Finding a new economic paradigm to replace outmoded dogma

I recently started following Prof Steve Keen on twitter and he retweeted this article yesterday (17 November 2014) by called Obsolete dogmas are crippling the world economy.

Given the whoo-ha over the G20 in Brisbane over the weekend and the disappointing showing by Australia on climate change issues in favour of ‘growth’ it’s a very relevant article.

If it could be made any plainer it was sadly shown on the 7.30 Report last night when Leigh Sales interviewed the Federal Trade Minister Andrew Robb. In discussing the likelyhood that the new trade deal with China would see demand for milk outstrip supply and prices rise, Minister Robb said:

“…if you introduce innovation and you will see costs come down and you’ll see capacity and production go up and therefore you can supply a bigger market and actually reduce the price of milk. This is the essence of increasing trade massively, increasing investment. You do get – we’ve got to be at the cusp of innovation, and if we are, we will reduce costs – that will increase profits – and we’ll increase production and that’ll also increase profits.”

It suggests a remarkable faith in the miracle of growth. Explaining or even contemplating ‘How?’ is not even considered. Limitations to land use, the physical capacity of cows to produce milk, competing demands for labour and capital and the potential negative environmental impacts hold no sway against the ability to ‘introduce innovation’. This is simply ideology.

I’m constantly disappointed by the orthodoxy of Australian economic discussion and the refusal to recognise that policy and the economic ideas being put forward are outmoded. Basic recognition of reality would be useful. Delmaide is right, the world needs to recognise that a new paradigm is needed.

Yet even were there to be a new paradigm there would have to be the strength of will to act on it. Capitalism just like communism is largely theoretical, the reality is a mongrelized version full of contradictions and imperfections. What we get is a capital-ish system. But there can be little doubt now that even if the system were ‘perfect’ it would not deliver the outcomes proponents of capitalism say. Sadly we now have a system that has slowly been corrupted to serve the interests of a capital-accumulating class, the growing dominance of financialism has distorted global economies and facilitated a perversion of democratic processes diminishing the capacity and independence of nation states.

A new economic paradigm is needed. However, it will be incomplete unless it can rebuild economics from the ground up. We must redefine how economic models perceive what it is to be human. We must regard people as more than self-interested utility maximizers and see them as humans with needs for dignity, respect and equality as well as for independence and choice. We must see people not just as free agents but as part of a social system with implications at local, regional and global levels. We must recognise that all people need to be fed and clothed, need housing, health and education, that their lives are finite and that their skills and abilities vary throughout that lifetime, are built over a single lifetime and that that requires investment and nurturing. Until we see people as they truly are we will not be able to define a broader economic system that facilitates humanity.

Such a new concept of humanity must equally recognise that not all people wish to serve each other, that some will be selfless while others are self-centred, that some will be avarice and others generous despite a reduction in their own utility or own wealth, that some will be self sacrificing while others will save only their own skin, some lack courage, some take risks. Some traits are fixed, some habits are consciously developed. No matter where a person stand by nature or morality, all people deserve respect, all people should be able to aspire to find a fulfilling purpose and all are part of the fabric of humanity. Such a concept of humanity will also recognise that the freedom of all demands limitations on the freedom of individuals and that provision of opportunity for all may diminish the opportunities of some.

Such a concept of humanity and society also redefines how we see nature, allowing economics to catch up on a 100 years of biology. We are not part of a competitive, do or die, survival of the fittest world. We are not a species defined by cruelty and indifference to the suffering of others. Yes, there are cruel, vicious and ruthless humans. But we are diverse, adaptive and social, we are able to change, to be flexible. When we can see ourselves more broadly as diverse and different yet deserving of equality and respect then we will be able to define an economic paradigm that will be relevant for the challenges and demands of the 21st century.


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