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The War of Economists

by Robert Misik
"A seeming consensus among economists can virtually force the shaping of political opinions.. For 30 years, neoliberalism marginalized all other schools, above all Keynesianism - and all of us hit a brick wall.. We must adjust for economic crisis years and for an epoch of indissoluble tensions, for confusion and trench-warfare.."
THE WAR OF ECONOMISTS

By Robert Misik

[This article published in: Freitag 5/27/2012 is translated from the German on the Internet, http://www.freitag.de/politik/1221-der-konomen-krieg.
Robert Misik is an Austrian journalist and writer.]

Economics broke down in the crisis. Since certainties are lacking, politics cannot rely on economics any more.

According to an old joke, economics is that discipline in which two researchers receive the Nobel Prize for discovering the exact opposite. In other words, economics is that discipline where what is right every year is the opposite of what was right the year before. This distinguishes the economy from the exact sciences like physics, chemistry and mathematics but not unconditionally from other human- and social sciences like sociology and philosophy. Sociology and philosophy do not have the same direct influence on politics.

Economists tell politics what is “true” economic policy. A seeming consensus among economists can virtually force the shaping of political opinions. This means the struggle around the hegemony of conservative or progressive world interpretations is fought out today in the field of economic theory.

DOMINANCE OF NEOLIBERALISM

Up to 2008 and the outbreak of the financial crisis, “neoliberalism” was dominant for 30 years. “Neoliberalism” is a somewhat vague auxiliary term. The word meant something very different 40 years ago, namely the economic theory behind the “social market economy.” Today the term stands for total market gullibility. The school of market fundamentalist economists is divided in different schools: the neo-classicists and fans of Milton Friedman and his successors, the school of “rational expectations” and the “Austrians,” the descendants of the Austrian school around Friedrich von Hayek. For 30 years, neoliberalism marginalized all other schools, above all Keynesianism – and all of us hit a brick wall.

With the financial crisis, Keynesianism first experienced a new high-altitude flight and was even dominant for several months. The power of facts stands behind the Renaissance – the fact that market radicals can not formulate any answers. Some leading “stars” in the economy have regularly fought the battle over dominance. Nobel Prize winner for economics Paul Krugman blogs daily on the website of the New York Times and writes a column two times a week. In 2009 he wrote the controversial essay “How Did Economists Get It So Wrong?” The essay was a challenge. On his side are people like the Nobel Prize winner Joseph Stiglitz and the Boston professor and economic blogger Bradford DeLong.

DID THE REBELLION FAIL?

Since then a war of academic economists has been raging. Since the economy distinguishes between the analysis of massive national economic streams (“macro” economy) and the little operational studies of specific branches (“micro”), people in the US speak of the “macro-war” or the “macro-economy war.” The question was recently raised whether Krugman and his supporters have already lost their “macro-war.” In 2010 the brief Keynesian dominance collapsed. After the great disaster was averted, bank bailouts, unemployment, massive business bankruptcies and “state debts” were suddenly in the center of attention, not the crash of growth. In Europe with its euro crisis and threatening state bankruptcies, the public budgets and their deficits suddenly were the exclusive theme. Conservative economists and experts hit back.

“Did Krugman’s rebellion fail?” the economic blogger “Noahpinion” asks. He insinuates: “Yes, doubtlessly but a new paradigm may gain acceptance in the economy from a long-term perspective. Krugman replies the opposite side is prevented from prevailing on all fields. This also has short-term effects – as in the distinction between an unemployment rate of seven or nine percent. Krugman is convinced: “We will win the fight.”

ORGANIZED DISSENSUS

A few things are already remarkable. Firstly, there is a worldview argument in economic theory between progressive and conservative economists that seldom occurs on the often de-ideological field of politics. Secondly, the change from neoliberal dominance to the rise of Keynesianism and to the organized dissensus that we now experience is a beautiful illustrative example how ideas spread and gain acceptance and how hegemony and consensus arise.

In a new study, the political scientist Henry Farrell and the economist John Quiggin document the global argument in the economists’ guild. They present several remarkable systemic reflections on how “ideas” of “experts” develop to a “seeming consensus” in an academic discipline and how this consensus then influences politics. Ideas and power are emphasized here.

When a certain idea – like “neoclassicism” or the theory of “rational expectations” in the economy – is dominant, dominance does not mean that everyone believes in this idea. Dominance means that the followers of this theory dominate important academic institutions and think tanks and that the remaining adherents of rival theories duck and keep their mouths shut. Whoever does not shut up is made to appear as an outsider of the discipline who need not be taken seriously. On the other hand, the followers of the dominant idea set the tone in the general public. For interested laity or politics, there seems to be a consensus among the experts.

However there is only a “seeming consensus,” a “visible dominance” as Farrell and Quiggin explain which doesn’t mean that there isn’t invisible dissensus. But “the appearance of consensus among experts is very important in manipulating the ideas of political actors.” To cut a long story short, hegemony and dominance are only possible when there is the “appearance of consensus.”

Unexpected events to which the adherents of the dominant theory have no answer can endanger this dominance. In this case, a rival idea can be heard and spread. The authors introduce metaphors from epidemiology: new ideas can “infect” others. In communicative networks, there are junctions – “media stars,” important economists – who are connected with many others and can accelerate the “infection.” The spread of new ideas is a game of conviction, new discoveries, prayer-wheel repetition, and spectacular change of sides, imitation and parroting. Against the newly widespread idea, the adherents of the previously dominant idea attempt a policy of containment as with anti-epidemic programs.

BACKLASH FROM EUROPE

Despite these defensive efforts, even powerful institutions that were bulwarks of the dominant idea in the past can be infected. For example, the International Monetary Fund (IMF) and the OECD changed their positions significantly in the last years. Even the past champions of the “more market-less state” ideology are now astounded by studies showing that crass inequality is the source of all problems of the market economy.

That the global anti-Keynesian backlash after 2010 came from Europe – from the executive floors of the European Central Bank, the executive floors of the German Central Bank, the German political elites and even the new British government – is remarkable. In the US, on the other hand, conservative economists have long not regained the standing they had before the crisis.

After we had a neoconservative dominance in the past 30 years and then a brief spring of Keynesianism, we are now in a time without “apparent consensus.” For the foreseeable future, we must adapt to dissensus. Since “the appearance of consensus” is absent, the prerequisite for a specific school of economics manipulating politics is also lacking. As a result, we must adjust for economic crisis years and for an epoch of “indissoluble tensions between different and diametrically opposite ideas on the order of the economy, for confusion and trench-warfare.” Therefore economic “expertise” is only restrictedly fit to legitimate politics.

RELATED LINKS

Altvater, Elmar, “In the Towrope of the Financial Markets,” November 2010
http://portland.indymedia.org/en/2012/06/416104.shtml

Krugman, Paul, “This Republican Economy,” June 3, 2012
http://www.nytimes.com/2012/06/04/opinion/krugman-this-republican-economy.html

Misik, Robert, “Economy and Ethics in Crisis,” 2011
http://www.eurozine.com/articles/2011-03-14-bucharest-en.html
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by Reminders from Mr. Max Robespierre
Some reminders from an old friend about the consequences of economic imbalance and injustice;



MAXIMILIEN ROBESPIERRE

THE POLITICAL PHILOSOPHY OF TERROR

SPEECH TO THE CONVENTION, FEBRUARY 5, 1794



"Citizen-representatives of the people.

Some time ago we set forth the principles of our foreign policy; today we come to expound the principles of our internal policy.

After having proceeded haphazardly for a long time, swept along by the movement of opposing factions, the representatives of the French people have finally demonstrated a character and a government. A sudden change in the nation's fortune announced to Europe the regeneration that had been effected in the national representation. But up to the very moment when I am speaking, it must be agreed that we have been guided, amid such stormy circumstances, by the love of good and by the awareness of our country's needs rather than by an exact theory and by precise rules of conduct, which we did not have even leisure enough to lay out

It is time to mark clearly the goal of the revolution, and the end we want to reach; it is time for us to take account both of the obstacles that still keep us from it, and of the means we ought to adopt to attain it: a simple and important idea which seems never to have been noticed. . . .

For ourselves, we come today to make the world privy to your political secrets, so that all our country's friends can rally to the voice of reason and the public interest; so that the French nation and its representatives will be respected in all the countries of the world where the knowledge of their real principles can penetrate; so that the intriguers who seek always to replace other intriguers will be judged by sure and easy rules.

We must take far-sighted precautions to return the destiny of liberty into the hands of the truth, which is eternal, rather than into those of men, who are transitory, so that if the government forgets the interests of the people, or if it lapses into the hands of the corrupt individuals, according to the natural course of things, the light of recognized principles will illuminate their treachery, and so that every new faction will discover death in the mere thought of crime. . . .

What is the goal toward which we are heading? The peaceful enjoyment of liberty and equality; the reign of that eternal justice whose laws have been inscribed, not in marble and stone, but in the hearts of all men, even in that of the slave who forgets them and in that of the tyrant who denies them.

We seek an order of things in which all the base and cruel passions are enchained, all the beneficent and generous passions are awakened by the laws; where ambition becomes the desire to merit glory and to serve our country; where distinctions are born only of equality itself; where the citizen is subject to the magistrate, the magistrate to the people, and the people to justice; where our country assures the well-being of each individual, and where each individual proudly enjoys our country's prosperity and glory; where every soul grows greater through the continual flow of republican sentiments, and by the need of deserving the esteem of a great people; where the arts are the adornments of the liberty which ennobles them and commerce the source of public wealth rather than solely the monstrous opulence of a few families.

In our land we want to substitute morality for egotism, integrity for formal codes of honor, principles for customs, a sense of duty for one of mere propriety, the rule of reason for the tyranny of fashion, scorn of vice of scorn of the unlucky, self-respect for insolence, grandeur of soul over vanity, love of glory for the love of money, good people in place of good society. We wish to substitute merit for intrigue, genius for wit, truth for glamour, the charm of happiness for sensuous boredom, the greatness of man for the pettiness of the great, a people who are magnanimous, powerful, and happy, in place of a kindly, frivolous, and miserable people - which is to say all the virtues and all the miracles of the republic in place of all the vices and all the absurdities of the monarchy.

We want, in a word, to fulfill natures's desires, accomplish the destiny of humanity, keep the promises of philosophy, absolve providence from the long reign of crime and tyranny. Let France, formerly illustrious among the enslaved lands, eclipsing the glory of all the free peoples who have existed, become the model for the nations, the terror of oppressors, the consolation of the oppressed the ornament of the world - and let us, in sealing our work with our blood, see at least the early dawn of the universal bliss -that is our ambition, that is our goal.

What kind of government can realize these wonders? Only a democratic or republican government - these two words are synonyms, despite the abuses in common speech, because an aristocracy is no closer than a monarchy to being a republic. . . .

Democracy is a state in which the sovereign people, guided by laws which are of their own making, do for themselves all that they can do well, and by their delegates do all that they cannot do for themselves. . . .

Now, what is the fundamental principle of popular or democratic government, that is to say, the essential mainspring which sustains it and makes it move? It is virtue. I speak of the public virtue which worked so many wonders in Greece and Rome and which ought to produce even more astonishing things in republican France - that virtue which is nothing other than the love of the nation and its law.

But as the essence of the republic or of democracy is equality, it follows that love of country necessarily embraces the love of equality. . . .

But the French are the first people of the world who have established real democracy, by calling all men to equality and full rights of citizenship; and there, in my judgment, is the true reason why all the tyrants in league against the Republic will be vanquished.

There are important consequences to be drawn immediately from the principles we have just explained.

Since the soul of the Republic is virtue, equality, and since your goal is to found, to consolidate the Republic, it follows that the first rule of your political conduct ought to be to relate all your efforts to maintaining equality and developing virtue; because the first care of the legislator ought to be to fortify the principle of the government. This everything that tends to excite love of country, to purify morals, to elevate souls, to direct the passions of the human heart toward the public interest, ought to be adopted or established by you. Everything which tends to concentrate them in the abjection of selfishness, to awaken enjoyment for petty things and scorn for great ones, ought to be rejected or curbed by you. Within the scheme of the French revolution, that which is immoral is impolitic, that which is corrupting is counter-revolutionary. Weakness, vice, and prejudices are the road to royalty. . . .

We deduce from all this a great truth - that the characteristic of popular government is to be trustful towards the people and severe towards itself.

Here the development of our theory would reach its limit, if you had only to steer the ship of the Republic through calm waters. But the tempest rages, and the state of the revolution in which you find yourselves imposes upon you another task. . . .

We must smother the internal and external enemies of the Republic or perish with them. Now, in this situation, the first maxim of your policy ought to be to lead the people by reason and the people's enemies by terror.

If the mainspring of popular government in peacetime is virtue, amid revolution it is at the same time [both] virtue and terror: virtue, without which terror is fatal; terror, without which virtue is impotent. Terror is nothing but prompt, severe, inflexible justice; it is therefore an emanation of virtue. It is less a special principle than a consequence of the general principle of democracy applied to our country's most pressing needs.

It has been said that terror was the mainspring of despotic government. Does your government, then, resemble a despotism? Yes, as the sword which glitters in the hands of liberty's heroes resembles the one with which tyranny's lackeys are armed. Let the despot govern his brutalized subjects by terror; he is right to do this, as a despot. Subdue liberty's enemies by terror, and you will be right, as founders of the Republic. The government of the revolution is the despotism of liberty against tyranny. Is force made only to protect crime? And is it not to strike the heads of the proud that lightning is destined? . . .

To punish the oppressors of humanity is clemency; to pardon them is barbarity. The rigor of tyrants has only rigor for a principle; the rigor of the republican government comes from charity.

Therefore, woe to those who would dare to turn against the people the terror which ought to be felt only by its enemies! Woe to those who, confusing the inevitable errors of civic conduct with the calculated errors of perfidy, or with conspirators' criminal attempts, leave the dangerous schemer to pursue the peaceful citizen! Perish the scoundrel who ventures to abuse the sacred name of liberty, or the redoubtable arms which liberty has entrusted to him, in order to bring mourning or death into patriots' hearts! This abuse has existed, one cannot doubt it. It has been exaggerated, no doubt, by the aristocracy. But if in all the Republic there existed only one virtuous man persecuted by the enemies of liberty, the government's duty would be to seek him out vigorously and give him a dazzling revenge. . . .

How frivolous it would be to regard a few victories achieved by patriotism as the end of all our dangers. Glance over our true situation. You will become aware that vigilance and energy are more necessary for you than ever. An unresponding ill-will everywhere opposes the operations of the government. The inevitable influence of foreign courts is no less active for being more hidden, and no less baneful. One senses that crime, frightened, has only covered its tracks with greater skill. . . .

You could never have imagined some of the excesses committed by hypocritical counter-revolutionaries in order to blight the cause of the revolution. Would you believe that in the regions where superstition has held the greatest sway, the counter-revolutionaries are not content with burdening religious observances under all the forms that could render them odious, but have spread terror among the people by sowing the rumor that all children under ten and all old men over seventy are going to be killed? This rumor was spread particularly through the former province of Brittany and in the departements of the Rhine and the Moselle. It is one of the crimes imputed to [Schneider] the former public prosecutor of the criminal court of Strasbourg. That man's tyrannical follies make everything that has been said of Caligula and Heliogabalus [cruel Roman emperors] credible; one can scarcely believe it, despite the evidence. He pushed his delirium to the point of commandeering women for his own use - we are told that he even employed that method in selecting a wife. Whence came this sudden swarm of foreigners, priests, noble, intriguer of all kinds, which at the same instant spread over the length and breadth of the Republic, seeking to execute, in the name of philosophy, a plan of counter-revolution which has only been stopped by the force of public reason? Execrable conception, worthy of the genius of foreign courts leagued against liberty, and of the corruption of all the internal enemies of the Republic! . . .

In deceitful hands all the remedies for our ills turn into poisons. Everything you can do, everything you can say, they will turn against you, even the truths which we come here to present this very day. . . .

Such an internal situation ought to seem to you worthy of all your attention, above all if you reflect that at the same time you have the tyrants of Europe to combat, a million and two hundred thousand men under arms to maintain, and that the government is obliged continually to repair, with energy and vigilance, all the injuries which the innumerable multitude of our enemies has prepared for us during the course of five years.

What is the remedy for all these evils? We know no other than the development of that general motive force of the Republic - virtue.

Democracy perishes by two kinds of excess: either the aristocracy of those who govern, or else the popular scorn for the authorities whom the people themselves have established, scorn which makes each clique, each individual take unto himself the public power and bring the people through excessive disorders, to annihilation or to the power of one man.

The double task of the moderates and the false revolutionaries is to toss us back and forth perpetually between these two perils.

But the people's representatives can avoid them both, because government is always the master at being just and wise; and, when it has that character, it is sure of the confidence of the people.

It is indeed true that the goal of all our enemies is to dissolve the Convention. It is true that the tyrant of Great Britain and his allies promise their parliament and subjects that they will deprive you of your energy and of the public confidence which you have merited; that is the fist instruction for all their agents. . . .

We are beginning a solemn debate upon all the objects of its [the Convention's] anxiety, and everything that can influence the progress of the revolution. We adjure it not to permit any particular hidden interest to usurp ascendancy here over the general will of the assembly and the indestructible power of reason."

http://www.worldfuturefund.org/wffmaster/Reading/Communism/ROBESPIERRE'S%20SPEECH.htm


http://www.youtube.com/watch?v=Z0ncE-h48UA
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