catallaxy files

catallaxy in technical exile

The root of evil

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It is hard to beat economic illiteracy as the root of most evil in modern times. Check out the butchers bill from fascism and communism.

Three examples of disastrously misreading the economic play.

1. The impact of the industrial revolution.

Conditions improved for the masses as a result of the so-called industrial revolution, although of course all boats did not rise at the same time or the same rate. Then, in Bill Hutt’s words “In the light of a rapidly growing ability to produce, the traditional living and working conditions of the wage-earning classes came to be regarded for the first time as deplorable.”

In other words for the first time in history the comparative disadvantage of the poor became a problem that had to be fixed up and it was not passively accepted as an inevitable part of the natural order of things. However the opposite spin was imparted by people who did not understand what was happening. The cure of the problem was misdiagnosed as the cause. In Hutt’s words:

This remarkable upward adjustment in standards and hopes, reflecting a new humanitarianism, could well be regarded as emergent capitalism’s outstanding attribute. So rapidly did the new (although partial) economic freedom cause people to change their judgments about what was tolerable that, in doing so, it caused the very forces which were currently eradicating condemned conditions to be blamed for the existence of those conditions.

The reference to the “so-called industrial revolution” acknowledges the claim by Sudha Shenoy that important changes were happening in the structure of British industry long before the period that became known as the industrial revolution.

Second example, the New Deal.

There is a vivid passage in Arthur Koestler’s autobiography where he described the incredible impact in Europe where families were on the brink of starvation when reports came though about the farm programs in the US where tens of thousands of pigs were slaughtered, milk was poured down drains, and crops were ploughed into the fields instead of going to market. This was viewed from afar as the ultimate failure of market capitalism, where people starved while food was deliberately destroyed in massive quantities.

That was just about the last straw for Koestler, he committed to the communist movement and the rest is history. The point is that many people, practically everyone, thought that the prolonged Depression in the US represented the failure of markets, when in fact it represented the result of interference with markets.

Third example, the subject of this piece from Spiked, Who is afraid of economic growth?

The point is that the best way to economise on the use of scarce resources is to ensure that they are subjected to market forces which will tend to maximise the efficiency of their use. The economic illiterates think that the reverse is the case, that markets will cause waste and inefficiency.

Even though increasing affluence is still generally accepted as a worthwhile goal in principle, it is typically subject to numerous caveats. Among other things it is accused of damaging the environment, leading to inequality and failing to make people happy.

The aim of this essay is to examine how cynicism about growth has become a central element of contemporary anti-humanism. It will examine the indirect forms that growth scepticism takes while pointing out its link to environmentalism. It will then consider how anti-growth thinking has moved from being an elite middle-class phenomenon to an idea widely held throughout society. A key factor in this shift was the capitulation of the left to environmentalist and anti-growth thinking from the 1970s onwards. The slowdown in economic growth over the same period, which in turn helped undermine the legitimacy of the market, was also important.

How growth is attacked

There are many ways in which apparent support for economic growth can be reconciled with calls for limits. To spell them all out in any detail would require considerable space. But there are a few common approaches favoured by the growth sceptics, which, in reality, tend to be variants of one another:

Linking growth to undesirable outcomes such as environmental damage, inequality and unhappiness.

Implying that low growth or no growth will lead to positive outcomes.

Asserting the need for limits to growth.

Arguing that the quality of growth – sometimes referred to by terms such as ‘wellbeing’ – is more important than the quantity.

Redefining development to downgrade the importance of economic growth.

On a more personal level it has become increasingly common to attack affluence by asserting the need for ‘ethics’ or ‘socially responsible’ behaviour.

Before considering what is wrong with such arguments in themselves, it is important to examine the assumptions underlying them. The character of growth scepticism means that such premises are often implicit rather than overt. Yet it is only when they are brought out into the open that the full implications of what is being argued can be understood.

First, attacks on the alleged effects of economic growth – such as environmental degradation or inequality – frequently act as a proxy for the rejection of growth as a whole. Often the critic will be cynical about growth in general, but prefer to express his criticisms in relation to one or two particular areas. Even those who start off being in favour of growth in principle often become increasingly cynical as a result of becoming preoccupied with one particular area. Specific limited attacks, which may have some truth in particular instances, tend to grow into more general critiques.

Second, growth scepticism is part of a broader disaffection with the more general idea of social progress. It is no longer widely accepted as given that the future should be better than the past. Instead a sense of social decay and foreboding has become strong. Whereas people used to imagine utopian futures full of possibilities, it has become increasingly common to fear a dystopian future (15).

Finally, the assault on growth represents an implicit attack on the destabilising tendencies inherent in the market. The very element of capitalism that has been historically progressive – its ability to raise the productive forces – has come to be seen as problematic. No systematic alternative is offered – only the imposition of restraint on the market system. In this sense, the attacks on growth have a nihilistic element. In contrast, earlier critiques of capitalism, certainly those from the left, criticised the market on the grounds that it created barriers to the raising of productivity. Often the explicit conclusion was the need for a shift to a more productive form of society such as socialism.

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Written by Admin

May 8, 2006 at 10:24 am

Posted in Uncategorized

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