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The Blind Spots of the Economy: Economic Theory in Crisis

"With the collapse of the planned socialist economies, the way seems clear for belief in the blessings of the market economy to breakthrough worldwide under the term globalization..In the past, countries and continents were conquered and subjugated by armies. Now corporations and coonglomerates conquer new markets worldwide..Belief in economic reason was long ago a new world religion. Only open systems are viable and capable of surviving." From the German
The Blind Spots of the Economy

Economic Theory in Crisis

By Bernd Senf

[This excerpt from Bernd Senf's Die Blinden Flecken der Okonomie, 2001 is translated from the German on the World Wide Web,  http://www.langelieder.de/lit-senf.html. Bernd Senf, born in 1944, has been a professor of economics at the Berlin economics academy since 1973. Among his books are: Political Economy of Capitalism (1976), The Programmed Mind - On the Social History of Data Processing (1981), The Fog around Money - The Interest Problematic, Monetary Systems and Economic Crises (1996) and The Rediscovery of the Living (1996).]

Table of Contents

Introduction: The Economy as a New World Religion
Francois Quesnay: The Economic Theory of the Physiocrats - an economic rescue of feudalism
Adam Smith: Middle class liberalism - The message of growing prosperity
The revolt of the middle class against feudal rule - Elements of classical theory - Light and shadows of the division of labor - Profit and loss: carrots and sticks - The classical ideas of functioning market mechanisms - Capitalism and impoverishment of workers
Karl Marx: The social crisis of capitalism and the shock of middle class society
The theory of alienation or estrangement - The historical genesis of capitalism: original accumulation - The surplus value theory - The blind spots in Marx
Menger Jevons and Walras: Neoclassicism - a new healed world of the economy
The ideological counterblow against Marxism - The neoclassical theory - Doubts regarding neoclassicism - From the economy to psychoanalysis: Freud and Reich - Healthy economy and sick persons - The emotional blindness of neoclassicism - The neoclassical blindness toward immanent crises
Silvio Gesell: The natural economic order - neither capitalism nor socialism - Gesell's criticism of Marx - The problematic of the interest system - The blindness of Gesell's theory toward nature
John Maynard Keynes: Worldwide economic crisis and the revolution of economic thinking - Keynes' theory - The Keynesian employment theory and policy - The blind spots of Keynesianism - Common interests and distinctions between Keynes and Gesell
Milton Friedman: The "monetarist counter-revolution" as pioneer of neoliberalism and globalization
Collapse of the Bretton-Woods system and inflation danger in the US - Monetarism: the "monetary drug detoxification" - Friedman's explanation of the worldwide economic crisis - Monetarism and the resurrection of liberalism - Monetarism and intensified conflicts

Dangers of Globalization - Critical Books
James Goldsmith: The Trap
Jeremy Rifkin: The End of Work
Hans-Peter Martin and Harald Schumann: The Globalization Trap
Maria Mies and Claudia von Werlhof: License to Plunder - The Multilateral Agreement on Investments (MAI)
Vivianne Forrester: The Terror of the Economy
George Soros: The Crisis of Global Capitalism


Excerpt

Introduction: the Economy as a New World Religion

Economic practical constraints determine broad areas of our individual and social life and set the framework for the creative possibilities of politics. Designs for social changes always have to pass the litmus test of "economic reason". The greater the expected profit, the greater is the chance of realization in the market economy. On the other hand, whatever brings or threatens losses is dependent on private or public support and has far more problems - particularly in times when public funds become scarce. Event he chances of political parties in democratic elections depend substantially on voters crediting them with economic competence.

Nearly everything that doesn't survive the litmus test of economic reason is marginalized and excluded as outdated, unrealistic or utopian without an independent right to exist in our society. The "laws of the market" have expanded in their operation for centuries beyond Europe through long-distance trade, colonialism and development of the world market. Still there were always large parts of the earth that were not covered by these laws or resisted them. This was true for the socialist systems where no viable alternative developed across decades and which recently collapsed (with a few exceptions) and also for societies and life forms largely removed from our view and our consciousness. In earlier times, these societies represented the foundation of existence and human life: the self-supporting communities and so-called "subsistence economies".

With the collapse of the planned socialist economies, the way seems clear for belief in the blessings of the market economy to breakthrough worldwide under the term "globalization". Those parts of the world entirely or largely untouched by the laws of the market become smaller and smaller. In the past, countries and continents were conquered and subjugated by armies. Now corporations and conglomerates conquer new markets worldwide. These processes have developed over centuries. For centuries, economics as a discipline has described, legitimated, propelled and discussed these processes. Economics has contributed to shaping and legitimating economic reality and transforming the world one way or another.

A few people are aware of the share of economics in these transformation processes. For most people, it is much too impenetrable to be understood. While they submit on one side to the laws of the market and their consequences, most people trust those who formulated or legitimated these laws and the enforcing authorities. All this happens to the best interests of everyone, it is explained. Economists have a technical term for this. They speak of an "optimal allocation of resources" and mean the best conceivable use of resources in the sense of the optimum satisfaction of human needs.

Belief in economic reason was long ago a new world religion after the old religions - in this part of the world in any case - lost persuasiveness and acceptance more and more. This new world religion is not preached in the churches but in the universities and advanced technical colleges. The quintessence of this faith was long ago infused in the textbooks, mass media and thought and conduct of politicians and unionists. As everyone knows, whoever violates the laws of the market or opposes them has to fear the worst. Punishment follows on the heels on earth, not first in the world to come. The business goes bankrupt, the political party loses the election, the unions lose their members and the individual wage-earner or researcher loses his or her job - except for a few niches where deviating thought and behavior is still endured as fool's license.

(... )

Within economics, passionate religious battles occurred again and again across the centuries. Main currents coalesced. One gained the upperhand one time and another at another time. "Heretical" secondary currents were more or less excluded. That they saw out of one eye and were blind in the other seemed characteristic in the past for the different schools of the economy. In other words, their perspective on reality was more or less blurred - in different ways - through different blind spots.

(... )

Only open systems are viable and capable of surviving in the long term. Rigid systems perish in their own inflexibility. This is also true for conceptual systems, particularly when they claim - like the economy - to assure the foundations of life on this earth in the long term. "Optimal allocation of resources" can only mean creating conditions under which the creatures of this earth can grow in their developmental potential as much as possible and to their greatest blossom and maturation: men and whites, children and seniors, blacks and whites, reds and yellows, tribes and peoples, animals and plants, heaven and earth. In short, the living organism of the earth damaged more and more in the last centuries through industrial development and intensively in the last decades can recover in all its parts.

The creation of a salutary, nature-friendly economy is an essential and necessary presupposition for a global healing process and for a healing of the sick social organism of the industrial society. To make headway, we must become conscious of the blind spots of the economy and overcome them. Because the solution of this task can hardly be expected from those caught or captive in their own blindness, very normal persons, the non-experts often more open for new and expanded perspectives, are needed. This book is dir3ected to them. After thirty years of professional occupation with economics, I have completely lost trust in the self-healing powers of the market and in the self-healing powers of the economy as a science or research discipline.

Dangers of Globalization - Critical Books

The stormy development of the globalization of markets is accepted by large parts of society as an unavoidable natural phenomenon. Even unions congeal like the rabbit before the snake in view of the globalization tendencies and the intensified competition starting from the world market. They are paralyzed in their capacity for action or adjust to the seemingly inevitable pressures issuing from these developments.

When global financial streams sweep over whole countries and continents like hurricanes and cause floods in the financial markets while other parts of the world are plunged into financial drought catastrophes, this is the result of neoliberal policy enforced worldwide in the last 20 years, not a natural disaster. These floods and droughts are results of a dynamic of raging capitalism that unscrupulously lives out its immanent pressure for exponential growth of capital even if against the vital interests of people, nations and all nature. The "globalization of markets" is only a code name for the globalization of capital rule or the world rule of capital.

A public discussion and growing realization are necessary about the monstrousness and destructiveness of this process and about the very questionable role of the politics of most governments in the First, Second and Third worlds that make themselves accessories of capital interests and abandon more and more the social, ecological and cultural possibilities of politics.

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