This post introduces a project. Its purpose is to explain why, and how, the institution of Economics is broken beyond repair, and to encourage ordinary citizens to discuss, and decide, how to replace it. The reasons for this harsh judgement will be spelt out by simply stating, in plain language, without mathematics or jargon, exactly what Economics has to say for itself, why it says it, and why it doesn’t work.
I invite everyone that shares these objectives, regardless of their familiarity with, or even interest in, the subject matter which Economics proclaims as its exclusive domain, to join this project. It is addressed neither to the narrow clerisy which controls its doings, nor the throngs of Pharisaic apostles who earn their livelihood by spreading its messages, but to the general public, because my conclusion is that it is the job of every human to wrest democratic control of economic policy from those who have usurped it for longer than humanity can safely tolerate.
The reason is, to paraphrase Eisenhower, that economics is too important to leave to the economists. The conclusion I draw is that Economics should be abolished.
The schools, faculties, and academic departments in which it is taught and researched should be wound up and integrated into useful ones like business, history, politics, finance, law, health or fine art. Banks should be forbidden to fund or pronounce on economic theory. Not least, the Chancellor of the Exchequer, and his equivalent in all countries, should be deprived of their veto over all but strictly fiscal policy.
In support of this, research and teaching in political economy should be funded by public institutions governed by clear regulatory criteria, among which the foremost is pluralism, the economic equivalent of the medical right to a second opinion. Practitioners, researchers, teachers and policymakers must recognise that economic questions have more than one answer. They must make verifiably clear the full range of alternative hypotheses relevant to the policy consequences of their work, including their social effects and risks. If they do not, they should be stripped of accreditation and left to peddle their wares where they will without any pretence of public approval.
The purpose of such a reform is, in summary, to deprive a self-appointed confraternity of the monopoly of theory and policy which creates its power to do harm.
I have come to these radical conclusions over a long time: I helped found the UK-based Association for Heterodox Economics[1] in 1998 and later became its second honorary life vice-president, treading in the footsteps of Victoria Chick, the subject’s most formidable intellect. I did what I could to support her and Fred Lee, the profession’s most indomitable fighter, through thirty years of struggle to bring our contemporaries to their senses and impose upon them the public control their disastrous practices called for. I was honoured also to take part in the pioneering explorations of George DeMartino and Deirdre McCloskey[2] into the basis for ethical economics.
As a practitioner, having created and then served in the Economics Intelligence Unit of the Mayor of London under Ken Livingstone and then Boris Johnson during the searing experience of the 2008 financial crash, I finally concluded Economics was beyond reform.
Let me be clear what these drastic propositions mean. I distinguish between the institution of Economics, which I will spell with an upper-case ‘E’, and the theory of political economy, which can and should provide ordinary citizens with the knowledge they need to decide between the policies their governments propose to them. Economics does not do this, because it was constructed to avoid the subversive conclusions which political economy leads to. This has rendered it, by its own admission, incapable of understanding Capital, the foundation on which the modern world economic and political system rests.
The resulting policies have been uniformly disastrous. Economics is complicit in every avoidable catastrophe of modern times: intolerable mass poverty in the midst of plenty; a systematic long-term decline in the productive capacity of the rich nations accompanied by rampant and growing inequality between them and the poor nations; ruinous financial crashes driven by speculative ‘get rich quick’ frenzies; systematic mass unemployment; and the reduction of social care from a right of all to the privilege of a few. These are crowned by a dysfunctional and unjust world trading system, held together by the lust of the global North’s oligarchs to preserve their monopoly of technology and finance by corrupting their governments into simple instruments for giving them everything they ask for.
Inevitably, all commitments to the enlightenment goals of rational discussion between people and respectful negotiation between nations, or the ideals of the sovereignty of nations and the material and political rights of human beings, have been discarded, as War becomes the sole agency left to élites who instead of controlling Capital, have foolishly placed it in charge of their governments. These same governments have turned on the very nations which have created a window of hope for humanity by prioritising common prosperity over selfish private gain. For this purpose they invoke, and strive to impose, the very same failed theories and policies that are the source of their own ruin.
According to the doctrines which Economics promotes—in particular its theories of growth, trade and finance—and more generally the foundation on which these rest, none of these should have happened. World capitalism should have brought steady progress toward universal prosperity, equality, liberty and even peace. The survival of pockets of poverty, occasional famines, and the sad condition of two-thirds of the world’s population can be dismissed as arising either because backward countries have yet to catch up with the advanced societies of the global North, or because governments still wilfully persist in interfering in the free operation of the market within and between nations.
If this were true, the onset of neoliberalism in the 1970s should have ushered in an era of growth, catch-up, and prosperity or at the very least, improved on the managed capitalism of the postwar years. The facts show the opposite: growth in the global North systematically and without any exceptions, has fallen since then.[3] World inequality between the global North and the global South, with the important exception of socialist China, doubled between 1974 and 2000 when the free-market frenzy reached its height with the destruction of the USSR.[4]
The reaction of Economics to these straightforward facts is, not to put to fine a point on it, to pretend they have not happened.
This because blindness to reality is written into its script. The standard 20th Century textbook, written by Paul Samuelson who almost single-handedly defined today’s orthodoxy, explained to the generation of students which have become today’s practitioners, that
The United States has experienced numerous cyclical ups and downs. At the same time, we have avoided depressions—the prolonged, cumulative slumps like those of the 1870s, 1890s, or 1930s. What has changed in the last 50 years? Primarily, developments in macroeconomics now allow governments to take monetary and fiscal steps to prevent recessions from snowballing into a persistent and profound slump. If Marxists wait for capitalism to collapse in a final cataclysmic crisis, they wait in vain. The wild business cycle that ravaged mature capitalism during its early years has been tamed.[5]
What better obituary could Economics deserve?
These failures affect us all; yet their roots are economic; they lie in a refusal to control the owners of Capital. Therefore, we will only finally put an end to them when all citizens take responsibility for so doing. But this means in turn that they have both the right and the duty, to understand how. Just like literacy and numeracy in the 19th Century, understanding what Capital does, and in consequence grasping its relation to our markets and our states, should be a general requirement of the 21st.
Instead, Economics has arrogated to itself a monopoly over both theory and policy. Its theories, research methods, practices and political recommendations are managed by a tight-knit network of Financiers, Government Treasury Departments, and Academia, which has evolved into a system for cleansing the advice which economists are permitted to offer of any threat to the owners of Capital. It is both hierarchical and repressive; its harshness towards dissenters is legend, provoking regular protests both from within its ranks and from outside. For all the world like a latter-day Church of the Immaculate Market, it shrouds its dogmas in quasi-magical mathematical incantations, shrugging off repeated and accurate public criticism as the foolish denialism of the uninitiated.
Yet experience shows it has become incapable of producing, or even tolerating, viable theories or beneficial policies. Despite the enormous resources at its command, the outcome of all its efforts persistently conflict with everything that ordinary people see in the real world. Worse still its theories, judged by the facts which it, itself, produces and publicises, predict the opposite of what has actually happened.
If it were a science, it would long ago have discarded its discredited theories of trade, of growth, finance and not least, capital. It does not do so because its purpose is no longer scientific enquiry; its function is to rationalise those policies which its masters deem acceptable. This is why, when all others can see they have no clothes, our Emperors seek to shroud their nakedness in scraps of uncut cloth they recycle from their tame Economists.
To cite Cromwell, Economics has sat too long for all the good it does. It is time for new institutions which can do better. However, such institutions will not arise spontaneously, any more than socialism will simply flower by the grace of liberal enlightenment. The precondition for any such reform to succeed is that ordinary people should struggle for it. One of their many tasks is, therefore, to simply understand what capitalists really do. They must, therefore, cease leaving this knowledge to self-appointed experts, and set out to acquire it themselves. This is not just a right. It is a duty.
This is not a pipedream; the basis for its realisation was already laid by the work of Karl Marx, his predecessors and comrades, and by the wartime discoveries in political economy that were popularised through the writings of John Maynard Keynes. Of course, nobody could claim that these writers are prophets. Neither Marx nor Keynes is a modern Nostradamus. The point, however, as we will show in subsequent posts, is that Economics was constructed precisely in order to avoid the politically and socially dangerous conclusions that followed from their discoveries. The rediscovery of their essential findings, together with those of their colleagues and comrades who amplified and broadened their work, is therefore a vital precondition for overcoming the damage that Economics has done.
In this respect, the project rests on a second foundation which consists of the critical literature that emerged in response to the repeated failures of Economics, first in the reaction against Free Market Economics in the 1870s, and more recently in the rapid escalation in critical, heterodox and pluralist studies, including repeated student revolts,[6] which has involved a wide network of critics within the profession, much of whose work is accessible to the non-specialist.
However, this battle can no longer be left to a beleaguered minority of dissenters, and cannot be completed while the critics, however well-intentioned, remain imprisoned in both the jargon and the basic doctrines imposed upon them by their intellectual jailers. The time has come for all those battling against all the malign practices of capital to dismantle the ideological foundation on which Economics rests, by grappling with what it really says and does.
I will cover these issues in a series of posts tagged ‘Economics is Broken’. Readers can also refer to longer works on academia.edu[7] and (eventually) to a forthcoming book. I invite all interested to get in touch.
The project, and the book, will set out to answer the question that passes through everyone’s mind at one time or another: why and how do economists cause so much damage?
[1] Association for Heterodox Economics
[2] DeMartino, George. 2011. The Economist’s Oath. Oxford: OUP; DeMartino, G, and D. McCloskey. 2016. The Oxford Handbook of Professional Economic Ethics. Oxford: OUP;
[3] Freeman, A. 2023. ‘The sixty-year downward trend of economic growth in the industrialised countries of the world’. The Japanese Political Economy special issue on Japan’s Secular Stagnation and Beyond (Vol. 47-4, 2021).
[4] Freeman, A. 2024. ‘The Geopolitical Economy of International Inequality’, Development and Change, Volume 55, Issue 1, Pages 3-37
[5] Samuelson, Paul A., and William D. Nordhaus. 1992 Economics McGraw-Hill Education. pp371-372 (Latest edition was the 20th, 2024, though earlier editions are widely used. An interesting PhD project would be to find out in which edition the paragraph was dropped, and what explanation, if any, was offered for so doing, or for the errors that led to the original).
[6] See, for example, the Manchester post-Crash Report, Rethinking Economics and the World Economic Association (www.worldeconomicsassociation.org)
Comments
Nothing yet. Say the first thing.
Sign in to join the conversation.