Leaving 20th Century Economics Behind

Eric Hobsbawm writes in The Guardian about the economic realities of the 21st century.

The 20th century is well behind us, but we have not yet learned to live in the 21st, or at least to think in a way that fits it. That should not be as difficult as it seems, because the basic idea that dominated economics and politics in the last century has patently disappeared down the plughole of history. This was the way of thinking about modern industrial economies, or for that matter any economies, in terms of two mutually exclusive opposites: capitalism or socialism.

This is exactly right, I think, but until a majority of our politicians and what passes for public intellectuals grasp this, our policies will drag way behind realities.

We have lived through two practical attempts to realise these in their pure form: the centrally state-planned economies of the Soviet type and the totally unrestricted and uncontrolled free-market capitalist economy. The first broke down in the 1980s, and the European communist political systems with it. The second is breaking down before our eyes in the greatest crisis of global capitalism since the 1930s.

The True Believers of both sides will argue no, no, no, pure Marxism/Free Market Capitalism has never been tried. But “pure” anything has never been tried. That’s the reality of our human condition. Any endeavor that requires human input is never pure. It will suffer some degree of corruption. Put together people, money, and power, and corruption is a certainty. That’s why any workable, sustainable model factors in corruption and makes some provision to keep it to a minimum.

That’s what the Marxists and the Ayn Rand culties cannot understand. Give all power to a central government planning authority, and you’re screwed. Give all power to an elite cabal of corporate heads, and you’re screwed. There has to be a way to reign in the power, to diffuse it, to oversee it and make it accountable to other power. That’s one reason the public and private sector need each other — to keep each other semi-honest.

The future, like the present and the past, belongs to mixed economies in which public and private are braided together in one way or another. But how? That is the problem for everybody today, but especially for people on the left.

From here, Hobsbawm talks about recent British history, New Labour and Thatcherism. But similar things go on here (is it the almost-common language?). Our Right has effectively taken itself out of the conversation (even though it won’t shut up) because it can’t let go of its old ideologies and aphorisms that don’t work any more. I’m not sure if what passes for a “Left” here is fully cognizant of the new reality, either.

But unlike the Right, the current Left has no one economic model that we all put on an altar and worship. At least some among us are looking hard at the current reality and thinking through solutions that might work in the real world, as opposed to solutions that make good sound bites and look good on a bumper sticker.

But a progressive policy needs more than just a bigger break with the economic and moral assumptions of the past 30 years. It needs a return to the conviction that economic growth and the affluence it brings is a means and not an end. The end is what it does to the lives, life-chances and hopes of people.

That’s something else that neither the Marxists nor the free-market Randbots ever understood.

8 thoughts on “Leaving 20th Century Economics Behind

  1. This debate between the pure socialists on one side, and the pure capitalists on the other has been going on since there were humans. I often tell wingnuts that wealth distribution is a permanent feature of every society, from the family unit on up. It’s just a matter of how much redistribution and what kind occurs, as there are no pure examples of capitalism or socialism. It’s a reflection of the permanent tension between the rights of the individual versus the needs of the group, of any group. Or put more simply, the permanent tension between the need to be alone versus the need to be part of a group.

    Given that the US is the major example of a society crafted around the rights of the individual – at the expense of nearly everything else – there are lots of counter examples around the world, that recognize the benefits of subordinating some of these rights to the larger group. The more socialist countries of Canada, Europe are one set of examples; Confucian societies, such as Japan and other Asian countries are another. Confucius Lives Next Door is a powerful little book, well written, explaining how this works in Japan, and what we could learn from it.

    Besides their inability to think in terms of a continuum between pure capitalism on one hand, and pure socialism on the other, righties have even more difficulty with the concept of giving up certain rights to gain other benefits. By marrying one person, and giving up the right to date others, we gain certain benefits. By restricting the way we pilot an automobile according to traffic laws, the roads are safer. By restricting guns, for example, we all get to live in a safer society.

    Beyond this perennial debate, I’m a lot more interested in the transnational aspects of the “new economics”, and how that’s going to take shape. Although there were earlier mini-crashes that got people thinking about how tightly coupled every country’s economy is with every other country (eg the Asian currency crisis of 1997-8), the current crash has brought down nearly the whole world, with a few exceptions like India, that illustrate the dangers of this tight coupling. And so there is a need for a vastly improved regulatory structure that is worldwide, not just national. Thomas Homer-Dixon’s The Upside of Down: Catastrophe, Creativity and the Renewal of Civilization is a great read on the subject of resilience and loose coupling, among many other topics.

    Same for global ecological problems like global warming. Baby steps like Kyoto are an important start, obviously more is needed.

    On the one hand there is a lot of reactionary dead weight mainly due to the old economy plutocrats that is holding everything back. On the other, I am encouraged by how the web in particular is shrinking the globe even further – this will seem entirely normal to the younger generations, who are going to be the ones mainly involved in transcending this limited national scope to become truly world wide. Sara Robinson posted a great article along these lines at Campaign for America’s Future a few days ago ago.

  2. Reading this made me think of Simone Weil, in 1937:

    In every sphere, we seem to have lost the very elements of intelligence: the ideas of limit, measure, degree, proportion, relation, comparison, contingency, interdependence, interrelation of means and ends. To keep to the social level, our political universe is peopled exclusively by myths and monsters; all it contains is absolutes and abstract entities. This is illustrated by all the words of our political and social vocabulary: nation, security, capitalism, communism, fascism, order, authority, property, democracy. We never use them in phrases such as: There is democracy to the extent that… or: There is capitalism in so far as… The use of expressions like “to the extent that” is beyond our intellectual capacity. Each of these words seems to represent for us an absolute reality, unaffected by conditions, or an absolute objective, independent of methods of action, or an absolute evil; and at the same time we make all these words mean, successively or simultaneously, anything whatsoever …We act and strive and sacrifice ourselves and others by reference to fixed and isolated abstractions which cannot possibly be related either to one another or to any concrete facts. In this so-called age of technicians, the only battles we know how to fight are battles against windmills.”

    (emphasis mine)

  3. Hermetically Sealed – your post brings to mind the Golden Mean of Aristotle, the Doctrine of Means of Confucious, the Middle Way of Buddha and much of what underlies the parables of Jesus.

    It seems inherent in us that we, left to our own devices, are forever on a trajectory toward the extreme. Someone even defined the duty of government as a body in place to save us from our excesses, better yet to nip them in the bud before they’re close to killing us. (I mentioned before that after Roosevelt had studied the Crash he decided that in future banks had to be prevented from committing suicide yet again.)

  4. Leaving-20th-century-economics-behind, best o’luck with that one; most of what passes as economics has to catch up with the 18th century, let alone 19th or 20th centuries.

    Economics is not taught in schools, it is not taught in colleges, it is not taught at universities. And yet, folks steeped in beliefs passing as economic not only have brought the economic system to its knees, they are pretending to posses the ability to remedy their own error; the blind leading the blind. What is required is regaining the ability to see and the blind cannot help. The enormity of intellectual investment in being blind precludes assistance from that quarter, their PhD is not worth the foolscap it is written on and provides insignificant consequence preventing their lordly pontificating on their speciality.

    Adam Smith recognized the ecological basis of economics and the nature of economic superstructures existing in his day, writing of the ephemeral relationship between value and money and the nature by which that relationship operates. He also makes note of the income that land, labour, capital, and entrepreneurship gain from participating in the economic process and why that income was necessary. The best modern academia can provide is capital is the driving economic consideration and free market conditions prevail, the intellectual masturbation for the justification of monopolies for the edification of the possessors of those monopolies who fund the universities which give them their employment trough. This intellectual environment is the foundation of the systemic failure and is incapable of becoming the source of repair. Revisiting Adam Smith’s “The Wealth of Nations” reading and understanding that opus must be essential to economic understanding, not some pabulum regurgitated by PhDs.

    Politics will always be inseparable from economic studies, politics being the study of power structures and their dynamics, and economics the study of the sources of power. The development in the 19th century of unrestrained monopoly on economic production primarily in the U.S. has skewed the economic system into an imbalance that periodically fails to meet the dynamic requirements of the economy. The economic superstructure contrived to provide financing is found at the locus of the systemic failures throughout economic history. Without a fundamental widespread understanding of economic and political processes, there is little hope that a way can be found to restructure the financial edifice into a functioning superstructure providing stability and continuity. Those economies that recognize and protect their sources of economic production and the social wealth provided will survive this collapse, those economies that don’t will not survive.

    There is a steep learning curve ahead for all.

  5. expat – very interesting. As I recall, Smith warned against monopolies in that they curtail competition which, if I understood Smith correctly, is what drives invention and innovation – all aimed at improving the lives of all mankind.

    Competition vivifies the economy by rewarding superior performance: innovation, efficiency, energy. It s the instrument that can make the pursuit of self-interest (a recognized human drive by most economsts) advance the common interest.

    As it is now, the government has abandoned its obligation to prevent restraints on competition which have been imposed by private business. Government has failed to eliminate flaws in the structure of enterprise that diminishes its ability to compete.

  6. The “cult” of progressivism never tires in its “strawman” arguments concerning laissez-faire political-economics. It’s not that so-called “progressives” don’t know much…it’s that they know so much that isn’t true. I would welcome unbridled competition without legislators involvement, bribes and quid-pro-quos.

    We truly need a separation of economy and state similiar to our separation of church and state (although the new religion of so-called global warming and live earth seem to violate that). I would gladly welcome the John Galts and Howard Roarks over the community organizer likes of the Obama cultists and their sucklings.

  7. Robert Tayor, your post was 100% ad hominem attack, and contained no information. Such is the fundamentalist thinker, whether, Rand-o-bot, communist, or Taliban.

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