How Economists Are Failing Society: Professor Robert Wade At The Ika Seafood Bar & Grill.

Heterodox And Proud Of It: Professor Robert Wade is an economist who refuses to toe the accepted line. Someone with the courage to point out that the neoliberal economic emperor isn’t wearing any clothes.

 

LAILA HARRE saved the very best for last. The “Salon” lunch with economist, Professor Robert Wade, provided one of those clarifying political moments when, at last, the veil falls away and you are shown the real state of affairs in all its terrifying clarity.

 

Wade is what his orthodox colleagues at the London School of Economics would loftily dismiss as a “heterodox” economist. Someone who refuses to toe the accepted line. Someone with the courage to point out that the economic emperor isn’t wearing any clothes.

 

More than this, however, Wade exposes orthodox neoliberal economics as a failure. Presenting itself as a scientific discipline, fully capable of pronouncing definitively on the true nature of reality – the profession was, nevertheless, unable to produce a single accurate prediction of the Global Financial Crisis (GFC).

 

There was a very good reason for this. As Wade explained to his mostly academic audience, the Dynamic, Stochastic, General Equilibrium (DSGE) model used by orthodox economists all over the world – including the OECD, the IMF, the World Bank and the Bank of England – does not factor-in the influence of the financial sector on the economy, and flatly denies that economies conforming to the DSGE model are susceptible to crises generated endogenously (i.e. from within themselves).

 

Just think about that for a moment. An economic model that makes no allowance for the most powerful force in the modern international economy – finance capital. A model which, for that very reason, simply could not see the Global Financial Crisis coming.

 

Now, you might think that a profession which had exposed its shortcomings so dramatically might be feeling just a little bit chastened; might be looking for a new economic model; might even be ready to admit that it had got just about everything horribly wrong and apologise to the world for all the extraordinary suffering its failure to read reality correctly has produced.

 

You would, however, be wrong.

 

Orthodox economists pride themselves on their positivism. They are not swayed by their emotions, nor do they make value judgements. The language of ethics and social responsibility is foreign to them. Their language is mathematics. Numbers don’t lie – and they certainly don’t apologise!

 

But if Orthodox Economics pays no heed to the real world and cannot predict an event as devastating as the GFC; if it scorns all those who posit a different interpretation of the economic data; if it guards the tenets of its economic faith as jealously as any member of the Roman curia, and punishes heretics with equal severity; then what, exactly, is the orthodox economics profession?

 

The answer lies in the word “faith”. Wade himself said that there is a religious quality to the thinking of the men and women in economic institutions like the NZ Treasury. And this, of course, is exactly what the orthodox economics profession has become – a modern priesthood.

 

In terms of the social and political function it serves, Orthodox Economics is no different from the Medieval Catholic Church. It exists for one reason and one reason only: to justify the ways of the rich to the poor, and to convince them there is no alternative to the inequality and injustice of the existing order. As it was in the beginning, is now, and ever more will be, world without end.

 

This brief review hardly does justice to Wade’s lecture. There is much more that I wish I could recall: astonishing quotations from these naked economic emperors that left his audience shaking their heads in disbelief.

 

The vote of thanks was given by Laila’s dad, who first met Wade when he was a young student of anthropology back in 1960s Auckland. Indeed, he was able to produce a wonderful photograph of the young Robert Wade, taken during an expedition to the islands of the South Pacific.

 

There he was, one of many rowers, hauling manfully on his oar, in the midst of a vast and troubled sea.

 

Somehow, it seemed appropriate.

 

This essay was posted on The Daily Blog and Bowalley Road on Wednesday, 2 December 2015.