatives.