When assessing commentary on the current unfolding tragedy of war in Ukraine and its possible motivations, as well as its potential direction and outcome, I am finding it useful to revisit some alternative approaches to history and social science. In particular, these include the ‘great men’ theory of history, and at the other end of the spectrum, that of history largely determined by impersonal forces, and the downplaying of individual action. I blogged about this here in one of a series of posts in response to former economist and UK government minister Vince Cable’s book Money and Power: the World Leaders who Changed Economics. Continue reading
I have just finished reading the recently published Economics and the Left: Interviews with Progressive Economists, a fascinating and at times inspiring read. Since my schooldays, I have been drawn to leftist political economics, and have found it difficult to find a huge amount of interest in the mainstream of the subject, so this book was right up my street. It consists of interviews with 24 ‘leading progressive economists’, many of whom have connections with the Political Economy Research Institute at the University of Massachusetts Amherst, one of the few universities with a strong heterodox representation.
As a former student of SOAS in London, where the economics department also has a focus on heterodox economics and political economy alongside its commitment to the study of economic development, I always appreciate ‘alternative’ approaches to economics. There is much more to this than youthful rebellion. Leftist political economy seems to me to be more concerned with the economic and social change that we can see all around us. It differs from the mainstream not only in the theories that it champions but also in the questions that it asks and the issues that it explores. This may be in part why its practitioners have often been marginalised, and have found it hard to break the stranglehold that the mainstream has on the profession. Continue reading
Thomas Palley has written a fairly short but insightful essay on the worrying and perhaps unstoppable current tendencies in US politics. Palley is a post-Keynesian economist and has been a vocal critic of rising inequality and its negative impact on prosperity and social justice, not least in the US. The pdf of the essay can be downloaded here and the abstract is below. His blog can be found here.
“This essay argues that some forty years ago the Republican Party struck a Faustian bargain whereby it traded integrity and decency for tax cuts and a corporate dominated economy. Now, the Republican party is reaping the consequences of that bargain in the form of its capture by Donald Trump and his followers. However, it also means we are all threatened, as the party has unleashed and legitimized neo-fascist tendencies that stand to destroy democracy and tolerance and replace them with authoritarianism and intolerance. The U.S. is now fighting a war for its soul. At issue are two core questions. One, will the U.S. remain committed to true democracy? Two, will the U.S. aspire to having a decent society with shared prosperity? The one upside of Trump and his purging of the old guard Republican Party is that he compels welcome clarification of those questions, which can no longer be evaded by the Democratic Party and the chattering class.”
This is the third and final post inspired by Vince Cable’s new book Money and Power, following discussions on the making of history and the keys to successful development. Today I take as my point of departure a quote from the concluding chapter to the book (p.345-6):
“It is tempting to look for a big picture and in particular a pattern of success or failure. If there is a big picture, it is probably around the attraction of hybrids. Planned socialist economies have moved towards markets, pragmatically and gradually or in a ‘big bang’. State capitalism has become a distinct and seemingly successful model not just in China but in many emerging economies such as Korea’s. Capitalist economies have tried to blend competitive markets and a strong state with welfare and public goods: the German model from Bismarck to post-Erhard Christian Democracy, Roosevelt’s American liberalism (while it lasted) and Nordic social democracy. Lee’s Singapore is perhaps an extreme example of how a powerful and effective state can coexist with an open market economy, and succeed (though there are some obvious failures like the attempts at reformed communism in Eastern Europe). Despite attempts to shift the balance, as in the Thatcher and Reagan years, such hybrids seem to have proved more durable, politically and economically, than purer models.”
Former UK Business Secretary and Liberal Democrat Vince Cable has a new book out: Money and Power – The World Leaders Who Changed Economics. In it he focuses on sixteen individual politicians who enacted significant economic policies and changed the economic trajectories of their respective countries, for good, ill, or somewhere in between.
Cable worked as an economist before going into politics, and became a government minister under the 2010 coalition, so he is well placed to write such a book. The leaders he covers presided over a range of national ‘economic models’ at different stages in the relevant countries’ development. From infant industry protectionism and industrialisation in Alexander Hamilton’s US and Park Chung-hee’s South Korea to economies in transition from communism to capitalism under Deng Xiaoping (China) and Leszek Balcerowicz (Poland). He covers post-war recovery in Germany under Ludwing Erhard, the welfare state mixed economy in Sweden under Tage Erlander, and ends bang up to date with Japan’s Shinzo Abe and ‘Abenomics’ alongside, perhaps controversially, Donald Trump’s US. Continue reading
For some on the left, Darwinism and theories of human evolution are associated with adherence to an extreme individualism, libertarianism and market fundamentalism. They are seen as the law of the jungle, with the strong rewarded and the weak neglected. Even if they are accepted in biology, their application to society and the economy should on this reading be avoided. But this argument is flawed. After all, human society is grounded in nature and dependent upon it. We cannot escape our origins!
Evolutionary, institutional and complexity economics draw in part on theories originating in biology. There is some overlap between the three approaches. In particular, evolutionary economics emphasises economic change, the generation of variety and novelty, and the complexity of economic systems. The change is not only quantitative, as in standard economics, but also qualitative, in the realm of technology, organisations and economic structure. It is non-linear and often chaotic, in the scientific sense of that term, which limits predictability. Institutions and their evolution are a key part of the analysis, as is innovation. Context matters, so that economic theories and laws should not be universally applied to every situation.
Geoffrey Hodgson, whose work I have recently quoted a number of times on this blog, is an institutionalist economist. In his book Darwin’s Conjecture he attempts to clarify and apply Darwin’s theories of biological evolution to socio-economic evolution. In short, Darwin’s framework of variation, selection and replication are used as a ‘metatheory’, an overarching theoretical framework which can be broadly applied to many phenomena.
Socio-economic evolution is part of the evolution of the natural world and is emergent from but irreducible to it. Applying Darwinian concepts to human society need not be simply about competing individuals but is also about institutions and organisations as evolving social structures. Competition and cooperation are both involved in socio-economic evolution. Yes, selection can involve individuals, and their genes at another level, but can also involve group selection, and institutions. The latter, broadly conceived, include such aspects of human culture as writing, laws, the codification of knowledge, and the institutionalisation of science and technology. Cooperation and morality can be selected in evolutionary processes as much as ‘winners’ from competitive processes, whether these are individuals or firms for example. This is a more subtle and comprehensive conception of human evolution.
The economy can be seen as being embedded in society, which can in turn be seen as embedded in nature. Nuno Ornelas Martins, in his book The Cambridge Revival of Political Economy, argues that for an evolutionary social theory, there are potentially transformational interactions between human agency, social structures, technology and the mode of production, whether that be feudalism, capitalism, socialism or whatever. These interactions occur to varying degrees at different historical moments.
In his 2015 work Conceptualizing Capitalism, Hodgson argues further that capitalism itself evolves, qualitatively as much as quantitatively. In fact the two are inextricably intertwined. It can evolve from within, but also due to external threats or interventions, such as war, foreign aid or the transfer of technology. The diffusion of technology across the system, as well as that of institutions, information and knowledge (and there is an overlap between these processes), helps to drive periods of growth and development. This tends also to involve increasing complexity within the system. But such growth is not automatic, and economies can pass through periods of stagnation as well. Competition may not necessarily increase efficiency or be economically optimal and it remains dependent on the successful functioning of particular institutions. Due to the fact that new institutions and behaviours are often path-dependent, building on old ones, there is always the possibility of ‘institutional sclerosis’ as society and the economy become locked-in to dysfunctional activities and outcomes.
Turning to a non-economist, Robert Anton Wilson, whose eclectic work Prometheus Rising attempts to describe the evolution of humanity, particularly as a result of the evolution of the brain and nervous system: there is some link, though not a direct correspondence, between evolution, wealth creation and the acceleration of the generation and use of information in human society. Genuine wealth creation that serves humanity comes not just from the orthodox economic factors land, labour and capital, but from using the neurons in our brains intelligently. This is not necessarily synonymous with GDP growth, at least over short periods, and to the extent that wealth creation can damage the environment, it can generate new problems to be solved alongside less sustainable forms of wealth.
Wilson echoes the arguments of Eric Beinhocker in his The Origin of Wealth by claiming that genuine increases in wealth and economic value involve the creation of greater order and coherence, or negative entropy. So there is some sort of correspondence between evolution and wealth creation. Socio-economic evolution is occurring faster than biological evolution, though the former remains dependent on the latter and truthfully speaking is part of it. We run a great risk of seriously damaging our own prospects if we neglect our impact on the nature on which we all depend. This is the essence of arguments for a more sustainable form of human development.
Thus applying biological theories such as Darwinism to the economy and society generates many insights, which can be more various and subtle than knee-jerk responses which object to the law of the jungle and the undermining of a kinder, gentler, more cooperative and less competitive world. There is plenty to learn from such an approach, for the left as much as the right. We cannot escape our place and role in nature. With the advance of knowledge and technology, we increasingly amass the power to damage the environment as well as solve its problems. All too often, these problems are of our own making. Let us hope that we can learn from such processes sufficiently to prevent the damaging activity which could potentially overwhelm our continued development.
To some the notion of a capitalism that can fulfill progressive goals is anathema. In today’s world of multiple crises, we may seem some way from such a society. But there are plenty of innovative thinkers who do not think that replacing capitalism is the only way to solve our major economic, social and environmental problems. That is not to say that capitalism will necessarily be with us forever. It remains a historically specific mode of organisation of the economy, and at some point humanity may evolve past it. But there is no doubting its tremendous power to transform the world, for good and ill. Reform-minded progressives are about harnessing this power to achieve and sustain what is in their eyes the good, and to undo and prevent the negative aspects. Continue reading
Many of us in the UK are sick of Brexit, and it hasn’t even happened yet. We have been living through the Brexit referendum and its aftermath, Brexit as process, for more than three years. Keen political observers and pundits may be among those who are fed up, though they keep a closer eye on matters, and some of them have reporter’s duties to uphold.
One of the aspects of this whole business which is not often examined, with regards to Brexit and politics more generally, is the use and abuse of political rhetoric. I have chosen a few terms that are over-used by our politicians and try to unpick them below. Since they generally pass without question, and are key to how we are persuaded, or otherwise, I thought it would be a helpful exercise. This is part politics and economics, part semantics.
When others are trying to persuade us using rhetoric, one must keep in mind that words are not the same thing as that to which they refer. Words are not reality. Words are symbols used in communication to convey meaning. While it is both inconvenient and practically impossible to contest every word as it is uttered, it should be remembered that ideas and concepts, however we name or describe them, miss out much of the related information that we can potentially perceive with our senses, as well as much that we cannot.
Our sensory experiences are mediated by our nervous system and the ways in which it is structured and has learned to process information. We tend to believe that what we perceive is equal to reality, whereas whatever reality might be, it has been filtered by our often biased and very human brain. Snakes can perceive heat waves, allowing them to “see” in the dark. Humans perceive things differently. This does not make either perception the “correct” reality, rather each one is partial.
Following this digression, I discuss some of the language games of Brexit below. Calling them games may rather trivialise the serious issues involved, so please forgive me for that. Continue reading
Some more clear words of inspiration about the potential directions for capitalism from institutionalist economist Geoffrey Hodgson:
“Thatcherism was seen by many Marxists as the only rational response by the capitalists to the crises of the 1970s. Hence the viable choices were either Thatcherism or a workers’ revolution to overthrow capitalism.
This view was profoundly anti-institutionalist. An institutionalist would argue that there is no reason to presume that Thatcherism is (or was in Britain at that time) the only viable version of capitalism. There are other versions of capitalism, and these can begin to develop at any point in time. After all, there are manifest varieties of capitalism throughout the world. The consequence is that we do face very real choices, even within capitalism. We are not confined to these rather narrow political alternatives proposed by many Marxists: either socialist revolution or accept an extreme and exploitative version of capitalism.
In contrast, there is the possibility of a politics that engages with the present more directly. It talks about real, immediate alternatives and opens up areas for discussion. These areas would include, for example, about different kinds of market, different degrees to which the market may operate, different kinds of planning, the role and limits of the state, different planning agencies, a pluralism of structures and agencies operating at the economic level, different types of mixed economy and so on. This debate becomes possible once you escape from the false dichotomy of accepting either the most rapacious version of capitalism or socialist revolution. This dichotomy disables serious discussion and analysis about what is possible in the present.”
Geoffrey M. Hodgson (2006), Economics in the Shadows of Darwin and Marx
A new Prime Minister is on her way, starting tomorrow. This is the latest chapter in the political turmoil that has engulfed the UK since the vote for Brexit a few weeks ago. Theresa May, formerly the Home Secretary, is to become the UK’s second female PM. Now I am not a great supporter of things Tory, at least from the perspective of economic policy, but I was interested to read some excerpts from May’s speech which formally launched her campaign to become the next leader of her party. Of course, this was before the dramatic withdrawal of her only remaining opponent in the contest, Andrea Leadsom.
Some of the details of the speech can be found here. I know that skilled politicians are good at making the right noises to attract voters and ultimately win power. Her bid was to unite her party and the country in the aftermath of Brexit, which will be hard going. But some of the quotes from her speech could have been taken from speeches by Ed Miliband, the former Labour leader. Miliband championed a ‘One Nation’ Labour party, and policies which would aim to promote his centre left, social democratic vision of Britain. Continue reading