This may come as a surprise to you. But over two hundred and fifty years ago there was no such animal as economics. Books that spoke about what evolved into modern-day economics had zero math in them. Homo Economicus, the selfish being that is all for himself, and cares none for the commons had yet to emerge. Morality and politics were part of it, as well as the effects on everyday life.
Back then the dominant system was mercantilism. The colonies were not allowed to develop their industry, and were forced to import finished goods. They mostly exported raw materials. Colonial powers kept to this very unequal relationship, which also protected nascent industries. This is why Alexander Hamilton was all for tariffs after independence. They had two goals. They would raise taxes for the nascent federal government. They would also protect American industry from more mature, better made, and cheaper goods.
This was not unique to the nascent United States. In fact, this was aired in the grievances of the Declaration. These are directly related to an early emerging industrial state:
>For cutting off our Trade with all parts of the world:
>For imposing Taxes on us without our Consent:
This free trade has become a mantra of modern economies, but in 1776 it was also about developing industry and exporting finished goods. In the colonial system, Americans were prevented from doing that. They were the client state. This unequal relationship remains to this day. However, these days it is the West setting the parameters for development, and using free trade and direct foreign investment to do it.
Incidentally, these days our insistence on access to developing markets leads to the same unequal power relationship, and prevents more primitive economies from developing internal markets. This is why we had tariffs for most of our history.
But there were two other aspects to this. Politics and morality were part of it. Economics was part of the useful arts, and how people benefited. Granted, there was no talk of the environment, or overt limits to growth. However, the Malthusian theory of population was in the background. It was responsible for sending populations to both the American colonies and Australia.
There was a deep fear that out of control population growth would translate into mass starvation, or revolution. Starting with the Elizabethan laws, people were removed from the British Isles for criminal offenses, abandonment and voluntary sale into indentures.
With the Enlightenment we saw a rising criticism of mercantilism. The Wealth of Nations was precisely that. But unlike modern-day economics, morality played a role. For Adam Smith the Theory of Moral Sentiments was of greater importance, to temper impulses, than the Wealth. And this is one place where the Dismal science lost its path. We are concerned about theory, and making it fit the math. But real world effects are rarely taken into account.
Nor do many realize that the other bookend of classical economics were Karl Marx and Friedrich Engels. Das Kapital provides a good criticism to unrestrained market economics. Some of those are surprisingly current. Both Smith and Marx spoke of the greed of many merchants, who wanted to keep wages low. Smith spoke of a need for a living wage, and to prevent merchants from price fixing. Marx dressed the need for labor to organize, as well as the class conflict between those who owned capital, and those who only owned their body. These days we are facing similar concerns. Ours are more complex due to the rise of robotics and the precariat. We are no longer an industrial economy, but an information and service economy.
Of note, when Marx and Engels wrote their works the Manchester School, that believed in unrestrained free trade, was at its high point. It’s the basis for modern neoliberal economic theory.
>It is not enough to call it capitalism, since capitalism has been around for hundreds of years and transforms itself with great dexterity. The term “late capitalism” acknowledges that, but it presumes something about the future that we cannot know. What can be identified is a shift, usually dated to the 1970s, when rich countries moved away from a regulated economy of mass production and mass consumption, organized within nation states. David Harvey, writing in 1990, saw it being replaced with “post-Fordism”: an economy built on just-in-time production, the internationalization of capital, the deregulation of industry, insecure labor, and the entrepreneurial self. In the years since, these trends have only accelerated due to improvements in, and the spread of, information technologies. But few call this “post-Fordism” any longer. They mostly call it “neoliberalism.”
>The neoliberals sought, Slobodian writes, to “encase” markets, not to liberate them. Their project was not anarchy: It was a global system that sufficiently ordered the world so that capitalism would be safe from certain forms of political interference. Friedrich Hayek, who had worked under Mises, imagined an organization independent of any one country that would set the rules of the market. Hayek envisioned separate cultural and economic governments: The former would satisfy the demand for mass participation, while the latter would make sure that democratic enthusiasms did not interfere with the functioning of markets across the world. The neoliberal world, Slobodian writes, “is not a borderless market without states but a doubled world kept safe from mass demands for social justice and redistributive equality by the guardians of the economic constitution.” Neoliberalism places property, in other words, beyond the reach of democracy.
So did the earlier Manchester school. What neoliberals have is math and economic theory divorced from from any moral constraints. What is needed, according to them, is a market that places property above all.
This is where it clashes with our present condition. The market does not care one iota about the environment. It cares even less about the commons, or good schools for the masses, or medical care that is accessible. Environmental regulations, nay, any regulations, are ultimately opposed to the market and property.
They are contrary to the concept of Homo Economicus who will place those constraints on businesses that sell bad product. Why? Because it assumes all humans are selfish, rational and intending to maximize utility at all times. We are discovering this model is divorced from reality.
The rise of the robots is already producing a permanent underclass, not unlike the one described by Marx and Engels. While we believe creative destruction should solve this in time, we have rising evidence that this may not happen this time.
This is where individual basic income may be needed. The concept goes all the way back to Alexander Hamilton. We may have to restructure our economic thinking completely. We will also have to bring morality into the equation, as well as the effects we have on the environment.
I believe all this will happen, since the conditions of the Anthropocene will force us to act. The problem is that humans are not capable of thinking ten years into the future, let alone fifty. Which is one reason for our collective inability to hold the powerful accountable.