A nearly perfect spaceship wouldn´t take you to the Moon either

In recent casual conversations with a few acquaintances of mine, I´ve been encountered with several economic arguments that could be ascribed to the Neoliberal school of thought. Nothing wrong with that, of course. In fact, I reckon that by now Neoliberalism has become the main school of thought in economics, and the policies adopted in Europe in response to the current economic crisis very much confirm that Neoliberalism has reached a golden age. I am not entirely sure about whether socioeconomic rights and a neoliberal economic model can coexist. Yet, my main concern with the late Nobel laureate Milton Friedman and his colleagues at the Chicago School is the way they hide their ideology behind a blanket of allegedly undisputable facts, as if economics was a natural science, like physics and chemistry, and not a social science, more like history and political theory.

The arguments I heard from my acquaintances seemed to be read out loud from a textbook. In social science, it´s perfectly fine to learn and copy from published authors (that´s what textbooks are for, actually), but intellectual honesty demands acknowledging the sources, as well as the limitations and the inherently disputable nature of the arguments.

In her majestic exposé of The Shock Doctrine, Naomi Klein summarises as follows the sacred perfection of economy in the eyes of the Chicago boys:

The core of such sacred Chicago teachings was that the economic forces of supply, demand, inflation and unemployment were like the forces of nature, fixed and unchanging. In the truly free market imagined in Chicago classes and texts, these forces existed in perfect equilibrium, supply communicating with demand the way the moon pulls the tides. If economies suffered from high inflation, it was, according to Friedman’s strict theory of monetarism, invariably because misguided policy makers had allowed too much money to enter the system, rather than letting the market find its balance. Just as ecosystems self-regulate, keeping themselves in balance, the market, left to its own devices, would create just the right number of products at precisely the right prices, produced by workers at just the right wages to buy those products –an Eden of plentiful employment, boundless creativity and zero inflation (2007: 50).

Those in love with the Neoliberal discourse tend to make their points as if they were explaining Newton’s theory of gravitation in a classroom. The problem is that real life is far more complicated than the theoretically perfect graphs and charts that can be found in economists’ textbooks. Their arguments are dependent upon assumptions that often do not pass the reality test. While complete information is one of the prerequisites of an efficient and perfectly competitive market, in real life information is asymmetrical: not all economic agents in the market have access to the same information. Moreover, economic logic doesn´t seem to understand that not all agents experience ups and downs in the same fashion. A recession is two very different things for international investors and for people living below the poverty line. One step right in the X axis doesn´t correspond easily with one step down in the Y axis when we try to represent the correlation between labour income and international trade.

Some neoliberals would acknowledge that reality would never match perfectly logical theory. However, as long as the government doesn´t interfere with the economy, they would say, the closer real life gets to their graphs, the better off we all will be. The underlying assumption is this: Perfection is unattainable, but an economic program meant to achieve near perfection (measured against the light of their graphs) is definitely better than any other economic policy. However, this understanding is not exempt of problems. I´ll put it this way: Engineers may be able to think of the exact structure and combination of materials needed to design a spaceship capable of travelling to Mars. However, this theoretical vehicle may not yet be possibly constructed in real life. A perfect machine may take you to Mars, but a nearly perfect spaceship wouldn´t take you to the Moon either. It would simply blast in the stratosphere. Due to different travel requirements and environmental conditions, another type of (nearly) perfect machine is needed in order to reach the Moon. A perfectly free market can make perfect economic sense on paper. However, a nearly perfect free market can ruin the economy of a country and the lives of thousands of families. As rightly pointed out by Jan L. A. van de Snepscheut, in theory, there is no difference between theory and practice, but, in practice, there is.

Economy is a social science, not a natural science. Phrases such as “a minimum wage is a bad thing because it makes the market inefficient” are arguments, not facts. As such, they are questionable, disputable by counterarguments constructed under different economic models or premises. In itself, Neoliberalism is not a threat as long as it remains in libraries and academic departments. The problem arises when policy makers apply its pseudo-scientific rules, putting democracy and human rights at risk as if there was no alternative.

 

Koldo Casla

@koldo_casla

This entry was posted in Human Rights and Social Justice, In ENGLISH and tagged , , , . Bookmark the permalink.

4 Responses to A nearly perfect spaceship wouldn´t take you to the Moon either

  1. Johannes says:

    Rodrik also once referred to Ann Krügers famous presentation: “Meant Well, Tried Little, Failed Much: Policy Reforms in Emerging Market Economies” http://www.imf.org/external/np/speeches/2004/032304a.htm

    Basically developing countries tried to follow the neoliberal advice and it failed big time. Ann Krüger concluded they haven’t tried hard enough. Ultimately she asks the developing countries to build the perfect spaceship right away… Can’t be that difficult to do for developing countries, right?

    • 山中 says:

      No only that. She is assuming the act of building a spaceship would carry you into space, and if you are still earth-bound that’s because you haven’t finished building that perfect spaceship yet. In essence, you will have to spend eternity building spaceship(s) and get nowhere.

  2. DRG says:

    Another thing to consider is that those neo-libeals are only liberal in theory, in practice what they are is ideologically against public and equal welfare state systems. Take for instance conservative party in Spain, they want deregulate labour relations..but have they done anything to deregulate for instance all the bureaucracy and notary paper work to acquire and sell property? Have they done anything to let the banks enjoy the wonders of the free market and fund-raise by themselves their bail-out? Not really, they have turn to the state (the supreme oppressor). They have as it were invoked a principle (not very liberal) by which debts are socialized and gains are privatized.
    The same can be seen in the education sector. And soon we will see how private hospitals only accept those clients with which they could make money while those patients that cost a lot of money (chronic diseases etc) are left to public system. Data is already available to insurance companies to establish this discrimination. Again privatizing the benefit and socializing the debts.

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