Ian Goldin, Guest Writer
Ideology: Liberal Independent | Writing From: George Washington University
Departments of economics are graduating a generation of idiot savants, brilliant at esoteric mathematics yet innocent of actual economic life.
Nobel Prize wining economist Wassily Leontief
It was the first day of classes, and I was sitting in my first Econ 181 lecture – a class on International Trade. At first, we went over the usual: the syllabus, class procedures, etc. It was difficult keeping my mind from wandering. Then, all of a sudden, I heard something. “You can assume that it is always beneficial for a country to trade with other countries,” my professor declared. I looked up, startled. Woah, wait a minute, I thought to myself. I thought that there would be at least some degree of balance and objectivity in such an advanced economics course, especially at such a reputable, national university. I guess not.
I raised my hand, “Professor, what about the fact that international trade is the reason that a financial crisis that would have been restricted to the US spread to the rest of the world in a matter of days, and has hurt the developing world worse than any other countries, even though they had nothing to do with the US housing crisis?”
“Oh, well that is true,” she replied.
“And what about the fact that the ‘free’ trade policies that were forced upon the developing world by the World Bank and the WTO have actually made these countries unable to even sustain their own people?”
“In some cases, yes.”
I’m remain confused. If both of my objections are valid, in at least “some cases,” then international trade isn’t always beneficial. In fact, frequently, it is only beneficial to the developed world, and attempts to exploit people in the developing world – the ones for whom economic development isn’t just about comfort or luxury, but about life or death.
Economic “scientists” at the World Bank and IMF, obsessed with comparative advantage, have encouraged the developing world to specialize in a single commodity, making them economically dependant on exports to the US, EU, and the rest of the consumer-driven world. While it might seem like a good idea to promote growth through exports, it becomes a problem when countries abandon their own agricultural industries for, say, the exotic flower industry… or the plastic toy industry. Whereas before, the country may have been poor (but subsistence farming made them self-sufficient), farms are replaced by factories, and food by exports. As a result, during a crisis, when Americans stop buying exotic flowers or cheap plastic toys, the people dependent on those exports starve.
The point of this story is not to demonize the concept of trade. I’m saying that as it is practiced throughout the world at this moment in time, it is destroying economies, ecosystems, and people.
The problem is neoclassical economics. Neoclassical theory is frequently the only theory taught in to students of economics throughout the country – especially in introductory courses (which are frequently the only ones many students take). Neoclassical is taught as gospel, when in reality it is only a theory – a theory that is being questioned more than ever before. The generations of tenured professors who have held a monopoly on economic theory are finally being called out. They’re being called out by “social economists, feminist economists, interdisciplinary economists, ecological economists, and hundreds of intellectuals and maverick professors who are openly critical of the neoclassical paradigm and are fighting to overthrow it.” (Kalle Lasn)
Economy and Ecosystem are both derived from the Greek word oikos, meaning household. An ecosystem consists of our home, and an economy consists of the allotment of goods within that home. The etymology of these words shows that we can’t separate these two ideas. According to neoclassical theory, however, labor is the only relevant resource. According to economic dissenters, that’s ludicrous. We are selling off our natural capital and calling it income. Our obsession with consumption is destroying the planet.
Neoclassical models leave no room for natural resource limitations. We are burning our rainforests to make room for cattle ranches, we are dumping waste into the very oceans in which we overfish, and the pesticides we use on our food are killing the very bees that pollinate our crops. And we wonder why there is a food shortage. The market has failed us. Consumption and production are no longer at equilibrium. We are consuming our natural resources faster than the Earth can replenish them. According to Mathis Wackernagel, the founder of the Global Footprint Network, humanity was demanding nearly one-third more than the Earth could renew in 2005. And it’s only getting worse.
I recently attended a briefing organized by the U.S. Climate Action Network. Farah Kabir, Country Director of ActionAid Bangladesh, talked about how there has been more natural disasters in the past year than ever before. Economics, ecology, and climate change are all related in important ways, and they have huge implications for national security. There has already been an increase in resource wars over the past decade – people are killing each other over access to clean water. Terrorist groups have become involved with many of these conflicts as well. It’s only a matter of time before Americans are directly affected.
So what can we do? It’s mostly about the way we consume. The economists who got us into this financial crisis want to get us out by encouraging us to spend more and consume more. I say let’s take a break from gorging ourselves for a while. Buy local, organic food. Stop drinking bottled water. Stop eating meat. Take public transportation. Take a vacation from shopping!
But it’s also more complicated than that. Governments need to enact serious eco-footprint reduction policies to protect their ecological reserves and natural resources. As resources become scarce, the countries that have done this will be the competitive ones, and the countries that have attempted to grow through resource consumption will be the ones asking for aid. We need to make our economy less resource-dependant. It’s a simple case of supply and demand.
As I sit through my econ class, I have to endure the many truisms of neoclassical theory: one of them being the assumption that more is better. The more money people have, the more stuff they can buy. The more stuff they can buy, the happier they are. Neoclassical theory uses GDP as an indicator for national happiness. But there is something missing. Lourdes Beneria, a professor of gender and economic development at Cornell University summed it up quite nicely: “There is no emotion or love involved in decisions based on economic rationality.” Our econ professors like to tell us that money equals happiness. I’d like to think that we’re not as shallow as they think we are.