Category: Neoliberalism

News From George Soros’ Berlin Conference – Economists Discover Human Beings!

by Lynn Parramore
 
Could economists be leaving behind their mechanistic paradise for the messy, unpredictable human world?

  
Economists are peculiar creatures. Last week a large posse of them descended on Berlin for the third annual conference of the Institute for New Economic Thinking (INET), a think-tank co-founded by investor and philanthropist George Soros in 2009 in the wake of the global financial crisis.

As I roamed through the various sessions and gatherings, pointy-headed folk squinted at me and rattled off facts and figures that gave them the sort of thrill I get from seeing spring flowers in bloom. The field of economics is known for attracting Asperger’s-spectrum wonks better at formulating financial models than the flow of human interaction. But if the Berlin forum is any indication, the field is now fitfully reorienting itself: it wants to understand those fascinating and often irrational beings known as “people.”

Tellingly, the title of the conference was inspired by Milton. Not Milton Friedman, but John Milton: “Paradigm Lost: Rethinking Economics and Politics.” Intriguingly, the brochure opened with a passage from Book XII of Paradise Lost describing Adam and Eve’s expulsion from Eden — the moment when they look back wistfully on their former paradise, but then, teary-eyed, forge ahead, knowing that “the world was all before them.”

Early on in the program, economist Rob Johnson, INET’s executive director, pointed out that the old economic paradigm, so beautiful in its mathematical modeling, was destructively narrow and dogmatic. Its journals were like so many temples — if you didn’t follow the prescribed religion, you were out on your ear. The new economics would have to be broad, interdisciplinary and open to disagreement. And it would no longer be having a conversation solely with itself. Johnson announced his conviction that the new economics must be firmly grounded in the humanities.

Wow. At a time when undergraduates increasingly choose business majors and obtaining an English or history degree is widely considered a cultural affront, that was exciting news. Such a refocusing could certainly help economists become better able to describe reality, and just as importantly, consider the needs of human beings in their prescriptions.

Back in the late ’90s, when I was studying for a doctorate in English at NYU, my friend at the Wharton School of Business used to tell me about his lessons in rational behavior, perfect information and the pure motivation of self-interest. When I noted that a single exposure to Shakespeare or a page out of Freud’s oeuvre could relieve him of such fantasies, he got defensive and complained that all we did in the English department was sit around and read fiction. “Well,” I shot back, “That’s what you seem to be doing. Only you don’t call it that.”

I worried a lot that he and his colleagues, ignorant of human psychology and alarmingly shallow in their understanding of traditional Western values and ethics, would leave business school and go on to run large companies. 

I had reason to fear: They went on to help blow up the global economy.

In the humanities, we had our postmodern excesses, but they didn’t tend to wreak havoc on the word’s most vulnerable people. But free-market economics, in the words of INET panelist Paul Davidson, was a “weapon of math destruction.”

In his address to the conference, George Soros made it clear that economic obtuseness had helped produce the euro crisis, and that the failure was more profound then generally realized. Economics, he noted, had tried hard to imitate Newtonian physics and set itself on establishing timeless laws for reality. But, Soros insisted, it’s really a social science, and it was high time practitioners stopped pretending otherwise. (I would urge scientists to realize the same thing, but that’s a matter for another piece.) The famous financier emphasized that economic activity is based on the behavior of human beings who act on imperfect information and are driven by a wide variety of motives. They think. They are, by turns, rational, silly and euphoric. They have a will of their own. And they are definitely not inanimate objects whose movements can be neatly summed up in an equation.

If you consider economics this way, then you have to realize that markets, as Soros pointed out, are just as likely to produce horrifically damaging bubbles as they are to create equilibrium. So you’d better damn well understand that when you’re thinking about regulation and political frameworks like the eurozone. If the Europeans can’t wake up to this, Soros warned, they can pretty much kiss Europe goodbye.

I was struck by the idea that just as religious elites had once created an elaborate system based on “Divine Will” to justify their power and oppression, the obstinate free-market economists had created their own supernatural entities, referred to as “The Market” and “The Invisible Hand” in order to pretend that their policies were inevitable and natural. Was a Reformation now in the works?

Throughout the week, I heard economists (certainly not all, but many) talking as if human beings mattered. Chinese economist Jiahua Pan mentioned the need for an ethical foundation and ecological principles. James K. Galbraith discussed the human costs of inequality. Arjun Jayadev of the University of Massachusetts, Boston, talked about why people needed debt forgiveness. Speeches centered as often on what humans think and feel as they did on what financial models could predict. There were lectures on neuroscience and social values.

Some will say this is all just talk. You don’t get an insurrectionary adrenaline rush at an economic conference the way you do at an Occupy Wall Street protest. But such talk, particularly among those who teach tomorrow’s leaders and act as policy advisers at high levels of government, is critical to any chance of changing the paradigm. Do we want a society that is people-driven, rather than profit-driven? Then Johnson is right: economics must reacquaint itself with the humanities. Do we want an economy that serves society rather than a society that serves the economy? Then we have to keep insisting on the social nature of economics.

There’s reason to think that the effort coming from INET will be long-term and influential. During the week, the announcement came of a $25 million gift from William Janeway, senior advisor at Warburg Pincus and INET governing board member, and his wife, Weslie Janeway. Along with that donation, the governing board of INET has launched a $75 million fundraising campaign, and Soros, in response, has pledged $50 million. Conference attendees also learned of a joint project (INET@Oxford) with the Martin School at Oxford University focused on visionary interdisciplinary approaches to economics, equity and curriculum reform.

After half a century of free-market orthodoxy, the field of economics is not going to produce a new paradigm overnight. As a woman and an English major, I can be forgiven for hoping that more women and more English majors will be joining the conversation. The need for diversity is strong, and the call for a vigorous examination of values urgent. But there’s a whiff of change in the air, and you could feel its electricity in Berlin. The economists were beginning the painful and exciting process of leaving the old fantasies behind.

And the world was all before them.

Lynn Parramore is an AlterNet contributing editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of ‘Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.’ Follow her on Twitter @LynnParramore.

The Precariat – The new dangerous class

by Guy Standing

For the first time in history, the mainstream left has no progressive agenda. It has forgotten a basic principle. Every progressive political movement has been built on the anger, needs and aspirations of the emerging major class. Today that class is the precariat.

So far, the precariat in Europe has been mostly engaged in EuroMayDay parades and loosely organised protests. But this is changing rapidly, as events in Spain and Greece are showing, following on the precariat-led uprisings in the middle-east. Remember that welfare states were built only when the working class mobilised through collective action to demand the relevant policies and institutions. The precariat is busy defining its demands.

The precariat has emerged from the liberalisation that underpinned globalisation. Politicians should beware. It is a new dangerous class, not yet what Karl Marx would have described as a class-for-itself, but a class-in-the-making, internally divided into angry and bitter factions.

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Republican liberty and the future of the centre-left

by Michael Lind

The dominant tradition in popular politics is infused with the values of republican liberalism.  The contemporary centre-left, influenced by a mix of residual Marxism and technocratic progressivism, has ceded this ground to conservatives and libertarians, losing elections and popular appeal in the process. A twenty-first century centre-left needs to reclaim the tradition of republican liberty as its own.

The centre-left in Europe and North America is in a state of political collapse and intellectual exhaustion. In recent elections the Labour party lost control of the British government to a centre-right coalition and in the US the Democrats lost the House of Representatives to a resurgent right.  Parties of the right already ruled Germany, France and Italy.  Even Sweden, long the flagship of social democracy, is now governed by conservatives.

The crumbling of social democratic parties on both sides of the Atlantic has much deeper causes than poor leadership or the voter discontent produced by the Great Recession.  It is the culmination of trends going back to the unraveling of postwar social democratic settlements in the 1970s. In Europe and America alike, the industrial working class that supported midcentury social democracy has contracted, as a result of the offshoring of industry, productivity growth and the shift toward services in employment. When the postwar boom came to an end in the 1970s, Keynesian full employment and demand management policies appeared to be discredited. Ronald Reagan and Margaret Thatcher and their counterparts in other countries led a counter-revolution which failed to shrink the size of the state but succeeded in deregulating the economy and marginalising social democrats.

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Is there a liberalism beyond social democracy?

by Colin Crouch
 
The liberal concern with challenging concentrated authority makes it a natural partner for social democrats; attempts to achieve this marriage have fallen short when economic power is neglected, but the unparalleled influence of corporate elites today makes this alliance more urgent than ever.

Traditional social democracy became doomed during the 1980s, and needed a new charge of liberalism to move it forward. In trying to do this while retaining the form of the mass party seeking to win national elections in a global economy, the Third Way movement was able to produce only a liberalism that fell short of social democracy’s fundamental values. Can there be a liberalism that “goes beyond” rather than “falls short” of social democracy? And can it be based on mass parties?

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Cut to the chase: 15 political truths for the centre-left

by Andrés Velasco & Francisco Diaz

The world has just experienced the biggest financial crisis since the Great Depression. Over 80 million jobs were lost worldwide. The United Nations estimates that as many as 145 million more people are living in poverty. Scores of countries have emerged from the crisis with weakened financial systems and huge public debts. These nations may be condemned to slow growth and insufficient job creation for years to come.

Market fundamentalism, weak regulation and misplaced incentives for excessive risk-taking helped cause the crisis. Yet in the aftermath of the meltdown, reforms have been few and far between. Local financial systems remain prone to speculative bubbles and the world economy remains vastly unbalanced between surplus countries that earn far more than they consume and deficit countries that consume far more than they earn.

A crisis of global capitalism might have been an opportunity for the centre-left. Yet social democratic parties have taken more blame for the occurrence of this crisis than credit for their efforts to control it and prevent the next crisis from happening. Electorates in many countries have been swinging to the far right as an illiberal, inward-looking mood becomes a by-product of the crisis.

This all poses a tremendous challenge for the centre-left. The challenge, first of all, is to extract the right lessons from the crisis, and then to translate these lessons into a progressive political action plan. Here are 15 ideas to help leaders in that effort.

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