Economics is much more than the study of money, writes Paul Mobbs. It is a belief system, and in its ‘mainstream’ incarnation, one that serves a very useful purpose – for those that reap the benefits. But as Brian Davey shows in his insightful new book, it’s letting the rest of us down: failing to deliver human wellbeing, while driving ecological calamity.
Brian Davey’s new book, Credo: Economic Beliefs in a World in Crisis, is an analysis of economic theory as if it were a system of religious belief.
It’s a timely book. The simplistic, perhaps ‘supernatural’ assumptions which underpin key parts of economic theory demand far more attention. It’s a debate we’ve failed to have as a society.
However, while simple to state, this analysis also throws up a major problem for the ‘ecological view’ of the world. If economics is a belief system, how can we persuade the devotees of economics – in particular politicians – with rational arguments when their outlook is based upon a self-justifying ‘faith’ in materialism?
In and of itself money is not ‘evil’. Money simply allows us to exchange goods more easily. As outlined in the more formally religious terms of The Bible, it is the “love of money” which is the “root of all evil”.
The pursuit of material wealth inevitably brings sorrow as we neglect the innate, non-material value of the people and living things around us – a point upon which many of the world’s other great religions tend to agree.
What’s wrong with economics? The way people actually behave
Be it evidential or moral, modern economics has a significant credibility deficit to deal with. To help us explore the substance of this issue, Brian Davey’s book takes us on a journey through the dominant theories within the history of economics.
In its 50 short, well-written chapters, the book contrasts economic theory with the growing body of evidence on the failure of economics. People, and the physical world upon which we rely, do not readily obey the simplistic assumptions of economic theory.
This is an important issue since these errors are arguably the basis of many of the seemingly intractable dilemmas which face society today – from economic inequality to climate change. As the world teeters on the brink of yet another global financial crisis, we need to take a long hard look at the theories which our leaders believe offer the salvation to our current difficulties.
Contrary to George Osborne’s Thatcherite exultation that there is no alternative, the clear implication of the continued pursuit of growth is escalating harm to the Earth’s biosphere, and both its human and non-human populations.
Within today’s spin-driven political debate such heretical ideas are likely to be dismissed. That’s because by questioning economic theory, we question the values and identity of the political class, and what they are there to do for us.
During the two decades following the neoliberal economists’ take-over of Western governments in the 1980s, many felt that the almost mystical terms of economics – such as derivatives, hedging, leverage, contangos, etc – were beyond the understanding of most ordinary people.
And without understanding those terms, irrespective of our gut feeling that there was something wrong, how could we challenge the political lobby those theories had put into power? In the end it took the financial crash of 2007/8 to demonstrate that those in charge of this system didn’t understand the complexity and risk of those practices either.
They pursued them as a matter of faith in the market and its processes, despite the apparent warning signs of their imminent failure. Tthose outside ‘orthodox’ economics could already see where the economy was heading in the longer-term.
Question is, did economists learn anything from that failure? Or, through austerity, have they once again committed us to their dogmatic belief system, unchanged by that experience?
Ecological damage is promoted by economic theory
Across the book, what we repeatedly see is that the ideological zeal of mainstream economists blinds them to the damaging impacts their theories promote.
The real value of Davey’s descriptive analysis is twofold: it dissects economics in a way that non-economists can understand; it also links the theories behind economics to the damaging practices which are driving the human ecological crisis today – from intensive / factory farming, to austerity, to the way we are made to allocate our personal time.
For example (as outlined in part four of the book), consider unconventional gas an oil extraction – or ‘fracking’, as it is more commonly labelled. Increasingly the evidence from field studies demonstrate that the risks from these processes are high, and in areas where unconventional oil and gas are extracted there is a high toll on public health and the environment.
However, through simple hubris or optimism bias, the political class has been convinced that ‘fracking’ is a solution to our economic woes – even though there is a paucity of verifiable evidence to demonstrate those claims, and it has already lost billions of investors money.
Economics is a reflection of power
Ultimately though, as within many custom or belief systems, what economics enshrines is a social order. One where a dominant minority are able to take a small quantity of wealth from each member of the majority in order to maintain their higher status.
This idea of economics as an exploitative mechanism is echoed in the cover picture of the book, Bosch’s The Conjurer – where a magician distracts the public with a sleight of hand trick so that they can be more easily robbed by his associate.
Again, in a world where we’re hitting the limits to human material growth, political models of well-being based upon wealth and consumption are damaging to human society in the long-term. The evidence that we’re heading for a longer-term failure is there, as was the case with the warning signs before the 2007 crash. The problem is that those in positions of power do not wish to see it.
It is this gap between physical reality and ‘supernatural’ belief, such as orthodox economists’ rejection of ecological limits, which is both driving today’s ecological crisis and preventing politicians from implementing effective solutions – most notably the climate crisis (outlined in part seven of the book).
‘Change’ requires a change in economic theory.
Economics is not all bad. In contrast to their orthodox colleagues, Ecological Economics and Degrowth theory presents a framework for economics which – like its classical ancestor – does internalise the biophysical realities of the world we live in.
Economics, in order to produce the greatest growth and financial returns, demands that we maximise productivity and economic efficiency. And in that pursuit, the value of human society and the environment is only an ‘externality’ – an economic factor in production, reduced to a monetary value, to be minimised and avoided at all costs.
When politicians promise economic growth and a stronger economy, they cannot guarantee that our personal well-being will improve. That’s because well-being cannot be economically valued as part of that process. To neoclassical economists we’re all idealised consuming units.
The world is on the brink on an ecological crisis, driven by a fossil-fuelled ‘bubble’ in the human system, enabled by economic and technological development. Problem is, economists and their political acolytes cannot acknowledge the signals of ecological overshoot. To do so would question their entire ideological outlook.
Within its exposition of economics as a quasi-religious theory, Brian Davey’s book helps us to understand why economic theory is driving us toward a global system failure – and why politics and economics are incapable of responding to the pressing ecological crisis which the pursuit of economic growth has spawned.
Contrary to the economic hubris of many world leaders, set alongside the reality of ecological limits humanity is not ‘too big to fail’.
First published at the Ecologist, with thanks.