Neoclassical economics is without scholarly integrity. It does not belong in universities. It certainly should not be the dominant source of policy advice to governments.
Most scholarly disciplines, be they history, physics or ecology, have a conception of appropriate standards by which the evidential basis of an argument is presented and the reasoning leading to conclusions is explained. The goal is to shed light on the workings of the world, and a criterion for a successful study is that observations or records are consistent with the study’s conclusions.
Neoclassical economics, the strand of economics that has dominated world policies for several decades, fails these criteria. Its conclusions are regularly contradicted by developments in the real world. A dominant criterion for a successful study is that its logic is internally consistent; it thus confuses mathematics with the science it claims to be. It is variously claimed that assumptions on which a theory is based don’t matter, or that the better the theory the more unrealistic the assumptions, or that all theories are wrong. It imagines its theories are useful approximations to reality, and fails to appreciate that more reasonable assumptions can lead to radically different conclusions, so its theories may be deeply misleading.
The right-wing ideology of the past 40 years has failed. It was always going to fail, because it is based on nonsense ideas, and because it harms people and the natural world. Australian politics has been dragged far to the right since 1980 because both major parties embraced an agenda promoted by right-wing radicals. Now the radical right’s grip on power is finally slipping. We are poised for a major political re-alignment.
Tony Blair, like a lot of mainstream people, is mystified why anyone would support Jeremy Corbyn for the leadership of the UK Labour Party, but then he’s mystified why anyone would think invading Iraq illegally based on a lie was stupid and wrong, so his views are not worth discussing.
The useful thing to discuss is whether it can be sensible to oppose austerity, and possibly some of the other ills of the modern world like rising inequality and social discord, and a feral and destructive financial system. Young Labourite Rosie Fletcher is right, this is not 1980, and a few things have become clearer since then, to those who will look.
For example, economic performance in the neoliberal era has never equalled the economic performance of the postwar mixed social-democratic economies.
[The recent TV series by George Megalogenis on how neoliberal market reforms allegedly saved Australia from the Global Financial Crisis caused me to read his 2012 book on the same theme, wondering if any evidence at all might be found for such an unlikely (but widely believed) claim. I have written my response into the book I’m working on, as follows.]
Despite their mediocrity and failure, and their lack of basis in human nature or defensible theory, the rightness of free competitive markets is taken almost completely for granted in mainstream discussion. That was true when neoliberalism was introduced in the 1980s and it remains true today. Back in the 1980s, I would look out for the basis for the praise being heaped on the latest reform. All I ever seemed to find was the circular reference back to free markets, which were self-evidently good. The mantra of the open, competitive economy is repeated a thousand times a day. Such immersion can lead one to doubt one’s reason and common sense, so it may be useful to search for any robust logic in the daily deluge.
[This article was published by the Canberra Times 14 January, p. 19, under the title “Carbon price, wealth creation are critical issues this year”.]
Prime Minister Julia Gillard has declared that 2011 will be a year of accomplishment for her Government. However many people are deeply frustrated that mainstream politics seems oblivious to new and dangerous issues, as global warming tightens its grip and the verities of old ideologies are found wanting. There is a huge chasm between politics as usual and the issues we really should be addressing.