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The Poverty of Economics

Adam Smith and Jean-Jacques Rousseau would be Horrified by the Neo-Liberal Model

by Johnny Reb, October 2015

Every advance in human civilization from the spread of science and literacy to the abolition of slavery, has had to meet the objection that it violated God-given laws - Christopher Hitchens

The poverty of our century is unlike that of any other. It is not, as poverty was before, the result of natural scarcity, but of a set of priorities imposed upon the rest of the world by the rich. Consequently, the modern poor are not pitied...but written off as trash - John Berger

Give me neither riches nor poverty, but enough for my sustenance - Book of Proverbs

A Parable

A traveler observes a fisherman sleeping in the shade of a tree. He rouses the sleeping man and asks him why he isn't catching fish. 'I already caught two fish for my family's evening meal.' 'If you had a bigger net and worked longer, you could catch ten fish,' says the stranger. 'But I only need two. What would I do with ten?' 'You could sell them. Do the same every day until you have enough money to buy a boat.' 'Why would I do that?' 'To catch even more fish. You could employ people, and send them out to catch more. You would grow rich.' 'What would I do with the money?' 'You could enjoy yourself. You could relax, sit and enjoy yourself and go to sleep in the shade.' 'What am I doing now?' asks the fisherman.

Introduction

Indigenous cultures everywhere, or what is left of them, tell a similar story. Today the inhabitants are almost all destitute and poor, despite the fact their countries were once rich and provided them clean air, water and abundant natural resources. Their societies were not plagued by poverty; they might have periodically suffered from natural disaster such as floods and drought, but never contaminated their ecosystems that provided them sustenance. Their religions, spirituality and world view were, for the most part, completely opposed to the Christian capitalist weltanschauung. The indigenous societies had a reverence for the natural order of things. Nature is not a commodity to be exploited and plundered but, but rather a home to be protected and nurtured. That natural harmonic order all changed from 1492 with the arrival of the rapacious Columbus and the subsequent Christian European invasions that plundered and stole their land and subjected their populations to racism, slavery and genocide. This Christian colonialism and imperialism is the major source of the present wealth of the West, most of which is, and always has been, in the hands of a tiny oligarchic elite. The pillage continues under the aegis of a venal globalized ideology of neo-conservative and neo-liberal capitalism.

Whenever the institutions and representatives of the corporatized West speak of poverty alleviation in the Third World, they don't mean the return and control of their land and resources to their rightful owners. They mean World Bank and IMF imposed debt, market discipline to labour and other profit generating and controlling capacities to multinational resource extraction and other exploitive business enterprises from the West. It subjects the people of these countries to entrenched domination and poverty for which there is no exit. It is only the poor that programs of austerity are devised, hypocritically claiming to address their basic needs, but never permitting them the possibility of self-reliance. And never  do the Western oligarchs of finance capital offer the rich such a reductive version of what they might need and how poverty may be addressed through fair taxation and certainly they never attempt to quell their own insatiable acquisitive desires.

This corporatist ideology, now dominating the entire planet is facilitated by the IMF, World Bank, EU, NATO, phony free trade agreements  and the hegemony of the US military and US currency. In the past, socialism attempted to ameliorate much of this greed and destruction but has now been rendered lifeless. All value in the world, including measures of poverty, are now expressed exclusively in monetary terms and abstruse economic measures such as GDP. We understand the price of everything but the value of nothing. This is the essence of Western economics. For generations, the West has continued to overthrow progressive governments, one after another. It has been murdering great political leaders like Patrice Lumumba, Mohammed Mosaddegh, Salvador Allende, and so on, blocking all attempts to build decent social democratic countries. Several years ago the cavalier attitude of the World Bank to countries of the Third World was summed up by then chief economist Lawrence Summers who stated in a memorandum:

"Just between you and me, shouldn't the World Bank be encouraging more migration of dirty industries to the less developed countries. The economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable, and we should face up to that...Under-populated countries in Africa are vastly under-polluted; their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City...the concern over an agent that causes a one in  a million in the odds of prostate cancer is obviously going to be much higher in a country where people survive to get prostate cancer than in a country where under-five mortality is 200 in a thousand."

The insensitivity and ethical vacuity of such a comment from a former president of Harvard University, high profile international economist and advisor to Barrack Obama defies comment.

We are now witnessing mass migrations, primarily refugees from countries of the Third World that have been enslaved, plundered and raped by the arrogant, racist, ethnocentric, insatiable and pious Christian West who call themselves "civilized". Very few in the countries of this so-called civilized First World are capable of making any logical connection between their wealth and the hundreds of millions of desperately impoverished of the Third World and the latest wave of refugees attempting to cross borders. While the tiny country of Lebanon is now a host of over 2 million Syrian refugees, the insensitive silver spooned conservative British Prime Minister David Cameron, lamenting the inconvenience to pampered holiday seekers,  has referred to the refugees on the outskirts of Calais trying to reach the shores of his country, as a "swarm". In other words, insects and vermin.

It is David Cameron's country that bears the responsibility for much of the enslavement, pillage and genocide of hundreds of millions in what we now call the "third world". Plunder and destruction of much of the world, enslavement, decimating and starving of millions, is regrettable but necessary price to be paid for the high standard of decadent existence of the biblically chosen, good white Christian folks in Europe and North America. Very few you talk to will even admit to this fact, locked into narcissistic self-delusion and cognitive dissonance. Many are incapable of thinking for themselves and have been indoctrinated by our sanitized history and a mindless patriotism, nationalism and corporate imperialism that continue to be inculcated by the dominant political, social, educational and economic zeitgeist.

Global poverty is the plight of at least half the world's population and is not a matter of lack of resources, but rather justice, fairness and redistribution. World poverty is a consequence of economic control and manipulation by the rich countries and their insidious institutions of predatory capitalism. How this came about has been air brushed and distorted by conservative historians representing wealth and privilege. Globalization shows remarkable continuity with colonialism. For colonialism from the 16th to 20th centuries was the program of the Western powers of Europe and North America to open up markets  not only for their own products, but for exploitation and plunder of the newly discovered lands. Their military prowess decimated indigenous peoples and their cultures, stole their lands and savaged its cultural and natural resources.

Is Economics Morally Bankrupt?

Economics is often referred to as the "dismal science"; it’s an epithet that’s been undoubtedly vindicated by a long and dismal track record. Examples are plentiful; but to understand why, we could cite a recent phenomenon, the failure of every economist and financial analyst within the mainstream to foresee the 2008 global financial crisis. Outlier economists such as Noriel Roubini, who were describing the sub-prime mortgage swindle as early as 2005 and predicting an impending financial debacle and stock market meltdown, were described as lunatics and doomsayers by the so-called expert economic analysts on corporate news networks.

For a more recent example consider the disgraceful chain of events in Greece. Chris Hedges, in a recent analysis of the events in Greece, had this to say:

The Greeks and the U.S. working poor endure the same deprivations because they are being assaulted by the same system - corporate capitalism. There are no internal constraints on corporate capitalism. And the few external constraints that existed have been removed. Corporate capitalism, manipulating the world’s most powerful financial institutions, including the ECB (European Central Bank) , the World Bank, the IMF (International Monetary Fund) and the Federal Reserve, does what it is designed to do: It turns everything, including human beings and the natural world, into commodities to be exploited until exhaustion or collapse.

Other than inflating their profits, human life is of no concern to corporate capitalists. The suffering of the Greeks, like the suffering of ordinary Americans, is very good for the profit margins of financial institutions such as Goldman Sachs. It was, after all, Goldman Sachs - which shoved subprime mortgages down the throats of families it knew could never pay the loans back, sold the subprime mortgages as investments to pension funds and then bet against them - that orchestrated complex financial agreements with Greece, many of them secret. These agreements doubled the debt Greece owes under derivative deals and allowed the old Greek government to mask its real debt to keep borrowing. And when Greece imploded, Goldman Sachs headed out the door with suitcases full of cash.

We are endlessly subjected to the same rhetoric and fallacious arguments of  Wall Street, The World Bank, IMF, ECB and EU Troika, that tell us the answer to Greece’s problems of massive debt and recession is (wait for it)... more debt and more austerity, which culminates in what? Yes, more debt, more harsh austerity for the masses and an even deeper economic abyss. It's been admitted by the oligarchs of the EU that the Greek debt is not repayable. But neither are the national debts of Japan and the United States, the 1st and 3rd highest debtor nation respectively on a per capita basis.

The latest bailout agreement, contrary to the rejection of a less severe program of pain in the referendum by the people of Greece adds another €86 billion to an already unsustainable national debt of €316 billion. Is this not Einstein and Freud's definition of insanity and stupidity par excellence? Instead of resolving the crisis, for example by forgiving much of the debt, all this recent program will do is ensure that Greece will need to return to the blackmailing troika for another round of pain and suffering and the madness will kick start (in the groin) once again. Debt, like fear, is a long standing mechanism of control. If there were any ethical considerations by the EU Troika, why have they not considered the seemingly obvious option of debt forgiveness?

Most of us are surely well aware that the Troika’s motives are ideological and political, not grounded in any moral sensibilities or economic sanity. What they call "sound  economic rationality" is the ruse they use for their neo-liberal dogma, in much the same way that the US government uses "bringing democracy and freedom" to the countries they regularly invade for their imperialistic agendas or their brutal cuts to social security to enable tax breaks for billionaires, multi-millionaires and corporate welfare bums.

People need to avail themselves with the sceptical disposition, logic and critical thinking skills with which to detect fallacy and deceit in political self-serving arguments whether they hear them from our duplicitous politicians in parliament, their handmaidens in the corporate controlled media, the propaganda of the fossil fuel industries and other mega-businesses or just from casual friends in debate.

It’s a widely held view today that economics is a dispassionate science of free choice, detached from ethical considerations. This is of course a delusion and it's certainly not how economics as an intellectual discipline began. Rather, it began as a subset of the humanities and more specifically as a further subsection of moral philosophy. Over time it shifted to the social sciences as it attempted to adopt and apply the methodologies of science and mathematics. Today this attempt at credibility and respect is accomplished primarily by complex and often arcane mathematical models, primarily applying the principles of probability and statistics. Many economists today are morally detached number crunchers with PhDs in mathematics isolated in ivory towers or corporate offices determining the economic fate of the rest of the planet. Many of their prognostications are no more reliable or effective than the mysticism of medieval scholastics.

What would Rousseau and other Enlightenment Thinkers have Thought?

Man was born free and he is everywhere in chains - Jean-Jacques Rousseau, Discourse on Inequality

Jean-Jacques Rousseau (1712-1778), the great Enlightenment philosopher of freedom and justice and inspiration for the French Revolution, would surely be appalled by the current political and economic ideology in Europe and North America. Most of Rousseau's works were banned and burned by the church, including Emile, one of his works on Education reform. In agreement with later anarchist philosophers such as Mikhail Bakunin and Pierre-Joseph Proudhon, power, force, excessive wealth accumulation and hierarchical institutions, Rousseau argued, are the four primary obstacles of freedom, democracy and civil society that must be always perpetually questioned - and eradicated. "It is manifestly against the law of nature that the few should be glutted with superfluities while the multitude lack the bare necessities", he proclaimed. Just as Rousseau in the Discourse on Inequality condemns the insidious effects of the unequal distribution of property, so in the Social Contract he objects fiercely to the extremes of wealth and poverty, each equally "fatal to the common good", with liberty a mere commodity on auction to the highest bidder, its wealthy buyers accumulating the powers of tyrants and its sellers relinquishing their liberty to the tyrant. Rousseau believed in a what anarchists refer to as "direct democracy" and "democracy from below", the only genuine article. Current forms of representative democracy whereby our  "representatives" are simply agents for wealth, power and conservative entitlement, Rousseau would deem fraudulent and contemptible.

Rousseau's Social Contract began with the proclamation, "Man is born free but is everywhere in chains". He continues on by saying that "you are lost if you forget that the fruits of the Earth belong to no one and the Earth itself belongs to everyone". The latter message, the notion that the world belongs to no one,  is not unlike those expressed by any one of the great North American native chiefs such as Black Elk or Luther Standing Bear. Rousseau's attacks on the state differed little from his views on orthodox religion which he believed existed only to protect the injustices and inequalities of entitlement, power and privilege. Foreshadowing the writings of both Karl Marx and Friedrich Nietzsche he wrote, "Christianity preaches only servitude and submission".

History of course never totally repeats itself, but certain patterns and themes resurface. From time to time, consciously or not, some influential men who lust for power attempt to force the rest of us into a procrustean bed of their own design, generally a hideous authoritarian vision of their imagination in an effort to reverse decades, and in the case of the dark ages of feudalism and theocracy, almost a millennium of possible social, moral and scientific progress.

The 20th century brought years of fascist psychosis in the form of Adolf Hitler’s “Thousand Year Reich” resulting in the deaths of 60 million people, many of them innocent civilians. More recently we have what can be similarly viewed as the United States of America’s version: the imperialist manifesto called "The Project for a New American Century”, drafted in 1997 but still in full effect today under the current administration. The PNAC is a self-proclaimed agenda to “promote American global leadership” resolutely and by military force when deemed necessary. It differs little from Manifest Destiny and the Monroe Doctrine and other notions of divinely inspired American right to dominance of the 19th century. The War in Iraq, resulting in the needless deaths of over one million, an ongoing civil war and the displacement of at least an equal number, is a prime example of that the modern version of that agenda called "American exceptionalism".

Montesquieu and his colleagues of the mid-18th century, such as Voltaire, Diderot, Thomas Paine and Rousseau, key thinkers during the Age of  Enlightenment, denounced feudalism as being a system exclusively dominated by aristocrats who possessed all financial, political and social power. During that time, which incubated the French Revolution and built its  ideological foundations, feudalism became synonymous with the French monarchy and the Catholic Church. To the Enlightenment writers, feudalism symbolized everything that was wrong with a system based on birth, privilege, inequality and brutal exploitation. Today, the conservative elite entitlements belong to multinational corporations, big banks and wealthy capitalist classes which are all enabled and safeguarded by the politicians and legal sanctions that these plutocrats have bought and paid for.

So  feudalism and corporate serfdom is making a comeback  in the latest evolution and under the impulse of neo-conservatism and its offspring unfettered predatory global capitalism. A feudal system may be defined as a society with inherited social rank with the privileges and entitlements underwritten by the full force of the prevailing government, its laws, police and military. The feudal system of the Dark Ages was the social and economic exploitation of peasants lords and powerful land barons who were protected by the monarchy which in turn was sanctioned by the "divine right of kings" and the Christian Church and hierarchy.  This led to an economy always marked by excessive poverty, sometimes famine, extreme exploitation and wide gaps between rich and poor. The feudal era relationship between of a serf to his lord was quantitatively identical to the present relationship between  of a WalMart "associate" to the heirs of the Walton family. If one looks objectively at the power stratum in the US in 2015, and the one of, for example, feudal France in the mid 18th century, it is not difficult to see the startling similarities. For example, attendance at Ivy-League schools in the US is principally an inherited privilege with the dimwit sons of wealthy powerful families such as "D" student George W Bush entitled to automatic acceptance at Yale. The same can be said for elected positions in Congress and the Senate. Merit is a consideration only for those aspirants and applicants from the lower classes who need a straight "A" resume.

“Market forces” are not natural physical phenomena like the laws of physics; they are the pre-meditated actions of hyenas and vultures from Wall Street who flourish in the top tier legal stratum - which means, like the banks, they live by their own rules. They then proceed to dismantle and feed on the carcasses of a targeted company, city or country. Decline does not just happen like the sun rising; it is engineered by the corporate entities of global capitalism to maximize profit without regard for human or environmental costs. It is ultimately up to us, for the common good of humankind, to put obstacles in the path of the well-oiled wheels of this global corporate machine and its malicious propaganda that is putting corporate profit before all else, including life itself, grinding down and crushing the accomplishments of more than 250 years, regressing to the servitude of a neo-feudalism run by banks, plutocrats and multi-national corporations.

The contemporary lack of historical, social, cultural or ethical concern regarding economic inequalities and injustice would have outraged many of the early Enlightenment philosophers such as Rousseau. This includes the 18th century Scottish Enlightenment philosopher Adam Smith, revered by Wall Street pundits and free market politicians as the founding father and patron saint of modern capitalism. Smith is touted as a deity both by conservatives and elites in finance and business, most who have never turned a page in any of his books. He's deemed the champion of the laissez-faire and unbridled free markets, as expressed through his mantra of the "Invisible Hand" of the marketplace. The "Invisible Hand" is a metaphor invoked to symbolize the apparent unintended social benefits that arise in a market economy from individuals acting solely out of self-interest. Moral considerations of empathy, caring and compassion are thus rendered superfluous.

The real truth about the so-called free markets (or the often preferred euphemistic Orwellian phrase "free enterprise") is that they are created and massaged by complicit scheming governments and backed by violence in the form of police, prisons and the military. This is done not only at home with attacks on labour, unions, environmental groups and general dissidence, but in the areas of the world that have been invaded, assaulted and plundered for centuries by capitalist colonialism and imperialism.

But this account is a narrow and generally erroneous interpretation of Adam  Smith, one that is at odds with the general theses of his major works, An Inquiry into the Nature and Causes of the Wealth of Nations and The Theory of Moral Sentiments. These are lengthy volumes that need to be read in their entirety to be fully understood. Smith died in 1790, before the industrial revolution, mechanization, and the rise of large-scale businesses, let alone the government-sanctioned corporations, investment banks, hedge funds, trusts, and giant global industrial or financial organizations that were light years from his world of small-scale competition. These entities distort outcomes and result in what economists such as the late John Kenneth Galbraith call "market failures", such as monopolies, oligopolies, market bubbles and "externalities" that can cause and have caused much harm in the form of collateral damage to the environment, workers and other individuals and public enterprises but do not show up on a corporation’s balance sheets.

The question is whether Adam Smith can be blamed and shamed for the global financial crisis, meltdown and subsequent multi-trillion government bailouts of 2008-09, as he was for that of 1929. When Larry Summers was asked which economist is most influential to his thinking, the director of President Obama’s National Economic Council, came up with John Maynard Keynes. It was if during times of economic crises we need Keynes and Smith when it the economy seems to be functioning as it ought. Smith for free floating bubbles, but Keynes to the rescue when the bubble burst - as they invariably do. The reality is that there are many people to blame for the crashes of 1929 and 2008*, but neither Adam Smith nor John Maynard Keynes were among them. Keynes in fact, although a liberal in favour of the markets, believed in strong regulatory mechanisms to quell the excesses of capitalism. If he was alive today, would be appalled at the current levels of corruption, grotesque levels of inequality and government complicity in unmitigated greed and corporate avarice. Keynes, one of the brilliant men of the 20th century, once remarked that, "Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone."

* It's a long nauseating story and most readers are likely aware of the sordid details, but the primary cause that sparked the crash of 2008 was rampant venality and criminal speculation in real estate, more particularly in exotic financial ‘derivatives’ known as ‘collateral debt obligation’ or ‘credit default options’ (CDOs). The market for these instruments eventually topped a mind-boggling $530 trillion. They were designed to hedge, or insure, against default on mortgages issued with no money down, and no criteria for the borrower’s ability to pay, on the idiotic pie-in-the-sky premise that housing prices only go up. Whether the problem was CDOs themselves, or just their misuse, in 2003 Warren Buffett accurately called them “financial weapons of mass destruction.”

While Smith celebrated competitive capitalism based upon a system of equal opportunity and merit, he didn’t trust capitalists very much at all. Smith was acutely aware that the “interest of any one order of citizens” can be subverted “for no other purpose but to promote that of some other.” Merchants in particular have “an interest to deceive and even to oppress the publick” and in fact “have, upon many occasions, both deceived and oppressed it.” Consequently, Smith did not rely exclusively on the workings of an invisible hand to ensure a good outcome. He specifically stipulates in the passage quoted above about the constant effort to better one’s condition that it be “protected by law,” as well as “allowed by liberty.”

In other words, my freedom to pursue my interest my own way means little unless it entails a like freedom for everyone else. Thus an element of justice is inherent in the concept of freedom; and Smith declares at one point that justice is “the main pillar that upholds the whole edifice.” Consider a few more ideas and excerpts from the writings of Smith:

 “All for ourselves, and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind.”

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

Second, he believed that workers deserve a living wage, far in excess of the starvation minimum wages of today:

“It is but equity … that they who feed, clothe and lodge the whole body of the people, should have such a share of the produce of their own labor as to be themselves tolerable well fed, clothed and lodged.”

Third - and here’s a real bombshell - he believed that the wealthy should pay more in taxes since it is they who have benefited excessively from the existing system:

“The subjects of every state ought to contribute toward the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Fourth, he believed in the necessity of public investments in infrastructure and public goods. He spoke of the obligation of government to support “public institutions and those public works, which, though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay the expense to any individual or small number of individuals, and which it therefore cannot be expected that any individual or small number of individuals should erect or maintain.”

Fifth, rigid free market neo-liberal libertarians will not be happy to hear that Smith even supported graduated tolls; for thus the “vanity of the rich is made to contribute in a very easy manner to the relief of the poor.” More importantly, safety and security consistently take priority for Smith over profits. He was prepared to restrict the freedom of bankers to issue promissory notes to willing customers where that “might endanger the security of the whole society.” He acknowledged that this is a “violation of natural liberty,” but compared it to a building-code requirement to erect fire walls.

In other words, Smith well understood the pitfalls and threats of capitalism to the common good. Smith's criticisms are not unlike those expressed in the 19th century by Marx [1] and Engels. Smith stressed the importance of strong regulatory mechanisms to mitigate its worst aspects of capitalism which are manifested by the most unsavoury of human attributes. He cited such laws as regulations of banks  and the need for progressive taxation. Certainly these and many other checks and balances recommended by Adam Smith are totally at odds with what the contemporary corporatist conservatives  and their political enablers such as Stephen Harper are touting.

Wealthy conservatives and corporate economists regularly trot out the worn out fallacious argument that they must be provided with "incentives", often in the form of tax reductions to enable them to grow their business, investments and the overall economy. What they really mean is to enrich themselves at the expense of everyone else, in particular their employees. This has been referred to as "supply side economics", Reaganomics or "trickle down", a ludicrous scam that has done nothing but create huge economic disparities and massive government debt. At the same time, the working classes, labour and poor must be subdued and controlled by "austerity" and "flexibility". The most disturbing element of this rubbish is most people actually believe it, like the imperialistic wars for greed and profit that are described as "fighting for our values and freedoms".  Whose values and whose freedoms one ought to ask? Not only are these policies unjust, they are unsustainable.

At this point one might ask, what exactly is this creature referred to as "conservative"? I expect many of you, like myself, are conservative in their personal lives. But the political conservative is another sort of animal. From my personal experience, most belong to some Christian denomination, generally the evangelical brand. Political conservatives never tire of touting  a society of obedience, law, order and good governance. They are what I would call utopians of the rule of law, but only insofar as their rule of law applies to others, the masses of the working class that arch-conservative Edmund Burke called the "swinish multitude". Entitled conservatives of privilege and wealth have always lived by their own rules means whatever they can get away with. Rarely are they punished for their heinous crimes.  Conservatives  also love war and start most of them in the "national interest" of greed, power and profit. But rarely if ever do they fight in them. By "good governance" they really mean that they will care for you before you are born and after you are dead, but couldn't give a damn about you while alive.

Smith condemned the insatiable elites of his day, the "masters of mankind" as he called them, vilifying them for their "vile maxim", namely "All for ourselves and nothing for other people". Sound familiar? Smith's views are hardly an endorsement of the kind of egoism, narcissism and rapacity that many of today's capitalists and financiers embrace. In our capitalist culture of self-interest and greed, theories about human nature are presented by elites as inexorable axioms. We cannot escape our selfishness, notions of restraint and the need to get as much as we can in any way we can while at the same time giving back as little as possible. People are by nature egotistical and acquisitive and capitalism and its mystical "invisible hand" is the only ideology that allows people to follow their "natural" selfish and narcissistic dispositions. We're also informed that this is all for the good and beneficial to society. This reductive view, far from describing human nature, merely describes the prevailing economic ideology of global capitalism. Our corporate controlled mass media rails against "mindless" killings in the Middle East, Africa and other parts of the world exploited and plundered for centuries by colonialism, imperialism and war all adjuncts of capitalism. But they never target mindless consumerism, marketing, television "reality" shows, video games, entertainment, violent sports, cell phone addiction, endless distractions, decadent holidaying on polluting cruise ships and all-inclusive five star hotels in otherwise poverty stricken countries of the Third World and ever-increasing low paying mind destroying work.

Smith’s enigmatic "Invisible Hand" remains the foundation of mainstream economics. It’s the rationale for the kind of neoliberal trickle down idiocy that has been aggressively pursued since the era of Reagan and Thatcher. It’s also underpins the perverted logic that the Troika is invoking in their insane demands on the Greek people that entail attacks on working conditions, pensions and  privatisations of their ports, airports, utilities and other public entities.

Persistent doubts remain about how much emphasis Smith actually gave to the idea of the "Invisible Hand", but there’s one thing we can be quite sure of: the plunder that passes for capitalism today would have horrified him. We need only examine the historically unprecedented levels of global economic inequality that plague the world today.

Building upon this selective interpretation of Smith and others, the subject of economics concocted the persona of homo economicus, or economic man. This is a character that consistently acts to selfishly maximise his well-being or what economists sometimes refer to as utility. This behaviour is produced through a robotic rationality of cost-benefit analysis. It also forms the basis what has become known by economists as the efficient market hypothesis. John Maynard Keynes, one of the most brilliant men and well-known economists of the 20th century remarked on the economic basis for capitalism and its efficient market hypothesis thus: "Capitalism is the astounding belief that the most wicked of men will do the wickedest of things for the greatest good of everyone." I've repeated this quote for effect and emphasis because it's so hard to disagree with it. And we wonder why the world is in such a mess, plagued by conflict, violence, war, avarice, venality and a contempt for moral sensibilities and the virtues of the common good of humankind including wanton disregard for the health of the planet and its other living species.

Do we behave like capitalists in our relations with our family and friends? I certainly hope not, because if we did our behaviour would be deemed psychopathic. If people behave as self-interested rationalists, void of any ethical considerations as if one were in fact psychopathic, then surely markets, which are just collections of individuals interacting with one another with the only aim being maximizing profit for himself, what is the inevitable outcome or set of outcomes? Peace, civility, justice, satisfaction and economic security for all?  

The theory of homo economicus makes a number of rather dubious assumptions such as the innate selfishness and competitiveness of human nature. Even research in evolutionary biology, genetics, neuroscience, ecology, anthropology and the social sciences is inconclusive. We have a strong propensity to cooperation as well as competition. In fact the mathematics of game theory has shown that cooperation surpasses competition when considering the security, harmony and economic interests of ourselves and our loved ones.  [I'm constantly rethinking my ideas on human nature and some of the views I held a few years back. You may read them here.]

The evidence for our caring and co-operative nature is everywhere. In Canada and our local communities there are people who care, helping out in soup kitchens and donating to charities. Studies have shown that poor people and others of modest means are in fact the most generous of all in donating both time and money to social causes of the oppressed, forgotten and destitute.

 So what about the evidence for our supposed "rationality"? The Noble prize winning psychologist Daniel Kahneman, who specialises in the psychology of judgement and decision making, put a number of economic assumptions to the test. His numerous empirical studies in his most recent book Thinking Fast and Slow found that individual behaviour simply does not match up to that described by our top economists, corporate leaders,  financial gurus, securities analysts and right wing think tanks regularly featured on business news networks.

Kahneman demonstrated that people tend to have significant short term and optimistic biases when making both financial and non-financial decisions. Thus they take on risky ventures without taking into account potential risks and costs, grossly ignorant of basic principles of probability theory and statistical analysis. This behaviour is in stark contrast to that described by our current mainstream neoliberal economists. This should not be entirely surprising, considering that we humans are an emotional and primarily unimaginative species, greatly influenced by our biases and inculcated beliefs, religious superstition, corporate run media, culture and society. We’re constantly subjected to propaganda, advertising and marketing that incessantly insist that we must purchase goods and services that we invariably do not want and certainly do not need.

It’s not hard to see, that far from the economist line about rational individuals making rational decisions in efficient markets, the truth is more often one of non-rational individuals, being implored to make irrational decisions in markets that are usually inefficient, affected by erratic emotional factors and often manipulated. When Adam Smith's mystical "Invisible Hand" of the market is left to do the heavy lifting, invariably it’s the government that's left to massage the markets and repair the damage of unintended consequences and collateral damage.

Investment portfolio myths such as "diversify" and "buy and hold" are a fools game for everyone but the brokers and financial advisors, the only ones who ever consistently benefit from these dubious adages. The boom and bust capitalist economies of the past 150 years have been devastating for the emergent middle classes and traditional working classes. In the past three or four decades when market collapses occur, despite the intrusions, manipulations and machinations of governments regarding interest rates, tax incentives and outright corporate welfare, they also act as corporate socialists with multi-billion dollar bailouts for the big banks and corporations deemed "too big to fail" - another bogus axiom invented by Smith's infamous "masters of mankind". The mysterious invisible hand of the marketplace has never been, and certainly in recent decades, not at all "invisible".

There is a paucity of evidence that ordinary people act according to the psychological and cognitive model touted by economists. Mainstream economics has proven itself to be remarkably resistant to any kind of self-criticism and reassessment, whether arising from its relative failure to foresee the financial crises, the dismal failure of its policies of austerity as a path to growth, or the growing empirical evidence which explodes the theory of rational economic humankind. Moreover, insensitive financial commentators and so-called experts on the markets void of conscience or ethical considerations have referred to the Greek crisis as mere "noise" that will not adversely affect investor profits and share prices.

An alleged intellectual enterprise such as economics which cannot engage ideas of other disciplines such as science, history, sociology, psychology, and philosophy, nor in a critical re-examination of its own core axioms,  theories and arcane mathematical models, especially when reality and the weight of evidence seems to refute them, can in no way claim to be following reason or the scientific enterprise. Thus the label, dismal science.

Thankfully recent students of economics have demonstrated concern with its obvious failings and shortcomings. From New York and London to Rome and Tel Aviv, a movement has taken hold that is determined to change the way economics is taught in Universities. The International Student Initiative for Pluralism in Economics has called for a "pluralism of theories and methods" to be taught. They also want greater engagement with the other aforementioned disciplines .

On the Aims of Education

We need to be teaching our young people how to think, not what to think. Scepticism, logic, reasoning skills, methods of scientific inquiry and creativity need to be taught and continually encouraged. This is true not only in the teaching of economic theories but throughout all of education, especially the sciences, mathematics, liberal arts, history, philosophy, ethics and life's many challenges. Perhaps we'd have a different more caring world if that had been the case.

Too many of our young people today have been inculcated into the notion that their economic and social status is exclusively the upshot of individual responsibility and choice, irrespective of life's contingencies, vicissitudes and wider structural forces. This is a much promoted hyper-competitive social Darwinist ideology whose message is that surviving in a society demands reducing social relations to atomized forms of social warfare. People today are expected to inhabit a set of relations in which the only obligation is to live for one’s own self-interest and to reduce the responsibilities of citizenship to the demands of a consumer culture. Yet, there is more at work here than a flight from social responsibility, if not politics itself. Also lost is the importance of those social bonds, modes of collective reasoning, public spheres and cultural apparatuses crucial to the formation of a sustainable democratic society.

We are drowning in an acquisitive narcissistic consumerist society in which the social has been individualized, lobotomized by endless technological distraction and celebrity spectacle. Emotional life has collapsed into the therapeutic and education relegated to either a private activity and descent into a kind of algorithmic mode of regulation in which everything is reduced to a desired measureable economic outcome. Entertainment, sports and superfluous distraction now replace political engagement and the concept of progress is defined through a narrow culture of metrics, measurement and efficiency in which anything that cannot be priced or quantified is useless or valueless. Our culture is drowning in a new love affair with cell phones, face book, internet dating services and endless unverifiable data.

Lost in this morass of distraction and entertainment are the registers of genuine intellectual discourse, understanding and compassion for "the other", empathy, the revolutionary imagination, a democratic vision of a different model of life, politics and society and a passion for justice. One of the famous works of art by Goya is his engravings called “The Sleep of Reason Produces Monsters.” The title is deeply suggestive, particularly concerning the role of education and other cultural instruments in leading our vulnerable young people to assume an insensitivity to the never-ending task of sceptical and critical thought. This insensitivity, Goya suggests,  creates horrors - the failure of conscience, the attacks on collective associations and solutions, marginalization of scepticism and critical thought, the flirtations with dogmatism, irrationality and authoritarianism that lie at the heart of a withering of political environment and withdrawal into narcissism and private obsession.

Education at all levels from elementary school to university is being subjected to stifling business models and corporate agendas that began in the 1980s. The aim is not to create a critical thinking reflective populace for a democratic society but rather to transform schools into training factories for entry into a low wage workplace of tedium and banality. The aim of a real education, as opposed to training, is to learn how to think for ourselves and most importantly to enable us to communicate effectively, understand the history of the world and powerful interests that have directed, controlled and owned it - and those who continue to do so. In the majority of cases, career training should be the responsibility of the employer and should not be the primary aim of education, only a minor consideration until a career path is chosen. Even most professional careers such as medicine, teaching and law require years of university course work in the arts, mathematics  and sciences.

Moreover, all education ought to be free, including for any student with the ability and aptitude to study at the university level. Student protests against debilitating debt from tuition fees and other costs, including widespread demonstrations in Quebec in 2012, are becoming more common. What the student demonstrators are doing is defending science, philosophy, history, literature and other liberal arts against a corporate dominated regime that believes none of these subjects are of any value except as a means to wealth and power. They are quite literally defending the values of civilisation from those who have abandoned them.

Claims that our country cannot afford free higher education should be treated with exactly the contempt the students in Quebec and throughout the world have been conveying to conservative corporatist governments throughout the world. It’s ridiculous to pretend that Norway, Sweden, Scotland, Finland, Ireland and poor countries such as Cuba or Mexico can afford free universities, but somehow the United States and Canada cannot. Germany has already abandoned its failed experiment with tuition fees. Surely Canada and the United States can do the same.

But in a way this isn’t the crucial point. It would also perhaps change the course of history, a way of reminding ourselves that education doesn’t just exist for the sake of the economy. Surely the economy exists to give us the means to pursue education, enlightenment and hopefully, wisdom. Is the economy working for the people, or the people working for the economy? It is ironic indeed that we are reduced to a situation where it is our children who have to point this out to us, as our conservative adult leaders descend to the moral and intellectual equivalents of philistines and barbarians.

If knowledge of injustice and inequality was all that was required to change the world, the oligarchs, masters of mankind and their trigger happy police forces, military and other forms of structural violence and coercion would have been eliminated long ago.

We simply cannot ignore a world history of authoritarianism, hierarchy and thought control. I've been working on a paper for several years now on the origins and rationale behind the automatic pilot sheep-like compliance of people to authoritarian political and socio-economic models, the very antithesis of real democracy and freedom, necessities to human flourishing  we've never had throughout human history. All authority, regardless of context, requires validation and there are precious few instances I can think of in which it can be legitimized.

Religion has been one of the primary obstacles to human liberation, not only of the mind but any chance of real social democracy. Religion, with the alpha-god carrot and stick monotheisms of Christianity and Islam being the worst of the bunch, teach unthinking docility and obedience to an imaginary deity and subservience to the tyranny of the churches and their venal hierarchies. Christianity does not contain an inherent tendency to humanize and civilise itself; it was the Scientific Revolution and the Humanist Enlightenment that forced it to do so. The same can be said of capitalism, despite efforts by social democrats to put a human face on it. Left to its own devices it will continue to exploit, plunder and create grotesque economic inequalities which today have become unprecedented.

The period when capitalism seemed capable of providing increasing and widespread prosperity for all was also, precisely, the period when capitalists felt they were not the only game in town. They were faced with internal revolutionary threats from labour unions and the many factions on the political left and faced a global rival in the Soviet bloc, revolutionary anti-capitalist movements from Latin America to China and South East Asia. In other words, rather than high rates of growth allowing greater wealth for capitalists to spread around, the fact that capitalists felt the need to buy off at least some portion of the working classes placed more money in ordinary people's hands, creating increasing consumer demand that was itself largely responsible for the remarkable rates of economic growth that marked capitalism's "golden age" in the era from 1945-1975. But the progressive social democracies that were created following the Great Depression and the post World War II era were historical anomalies that have been steadily under assault by power elites and are in the process of being dismantled by the new world order that began with Reagan and Thatcher. Stephen Harper in Canada is a prime example of someone who hates the social democratic country it once was and is doing everything in his power to destroy it.

Since the mid 1970s, as any significant political threat has receded, conditions have reverted back to their normal state; that is, to 19th century style Robber Baron savage inequalities, with a miserly tiny plutocracy presiding over a social order marked by increasing social, economic and even technological dysfunction and stagnation.

French economist Thomas Piketty begins his best-selling book by denouncing "the lazy rhetoric of anti-capitalism". Despite his caustic critique of the venality of current global economic order, he has nothing against capitalism itself or even, for that matter, economic inequality. He just wishes to provide a check on capitalism's tendency to create a useless class of corporate financial parasites. Consequently, he contends that the left should focus on electing governments dedicated to creating international mechanisms to tax and regulate concentrated wealth. Some of his suggestions – an 80% income tax on extreme wealth – may seem radical, but we had these levels of graduated taxation on income in the "golden era" of 1945-75. Piketty's depiction of neo-liberal capitalism as a gigantic hydra headed monster sucking wealth into the hands of a tiny elite, insists that we do not simply unplug the beast, but try to build a slightly more benign ogre sucking in the opposite direction.

What's more, he doesn't seem to understand that it doesn't matter how many books he sells, or summits he holds with financial luminaries or members of the policy elite, the sheer fact that in 2014 a left-leaning French intellectual can safely declare that he does not want to overthrow the capitalist system but only to save it from itself is the reason such reforms will never happen. The financial oligarchy are not about to cease or even mitigate their exploitation and plunder, even if asked politely. They never have in the sordid history of capitalism's hegemony. And they have spent the past several decades creating a lock on their corporate controlled media and financially political machinery to ensure no one will do so through the farcical electoral process. Moreover, they have the back-up of violence in the form of police and military if any hoi polloi challenge to their grip on power threatens them. The history of social movements such as labour and civil rights have graphically illustrated this.

Since no one in their right mind would wish to revive anything like the transformative Stalinist nightmare that destroyed socialism in the former Soviet Union, we are not likely to see anything like the mid-century welfare state scenario created to combat it either. If we want an alternative to stagnation, exploitation, horrendous inequality, impoverishment and ecological devastation, we're just going to have to figure out a way to unplug the immoral, unjust and hideous octopus-like machine and start all over again.

An important historical note to presently consider is regarding how the welfare states throughout Europe and North America that are now being systematically dismantled by the neo-liberal economic order of the corporatist states, actually came about. One thing is for sure, contrary to what conservative historians have famously argued, it did not come about as a an upshot of compassion and benevolence for the working classes from those same conservative and liberal power elites. Any humanization of capitalism has been the direct result of dissent, civil disobedience and, in some cases, revolution.

Every nation state has been established through violence and maintained by the threat of violence; call it "terrorism" if you will. The state itself, as Friedrich Engels explained, emerged as a result of primordial class divisions. The ruling classes have throughout history maintained their control over the masses, "taming the bewildered herd", as Noam Chomsky called it. This is maintained by propaganda via various cultural mechanisms of thought control such as the mass media, the education system, churches and, failing this, resorting to mental and physical terrorism by police, military and secret services.

Those elites who both own and run the state use the threat if not the constant use of violence to maintain law, order and good government devised by them and on their terms. Witness the North American inner cities, where the police are perceived by most of the working class, poor and homeless as a kind of armed occupation force. The same can be said for political dissent and protests against the hegemony of global capitalism, the most recent being Occupy Wall Street, whose message was getting to the masses. Consequently, it was summarily shut down with force.

The conservative corporate oligarchy that typically holds political power and those, such as Stephen Harper who employ endless rhetorical and legal devices have their reasons, but predictably the emotionally charged ones they offer to the public have precious little to do with the so-called "national interest", open debate, rational discourse or adherence to truth. Their reasons are the preservation of hierarchical political and economic power by major decisions made behind doors. Their targets are those sceptics, radicals, revolutionaries, environmentalist and other dissidents who strive to challenge their privileged status. Moreover, it has been these same political conservatives who have been the primary instigators of terrorism in their endless state foreign interventions, their secret police, imperialist wars, military coups and attacks on their own people who question their illegal and immoral practises.

When these actions have failed, in order to preserve their own entitlements at all costs, they have invariably supported the fascism of Hitler, Mussolini, Franco and other brutal tyrannies. This happened throughout the 20th Century  when their privileged socio-economic and political positions had been rendered inert and seriously threatened  by democratic and revolutionary movements from below.

So, expecting change from our corporate oligarchs and their political pimps is feasible only if reform would at least be entertained by them. But history has graphically demonstrated the delusion of this option. Supplications to immoral sociopaths and psychopaths who control most of the world's wealth and wield the strings of power simply will not work. As the old adage informs: power never concedes anything without a fight. Raw power and violence seem to be only strategies power elites understand. Reform had worked for that all-too-brief period following the Great Depression because elites feared revolution and wanted to save their coveted capitalist system, a system that works almost exclusively in their interest. That was the impetus behind the New Deal of Franklin Delano Roosevelt during the Great Depression; there was little or no compassion or empathy involved, only to save the insatiable beast of capitalism. Concessions such as pensions, unemployment, insurance, health care and social security were made. But those concessions are being rescinded everywhere, including once proud social democracies in countries like Canada which is now under the control of a one-man wrecking crew by the name of Stephen Harper.

Factor in the centuries of actual societal logistics where, with the rare exceptions of North American Indigenous societies that were non-hierarchical and more democratic than the rapacious Christian European barbarians who enslaved them, murdered them and stole their land, the Social Democracies of Northern Europe such as Sweden and Norway where wealth gaps are not as exaggerated as elsewhere (but are now suffering under the stifling hegemony of neoliberal ideology) a distinctive socio-economic order prevailed. It was that of a preponderant group of kings, priests, long lines of aristocratic families enriched by divine right and other countless dictators and tyrants have made it seem that there will always be a tiny minority of rich and a mass majority of poor. Today under corporate capitalism we have different masters, and our poor, most whom have jobs are employed in mind destroying wage slavery, what I would call "the dead souls of an ersatz democracy".

But the insatiable pathological pursuit of wealth by the rich who live by their own set of rules has not just created increasing dysfunction and misery for the poor, it has not made those who can't get enough any happier. And it has for the upper classes, including the middle classes, resulted in narcissism, ethical insensitivity, distraction with mindless toys and technologies, addiction, neuroses, family breakdown, loss of community and psychic disorders real or imagined that have resulted in huge profits for the multi-billion dollar pharmaceutical industries. Our young people are being amused to death, immersed in cell phones, computer games and social media while detaching themselves from political involvement. How are they able to learn when learning and the intellectual life require dedication, concentration and sacrifice through intense intellectual toil. I fear for the future.

That post World War II social contract is now being ripped to shreds and will not be reversible given the magnitude of the entrenched corporatist fascist police state and its power. Any attempt at civil disobedience by the 99% will be violently crushed by the militarized police and the military itself. These two groups are, and always have been, the hired thugs of entitled elites. They exist and have always existed to "serve and protect" wealth and power.

Mother Nature, like physics, has laws of her own. These natural laws, studied, among others, by the ancient Chinese sages were formulated into sacred texts. Indigenous cultures in North America lived in harmony with the natural world, a world they deemed spiritual and worthy of reverence. Not the Christian white man - he had other deities with other ideas about mother nature as merely another candidate for exploitation. Too often the arrogance of the Christian European alpha male, the conqueror who has raped, pillaged, and plundered every continent with the ambition of turning these territories into his image and likeness, forgets that Mother Nature bats last. All was ordained and justified by the will of their vengeful arrogant alpha male god.

Endnotes:

[1] It was also Karl Marx who described a “fetishism-of-commodities,” whereby humans project their own alienated, atrophied qualities and capacities into the very products of their creativity. Marx was analogizing from the notion of “primitive man,” carving a wooden effigy of his “god” - and then worshiping the idol. Anthropologists later also postulated that the earliest stage of religion was “animism” - the projection of “consciousness” into such inanimate forms as rivers and mountains. Only much later did animism presumably develop into nature-deities and anthropomorphized gods and goddesses. If Marx could only see what he had warned against, a self-lobotomizing zombie consumer culture of narcissism and obsession with technology. The cell phone has replaced the palliative of religion and the pacifier. Like self-obsessed Buddhist monks, people covet their grossly overpriced i-phones like a teddy bear or security they packed around as an insecure child. But as a child they could be excused.

If we define techno-idolatry as an awestruck over-valuation of the technical mediation of human experience, then such a secular religion – however false and destructive - has now almost replaced previously less efficacious forms of communication and veneration. As in the case of “primitive magic,” as people have felt increasingly foiled and spellbound in their actual lives, they have turned in desperation to more atomized “ritual techniques”, “empowering” technological devices that are slowly replacing face to face communication. For example, do young men any longer engage face to face in conversation with a young lady he's attracted to and ask for a date? Admittedly, it does require courage, decorum, sensitivity and communication skills. As the late Theodore Roszak, Neil Postman and others noted, such “techno-hubris” has been an historical by-product of an increasingly anti-intellectual urbanized existence, as countless millions of people are cut off from the natural world, solidarity and sense of community. They have increasingly come to share certain delusions and faith regarding the omnipotence of our current dogmas of global capitalism, the market, and its necessary partner, the enabling corporatist state.

Addendum:

A good introduction to economics, inequality and a critique of neo-liberalism and other themes in the philosophy of economics, including an examination of whether we should see the economy simply as the sum total of individual actions or as having some kind of reality over and above this, can be found in Ha-Joon Chang, Economics: A User’s Guide (2014) and 23 Things They Don't Tell you about Capitalism (2011). Most interesting is his rejection of the view that neo-liberalism gains credibility from being a "value-free" approach to economics. Rather, Chang acknowledges that conflicts about values drive competing economic perspectives. In particular, he sees neo-liberalism’s current dominance as the latest stage in the evolution of an ideological arms race between capital and labour (globalisation being its structural counterpart), which has stifled progressive liberalism. In fact, since Thatcher and Reagan convinced most of us, including a now cynical electorate and political class, that “there is no alternative” (the infamous TINA principle) to a radically free market, "trickle down" has turned upside-down, into an ‘Archimedean screw’ conveying resources ever higher up the social scale, into the pockets of the increasingly rich (OECD Report, 2014).

Another economist that makes some sense of the economic death march the world is on is the Chilean Manfred Max Neef.

Manfred Max Neef claims that economics ought to be understood "from the inside out" and the perspective of "human needs and human-scale development".

He spent many years as an academic, a professional economist in the ivory tower. He had to rethink everything he was taught about economics after living many years with indigenous people in abject poverty. He argues that we can learn much from indigenous cultures that our so-called western civilization has demonized, enslaved, subjected to pillage of their land and resources and ultimately extermination.

He argues that if we don't make dramatic changes, we are all facing extinction.

A brilliant man who would be deemed a madman by our arrogant Wall Street short term economic dogmatists and theologians on Bay Street and Wall Street..

Here is a 2010 interview with Amy Goodman of "Democracy Now".

https://www.youtube.com/watch?v=iFqU8lKrzeA

Featured on the same program is Derrick Jensen, another man worth listening to.

Here is the Democracy Now link to the two interviews...

http://www.democracynow.org/2010/11/26/chilean_economist_manfred_max_neef_on

JR, October, 2015

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