Practical Economics is Radical?

I have a book by James Meade published in 1975. It’s called “The Intelligent Radical’s Guide to Economic Policy”. Thumbing through it reveals how some things never change and yet, also, how the neoliberal suffocation of economic thinking and policy has allowed us to drift from a socially just economy.

He ends his first paragraph thus:

“The radical in politics is the citizen who places a rather high relative value upon Liberty and Equality in the catalogue of social goods.”

To a contemporary ear his defense of free competitive markets sounds suspiciously apologetic for raw capitalism, but he is more sophisticated than that. He gives us what might appear to our jaundiced minds an old and naive argument: a mixed economy gives us the best of all worlds:

“The intelligent radical thus starts by advocating the removal of all unnecessary restrictions on the operation of free competitive markets. But he recognizes that on the foundation of this market mechanism the must be built a superstructure of governmental interventions and controls. Some of these interventions are needed simply to set a background of conditions in which free competition can work effectively; others are needed to replace entirely the mechanism of competitive markets, where that mechanism cannot be expected to operate effectively; others have an intermediary purpose, namely to modify without replacing the operation of a market price mechanism.”

I see this not as radical, but as pragmatic.

History teaches us, or, rather it teaches me, that freedom of individual action, which in an economic setting means being able to profit from one’s own efforts, skills, and industry, is the best method for assuring rising living standards for us all. I don’t think this is empirically contestable. Ideologues with a worldview that demands denigrating the individual and making it subordinate to some collective identity will, naturally, oppose such pragmatism. But their case collapses in the face of the evidence of the past hundred years. Alternatively, other ideologues whose worldview superimposes rugged individualism on absolutely every economic activity are equally proven false. There are plentiful occasions in which collective action is not just preferable, but more efficient. Besides history also has taught us that such a reliance on the individual leads to socially pernicious outcomes. The evidence is piled up against the ideologues on both sides.

So it is odd, to me, for a practical and inclusive call for a variety of solutions to economic problems to be called radical.

Yet set Meade’s call for flexible policy in today’s context: we have suffered through four decades of policy making that is determinedly one sided. It has been taken as a basic rule that market based solutions are always preferable to governmental solutions. Hence the steady drip of neoliberal policy: deregulation, weak or non-existent opposition to monopoly and oligopoly creation, trade deal making that benefits capital and harms labor, tax structures biased towards capital, opposition to labor union activity, shifting of financial risk onto households and away from employers, a mania for balanced government budgets – even if the result is far from that – and steadfast opposition to the provision of government services in key areas such as retirement or health care, sometimes successful, sometimes not.

Meade is urging us to look at this list and to impose solutions that balance liberty with equality. He argues we ought oppose monopolies vigorously because of the cost they impose on all of us. He argues we ought bias policy towards encouraging and not diminishing competition because that way we all benefit from the enterprise and ingenuity of market ‘winners’. But he also says we need to recognize the downside of capitalism and defend our vision of equality against any slippage towards class domination, reduced opportunity, and, worse, the co-option of government by special interests.

Call me old fashioned, but I think this makes a lot of sense. And it is just about where Bernie Sanders was in his ill-starred run in this year’s primary elections.

Then again he was called too radical by the heavyweights of the erstwhile left in economics. Modern economics, by taking onboard so much of the individualist delusion has set itself determinedly against democratic action. After all it is through our democratic political processes that we express most clearly our desire for the mitigation of the downsides of capitalism. Yet modern economics is blind to that form of expression of choice – it sits outside the market, so economics has no metric to weigh its worth or tolerance for its interruption of so-called market forces.

So perhaps Meade was correct. His is a radical’s guide to economic policy. Being pragmatic, apparently, is being radical. Who knew?