The Problem With Economics

The Problem With Economics

I just got through reading Erik Reinert’s How Rich Countries Got Rich… And Why Poor Countries Stay Poor. It was a good book and compliment to other books like Ha-joon Chang’s Bad Samaritans, Naomi Klein’s The Shock Doctrine, Robin Hahnel’s Economic Justice and Democracy and Michael Albert’s PARECON.

The book amounts to a good critique on neoliberal economics. It effectively challenges the myths of Free Trade Capitalism (FTC) and points out quite clearly that protectionism during the nascent stages of industrial development is key to creating wealth.

Reinert writes, "The history of economic thought tells us what Adam Smith said England ought to do, but no branch of academia seemed to worry much about what England actually did, which proved to be very different from what Smith had advised."

Like Chang’s book mentioned above, Reinert uses the example of having a child compete with skilled adults in the labor force to demonstrate the lunacy of demanding poor countries compete with rich countries.

Reinert also challenges the notions of comparative advantages by saying a country specialized in washing dishes will not and cannot secure the same wages as a country that specializes in some form of industrial production.

But the real problem of economics that I seem to have gotten from this book was how FTC looks at economies through lenses blinded by rhetoric and ideology, which are often explained in natural terms or mathematically.

Economies are not the products of nature and it’s silly to try to explain them with calculations. There are too many constantly varying variables in our manmade economies to rely on lofty rhetoric and mathematical formulas to solve problems.

Free Trade Capitalism (as well as other authoritarian economic systems) tries to reduce economies to a “one size fits all” and the results have proven to be quite disastrous.

Reinert realizes and stresses that economies need protecting and planning much like a child needs the same for its nurturing into a healthy adult.

But who and where does this planning come from? Realizing the flaws in market systems or centrally planned economies is not enough. We have got to be able to address it with an alternative planning system that addresses the root issues of inequity, inequality, injustice and poverty, and I think that is where folks like Hahnel and Albert fit in perfectly…

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