A retrospective of this year’s postings would highlight some of the flaws in accepted economic theory. Many have been flagged up elsewhere: economic theory is not, and never has been, without its severe and knowledgeable critics. However, there are a couple of errors which are fundamental to the study of economics which are not often mentioned elsewhere.
The Revolt was precipitated by the government’s heavy-handed attempts to increase taxes and cut public services, in order to repay the debt which had been incurred by the speculative losses of the bankers, who continued to pay themselves massive bonuses. The government actions affected some of the poor more than others and the wealthy, including the bankers, not at all.
So far as the recent American elections were concerned, Tomasky may have been right that the free market shareholder primacy ideology was the only big coherent picture then on offer; more socially oriented policies lacked coherence. But the next big theme is in sight and may well shift free market shareholder primacy, with its excesses of greed and self-interest, into the long grass of history. The straws in the wind which suggest such a change are many and various: population growth, resource depletion especially water and oil, climate change, pollution, growing inequality between rich and poor, and above all, the ever widening recognition by ordinary people that finite earth and self-interest maximising man are on course for a massive and decidedly unpleasant collision.
In a recent article in The New York Review of Books, Michael Tomasky suggested the lack of any alternative big theme gave the free marketeers a head start in shaping and continuing to dominate the United States economy. The free market big theme may have been planted by Adam Smith, but it developed on the open prairies of North America where land was the free resource – confirmed by the Homestead Acts – which drove the early development of the US economy. So the big theme was not just markets freed from government interference and control, but personal freedom to claim a bit of America and the right to defend it with guns to fight off its previous occupants, the native Americans. That tradition gave primacy to ownership. When Friedman declared that corporate officials had no social responsibility other than to make as much money as possible for shareholders, it was hardly a shot out of the blue, but the confirmation of a long tradition.
The takeover of British confectioner Cadbury, with its long and honourable history in British industry, from its Quaker origins to its death throes earlier this year, has been featured as the main topic of two posts on this site, and mentioned in passing on five others. It is a compulsive story which celebrates the satisfaction of greed, the naïve stupidity of ideologically driven government, the destruction of Britain’s real economy and its real jobs, and the fatalistic acceptance of all this by the population at large.