Sociologist Fred Block believes it’s time to take economic fundamentalism down from its pedestal. In his article “Confronting Economic Fundamentalism” (published in 2007 in Socio-Economic Review), Block defines it as a “vastly exaggerated belief in the ability of self-regulating markets to solve problems” such as poverty, political instability and environmental degradation. It implies a stubborn observance of market-oriented principles (including liberalization, deregulation and privatization) that fails to consider differing historical and current experiences, changes in context or people’s real needs and concerns.
Lee Boldeman adds to Block’s critique in his book “The Cult of the Market.” He calls economic fundamentalism essentially “a claim to moral authority: authority to determine policy directions based on an assertion of superior economic knowledge – knowledge of the way in which the economy operates and should operate.”
For almost half a century, economics as a discipline and economic policy has been shaped by an almost unflinching belief in the “moral benevolence” of the market and minimal government interference, except to protect private property and uphold the sanctity of contracts. Allowing market forces to work freely, say true believers in this mainstream doctrine, leads to the highest levels of efficiency in the production and distribution of goods and services and, in the end, guarantees both personal happiness (read: higher income and consumption) and collective prosperity (read: higher economic growth). Economic pundits’ constant repetition of this doctrine, as if it were a religious mantra, prompted theologian Joerg Rieger, in his book “No Rising Tide: Theology, Economics, and the Future,” to observe that they had elevated the so-called “invisible hand of the market” into a “quasi-theological concept.”
Increasingly, the “market” has become the ultimate guide not only for economics and economic policy, but also for other social disciplines and for public policy domains such as environmental policy. Proponents of neoliberalism, such as Jack Hirshleifer, who is cited by Boldeman in “The Cult of the Market,” have even gone on to say that: “There is only one social science … . What gives economics its imperialist invasive power is that our analytical categories – scarcity, cost, preferences, opportunities, et cetera – are truly universal in applicability. … Thus economics really does constitute the universal grammar of social science.” Market-based thinking is more and more regulating other relationships, including personal ones, such that it would seem that “the world is being remade in an economist’s image” (see “Debunking Economics” by Steve Keen).
THE IMPACTS ARE PROFOUND AND FAR-REACHING
In many classrooms around the world, one school of economic theory – neoliberal economics that advances free market thinking, sometimes sprinkled with a bit of Keynesian ideas (which allow some role for government) – dominates the curriculum and is taught as if it were an absolute science.
Across the developing world, “one size fits all” structural adjustment programs were “prescribed” by the International Monetary Fund and the World Bank in the 1980s and 1990s as preconditions for the disbursement of loans in disregard of the countries’ varying levels of development and political and cultural contexts. In agriculture (which continues to be the main source of livelihood for the poor in many developing countries), the state was made to recede from its supportive role. As a result, small farmers lost their access to land, credit, technical inputs and to stable, domestic markets. The opening up of agricultural trade made redundant millions of small farmers. Structural adjustment programs also cut government spending on health and education and introduced “user fees” in schools and hospitals, which had the horrific effect not only of lowering literacy levels, but also of increasing child and maternal mortality rates in many African nations.
Elsewhere, in the richer parts of the world, the so-called “welfare state” is gradually being disassembled. Social protection of the poor, the unemployed, the elderly, is being dismantled at a time when it is needed most. More recently, the liberalization and deregulation of financial markets and capital flows had been pursued by both industrialized nations (especially the U.S. and U.K.) and developing ones – despite a wealth of analysis (from heterodox economists and previous experiences such as the 1997-1998 Asian financial crisis) of the risks and costs of doing so. It is now widely recognized that the 2008 global financial crisis – which cost millions of people their homes and jobs and impoverished many more – could have been foreseen and would have been less ferocious and widespread had economic analysts had more pluralistic training and had there been stronger regulation and restrictions on the movement of capital.
Free market logic intent on maximizing “net present values” (and discounting the future) has also been increasingly imposed on the very different reality of nature and ecology, which is governed by regenerative limits. It is effectively commodifying mountains, forests, water and even the air we breathe.
ECONOMIC FUNDAMENTALISM’S HISTORICAL ROOTS
Neoliberal economic assumptions about free markets and private property are rooted in Western Enlightenment philosophy (beginning roughly in the 1700s) that supposedly held central the values of reason, freedom and democracy. During this period, a new type of political and moral theorizing began to emerge in Europe, especially Britain, which sought to produce a secular, naturalist, individualistic and so-called objective, rational and scientific justification for our social arrangements. Interestingly, the traits deemed essential (objectivity, rationality, et cetera) are associated with masculinity, and not surprisingly they were promoted by male philosophers. Thomas Hobbes argued that individuals have an isolated mind and will (apparently devoid of any social attachments). John Locke presented a view of the right to property as being prior to society – a natural right based on divine law. Bernard Mandeville, David Hume and Adam Smith transformed self-interest from being a moral failing to a source of common good. Using “survival of the fittest” as a justification, Herbert Spencer sanctioned naked self-interest and the fight for dominance and supremacy. All these philosophers placed a premium on the language of natural science compared with other approaches.
Overall, Enlightenment theorizing gave birth to neoliberal economic ideology, which conceived society as meeting no fundamental human need. People were viewed as “insatiable appropriators engaged in a competitive search for power.” It was deemed both natural and rational for humans to pursue their self-interest. The market was regarded as moving according to natural laws, and government intervention in economic matters was considered “unnatural.”
Riccardo Baldissone argues his essay “Beyond Economic Fundamentalism” that “[e]conomic events are far from inevitable, as they are the results of complex and unpredictable human activities, such as planning, taking decisions, building relations, defining values and negotiating. They are neither acts of god nor nature, but social activities.”
Karl Polanyi also contended in “The Great Transformation — The Political and Economic Origins of Our Times” that markets and the pursuit of self-interest are not natural from a historical perspective: “Previously to our time [which he marks as beginning about the year 1800] no economy had ever existed that, even in principle, was controlled by markets. … [G]ain or profit made on exchange never before played an important part in human economy.” He asserts that production for gain is “not natural for man,” and that markets and money used to be “mere accessories” to otherwise self-sufficient households. Polanyi and many feminist thinkers hold that the natural human economy actually rests on reciprocity, redistribution, and householding or the production for the use of households or families. For feminist economists, provisioning for human life is the foremost objective of economic activities, not personal gain nor profit nor growth.
But perhaps John Maynard Keynes (as quoted by Douglas Vickers in his book “Economics and Ethics”) summarizes the critique of Enlightenment thinking best: “It is not a correct deduction from the Principles of Economics that enlightened self-interest always operates in the public interest. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. Experience does not show that individuals, when they make up a social unit, are always less clear-sighted than when they act separately.”
While we may all agree that economic activities cannot and should not be reduced to maximizing individual utility and pleasure, corporate profit and, at the more macro level, Gross Domestic Product (which sums up the market value of the goods and services an economy produces), Robert Merton warned in his book “Social Theory and Social Structure” that values such as individualism, consumerism and greed are “socialized” (that is, absorbed and learned). And after 30 years of what was and continues to be essentially propaganda (via media and advertising, education and government policies), neoliberal prophecies about human economic behavior are now more likely to “self-fulfill.” So even as neoliberal economics purports to rationally and objectively describe natural human economic behavior, its followers have taught economics and dictated economic policies based on the supposedly natural and unchangeable laws of the market, which, in turn, have strongly influenced this very economic behavior that is said to be natural.
HOW MATH CONTRIBUTES TO ECONOMIC FUNDAMENTALISM
Faith in the market has been further engrained in modern economic thought and policy through the use of mathematics (and complex mathematical models) in backing up neoliberal claims. No doubt math has contributed greatly toward creating and deepening the appearance that economics is a scientific, positive, objective and value-free discipline rather than a normative one. For how can mathematical results be wrong? Math is an absolute science, right?
Feminist economists such as Marianne Ferber and Julie Nelson contend that mathematical methodologies do not necessarily make neoliberal economics more objective. At the outset, the exclusive use of mathematical models limits the scope of economic phenomena under consideration to those that are quantifiable or measurable, especially in monetary terms. This has the effect, for instance, of completely ignoring or undervaluing the economic role of non-monetized social reproduction (also called the care economy), which includes unpaid domestic and community work (cooking, cleaning and taking care of the ill, young and elderly) done predominantly by women. Yet when you think about it, production intended for the market cannot take place without social reproduction: for instance, workers have to be nourished before they can go and work in the factories.
Dismantling fundamentalism in economic thought and practice requires, first of all, sincere and critical dialogue – that is, a willingness to listen to, respect and learn from other voices, perspectives and schools of thought, which in turn entails a profound humility and acknowledgement of our limited capacities and knowledge. It is in this spirit that the Ecumenical School on Governance, Economics and Management for an Economy of Life (GEM School) was established by the World Council of Churches and the World Communion of Reformed Churches in August 2016. As articulated in the Sao Paulo Statement: International Financial Transformation for an Economy of Life, the primary objective of the GEM School is to develop competencies in economics within the ecumenical movement, ultimately contributing to the larger objective of building movements advocating for an Economy of Life.
The GEM School counters the idea that economics is a value-free discipline by discussing the ethical, moral and theological starting points for economic justice (i.e., why and how theology and ethics are related to economics). While it provides a basic understanding of mainstream economic thinking, it seeks to relativize and contextualize the normative fundamentals of economics as well as economic methodologies. Further, the GEM School broadens the horizon of economics by introducing pluralistic and intersectional approaches, especially highlighting feminist and ecological approaches to economics. Finally, it lays out the political and strategic implications for churches and their advocacy for an Economy of Life.
ATHENA PERALTA is responsible for the Economy of Life Project of the World Council of Churches. She was previously senior economic development specialist at the National Economic and Development Authority of the Philippines.