THE ASIAN AFFAIRS PUBLISHER'S MOOD
SCIENCE AND THE LAW OF THE MARKET (issue nº 06)
It is generally assumed that in economics there are some immutable laws based on facts and conclusions drawn from facts.
Take for example globalization which is the concept of the law of the market without border. Today, it is widely accepted that no one should interfere with it. Such attitude is rooted in the belief that only a global market, and no other means, can determine what is a just price. In other words, with the triumph of the capitalism ideology, the greatest dialectic of economic life, that between morality and price has been solved, once and for all.
On closer analysis, it is quite clear that a little brainwashing goes a long way into such belief. Economics knows no-bare facts at all, and no laws. Therefore, why would indeed the law of the market rule the world for the better? After all, past history of economics does not give any reason to believe that it does except in the mind of the winner.
A just price as Thomas of Aquina observed a long time ago, is a highly subjective matter, even more so today, when money, that was for centuries a more or less neutral intermediary facilitating the exchange process, has lost that virtue. The naked truth is that “the market”, whatever that is, has no sense, no more than a alarm clock has any sense of the time. Therefore, to entrust with a moral quality an instrument that is basically blind is at best foolish, at worse criminal.
Yet, this is what we do, with all the more devotion than we are absolutely frightened by its vagaries. Obviously the misadventure of the great crash of 1929 are forgotten. We believe in our newly acquired gimmicks, our sophisticated computers and their enormous storage capacity that reduce the world to a set of figures and forget that statistics is not a science but an art employed to sensationalize, inflate, confuse and oversimplify.
Although it is hard to reconcile rational thinking with blind faith, we are told time and time again that we are smarter than anybody else before our time, that is if we discount a few blunders here and there such as the abysmal poverty of the majority of the human kind living in Africa, the recent Asian crisis and many other black spots on the world map.
At the end of this millennium, the belief in science has never been so intense. Whether it is to clone a sheep, to convert USD 1000 billion into a large and profitable trade in few seconds, or to run a diverse and complex human society, the political establishment of the day, from Europe to United States, still believes that science as the answer and that the law of the market without border is part of the answer. Just few days ago, we were again told to the digital divide was the next problem to solve, as if technology was all that matter.
Yet everything, from political failures to economic disasters we have witnessed lately suggest that more science, more bureaucracies, more technocracies, more statistics are not the way to go to run our societies.
There is here a large paradox. Man, a supposedly great thinker, is well aware of all these failures, yet he is absolutely incapable of dealing with them. And when it comes to fixing the problems of the human society, he trusts once again laws that have never existed except in his mind as if they were truly natural laws.
Never mind that they contradict the facts. We lived for a very long time with the sun orbiting around the earth, without questioning such a strange thing. Never mind that, in economics, we have a sense of déjà vu. Never mind that we were told in 1929 that the “Exchange is a market place where prices reflect the basic law of supply and demand” to learn a few months later that it was a fallacy.
Maybe in non-industrialized countries, some governments got their mathematics wrong, maybe some resort to what the well off considers dubious methods. But the so-called natural laws of economics, all combined into one mechanism, that of the market, have never ever permitted a poor country to become rich. If there is one great principle to remember, it is precisely that one.
The United States are a living proof of its validity. This paragon of capitalism only achieved its current economic status, because it flouted during one hundred and fifty years each and every recognized economic rules of the London establishment. And to theses days, although preaching the contrary, it continues to do so. Take the monopoly rules. Monopolies are bad. But when? Could we say that Carneggie, Rockefeller or Bill Gates hampered the development of the United States economy? Certainly not. Take the banking rules. To print money is bad for your health, or so it seems, according to the textbooks of the IMF and the World Bank. Yet, in the mid nineteenth century, nearly every citizen of the Middle West of the United States regarded it his constitutional right to print money of one sort or another, so much so that it took a very long time to agree on a Central Bank with any kind of authority.
The orthodox thinkers, today from some international bureaucracies such as IMF, are adamant. To print money was very bad economics. Yet, the Middle West became a source of wealth and a competitor because the settlers did not read and could not care less. They had no established wealth to protect. Actually, they had nothing except natural resources, and therefore they were considered a bad risk, as bad as many countries today.
We are left wondering what exactly is the validity of the rules? When to they apply and what is their purpose? Is it really to create wealth or to protect wealth?
And then, when economics fail us, comes the moral argument. Every Asian country in recession in 1998 was a victim of its own inefficiency, misguided regulations, misconceived investments and hopelessly corrupted. Everything, we were told, was riddled with waste, fraud and abuse of power.
If so, Asian countries are in good companies. According to Stefan Halper, a former White House and US State Department official, the United Nations, the International Monetary Fund and the World Bank, not to mention the International Olympic Committee and the industrialized countries, have the same characteristics.
Our political elite and the politically correct are so confused that they believe that individual greed which is the underlying force of the law of the market can hold the world together. If that story is a powerful one, it is however very short-sighted as it will not hold a society for ever. And with no social responsibilities, political leaders are bound to cater to their personal micro agendas and it means to rely on any single-issue special interest group they fancy. Such group or groups, clearly not bound by an attachment to the community but to their own narrow agenda, are already getting power far out of proportion to their numbers, (look at the front page of the newspapers to see how it is done)
Political leaders also preach that globalization is conducive to development, and development conducive to democracy. Again we tend to grant moral attributes to mechanisms that do not have any other purpose than to postulate very narrow goals, an individual interest in maximizing personal consumption for globalization, and to organize how one takes or leaves power for democracy.
Democracy in a global world is likely to become a statistical charade. A quarter of the popular vote is all that is required to be elected President of the United States, or Prime Minister of Great Britain. The process of democracy is already in the industrialized nations no more that some sort of algorithmic procedure that divorce the final outcome from the individuals and their inner emotions.
To have a formal mathematical system which no further judgment has to be made to organize power is tempting for people of wealth. Not only it takes the human factor out of the equation (electors are prone to be unreliable), but it also takes responsible behavior out of it. Hence the success of technocracy and bureaucracy. They thwart easily any attempt at accountability with the added quality of being great scapegoats. That is why leaders of already industrialized nations are so attracted to them.
Although the world is sick of systems, political leaders of the West still love them and want to create a new one: the global system. They believe in science as a way of solving man’s quest for happiness. Very much like Lenin adhered to a Marxist view of the world, they adhere today to the view that human kind’s possibilities are, provided they combine with capitalism, unlimited.
Unfortunately, the human factor is very much at the centre of everything and our knowledge of it very far from perfect. As for economics, we have yet to agree on what is its very purpose. With humility, we have to admit that if true science helps our understanding of the world, economics is not a science. Thus we have little understanding of the way globalization may help reduce inequality. But since its very tenet is a survival-of-the-fittest rule, it is doubtful it will. If anything, it will just raise the stake and one cannot escape the feeling that the contemporary world needs more than ever a conscience.