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Archive for July 21st, 2009

I have just returned from a summer internship in Uganda, where I was working with the Ford Family Program in Human Development Studies and Solidarity which is based at Notre Dame. Apart from learning about the day to day work of a development organization, I realized first hand the importance of Marxian contributions to development economics. During meetings and workshops with village representatives, there was often a great deal of disagreement about the priorities of various needs, such as water and sanitation, health, education, financial services, agriculture, etc. Development and aid organizations have a tendency to view villages as homogenous and harmonious and having villagers with common interests, while in reality there are various interests depending on the class position that different people occupy; these positions include agricultural laborers who do not own sufficient land, subsistence farmers, rich peasants who market a surplus and are able to hire laborers, wage earners (such as teachers, nurses, and staff workers), traders, shop owners, fishermen, politicians, clergy, and boda boda and taxi drivers.

This led me to seek more on development from a Marxian perspective, and I found a wealth of interesting material concerning topics ranging from rural class structure to the historical process of underdevelopment. One example comes from George Dalton, an economic anthropologist who studied under Karl Polanyi. In the summary to “The Development of Subsistence and Peasant Economies in Africa,” the author writes:

To understand the social implications of rural African development one must first understand the relation between traditional social organization and economic structure in primitive and peasant communities. Case studies show that unsuccessful development occurs where an increase in production for sale is unaccompanied by technological and cultural innovations: traditional economy and society are forced to change without new modes of integration being formed, and without sustained growth in income forthcoming. Successful development requires mutually reinforcing innovations in economy, technology, and culture which induce sustained growth in income over successive generations, and integrate the local community with the region, the nation and the world.

You will not find too much of this in The End of Poverty, but based on experience I find it too important to ignore.

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In the Monthly Review Zine, John Bellamy Foster writes about “Adam’s Fallacy,” a term coined by radical economist Duncan Foley, and how it relates to the current crisis. The fallacy, as Foley writes, is

The idea that it is possible to separate an economic sphere of life, in which the pursuit of self-interest is guided by objective laws to a socially beneficent outcome, from the rest of social life, in which the pursuit of self-interest is morally problematic and has to be weighed against other ends.

Foster observes that this is very similar to a Polanyian view, which we’ve discussed before here. He also notes that the policy push from the fallacy has reached a “zenith” in recent decades with the rise of neoliberalism.

Thus we have witnessed in recent decades what John Kenneth Galbraith aptly called, in the title to his last book, The Economics of Innocent Fraud, marked by the “renaming of the system” as the “free market system.”  This is a perfectly meaningless designation meant to draw attention away from the harsh realities of capitalism (and monopoly capitalism): corporations, class power, and social inequality. In short, orthodox economics was stripped in the neoliberal era of all remaining historical and sociological content.

He then points to a number of directions for analysis that arise once the fallacy is discarded, which are discussed in greater detail in a recent book, The Great Financial Crisis: Causes and Consequences (2009). First,

For Marx categories such as class were equally economic and sociological in a way that was entirely foreign to mainstream social science.  Compared to the sterile conception of “class” when it appears in orthodox economics, Marx’s concept of social class, Schumpeter wrote, “is a living, feeling, acting sociological entity.”…From a Marxian dialectical perspective, the social world cannot be looked at exclusively in either economic or non-economic terms.

With regards to growth,

our book challenges the prevailing assumption that the capitalist economy naturally promotes rapid growth and full employment equilibrium — a viewpoint that makes persistent unemployment, underemployment, and slow growth anomalies that need to be explained. Rather we argue the opposite — slow growth, rising unemployment, underemployment, and excess productive capacity comprise the normaltendency under monopoly capitalism.  In this view, rapid growth and full employment, as in the “golden age” of the 1950s and ’60s, are the anomalies that need to be explained.

The virtue of this approach is that it conforms much more closely to reality.

As for the economy of recent decades, Foster argues it was propped up by a couple things: technological shocks and financialization.

Hence, in order to continue growing at a pace sufficient to hold off a widening underemployment gap, exogenous forces, or special historical/sociological stimuli not due to the internal logic of the accumulation system, have to enter in…From the 1980s on, the main prop to the economic system was provided by the fiancialization of the capitalist economy…The financial balloon lifted the economy but ultimately ran into a contradiction, given the underlying weakness of the real economy from which it derived.

And, of course, the rest is history.

working-class household finance had been so destroyed by financialization, and by the emergence of a housing bubble, that the time for this strategy of accumulation was running out, and that a crisis of financialization was increasingly likely…

This is another example of radical economists being very quick to point out that growth has not been so great in our economy, and I agree that it is their best point of attack at this point. Blindness to alternatives seems to persist.

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