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Issue no. 9;  20 October 2001                                                   back issues at www.paecon.net

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                    In this issue:                    

                    - Julie A. Nelson,  Why the PAE Movement Needs Feminism

                    - Geoff Harcourt,  An International Marshall Plan

                    - James K. Galbraith,  The War Economy

                    - Jeff Gates,  The Globalized Economy

                    - Gilles Raveaud,  Support the Report 

                    - PAE in the media: excerpts from:
                            - Foreign Policy, Economistes Sans Frontières   
                            -
Science & Society, Of People, Curves and Autism

 

 

 

 

 

 

Why the PAE Movement Needs Feminism 

Julie A. Nelson   (Global Development and Environment Institute, Tufts University, USA)

What can feminist economics contribute to the Post-Autistic Economics movement?
Anyone familiar with both of these will have noticed that the two have much common ground.
Both seek to put at the core of analysis the economic and social problems facing women,
men and children.  Both protest the definition of the economics discipline around a single,
narrow set of methodological tools. Both are international and pluralistic movements,
incorporating participants from many countries and many schools of economic thought.

I would like, in this essay, to bring to the attention of PAE participants what I believe is
one of feminist economics’ most unique and fundamentally important contributions to the
discussion of the potential transformation of our field. This newsletter has carried articles
examining materialist, institutional, geographical, political and intellectual explanations for
the current abysmal state of economics research and teaching. Feminist analysis brings to
light other important dimensions of the story of how economics got into its current autistic
condition, and why it is so resistant to change. I believe that PAE will to some extent

misunderstand its own historical dynamics, and be less effective as a force for change, if
it neglects the insights that come from a gender-sensitive analysis of the value system
underlying contemporary economic study.

I invite you to do a three-part thought exercise with me.  First, think about the characteristics
held in highest esteem within the contemporary hegemony of mathematized rational-choice
modeling.  You will probably come up with a list that includes characteristics like rigor,
precision, detachment, quantitative analysis, abstraction, self-interest, autonomy, rationality,
etc. Next, think about the flip side of each of these terms. You will probably come up with a
list something like this:  pliability, vagueness, connection, qualitative work, concreteness,
generosity, interdependence, emotion. Lastly, consider the gender connotations of each list.
Most people raised in Euro-American cultures will immediately recognize that the first list is
culturally coded as “masculine” and associated with toughness and power, and the second
as “feminine” and associated with softness and powerlessness.

What is at issue, then, for PAE, is not simply changes at the level of methodology, but
a sea change in the underlying value system of contemporary economics.  A long and
intricate history of relations among gender, social organization, science, and conceptions
of knowledge formed these values. At the time of the Enlightenment, the world--and the
economy--came to be seen as
clockwork-like and mechanical.  This image of the economy,
 and an epistemological image of the knower as radically separate from the subject of study,
encourages the primacy of mathematical modelling. Feminist scholars have pointed out how
this epistemology reflects a fantasy of achieving solid security through the control of nature
by our minds, and a denial of all connection, embodiment, vulnerability, or flux. An early
Secretary of the British Royal Society, for example, stated that the its scientific purpose
was to "raise a masculine Philosophy … whereby the Mind of  Man my be ennobled with
the knowledge of Solid Truths." (Note the absence of feminine, body, women, and
contingency.) The autism of contemporary e
conomics reflects the cultural sexism in
which it historically developed--with a vengeance.

What is needed, much feminist theory suggests, is not a flip-flop into an image of humans
as totally powerless and fragmented, but rather an overcoming of the whole either/or
understanding of the relations of humans to each other and to the world. An authentic

recognition of natural and social connection leads to an understanding of the human

knower as both part of the reality to be studied, and able to reflect on that reality. The
fantasy of detached control can be replaced by the knowledge of lived experience.

Participants in the PAE movement should therefore be aware that whenever we call for
more connection to social problems, whenever we call for more concreteness, for more
flexibility, or for more embodiment, we are asking a lot.  We may think we are shaking a
disciplinary branch, but in reality we are rattling a very big emotional and socio-cultural
tree. We should not be surprised when defenders of the status quo often fail to engage
with us at an intellectual level. The fact that we are, in fact, generally much more reasonable
than they are (in the broad sense of human wisdom) is almost beside the point. Our calls
for change will often be perceived as calls for the emasculation of economics, for making
economics soft, for making economics impotent. Our calls for change demand that our
listeners “think outside the box” in a radical way that will, at the least, feel unfamiliar and
uncomfortable to many, and be perceived as profoundly threatening by some.

That said, it is important to clarify the roles of actual men and women in the perpetuation
of sexist gender constructs at the core of economics.  Common misperceptions about
feminist economists include beliefs that it is concerned only with “women’s issues,” is
only done by women, advocates a purely qualitative and emotional alternative to
contemporary thinking, or treats men as the enemy.  Those who hold these views display
their ignorance of contemporary feminist work.  A number of men challenge the sexist
beliefs at the core of the value system, and many women do not. The reason that w
omen
have tended to take the lead in the feminist push within economics, is not because we
"bring something different" (via our genes or brain functions), but because the biases are
far more obvious to those who start somewhat outside the system.  Fish, it is said, do not
notice they are swimming in water.  Other "outside" groups, characterised as "other" by
way of race, sexual preference, age, disability, nationality, or class vis a vis the dominant
culture, also bring important perspectives. The PAE movement will be self-deluded if it
looks for accomplishments largely within a debate among Euro-American professional men. 
It will miss its mark if it ignores the problems suffered--and contributions offered--by those
who have long been labelled as non-rational and dependent, by a culture that elevates mind
and autonomy above all.

As I write this essay, in October of 2001, the events of September 11 are fresh in
everyone’s mind. To readers who may still think of feminist concerns as “just” women’s
issues, and of no concern to them, I offer one last reflection.  The Taliban, and its variety
of fundamentalist thinking, has been the most controlling and oppressive regime in regard
to women in contemporary times. Contemporary academic economics, and contemporary
global economic policies, are gripped by other rigidities of thinking--what George Soros
has dubbed “market fundamentalism.” Fantasies of control are operative in both phenomena,
and gender is far from irrelevant to understanding their power, and their solution.

_________________________
Julie A. Nelson is the author of Feminism, Objectivity, and Economics (London: Routledge, 1996) and (with
Marianne A. Ferber) Beyond Economic Man: Feminist Theory and Economics (Chicago: Uni. of Chicago Press, 1993). 

For more about feminist economics, visit http://www.facstaff.bucknell.edu/jshackel/iaffe/

 

 

 

 

 


 

An International Marshall Plan
Geoff Harcourt   (Cambridge University, UK) 

It is necessary that those who masterminded the attacks on Tuesday 11th September
should be brought to justice; but parallel with the steps needed to achieve this should
be international efforts to remove the injustice and poverty that provide the conditions
that create such despair in persons that they are moved to take such awful actions in
the first place.

In the early post war years, the USA rightly received praise for implementing the
Marshall Plan to help Europe recover from its wartime devastation.  This was an
example of the best of American virtues.  What is needed now is an International
Marshall Plan to tackle injustice and poverty in the Middle East, Africa, the poorer
parts of Asia and Latin America.  The funds should come from the USA, Europe, Japan,
and the wealthier economies on the Pacific Rim.  The administration of their use could
be monitored by the World Bank and the IMF.  The aid should be immediate, and then
a sustained flow of funds over several years.  Quid pro quos would be necessary, for
example, Israel should again allow Palestinians into Israel to work and should allow
the development of social and industrial infrastructure in the Palestinian areas
themselves.

The altruism implied by these suggestions would not be without benefit to the altruists. 
The expansionary forces unleashed by the measures would be a welcome offset to the
contractionary forces (probably soon to be reinforced by reactions to last week's horror)
at present sending the advanced economies into recession, or in the case of Japan,
worsening its recession of the last 10 years.  If such a cumulatively virtuous process
could be started, it would not only bring economic benefits to the poorest citizens of the
world, but it would also serve to lay a base on which democratic institutions could be
erected.

People of good will are desperately needed to float ideas, to offset the understandable
reaction to the happenings of Tuesday 11th September that war-like actions are the
only possible reaction.

 

 


The War Economy
James K. Galbraith   (University of Texas, Austin, USA)

An economic calamity

In a war economy the public obligation is to do what is necessary: to support the military
effort, to protect and defend the home territory, and especially to maintain the physical
well-being, solidarity, and morale of the people. These may not prove to be easy tasks in
the months ahead.

We are facing what is not only a terror attack, but also an economic calamity. The impact
of the strikes at the World Trade Center now includes a 14.4 percent drop in stock prices
in the first week following the attack, and a collapse in those sectors related to travel and

leisure, notably airlines, hotels, and resorts. As these events cascade through the
economy, they will shatter fragile household balance sheets and precipitate steep cuts in

consumer spending. The ensuing recession could be very deep and very long.

This is not merely a shock to a healthy system, requiring only limited measures to restore
confidence and stimulate spending. Household finances have been badly out of balance
since 1997, as the household sector financed consumption above income by borrowing,
largely against capital gains. But capital gains turned negative after April 2000. Once that
happened, large cuts in consumer spending could be delayed but not avoided, absent
major policy changes. What has happened since September 11 consolidates, advances
in time, and also intensifies a decline that was already well under way.

By way of a rough order of magnitude, my Levy Institute colleagues Wynne Godley and
Alex Izurieta estimated last summer that unemployment would have to rise to 7.4 percent
just to bring household expenditures into line with income. Unemployment would rise as
high as 9.0 percent, they estimated, if households were to try to return to normal post-
World War II saving levels. And that was on a smooth trajectory involving a gradual but
not catastrophic slowdown-namely, before the events of September 11. Now it is possible
that households will try even harder to restore depleted reserves, driving unemployment
higher still.

There is thus no chance that events will right themselves in a few weeks, or that we will
be saved by such underlying factors as technology and productivity growth-as Chairman
Greenspan professes to believe-or by lower interest rates or the provisions of the recent
tax act. Rather, we are in for an economic crisis; the sooner this is recognized and acted
upon, the better.

Normally during wartime, large-scale support of the domestic economy is not needed,
because of vast increases in military spending. However, what we face so far is not the

reality of wartime mobilization, but a veneer of military action over a worldwide diplomatic
and police offensive. The $20 billion already appropriated for the military may cover the
costs of near-term operations, but neither that nor the $20 billion allocated for relief and
reconstruction in New York City is nearly enough to deal with the larger economic problem.

In total at this moment, federal spending measures of $55 billion are being considered,
including the airline bailout. A further program of perhaps $100 billion may soon be
proposed, including expanded unemployment insurance, extended tax rebates, and
payroll tax relief. This movement in Congress to lift the "budget constraint" is a welcome
revival of Keynesian instinct, but proposals so far have been based on numerical
guesswork and not on the objective of maintaining full employment. As their advocates
will usually acknowledge, proposals in the $100-to-200 billion range still involve accepting
a severe recession, loss of tax revenue, and, no doubt, falling government spending at
state and local levels no matter how much federal spending expands.

In these circumstances, the concept of "stimulus" should be discarded in favor of the
larger objective of economic stabilization-a sustained effort commensurate with the crisis
as it unfolds.

Business tax cuts, whether temporary or permanent, are useless in this situation. Without
profits, reduced taxes on profits have no effect; without sales, investment is pointless even
if the tax regime favors it. Both the logic and the motives of those proposing such
measures are to be suspected. All wars attract profiteers; public morale will be destroyed
if they succeed. For this reason, the shocking proposal to reduce capital gains taxes in
the crisis was rightly shelved, for a few days at least.

A further dilemma emerges when one considers that personal tax cuts, even if temporary
and targeted properly at working households, may not stimulate spending by much in a
time of crisis. If households are determined to increase their financial reserves, and as
they are flush with durable goods after a long expansion, increases in cash on hand may
translate weakly into increased spending; such a situation could last for years. Of the
available tax cuts, payroll tax rate reductions are the most likely to prove effective at
stabilizing spending, because they would target households that are income-constrained.

Averting collapse


Cautious men are in charge of the economy at the moment, but this attitude can only
bring disaster. There no longer is any danger of overdoing fiscal policy; demand-pull
inflation is not even a remote threat. The danger, at the moment, is collapse. To avert this,
an initial program could be up to three times as large as what has been so far proposed.

Increases in federal spending on public health, education, transport, and other areas are
also absolutely needed and should be funded liberally. But the option of revenue sharing
is perhaps most readily created and implemented on a large scale, most likely to have
early direct and indirect effects, least likely to be dissipated in saving or imports, and also
the most nonpartisan in concept. Direct purchases by state and local governments now
constitute nearly 10 percent of GDP; they have been rising rapidly in the past few years
and could fall rapidly if revenues are curtailed. Preventing this, and creating new capacity
for state and local action in many areas, including direct job creation, should be a very
high priority at this time.

In activity on a grand scale, the federal government might extend revenue sharing to cover
as much as one-fourth of total expenses this fiscal year-$300 billion-with a provisional
follow-through of 20 percent in the second year and 10 percent in the third. The numbers
can be adjusted as events and more refined calculations dictate, but they should be large
enough to stabilize budget and service provisions at all levels of government.

In the realm of financial issues, it is now clear that Federal Reserve policy has completely
lost domestic effect. Cuts in interest rates on September 17 had no impact on the largest
one-week decline in stock prices since 1933 and none on underlying economic activity.

History and the dollar


Here, the analogy to World War II mobilization is misleading. After World War I, the
United States was the world's creditor nation and held a near-monopoly on the gold stock.
With the collapse of world trade in the 1930s, global economic interdependencies receded
sharply; meanwhile, the United States in the late 1930s was energy self-sufficient and did
not run a large trade deficit. None of these conditions now holds. In historical terms, the
U.S. position today much more closely resembles that of the Great Powers in Europe in
1914 than that of the United States in 1939. As a result, a high-order Keynesian response
will have global financial repercussions. To finance either a major military or a major
domestic economic effort, or both, on world capital markets could very well unhinge the
dollar and shift the balance of financial power-presumably to Europe.

Lower interest rates worldwide-beginning on September 17-have so far staved off a major
fall in the dollar. But that situation could change, particularly if the brutality of actual
hostilities or the outbreak of famine in Afghanistan or a similar calamity leads to a global
shift of opinion against the United States. Oil and gas prices will follow demand downward
in the short run and the recession will cut imports, improving the current account so long
as exports do not continue to slump. But uncertainty over the war aims of the administration
is likely to curtail activity worldwide and so add falling exports to our miseries; moreover, oil
supplies could be disrupted in a wider war, and imports will rise again if large-scale
Keynesian policies take hold.

Any of these scenarios could destabilize the dollar, causing a decline far greater than the
20 to 25 percent that is probably needed for current account adjustment. There are vast
public and private dollar holdings overseas-all substantially contingent on confidence that
other actors will hold on to their holdings. In this crisis, they may not stand firm; a run on
the dollar cannot be ruled out. This is the classic scourge of war efforts and "populist"
expansions. Unless prevented, the natural reaction of the Federal Reserve would be to
raise interest rates, thereby deepening the slump. An economy with high unemployment
and high inflation is a very possible, even likely, result in this case.

Cars and the global financial architecture


What is to be done about this risk? An old truism in global finance holds that debtors
cannot run wars-or economic recovery programs-without the organized assistance of their
friends and allies. Such assistance will surely not be forthcoming, on a sustained basis,
unless it involves a commitment to a more stable and successful global financial system
afterward. The further reality is that the United States needs the sustained support of the
world community for diplomatic, intelligence, and military purposes. This support cannot be
assumed to be available free of cost, especially from poor countries that have not benefited
at all from the modern global order. Therefore, like it or not, a new and more just and stable
global financial order will have to emerge from the present crisis, or we will eventually
become mired indefinitely in fruitless and unending military struggles, aided by fewer and
fewer reliable allies. Comprehensive debt relief for cooperating countries (Pakistan is a key
example) would be a good place to begin.

The modern system of floating exchange rates and unregulated international capital
markets-just 30 years old-has never been tested on the present scale. It could easily fail
now. This being so, planning for a transition in the global financial system toward an
effective multilateral regulatory and stabilization system should begin quietly, but soon.
It is time to examine a return to a Bretton Woods framework of fixed but adjustable
exchange rates among the major currencies, backed by a multilateral reserve. This task
is simplified by the creation of the euro; it would be easier now than at any time in decades
to fix parities for the industrial world, allowing first for a substantial dollar depreciation.
Beyond this, we will need new, perhaps regionally decentralized, exchange stabilization
and liquidity facilities for the developing world

Further, the current crisis offers compelling reasons to examine the structural sources of
the U.S. trade position. Here, oil is a major factor: cutting imports totally would reduce
the deficit by a quarter. Cars are a larger factor still. In the medium run, reconstruction of

our transportation networks and housing patterns in a way that would rely far less on oil
and automobiles (and airlines) may be the necessary domestic adjunct of real security
abroad.

The issues of global financial architecture and our national monoculture of oil and cars
lie behind the present emergency; they have helped to translate a terror attack into an
economic crisis. In the end, our ability to address these issues effectively will prove
central to ultimate success in the quest for both physical and economic security. The
immediate response should include a planning process in which these issues can be
discussed freely by competent experts and without domination by partisan views or
special interests.

If mass unemployment or inflation cannot be avoided by preemptive means, then the entire
experience of the New Deal and the War Economy will have to be called upon in due
course. But there is no point in going into all that now.

___________________________________
With the author's permission, this article has been excerpted from a longer version available on
the web site of The Levy Economics Institute at
http://www.levy.org/docs/pn/01-8.html

_________________________________________
James Galbraith is the author ofCreated Unequal: The Crisis in American Pay (1998) and the editor (with
Maureen Berner) of Inequality and Industrial Change: A Global View  (2001).

 

 

 

 



The Globalized Economy

Jeff Gates   (Shared Capitalism Institute, USA)

Finance Driven Phenomenon

Globalization is a finance-driven phenomenon.
Its operations are geared to a key
assumption advanced by neoliberal economists: “maximize financial returns and – trust
us -- everything will turn out fine.”  As I will show, that naively mechanistic model is
dangerously dysfunctional.  Its unbridled operations are a key reason wealth is being
redistributed worldwide - from poor to rich, from poor country to rich country, from the
future to the present -- with the unflinching support of rule-making crafted by the World
Trade Organization (WTO).

The problem with globalization is not the corporate entity, as some insist.  Nor is
globalization a problem per se.  The malady lies in the combination of: (a) the narrow
bandwidth of values to which the corporate entity mechanistically attunes its operations
(i.e., financial values), and (b) the current state of corporate ownership – abstract, remote
and concentrated.  The result is a globalizing economy that is experienced by most as
disconnected, speeded-up and dumbed-down.  The solution lies in evoking a policy mix
insistent that business methods mature so that ownership patterns quickly become
more personalized, localized and human-sized.  In a private property system, that is the
only sensible way globalized private enterprise can attune its operations to the legitimate
concerns of those influenced by its operations.

Globalization has the potential to be a positive force.  However, under neoliberal-informed
rule-making, globalization instead has emerged as a capital markets-led, government-
backed process that radically redistributes wealth (from weal or “well being”), as I
chronicle below.

Rather than integrating the world economy, today’s dominant economic model divides
people (both within and between nations), plunders natural resources, and imperils
posterity.  Instead of fostering free enterprise democracies, today’s globalization attunes
its operations to such a cramped range of values that the “financially fit” are viewed as
sufficient unto themselves while the rest are not worth the bother.

 
Wealth Redistribution Trends


This finance-obsessive rendition of globalization guarantees results that are inequitable
and unsustainable.  Left unreformed, WTO rule-making is destined to evoke hostility and
instability as its operations are often associated with oppression, exploitation, domination,
corruption and disrespect.  To become sensible and sustainable, globalization requires a
counter-force to today’s wealth-redistribution trends:

1.
       From the bottom to the top.  As the US is the leading advocate for the neoliberal
model of globalization, the trends emerging there are instructive.  The wealth of the
Forbes 400 richest Americans grew an average $1.44 billion each from 1997-2000,
for an average daily increase in wealth of $1,920,000 per person ($240,000 per hour
or 46,602 times the minimum wage).  The financial wealth of the top 1 percent of US
households now exceeds the combined household financial wealth of the bottom 95
percent.  The share of the nation’s after-tax income received by the top 1 percent
nearly doubled from 1979-1997.  By 1998, the top-earning 1 percent had as much
combined income as the 100 million Americans with the lowest earnings.  The top
fifth of US households now claim 49.2 percent of national income while  the bottom
fifth gets by on 3.6 percent.  Between 1979 and 1997, the average income of the
richest fifth jumped from nine times the income of the poorest fifth to roughly 15 times. 
The average hourly earnings for white-collar males was $19.24 in 1997, up from
$19.18 in 1973.

2.
       From democracies to plutocracies. Today’s capital markets-led “emerging markets”
development model is poised to replicate US wealth patterns worldwide.  For
instance, 61.7 percent of Indonesia’s stock market value is held by that nation’s 15
richest families.  The comparable figure for the Philippines is 55.1 percent and 53.3
percent for Thailand.  Worldwide, there’s now roughly $60 trillion in securitized assets
(stocks, bonds, etc.), with an estimated $90 trillion in additional assets that will
become securitizable as this model spreads. 

3.
       From the future to the present.  Unsustainable production methods are now standard
practice worldwide, due largely to globalization’s embrace of a neoliberal-inspired
financial model that insists on maximizing net present value (that’s largely what stock
values represent).  That stance routinely and richly rewards those who internalize
gains and externalize costs (such as paying a living wage or cleaning up
environmental toxins).

4.
       From poor nations to rich.  Today’s version of globalization assumes that unrestricted
economic flows will benefit the 80 percent of humanity living in developing countries
as well as those 20 percent living in developed countries.  Yet the UN Development
Programme (UNDP) reports that 80 countries have per capita incomes lower than a
decade ago.  Sixty countries have grown steadily poorer since 1980. 

5.
       From families to financial markets.  How is globalization affecting OECD countries? 
The work-year for the typical American has expanded 184 hours since 1970.  That’s
an additional 4-1/2 weeks on the job for about the same pay.

6.
       From free-traders to protectionists.  OECD nations channel $326 billion a year in
subsidies to their own farmers while (a) restricting agricultural imports from developing
countries, and (b) insisting that debtor nations repay their foreign loans in foreign
currency, which they can earn only by exporting. 

7.
       From law-abiders to law-evaders.  Roughly $8 trillion is held in tax havens worldwide,
ensuring that the most well-to-do can harvest the benefits of globalization without
incurring any of the costs.

8.
       From personal freedom to financial freedom. The free enterprise component of
democracy is founded on the  notion that free markets provide an opportunity for
free people to freely express their free choices and thereby enjoy the dignity of
self-determination, democracy’s most treasured freedom.  Though terrific in theory,
the map fails to match the territory.  To equate markets with expression of the
common will is misleading, even deceptive.  Markets don’t respond to people, but to
people with money.  Embrace a policy mix, like today’s, that concentrates income,
and that mix is destined to undermine both self determination and markets, the moral
foundations of free enterprise democracies.

9.
       From education to incarceration.  Since 1980, US prison budgets have increased at
a pace six times that for higher education.  Florida now spends more on corrections
than on colleges. 

10.
   From the real to the abstract.  Today’s neoliberal-dominated perspective on progress
insists that globalization has helped the US achieve two decades of unprecedented
financial prosperity.  Yet social, fiscal, cultural, political and ecological indicators
confirm that the world’s “richest” nation is experiencing a steady 20-year decline
across a broad array of quality-of-life indicators, and in numerous living systems.


Conclusion

Globalization’s “guidance system” is designed to scour the globe for shareholder value,
with financial value a proxy for shareholder value.  If that value “shows up,” the neoliberal
model signals success, and this self-reflective process repeats itself ad infinitum.  Only
with a component of personalized “up-close capitalism” will privately owned enterprises
become “re-wired” so that their operations adapt to the more complex, diverse and
multidimensional concerns of people, place and pace.  Tyranny becomes structural when
a model enforces behavior attuned to too narrow a bandwidth of values

In “systems-eze,” the challenge lies in how best to smarten-up free enterprise by re-wiring
its signaling systems into more robust patterns so that it learns ongoingly and, ideally,
trans-generationally.  At present, the corporate entity has no designed-in means for taking
into account the values of those whose lives it effects.  Though envisioned as a
self-organizing model, it’s missing a key component: locale-imbedded ownership, the
essential feedback-generating relationship required for locale-sensitive self-correction. 
Regulation becomes the alternative when those affected have no property-empowered
right to have their voice heard.  Yet the WTO routinely rejects regulation as a restraint of
trade.  If the maladies that accompany globalization are re-framed in terms of property
relationships, it is clear that components of localized ownership offer a hopeful way to
rationalize today’s dysfunctional, finance-myopic paradigm.

Given the nature of the threats that sovereign nations now face -- global, systemic,
multidimensional, interdependent, transgenerational -- the best risk-management strategy
lies in a multilateral commitment to prove the truth of an age-old axiom: “If you want
peace, work for justice.”  Today’s immature and mechanistic model generates results
that alternate between disappointing and appalling.  The solution lies in a paradigm that
evokes property relationships able to reflect a broader spectrum of values – social,
economic, cultural, political and ecological. At a minimum, globalization requires a
model that stops today’s radical redistribution of wealth
.  In that direction also lies
the only sensible strategy for long-term national security. 

As presently practiced, globalization urges that nations ally to make the world secure, not
for the forces of democracy, but for the forces of finance.  That fanciful stance is founded
on the neoliberal assumption that the free flow of global capital will evoke free enterprise
democracies that are robust, just and sustainable.  Instead, insistence on that naïve
prescription has ravaged the natural world, ignored the legitimate needs of the poor, and
fed the greed of a privileged few.  Any economist not actively crafting a paradigm to
reverse these trends is lending support to a globalized form of finance fundamentalism.
_______________________
This article is based on Jeff Gates’ testimony to the United Kingdom Parliament’s Select Committee on
Economic Affairs on 8 October 2001.  His full testimony, including documentation of his statistics, is available
at 
http://www.btinternet.com/~pae_news/Gates-testimony.htm
_______________________
Jeff Gates is President of the Shared Capitalism Institute (www.sharedcapitalism.org).  Former counsel to the U.S
Senate Committee on Finance, he is the author of The Ownership Solution (1998) and Democracy at Risk (2000).
_________________________________________________________________________________________


 

The PAE movement began in June 2000 when economics students in France, under the
banner autisme-économie, launched a protest that captured French media attention and
started a public debate on the future of economics and economics teaching. Jack Lang,
the French Minister of Education, commissioned Jean-Paul Fitoussi, head of the French
Economics Observatory, to investigate the students' charges.  Fitoussi's book-length report
was released last month.  Lang says he will implement it.  Below, Gilles Raveaud, one of
the student founders and leading spokespersons of the movement in France explains why
Fitoussi's report is an important victory for the reformists' side.
 


Support the Report

Gilles Raveaud   (ENS Cachan, France)

The Fitoussi Report may fail to satisfy some people, especially because it does not
acknowledge the existence of a “global alternative” to mainstream economics.  Indeed the
Report seems to say that nothing really valuable exists outside the “neoclassical-keynesian
consensus”, a statement with which we of course deeply disagree.  But worse, Jean-Paul
Fitoussi, being an “old-fashioned” keynesian, has apparently not realised that what he
believes in is, regrettably, now largely forgotten in most universities.  What is taught today
in France is not his kind of economics, but “general equilibrium with rational expectations”
– a somewhat different approach, to say the least. There seems to be here a sort of
“generation gap”.  Some members of Fitoussi’s generation have a culture and an approach
to economics which they find hard to believe has disappeared. But it has.  And this is why
we stress the importance of teaching the history of economic thought and economic history.

Nonetheless, the Report contains strong statements regarding the use and misuse of
mathematics and regarding neoclassical economics’ oppressive domination. For example:

“One must acknowledge that concerning mathematics and formalisation, some
excesses have taken place. We sometimes (often?) see an excess of modelisation
and very little concern for its empirical relevance.” 

“We must avoid using the teaching of mathematics and statistics (and sometimes
microeconomics) in undergraduate courses purely as a tool of selection.”

The Fitoussi Report does not, it is true, deal directly with the questions we raised.  In
particular, it fails to deal directly with the lack of pluralism and the intolerant domination
of neoclassical economics.  But by proposing a “bottom-up” approach, Fitoussi offers a
politically adroit answer to these problems.  The report’s method is not to dictate what is
to be taught, a method neither feasible nor desirable. Instead, Fitoussi’s idea is merely to
take teaching seriously
, something which in economics too few people do. He proposes
three ways – these are the teeth of his report -- in which this should be done.   They entail
reforms in the teaching of economics which if implemented (and the Minister of Education
suggests that he will see to it that they are) will have the effect of going a long way toward
realizing the demands for reform which our movement in France has been seeking. 
Fitoussi’s three primary means of reforming economics teaching are as follows.

1. The organisation of a multidisciplinary curriculum for at least the first three years.  
Within this curriculum students will be allowed to choose between disciplines as they
progress, and to intellectually confront them with one another.  Economics will then find
itself in competition with other subjects: either it turns to sensible courses or remains as
it is and loses students.  Furthermore, even if it does not reform, the economics students
that remain will, because of their exposure to other disciplines and to real debate in their
first three years, be in a much stronger intellectual position than they are today.

2.  Fitoussi wants debate on economic issues to be “integrated” into the structure and
content of economics courses, not only through theory and statistics, but also through
institutional and historical facts. There should be no “naked tools” (for Fitoussi these include,
alas, the history of economic thought).  The Report is categorical on this point.  For
example, it says:

“The debates [in economics] are to be taught, not only for the sake of pluralism, but
because their understanding allows the students to better grasp the concepts
.
Economics has always been and will remain the place of debates. It surprises me
that people are surprised by this.  Can one imagine that problems like unemployment,
inequality and poverty could be treated as physical phenomena ?” (emphasis added)

3. The shift from silly exercises to the production of essays, oral presentations and student
debates, things which are very rare in
France.  Teachers are to be required to give time to
helping their students prepare these projects.

Fitoussi also proposes an evaluation of teachers, something that does not exist in the
French system. We think that this could be useful for making economics teachers listen
to students’ complains, which now, as we know, they usually do not.  But we would prefer
a system in which students and their representatives would be associated in some way
with the evaluation of the curriculum itself, at least as far as teaching methods are concerned.

Apart from this last point, we support the Fitoussi Report, imperfect as it is.  We think that
if it is implemented, it would make economics in French universities look like VERY different
than it does today. The Report’s approach could be summed up as an attempt to squeeze
mainstream economics from two directions: one from the top with the introduction of
multidisciplinarity, and one from the bottom with the stress on debates and “integrated”
courses. If implemented, this strategy could be quite effective as a force for the reform of
economics both in and out of the classroom.

These are the reasons why we are currently  trying to convince economics teachers to join
us in support of the Report. (At present we are working on an article for Le Monde.) In fact,
it is only the teachers who can now change things. If they will try to do it and succeed,
then our revolt will turn into a peaceful and quiet revolution, but a revolution nonetheless,
where economics teachers will teach and students will learn economics at last.
raveaud@idhe.ens-cachan.fr


 



PAE in the media

Foreign Policy, The magazine of Global Politics, Economics, and Ideas
September–October 2001, excerpts from

"Economistes Sans Frontières" by Carlos Lozada.

 . . . In June 2000, a small group of French economics students published a petition on
the World Wide Web, declaring war not simply on the impact of globalization, but rather
on what some consider its root cause: neoclassical economics.

The petition sparked what is now known as the "post-autistic economics" (PAE) movement,
an academic backlash against traditional economics that is rapidly gaining adherents
among disaffected practitioners of the dismal science in developing and advanced
economies. In their initial petition, PAE proponents lament the use of mathematics "as an
end in itself" in the economics profession, decry the discipline's dogmatic teaching style
that "leaves no place for critical and reflective thought," and insist that their discipline
become engaged with the "empirical and concrete economic realities" of the day. They
advocate new approaches—including deeper study of the history of economic thought,
as opposed to merely economic theory—and call on their colleagues to rescue economics
from its "autistic and socially irresponsible state."

The PAE movement is drawing praise from antiglobalization activists and thinkers. Writing in
The Independent
, Andrew Simms of the United Kingdom-based New Economics Foundation
hails the PAE movement as part of an effort to make "the mandarins of the global economy
experience a reality check" and protect the environment. The movement's Web site and its
e-journal, the Post-Autistic Economics Newsletter (published every one or two months),
showcase PAE's specific critiques of mainstream economics as well as the movement's
growing influence.

In the July 10, 2001, issue of the newsletter, Professor of Applied Economics Grazia Ietto-Gillies
of South Bank University in London deplores the inability of the economics profession to
incorporate the unique role of transnational corporations (TNCs) into traditional economic
theory . . . .

Ietto-Gillies maintains that the blinders of traditional economics result in too little systematic
thinking by economic theorists on how multinational firms exploit regulatory differences in
labor laws, play investment-hungry governments off one another, and manipulate prices
across countries. "So far, transnational companies are the only economic actors who can
truly plan, organise, [and] control activities internationally," she concludes. "Other actors
such as labour, national governments, uninational companies, and consumers are as yet
unable to do so. This puts TNCs in a very special and privileged position."

Of course, Ietto-Gillies fails to mention another group that is managing to organize across
borders—the PAE movement itself. A different article in the same issue reprints an
anonymous letter from 27 Ph.D. candidates in economics at Cambridge University, written
after a meeting with PAE representatives. The Cambridge students called for the "opening
up" of the economics profession, proposing that the foundations of mainstream economics
be widely debated and that competing approaches receive the same degree of critical
scrutiny. "Economics is a social science with enormous potential for making a difference
through its impact on policy debates …. [P]rogress towards a deeper understanding of
many aspects of economic life is being held back."

The newsletter editors encourage concerned economists to e-mail their names and academic
affiliations in a show of support. As of July 19, 2001, more than 250 economists from at least
26 countries had written in—a testimony to the PAE movement's effective public-relations
efforts. Indeed, the stated purpose of the group's Web site is to "facilitate the spread of the
post-autistic economics movement to other countries and its eventual globalization." No
small irony that a movement linked to antiglobalist thought would be so eager to disseminate
its message across national borders.


Carlos Lozada’s article can be read in full at
http://www.foreignpolicy.com/issue_SeptOct_2001/gnsseptoct2001.html

Carlos Lozada is the associate editor of Foreign Policy magazine.

 


Over 500 people have now signed the Cambridge Proposal .  You
may sign it and the
"Kansas City Proposal" by clicking here.


 


Science & Society, Fall 2001, excerpts from
"Of People, Curves and Autism" by David Laibman  (City University of New York, USA) 

Strolling across the new campus of Complutense University on the outskirts of Madrid, in
March 1999, I was struck upon seeing this slogan, painted on a wall: "La econom!a es de
gente, no de curvas!" ("Economics is about people, not curves!").  Anyone who has not had
the pleasure of instruction in contemporary academic economics may not fully appreciate
the students' sense of being tormented by "curves": diagrammatic representations of
relationships among variables. (Think of intersecting supply and demand curves.)  The
slogan rejects abstract and quantitative theory in economics -- and by extension in the
human disciplines generally -- in favor of study of concrete, historical social reality.

I had no idea at the time that the "people vs. curves" slogan I witnessed would turn out to
be prophetic.  In June 2000 a group of French students assembled a petition, published
on the web, complaining about the current state of economics: its indiscriminate use of
mathematics; the "repressive domination" by neoclassical theory; and the exclusion of
alternative, critical approaches.  The students called upon the economics profession to
engage with the empirical and the concrete, to avoid "scientism," to embrace "a pluralism
of approaches adapted to the complexity of economic objects and to the uncertainty
surrounding most of the big economic questions," and to pursue reforms "to rescue
economics from its autistic and socially irresponsible state."  The petition resulted in the
launching of the Post-Autistic Economics Movement, which has spread like wildfire among
students in France and Spain, with growing numbers of correspondents in other countries
as well.  On June 21, Le Monde reported on the movement and solicited statements from
leading economists worldwide.  A conference to produce more detailed proposals was held
in December 2000.  Since then the movement has continued to grow and develop.

      The economics establishment, for the most part, has been waiting to see if the storm
will pass.  One noteworthy response came from Professor Robert Solow of MIT, Noble
Laureate and progenitor of the "neoclassical" growth model that has recently become a
staple of courses in macroeconomic theory.  Writing in Le Monde, January 3, 2001, Solow
called the students' position "an exaggerated reaction to this minority group (of highly
mathematical theorists), or a disguised attack upon something else."  Concerning the
dominance of neoclassical theory, Solow characterized that theory as follows: households
and firms are rational; prices and wages are flexible, so that goods and labor markets "find
their equilibrium"; and competition is "almost perfect."  All of this, however, Solow noted,
has been called into question by neoclassical economists themselves, who now study
incomplete markets, imperfect competition, rigid prices, asymmetric information, and
other complexities.  We can all agree, the argument goes, that the simple model is not
adequate; the challenge is to find ways to go beyond it without becoming immersed in
undue complexity . . . .


Now the students' movement, with its call for pluralism and for "critical and reflective
thought," is a remarkably positive development, and it is a sign of their potential that top
guns like Solow have emerged to engage with them.  I find, however, that an attempt to
come to grips with Solow's argument also raises some questions concerning the students'
position. or perhaps concerning ambiguities in the statement of that position reflecting the
coalition character of the movement.

The hallmark of the Solow response, after all, is its reasonableness.  We all want the
same thing, he says: good applied economics, relevant to real-life problems and issues. 
In his subtle deprecation of "ideology," however, Solow fails to note the ideological role
of his own neoclassical consensus.  The religion of the "free market" is closely connected
to the abstractions of rationality, competition and equilibrium as summarized by Solow. 
But when these abstractions are questioned, their proponents say that of course no one
believes in them any more!  We are concerned, they insist, with the messy world of limited
information, limited competition, non-equilibrium behavior, etc.  Trying to pin this down is,
as one of my colleagues once put it, like "boxing with jello."  Or, to cite a phrase from the
philosopher Hilary Putnam, neoclassical economics "keeps a double set of books" (quoted
in Vivian Walsh, Rationality, Allocation, and Reproduction, p. 6).  One set is for
undergraduate students, politicians and journalists: it promotes the social optimality of
"perfect" competition and the "free" market.  The other set is brought out whenever critics,
such as the students organized in the post-autistic economics movement, try to get to the
bottom of this pervasive pro-capitalist ideology.
. . . .


David Laibman's article can be read in full at
http://www.btinternet.com/~pae_news/Laibman1.htm


David Laibman ( scsjj@cunyvm.cuny.edu ) is editor of Sceince and Society.

 

 

 

 

_________________________________________________________________________________________________

EDITOR: Edward Fullbrook
CORRESPONDENTS: Argentina: Iserino;  Australia: Joseph Halevi, Steve Keen:  Brazil: Wagner Leal Arienti;
France: Gilles Raveaud, Olivier Vaury; J. Walter Plinge;  Germany; Helge Peukert;  Japan: Susumu Takenaga;
Spain: Jorge Fabra;  United Kingdom: Nitasha Kaul; Michael Murphy;  United States: Benjamin Balak,
Daniel Lien, Paul Surlis:  At large: Paddy Quick
__________________________________________________________________________________________________

Proposals and suggestions for articles
should be sent to the editor at pae_news@btinternet.com 
_____________________________________________________________


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