A lot of commentary in the US has focused on both the politics of Barack Obama’s stimulus package and on the TARP II bailout announced by Treasury Secretary Tim Geithner last week. In developments which somewhat parallel the Australian debate – such as it is – between the stimulators and the taxcutters (in truth, it might be a bit misleading to characterise it as one between Keynesians and Friedmanites), economists have lined up to give their verdicts one way or another. Perhaps it’s fair to say that no one is competely satisfied – for the stimulators, it doesn’t go far enough and much of the more immediate spending has been cut out to jump procedural hurdles Senate Republicans put in the way of passage. For the newfound apostles of fiscal discipline, it’s debt and deficit (though without the tendentious comparisons to Whitlam obviously).
To a large degree, most of this debate is highly ritualised. I thought Bernard Keane had a very interesting point to make today in a long Crikey piece where he argued that decision makers who are gleefully imposing a story or narrativising both events and their preferred solutions may be as much in the dark as the rest of us. The increased unpredictability of events, and of prescriptions as well as diagnoses in a time of crisis really foregrounds the artefactuality of sense-making work as people try to reduce uncertainty and simultaneously ensure that their preferred perspective becomes “common sense”. Aside from the really dire possibilities facing us all from a system which has precisely been characterised by distributed decision making and thus – by design – up until now resistant to centralised control, it’s been a fascinating study in both the sociology and social psychology of policy making.
It’s in no one’s interest, of course, to admit that they don’t quite know what is going on or that they’re frantically trying to impose a frame on the world economy for the intertwined purposes of politics and policy. It may be that we need different tools for understanding the social aspects of finance and market behaviour. It may also be that we need more research on exactly what drives “confidence” from a perspective which takes into account the fact that markets and investment decisions are far from random if driven by logics other than purely economic ones – what exactly is going on, for instance, when Geithner’s proposals send the Dow plummeting? It’s got to be both more complex and more interesting than the usual story (his presentation was poor, “investors”/”markets” were “spooked” by a “lack of detail” etc…)
One threshold such studies would need to overcome would be the notion that “the economy” itself is a reified sphere with perhaps only tenuous or tendential connections to the social and the cultural. Another would be the enforcing of the borders of explanation which are erected around events, and which often refer back to purportedly “natural” equilibria and explain far too much actual activity as in some way deviant. We need to re-embed the economic within the social, as both an analytical and a political project. As SocProf points out, Karl Polanyi can teach us how to do this. So I’d like to experiment a bit and characterise this post as a longish introduction to hers, which I’d now encourage you to read…
Good post. Much for what passes as economic analysis is ritualised ideological guff masquerading as ‘science’. Most Economists seem petrified to admit the extent to which their work is designed to format the economy itself rather than merely describe it in some rational, detached manner.
Yet, I borrow from their phrasebook all the time. But I put externalities front and centre. Coal cheap? Not when you start counting the Real Costs – the more things you include in the economic frame, the more expensive it starts to look. Of course, every time I include something in that frame, I’m essentially assuming consent from the person affected by coal – I assume they’re concerned about the direct emissions of SO2 on their kids’ lungs; about its climate change impacts and the flow on effects on infrastructure. Each time my judgement is ethical and also epistemological – what should count, and what can count. And yet these judgements are consistently glossed over.
When you think of the work of economics as exercises in deciding who and what counts, it makes a lot more sense.
Interesting post, Mark. I’m still trying to sort out what I think about it, will have to return later with more considered thoughts. Here’s a couple small questions/critiques of snippets though, not in the spirit of riposte so much as trying to disentangle some interestingly entangled strands…
“It’s in no one’s interest, of course, to admit that they don’t quite know what is going on…”
I don’t think Socrates would agree; it’s in everyone’s interest (except in the most narrow Blagojevichian sense) for experts, especially ones ostensibly in charge of important matters, to admit the extent of their ignorance early and often. Insofar as those in power are concealing or avoiding the fact that they don’t know what’s going on, they should be prodded out into the sunlight, which is generally to everyone’s advantage.
“…It may be that we need different tools for understanding the social aspects of finance and market behaviour.”
This could be read a few different ways, so I’m curious what you meant. Do you mean by the ‘social’ aspects of finance the larger socio-ec role played by the sheer fact of finance w/r/t market behavior in the machinery of an advanced economy, or do you mean the human-behavioral codes of social status, privilege and clubbishness which so frequently envelope the individuals who participate in the sector? (or perhaps some other thing which I’m not grasping.)
“it’s been a fascinating study in both the sociology and social psychology of policy making.”
Personally I think it’s been a rather disappointingly primitive case study of same, though I guess that doesn’t mean it can’t also be fascinating, in a train-wreck kind of way (at least in the US, don’t know how the Rudd stimulus is playing out). But that will have to wait for a later more detailed comment.
I read the linked post about Polanyi and thought it was puzzling in places. For instance…
“The market is not governed by its own internal laws but rather is and always has been regulated by humans.”
This strikes me as a sophisticated species of tail-biting. A market is a human construct, and so its laws, whether “internal” or not, will be human laws. Clearly a market also is subject to structures which determine its success or failure somewhat independently of human caprice (otherwise we could simply “legislate” Communism into success) but that is not to say that markets operate outside of human behavior, in the way that Pluto orbits whether humans want it to or not. A better example might be plumbing, which is a human thing made for human purposes, but which also exists in relation to the laws of fluid dynamics. There are such things as better and worse plumbing, and also no plumbing at all. But just because plumbing is human doesn’t mean it’s 100% subject to human caprice. I can claim that my bookcase is a kind of plumbing, and if I get cholera from reading, well, whaddaya gonna do.
“things like contraceptive programs were discarded as if family planning programs had no impact on the economy.”
Of course family planning has a tremendous impact on the economy, just not in the way I bet the writer thinks it does.
“embraced by conservative because it allows them to fight against social programs (seen as non-economic spending) as if social programs and economic factors were completely separate.”
This is a pretty simple-minded point of view, but to say why will have to wait.
dk.au: “the more things you include in the economic frame, the more expensive it starts to look. Of course, every time I include something in that frame, I’m essentially assuming consent from the person affected by coal – I assume they’re concerned about the direct emissions of SO2 on their kids’ lungs; about its climate change impacts and the flow on effects on infrastructure.”
The basic observation is true, but the problem arises in units of measurement. The price-per-unit of say a lump of coal affects each consumer identically, impersonally, and roughly equally (that is to say, if a lump of coal costs one dollar, we all pay the same dollar for the same lump). But the other impacts you cite affect different individuals on an unequal range, and necessarily so. True, if you could muster the political will, you could distribute these costs to be borne throughout a society on an equal basis by sheer legislation, but that still would never make the thing actually “true,” and so it would be a very difficult game to imagine a theory of price and cost that would reflect reality on an objective basis. Not that you’d be categorically wrong for wanting to explore it, just pointing out a basic theoretical speed bump.
Neither the ideas of Keynes nor Friedman (or the second rate politicians who claim to be in either camp) explain the crisis let alone provide solutions.
Perhaps Marx was right and there is a tendency for the rate of profit to fall, somehting that arises from the very way capitalism is organised. If so it doesn’t really matter in the long term whether you are a stimulator or tax cutter. You still haven’t addressed low profit rates. From capital’s point of view attacks on workers living standards are one important way of doing that.
In fact Government spending to stimulate demand may be a substitute for the other obvious way to do that – increasing real wages. Such Government spending can only be a short term and insufficient stimulus compared to real wage increases.
Another tack might be to cut working hours without loss of pay. During the Depression the ACTU had a 30 hour week as a policy to address the crisis. In the US a proposal to cut the working week to 35 hours only narrowly lost after FDR lobbied against it.
Such policies of course challenge the rule of capital and the grundnorm of profit. So instead of increased wages and living standards we’ll get a mickey mouse stimulus package to staunch any possible real wage increases or hours reductions.
Who pays for the wage increases, John? The communism fairy? Where does the money come from?
Your answer to an economic slowdown is for people to work less? Talk about ‘mickey mouse’.
Japerz does some nice tap-dancing round this point. The plumbing analogy is a good one.
But here is the point. No one wants the depression that the world is about to enter. Yet all the desperate spigot turning and banging of pipes appears to be utterly ineffectual in preventing its occurrence.
If humans were capable of regulating these events, then we would never have depressions.
Now, it is true that normal economic interventionism has proven itself to be capable of lopping the top of some exuberant booms and leveling out some mildish recessions.
But the market — that is the aggregate of everyone’s economic and financial decisions — seems capable occasionally of generating events that no one wants and no one can control.
Not sure about this discourse that economics has no answers. Note how it has been taken up by the right the consensus of economists in support of economic stimulus is dismissed by them just as they dismiss the consensus of climate science.
But there’s not a consensus of economists, Geoff. And there’s a big difference epistemologically between economics and climate science.
The post doesn’t say that!
This is one of the best things I’ve read about the GFC: No ordinary recession
Two great quotes:
and
It doesn’t matter whether you’re a stimulator or a tax cutter, its all going to vanish into the “financial sinkholes” until the banks are fixed. The U.S. government won’t act to “pre-privatise” the banks because of the ideological taboo against nationalisation, and so we will see many attempts at recapitalising an insolvent banking sector before they finally do what needs to be done. How long this process takes will determine whether we the US (and the world) will have to endure a Japanese-style “lost decade”
Perhaps we need to look at this more from a Lacanian perspective, where we see that we are all trying to make sense of that which defies being reduced to symbols. I am not sure if it was Lacan who said “the symptom arrives from the future” but I think that this is the case here. We will find a way to understand what has happened and why by ordering our present experiences with those yet to come to create a story of “the GFC”. We willcomplete this process when it has been exhausted- when the GFC is no more and can safely be locked away, like the “Depression”. Until then we are all in processes of meaning making that cannot be mistaken for the real. More interesting perhaps is what will be revealed about ourselves when this is all done. My own emerging story of meaning making (that can never be mistaken for what “really” happened, even if i am “right”) has something to do with the mistmatch between what the market was supposed to deliver, and that which it did in the minds of those who were meant to be its beneficiaries (us). The gap between the “haves” and the “have-nots” was constantly widening, leaving most people (even if better off in “real” terms (don’t you love it) feeling at least a bit ripped off. This process was showing no signs of abating (the “pay peanuts get monkeys” analogy to justify massive payments and payouts to people it is now revealed were not much better than monkeys anyway) but the magic of the market (that which is made by our decisions but no one directs) intervened. Yes economics is undoubtedly part of the social no matter how much we think we can design it otherwise. We humans find a way.
Okay roger, but like, can I buy shares in Lacanian philosophy?
With my “money”?
FDB, you might be able to if you have any left…but are you sure you want to? It might be more of a roller coaster ride than you expect…
In relation to your “money” Lacan might say (note the way I am able to deflect personal attribution through this device) that it doesn’t exist anyway; the idea of money (or anything else) is just an interplay between subject and langauge (which is not to say that it is not important). Therefore the commitment of your money places your desire into a socially understandable set of practices that drive things like the world economy, and this is why it is important.
I was just being a smartarse as you no doubt guessed, because I don’t think it needs to be (or at least sound) as opaque as you put it (or was it Lacan? Who can know?).
So then… when we collectively settle on a name for a thing, it becomes as much part of the social as anything, and through the same process it usually, but not always, becomes amenable to being located, understood and (ideally) controlled. Or at least meaningfully manipulated. Okay then, a real small target – explained in relation to other things in some way or other.
Unfortunately, certain events and concepts achieve wordhood well before those other conditions pertain – ecology, universality, nothingness, infinity, the Global Financial Crisis &c. The latter is one we have a good chance of improving our understanding of in time, but for now and for most people if not all, it’s still a big boogy man under the bed.
FDB, it sure is, and it is the fear of the unknown that makes it scary, and a cpoing strategy is to attempt to name it to control it. This is why it is sort of funny (in a depressing and sad way given the situation) that people (economists and journalists and bloggers all) try to develop narratives around what is going on when we really have no idea. It is only when we have tied it down and beaten it to death will we be able to say “now I understand the GFC”. This is the point of the symptom arriving from the future, we are all trying to piece things together and make sense of them, which is what we always do, but the story we come up with is never the real story as the real is that which defies explanation (which is why Lacan didn’t seem to care about the “objective” world (there I go again with those infernal inverted commas!)).