Real Life Economics

Paul Ekins, Manfred Max-Neef, Paul Ekins, Manfred Max-Neef

• Publisher: Routledge
• Year: 2006
• Print ISBN: 9781138419230
• eBook ISBN: 9781134896103
• Topic: Business
• Subtopic: Business General
• Index: Business

The past fifty years have witnessed the triumph of an industrial development that has engendered great social and environmental costs. Conventional economics has too often either ignored these costs or failed to analyse them appropriately. This book constructs a framework within which the wider impacts of economic activity can be both understood and ameliorated. The framework places its emphasis on an in-depth understanding of real-life processes rather than on mathematical formalism, sressing the independence of the economy with the social, ecological and ethical dimensions of human life.

Part I
On the nature of the economy and economic science

1 Economics, knowledge and reality

The principal objective of this book is to further the understanding of real processes in the real world, especially as they relate to the economy, and especially as they relate to the more threatening or least satisfactory aspects of the human condition, with a view to enabling improvements in those aspects. That is to say, it seeks to define a framework of ideas through which useful knowledge can be generated that can be put to practical use in concrete situations.

The three papers in this chapter set down some ground rules for this endeavour, exploring:

• the relationship between the economy and the real world;
• an appropriate practical methodology for economists in the real world;
• an appropriate intellectual methodology for economists to employ in investigating reality.

The view of the subject-matter of economics to be adopted in this book is not controversial. It is based on Lionel Robbins’s famous definition: ‘Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses’ (Robbins 1984: 16). A further aspect is that ‘the ends are capable of being distinguished in order of importance’ (ibid.: 14). It is presumed here that this ordering takes place with a view to increasing human welfare.

The ‘real world’, however, is nowhere near as simple a concept as it sounds. It is actually experienced by different groups of people in radically different ways, to the extent that one might not know from their descriptions of it that they were talking about the same ‘world’ at all.

Anthropologist Richard Schweder (1984, 1986, 1989) has explored this issue in some depth. He identifies three responses to human diversity: universalism, developmentalism and relativism. He regrets that one of these three responses is so often posited as the true explanation of the human condition in contradistinction to the others:

The human mind is tripartite – it has rational, irrational and nonrational aspects: and comparing our ideas to the ideas of others, we will always be able to find some ways in which our ideas are like the ideas of others (universalism) and some ways in which our ideas are different. Sometimes those differences will suggest progress (developmentalism) and often they will not (relativism).

(Schweder 1984: 60)

While thus accepting the possible validity in specific instances of the universalist and developmentalist approach, Schweder elsewhere stresses ‘the relativistic idea of multiple objective worlds’ (Schweder 1989: 133). His argument can be presented in his words as follows:

While reality is not something we can do without, neither can it be reached (for it is beyond experience and transcends appearances) except by an act of imaginative projection implicating the knower as well as the known. . . . An interpretive or hermeneutic or projective element (call it what you will) has long since been incorporated into philosophical conceptions of objectivity-seeking science. . . . Objectivity-seeking science portrays for us a really real external world so as to explain our reality-posits, but it does so by making use of our reality-posits in a selective, presumptive and partial way. . . . Since no reality-finding science can treat all appearances, sensations, experiences as revelatory of the objective world, and since, at least for the moment, no infallible way exists to decide which reality-posits are signs of reality and which are not, much is discretionary in every portrait of the objective world out there beyond our symbolic forms. . . . Yet it is possible for us to have important knowledge of the world, even if the objective world is subject-dependent and multiplex and even if we give up trying to describe the world independent of our own involvement with it or reactions to it or conceptions of it. . . . Accordingly, it is a core aphorism of the position advocated here that the objective world is incapable of being represented completely if represented from any one point of view and incapable of being represented intelligibly if represented from all points of view at once. The real trick and noble challenge is to view the objective world from many points of view (or from the point of view of each of several prejudices) but to do it in sequence.

(ibid.: 128–31)

The conception of ‘multiple objective worlds’, each with their own validity, is poles apart from the homogenizing thrust of western economism. The whole practice of economic development round the world bears witness to the imposition of a single ‘development model’ on widely disparate peoples and communities, which has resulted always in their disruption and transformation and often in their destruction. In a perceptive series of papers, three of which are included in this volume, Wolfgang Sachs has explored ‘the archeology of the development idea’. The paper that follows deals explicitly with the hegemony of the economy on the world stage.

The economist’s prejudice

Wolfgang Sachs

‘Should India ever resolve to imitate England, it will be the ruin of the nation’. In 1909, while still in South Africa, Mohandas Gandhi formulated the conviction upon which he then, over a period of forty years, fought for the independence of India. Although he won the fight, the cause was lost; no sooner was independence achieved than his principle fell into oblivion. Gandhi wanted to drive the English out of the country in order to allow India to become more Indian; Nehru, on the other hand, saw independence as the opportunity to make India more western. An assassin’s bullet prevented the controversy between the two heroes of the nation from coming into the open, but the decade-long correspondence between them clearly demonstrates the issues.

Gandhi was not won over to technical civilization with its machines, engines and factories, because he saw in it a culture which knew no more sublime end than that of minimizing bodily effort and maximizing physical well-being. He could only shrug his shoulders at such an obsession with gaining comfort; as if a good life could be built on that! Didn’t India’s tradition, undisturbed for thousands of years, have more substantial things to offer? Although far from being a traditionalist on many issues, Gandhi insisted on a society which, in accordance with Hindu tradition, gave priority to a spiritual way of life. An English style of industrialism is out of place wherever swaraj, the calm freedom to follow personal truth, is to rule; Gandhi pleaded for a renewal of the countless villages of India and for a form of progress to be judged accordingly. In his eyes, India was committed to an idea of the good and proper life that contradicted the ideals prevalent in England during the age of automation. For this reason, a wholesale imitation of the west was simply out of the question; individual elements should be adopted only in so far as they could help give better expression to India’s aspirations.

Nehru disagreed. He saw no choice other than introducing the young nation to the achievements of the west as soon as possible and taking the road toward an economic civilization. Even in the early days, and in spite of his great admiration for the man, he found Gandhi ‘completely unreal’ (letter of Nehru to Gandhi, 9th October 1945) in his vision. Though he intended to avoid the excesses of capitalism, he still viewed Indian society primarily as an economy, that is, as a society defining itself in terms of its performance in the provision of goods. From an economic viewpoint, however, human nature, the function of politics and the character of social reform assume a particular meaning. People are seen as living in a permanent situation of scarcity, since they always have less than they desire; the most noble task of politics is thus to create the conditions for material wealth; and this in turn requires the reorganization of society from a host of locally based subsistence communities into a nation-wide economy.

Nehru thus fostered precisely that western self-delusion which was also at the core of the development idea: the essential reality of a society consists in nothing else than its functional relations to achieve useful things; the rest is just folklore or private affair. In this view, the economy overshadows every other reality; the laws of economy dominate society and not the rules of society the economy. This is why, whenever development strategists set their sights on a country, they do not see a society that has an economy, but a society that is an economy. To take this conquest of society by the economy for granted is a burden inherited from nineteenth-century Europe which has been passed on to the rest of the world over the last forty years.

Production as a matter of secondary importance

Observing a group of Indios who work in their fields in the mountains around Quiche, and seeing the barren ground, the primitive tools and the scanty yield, one might easily come to the conclusion that nothing in the world is more important to them than increasing productivity. Remedies could swiftly be found: better crop rotation, improved seeds, small machines, privatization, and anything else the cookbook of business management might recommend. All this is not necessarily wrong; however, the economic viewpoint is notoriously colour blind: it recognizes the cost–yield relation with extreme clarity, but is hardly able to perceive other dimensions of reality. For example, economists have difficulty in recognizing that the land bestows identity upon the Indios since it represents the bridge to their ancestors. Likewise, economists often fail to note the central importance of collective forms of labour, in which the village community finds visible expression. The outlook of the Indios is incompatible with that of the economists: neither land nor work are for them mere production factors waiting to be optimally combined. To put this in the form of a paradox: not everything that looks like an economic activity is necessarily a part of economics. Indeed, economics offers only one of the many ways of apprehending goods-orientated activities and putting them in a larger context. Obviously, in every society things are produced, distributed and consumed; but only in modern societies are prices and products, conditions of ownership and work, predominantly shaped by the laws of economic efficiency. Elsewhere different rules are valid, other models prevail.

One does not need to cite examples of ancestral beliefs, such as those held by the Bemba in Zambia, who see a good harvest or a successful hunting expedition as a gift from their ancestors and thus court their favour in the hope of higher production. Even the haggling and chaotic hustle and bustle in the souks of an Arabian medina have nothing to do with undercutting the competition; who pursues which of the many trades is determined by factors of social and geographical origin as well as by one’s allegiance to a Sufi sect. (And of course by one’s sex; trade is usually a man’s job, but in Haiti, for instance, women have the say in such matters.) Likewise it is enough to consider the cycles of cultivation practised by farmers in Maharashtra, which neatly fit into the yearly round of weddings, festivals and pilgrimages. New methods of cultivation can soon disrupt this social calendar.

In societies that are not built on the compulsion to amass material wealth, economic activity is also not geared to slick, zippy output. Rather, economic activities like choosing an occupation, cultivating the land or exchanging goods are understood as ways to enact that particular social drama in which the members of the community happen to see themselves as the actors. That drama’s story largely defines what belongs to whom, who produces what and how, and when what is exchanged with whom. The ‘economy’ is closely bound up with life and has not been isolated as an autonomous sphere which might stamp its rules and rhythms on the rest of society.

But in the West the economy alone dictates the drama where everyone must play their role.

An invention of the West

As late as 1744, Zedler’s Universal Encyclopedia unwittingly gives a naive definition of the heading ‘market’: ‘that spacious public place, surrounded by ornate buildings or enclosed by stands, where, at certain times, all kinds of victuals and other wares are offered for sale; hence the same place is also called market-place’. The market, heralded both as blessing and as bane over the last two centuries, this powerful idea – nothing more than a location! The author of the encyclopedia seemed only to be thinking of crowds, stands and baskets; there is no mention of ‘market shares’, ‘price fluctuations’ or ‘equilibrium’. His concept of ‘market’ has practically nothing to do with the familiar concept of today; between then and now a far-reaching change has taken place in the self-image of society.

Adam Smith was the first thinker who, when using the term ‘market’, no longer envisaged a locally determinable outlet for goods, but that society-wide space throughout which all prices intercommunicate. The term, which until then had designated a specific place, subsequently acquired its generalized and abstract meaning: it now refers to the action of supra-individual equilibrium mechanisms.

This conceptual innovation was no accident, but mirrored a new social reality: an economy of national scope. Before then, a domestic market was not something to be taken for granted; even in Europe at the end of the seventeenth century one could hardly find trade between different regions of one country. Of course, there has always been trade – one need only think of the North German Hanseatic League or the splendour of Venice – but it was trade with distant countries, which remained limited to a few cities as bridgeheads. It is true that history knows markets in all shapes and sizes, but they were precisely local and temporary places of exchange, mostly between towns and the surrounding country with prices more a matter of custom.

In Adam Smith’s century, however, the nation-state had drawn a web of trade relations over the whole of society and established the domestic market. Like today’s developing countries, the young states of that time pushed hard to make economic principles prevail everywhere, be it only to finance their own existence. That was the birth of the national economy, even on a lexical level: while the term ‘economy’ had formerly been applied to the ‘domestic economy’ of the prince, now the whole nation was transformed into a ‘political economy’. And Smith became the theoretician of a society governed by the rules of the market.

Alternatives to the economy?

The transformation of society into a political economy was, of course, only achieved after a prolonged struggle demanding many sacrifices. After all, neither how people gained their livelihood or regarded property, nor their idea of good conduct or their sense of time, was shaped by a commercial ethos. The merchant was not yet an entrepreneur, land was not saleable, competition was frowned upon, usury disreputable, and those who worked for wages lived on the fringes of society. As a result, the progress of capitalism was punctuated by bitter disputes about whether and to what extent land and forest, grain and money, and workers themselves, could be treated as commodities.

In the last dec...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Figures
• Tables
• Contributors
• Acknowledgements
• Introduction
• Part I: On the Nature of the Economy and Economic Science
• Part II: On Economic Activity, Progress and Development
• Part III: On the Mechanisms of Economic Policy
• Conclusion
• Appendix: Contacts and Addresses
• Bibliography