Archive for September 20th, 2008

Ideology and Economics

One of the most pernicious and misguided developments of the past century or so is the rise of ideology as a kind of secular religion.   Ideologies emerge as vast simplifications of reality in order to build theoretical frameworks that are based on certain core assumptions.  The result is a world view that yields some fundamental principles which in turn are used to justify and rationalize action.

One example is free market capitalism.  Assumptions are made about human behavior, an individualist ontology is adopted, and the result is a theory of how the market works (supply and demand, equilibrium, self-interested behavior yielding the best result, markets being better than bureaucracies in making decisions since markets gather massive amounts of information through individual choices, etc.)  This theory then provides policy prescriptions and a blueprint for the ‘best’ sort of economic structure.  If you take this to a logical extreme (i.e., if you forget that the ideology is based on a vast simplification of reality) then markets are always the answer, there should be little or no government, and the ideology guides every choice to be made.  In its most dangerous form, ideologues try to don the mantel of ethics and principle by defining the ideology as the central core of human meaning.  A few of these people become ideological zealots, uncompromising puritans whose need for meaning in life is filled by a secular religion, and they become as dogmatic as your most devout religious extremist.   Often these same people see religion as a myth for the small minded, and don’t recognize that they are just as tied to myth as the religious folk they ridicule.  Whereas the religious at least know they are taking a leap of faith, the secular ideologues believe that reason has given them an objectively true answer.

But then check the other side, the socialists.  They have an ideology that defines capitalism as inherently exploitative and crisis prone, which, obviously, it is.  Yet when faced with this they try to create an ideological alternative where there will be no crises and no exploitation, just people working for the good of the whole, and sharing in the wealth.  This is rationalized with an ideology that subordinates politics, culture, human nature and psychology to economics.  All that matters is the economic system, and if it is run properly, a truly rational and just outcome will emerge, one that will yield such success that individuals will be free from alienation and able to achieve their true desires.

Of course, this “objectively just” economic system can’t function without a government, and somehow human beings when given power in a capitalist system will exploit, while when given power in a socialist system will work for the good of the masses.  Anyone see a problem with that assumption?  People are what screw up capitalism, people are what screw up socialism, and people do so not just out of ill will or selfishness, but also because their actions are driven by their cultural beliefs, political values, and position in society.

Now, as governments step in to develop plans to attempt to guide economies away from the catastrophic dangers that credit market collapse would create, left and right alike cling to ideology as their source for prescriptions about what to do.   Many “free marketeers” are appalled that even Republican governments and candidates are embracing an intrusive government solution.  The problem, however, is not regulation or government action, but under-regulation and government inaction.  The problem is also that you cannot have a major economic system without it being prone to close government-business ties.  The ideological dream of a market system absent politics (or with minimal political involvement), or of a socialist system absent markets (or with intensely manipulated markets) are practical impossibilities.  Such perspectives are examples of ideology-driven understandings of reality, rather than consideration of how human society really works.

Simply, ideology does not give answers about economics.  At best theories about capitalism, socialism, and various types of economic structures can be useful to develop pragmatic approaches to economic problems.  Those who grab an ideology will simply look for solutions, or rationalize non-action, by applying a principle which they falsely believe to be based on objective truth.  Instead of taking into account different perspectives, thinking creatively for solutions, making compromises about accepting some market exploitation and inequities and some government interference for a balanced, mixed approach that isn’t perfect, but might be as good as we can manage, they want their “ism” pure and unvarnished.  Instead of thinking, they want an answer key that comes from a set of assumptions and principles.

The current crisis defies ideological thinking.  It cannot be addressed with glib “well, let them collapse, it was a bad investment” or “bail out everyone, they were all fooled.”  Instead, we have to think about the consequences of different policies, the fiscal realities the country faces, the danger that doing too much to rescue failing banks and firms might harm the economy in numerous other ways, while doing too little might allow the crisis to spread out of control.   Most importantly, we have to separate economics from ideology, at least ideological purity.  The world is too complex, ideologies are too shallow and incomplete.  Creative problem solving involves borrowing and taking from many theories in a way that practically deals with problems.

The stock market has bounced back up, but the crisis hasn’t passed.  People don’t know for sure what will come next, short term traders are glad government is thinking of a $1 trillion dollar bail out, long term thinkers are worried what that means for the value of the dollar, debt, and the US economy.  This also shows the folly of paying hundreds of billions for wars we can’t afford, and suggests that ambitious efforts to expand health care and social welfare may be out of reach for awhile.   Somehow both parties have to come together and realize that this problem is such that we can’t afford ideological fantasy or partisan posturing.  We need solutions.

And as for ideology?  One can imagine perfect systems, such as a totally free market somehow balancing everything with government simply standing by (or maybe not existing).  One can also imagine a utopian socialism, of people all with enough to live well, no exploitation, and a true sense of liberty.  One can theorize that either of these would be a true, ethical and correct system, but both are so out of touch with the world as it really is and people as they really behave that they are meaningless.  Become a secular capitalist or socialist ideologue, and you’ll end up angry and resentful at a world that isn’t anywhere close to how you believe it should be.