For the Many, Not the Few
by Robert Reich
Allen & Unwin, East Melbourne
Paperback: 304 pages
Reviewed by David James
It says something about modern academic and intellectual life that mainstream economics, as it is taught in universities and applied in government, is almost entirely fraudulent.
That the emperor has no clothes can be demonstrated readily by engaging in some basic semantic analysis. That such analysis is rarely, if ever, conducted is highly suspicious. Is it stupidity or a deliberate intention to deceive in order to favour rich and powerful interests?
Consider, for example, the phrase “financial deregulation”. This is a flat out oxymoron. Finance consists of rules. You can no more “deregulate” it than you can take the wetness out of water. Yet the deregulation push has been going on for four decades, resulting in government giving up on its governing role and allowing traders to invent their own rules. The resulting debauch led to the Great Recession and the near collapse of the world monetary system in 2008.
Such nonsense is endemic in economics. The epistemological basis of the discipline is fraudulent. It purports to be a science. Yet it goes nowhere near satisfying the fundamental requirement of a science: the ability to predict accurately.
The core of the problem, however, is the lack of precision in the use of language – semantics. This is what Reich, in his book, Saving Capitalism, focuses on. Why has it taken so long? A little rigour would have revealed, pretty much immediately, that there was a problem. Still, I suppose better late than never.
The central semantic confusion that Reich addresses in the book is the distinction between “free market” and “government”. That is one deception used by neo-classical economists and neo-liberals. It is a concoction of nonsense that locally can be seen spewing out of right-wing think tanks like the Centre for Independent Studies and the Institute of Public Affairs.
This propaganda elides “freedom” (a slippery word) with markets, and government with repression – socialism or communism. In America, it has become surreal. As Reich notes, corporations are deemed people under the First Amendment of the Constitution, and so entitled to freedom of speech. Of course it is very selective; the freedom for workers to bargain collectively or organise themselves is demonised as an attack on freedom.
The con trick is that the only choice is between “good” private enterprise and “bad” government.
Reich explains: “Few ideas have more profoundly poisoned the minds of more people than the notion of a ‘free market’ existing somewhere in the universe, into which government ‘intrudes’. In this view, whatever inequality or insecurity the market generates is assumed to be the natural and inevitable consequence of impersonal ‘market forces’. What you are paid is simply a measure of what you are worth in the market.
“It is taught in almost every course on introductory economics. It has found its way into everyday public discourse. One hears it expressed by politicians on both sides of the aisle.
“The debate it has spawned is utterly false. There can be no ‘free market’ without government. The ‘free market’ does not exist in the wilds beyond the reach of civilisation … a market – any market – requires that government make and enforce the rules of the game.” Well, yes. It should always have been obvious that this quasi-mystical drivel about the “market” is just a device used by powerful interests to organise markets in their own interests. To see how ridiculous it is, just ask the question: “How long have markets existed?” The answer is: “Thousands of years.” That is, they long preceded “capitalism”.
Reich goes on to argue that we can reorganise markets and should do so in relation to laws about property, monopoly, contracts, bankruptcy and enforcement. Yet, although he brings some welcome rigour about the definition of markets and government, there is no such rigour about the word “capitalism”.
If we look at the different ways that capital is formed in what are termed capitalist countries – having accepted that “free markets” are not their defining feature – it is evident that there are such large differences that the term is all but meaningless. Capitalism is not an “ism” at all. It is just “not-communism” (communism being an identifiable ideology).
Reich, with all the mandatory narcissism of an American, assumes that if capitalism in the United States is failing, then so is capitalism itself. But the situation is much more complex, not least because a nominally communist country, China, is fast becoming the world’s largest economy after allowing some of its markets to flourish. It is good to see greater precision in economics language, but there is a long way still to go before the discipline becomes even remotely credible.