Saturday 8 September 2012

The Iron Bed Of Procrustean Economics

Made To Order: Like the mythical monster, Procrustes, neoliberal economists are offended by the real world's inability to fit into the iron bed of their assumptions. No matter. Reality can always be "struturally adjusted" to conform to neoliberalism's Procrustean specifications.
PROCRUSTES was an exacting host. Travellers offered a night’s rest on his iron bed never fulfilled his expectations. Inevitably, they were a head too short or a foot too tall. No matter. Procrustes had a simple remedy. If his guests proved too short he stretched their bodies until they measured up. If they were too tall, he just lopped off the bits that stuck out. Unsurprisingly, the Athens to Eleusis Road, which passed by Procrustes’ forge, acquired a grim reputation.
The Greek hero, Theseus, put an end to Procrustes’ reign of terror by forcing him to lie on his own beds. That’s beds, plural, because, of course, there had always been two: a long bed for the short guests and a short bed for the tall ones. And since not even the monstrous blacksmith, Procrustes, could be both short and tall at the same time, Theseus was obliged to serve him as he had served others. He did not survive the process.
His infamous bed, though, has endured – at least in the English language. Whenever we are obliged to conform to someone else’s undifferentiated and unyielding expectations, we say they are fitting us to a “Procrustean Bed”.
Never has the term been more appropriately applied than as a metaphor for contemporary economics. Like the unfortunate travellers along the Athens-Eleusis Road, the nations of the world are invited to measure themselves upon the iron bed of Procrustean Economics and, just like the ogre’s victims, they inevitably find themselves being “structurally adjusted”.
It was not always so. As the Norwegian economic historian, Erik Reinert, persuasively argues in a paper presented to the New York-based Social Sciences Research Council, there was a time when not only economists, but ordinary members of the public, could choose between a range of radically different and fiercely competing economic theories.
Not any more: “Today we are in the extraordinary situation that these economic theories – covering the whole political spectrum – have virtually disappeared from practical use.”
What we are confronted with now, Reinert says, is an “academic monoculture” – with all the risk of catastrophic failure that the term implies.
Nor can we rely upon the democratic process to rescue us from the consequences of such failure. Unlike the economic crises of the past, when competing economic prescriptions recruited political champions from within the major political parties, the present crisis has generated an astonishingly uniform political response. Between the parties of the Left and those of the Right minor differences of sequencing and emphasis certainly do exist, but there are no politicians of any stature within the world’s significant economic powers willing to identify themselves with a fundamental challenge to the neoliberal paradigm.
Barack Obama may have campaigned in the poetry of “Hope” and “Change”, but as President he has governed according to the very same, prosaic, rules as the Bush Administration, and with the assistance of many of the same personnel.
The contrast with Franklin Roosevelt could hardly be more striking. Confronted with a financial system in near collapse, Roosevelt called down the wrath of heaven upon the money-changers of Wall Street and embarked on a “New Deal” that both confronted and confounded the conventional economic wisdom of his day. But President Obama, far from driving the money-changers from the Temple, calmly set about reappointing them to the positions from which they had overseen the gravest financial catastrophe since the Great Depression.
The situation in New Zealand is little better. Labour makes a great virtue of the fact that it has signed-up to many of the neoliberal Treasury mandarins’ pivotal recommendations. Where Prime Minister Key refuses to touch National Superannuation, David Shearer promises to lift the age of entitlement and sever its relationship to the average wage. Where Bill English rules out a Capital Gains Tax, David Parker promises to introduce one. Unlike its hard-pressed wage and salary earners, the economically orthodox business leaders of this country have little to fear from a change of government.
If Procrustes had two iron beds upon which to stretch or truncate his victims, the current neoliberal establishment possesses two political parties to fend off any genuine ideological challenge. Both parties insist that New Zealand measures-up to the financial markets, and if it’s found wanting, both are ready to lop off a billion or two.
Where is Theseus when you need him?
This essay was originally published in The Waikato Times, The Taranaki Daily News, The Timaru Herald, The Otago Daily Times and The Greymouth Star of Friday, 7 September 2012.


guerilla surgeon said...

Well at least some economists are beginning to take note of psychology. Amazing that, with psychologists showing that people don't behave in the way that classical economists assume, and physicists showing that the actual equations they based their original theories on our rubbish, it's lasted so long. We live in hope.

Brendon said...

Well written Chris.

We desperately need some heretical thinkers and politicians. In the 1920's and 30s there was John Keynes who argued against imposing excessive war debt onto Germany and advocated leaving the gold standard. These were very anti establishment views but politicians of his day listened and this economic debate allowed Roosevelt the freedom to create the New Deal.

Today it is hard for any economist to even debate the neo liberal establishment. Economists like Steve Keen have been ignored by his intellectual superior colleagues, despite having a better explanation for the current financial crisis.

Draco TB said...

Nor can we rely upon the democratic process to rescue us from the consequences of such failure.

This is wrong. We could rely upon democracy to shift us from this failed economic model if we had a democracy rather than an elected dictatorship. The answer is to shift the politics and thus change the economics.

But President Obama, far from driving the money-changers from the Temple, calmly set about reappointing them to the positions from which they had overseen the gravest financial catastrophe since the Great Depression.

This is due to the cult of management. The people who caused the GFC are seen as the only people with the knowledge and skill to correct the GFC. People actually believe that managers got there by being better than anyone else rather than that they're just people who make the same mistakes and got lucky. Of course, what they'll do is exactly what they were doing before and thus we're just on course for more of the same.

Kat said...

"Take two tax cuts and roll back a regulation or two"

Never has a president of the USA been as constrained as Obama. By comparison Roosevelt had a fairly free reign between 1933/1937.

What you seem to overlook Chris is that becoming leader, gaining power, then getting re-elected is a balancing act and at the same time incorporates a fair degree of compromise.

You can't please all of the people all of the time. So better to have someone pulling the levers of power who can please most of the people most of the time than someone who only pleases some of the people all of the time.

peterpeasant said...

Hopefully it will be southern Europe does the job. If Greece, Italy, Spain, Portugal (and Ireland) renege on their "deals" then the US, Germany, China, India might get serious.

Mind you we could always have another world war to bail us out.
Just like the last time.

Oil supplies look problematic.

Perhaps the US and Russia could team up to fight another world war in Arabian/Islamic nations

Anonymous said...

Richard Wolff said likewise recently, saying it was, in practice, the New Deal which rescued capitalism from itself, and that, in the current conditions, capitalism is eliminating the reactive preconditions of a possibility of its continuance.

Parliamentary politics--with all its empty histrionics regarding tax, etc., the dismantling of the welfare state (always intended as a soft compromise backstop for capitalist exploitation by its spineless social democrat engineers), and its uninspiring rhetorical affinities with some supposedly generalisable middle-class bigotry (while the "middle class" dwindles)--died some time ago, and it's only now the stench is becoming unbearable.

The real issue, per Lenin: "it is too late to form the organisation in times of explosion and outbursts; the party must be in a state of readiness to launch activity at a moment’s notice."

Brendan McNeill said...

and the economic solution is?

Galeandra said...

Brandan wants THE economic solution. Q.E.D.

jh said...

The Savings Working Group blamed government policies for high house prices, singling out immigration and tax policies favouring property investors.
The Govenment covers it's vitals with research that concurs with a strong correlation between immigration and house price inflation but can find no evidence on the ground. The government therefore concludes the Savings Working Group are wrong and gets away with it because Labour changed immigration policy in the 1990's and the Green's are proud that their policies are "the opposite of Winston Peters" and "based on an objective analysis" of what is "excruciatingly difficult to figure out (a sustainable population). So immigration even to gateway cities like Auckland doesn't price Kiwis out of their nest and this despite Harcourts at Shanghai showcasing $800million of property (that we know of). So it is (to quote an expert):
" the issue was captured by an elite of politicians, public servants, academics and vested interests, and that as long as there was a consensus across the political parties to stick to the mission, the voter had very little say in the matter"

jh said...

When you hit limits you run out of the usual options,but while the Greens readily admit peak oil they wouldn't view Pacific Island populations as post sustainability or (perhaps) apportion the blame for boat people on large populations.
Instaed they would say that there is plenty for everyone except that Uncle Scrooges are hoarding.

Unknown said...

The economic solution is some common sense. Common wealth is a great generator of long term, sustainable prosperity. We need the bottom sector (the benefit-dependent poor, the working poor and the lower middle) to have purchasing power. Through lower taxes, a full employment policy, collective bargaining, judicial labour dispute arbitration and much lower house prices.

Shift investment away from real estate and finance which drains this aforementioned sector of their ability to participate economically.

Imagine all the people who can barely get by on their $500 a week wage package, the people who think they can't work and the debt laden middle class having enough hope to live full economic lives. To have spare cash. To be freed from huge mortgages. This will boost jobs.

We need a strong state presence not just in the essential non-profit making services but in profit generating enterprises.

We should be swapping our energy company shares with Chinese companies, not flogging them off entirely in a bad market.

These are just common sense things, it doesn't take a Keynes, Hayek or Marx to figure it out.