Ten years on … – no wisdom gained?

Of course, there are many contestable issues concerned with the “ten years on” – leaving the question of timing aside, one point may well be concerned with the word “on”, considering that it should be replaced by “into” or even “digging the grave deeper”. The success-stories so far are, if they exist, stories about de-synchronisation: the fact that some countries succeeded again in a more pronounced way to live on the back of others, temporary victories, and often victories for the countries, not for the people (for instance good overall “economic performance” often means increasing inequality)  …
Preparing the class for coming Monday, but also working on finalising the book
Changing the Socio-Economic Formation – Revisiting Value and Valuation in a Globalising Digital World
I looked up a Briefing Note, presented in 2008, in preparation of the OECD Global Forum on International Investment, titled
It is not looking at the crisis – if the collapse of Lehmann Brothers is taken as reference, it would be even a pre-crisis work, presented on a pre-crisis conference. What makes it interesting (surely – not only – for my classes “Development versus Growth”) is the fact of presenting in a masterful way the shortcoming of an understanding of economics and political economy that can well be seen as structural weakness leading to a crisis like the one we are still suffering from (sure, not everybody).
A quote right from the beginning of the briefing note:
The service sector makes an important contribution to GDP in most countries, providing jobs, inputs and public services for the economy. Trade in services can improve economic performance and provide a range of traditional and new export opportunities. However, services liberalisation also carries risks, and appropriate regulation and other complementary policies help to ensure that liberalisation delivers the expected benefits. We have reviewed the literature on these issues for 6 service sectors (tourism, financial services, energy services, information and communications technology, and Mode IV), … .
And it goes on and goes on and goes on in this spirit, not talking about the essentials of what should be at stake of any analysis. Engels, in 1884, wrote:
According to the materialistic conception, the determining factor in history is, in the last resort, the production and reproduction of the immediate life. But this itself is again of a twofold character. On the one side, the production of the means of subsistence, of food and clothing and shelter and the implements required for this; on the other, the production of human beings themselves, the propagation of the species. The social institutions under which men of a definite historical epoch and of a particular country live are determined by both kinds of production: by the stage of development of labour, on the one hand, and of the family, on the other.
(Engels, Frederick, 1884: Origins of the Family, Private Property, and the State. Preface [to the First Edition]; in: Karl Marx Frederick Engels. Collected Works. Volume 26. Frederick Engels. 1882-89; London: Lawrence&Wishart, 1990: 131-133)
The OECD-experts go exactly the other way round, starting from the end – and actually defining the end as ultimate point of departure and ultimate goal: growth, though remaining undefined, only specified by the reference to the GDP.
Indeed, there is something interesting about GDP and Development.
In fact, the up for some may mean the move back for others
Commonly the “concept” of GDP is attributed to Simon Kuznet – detailed in 1934 in
, it is time to acknowledge that already then the author spelled out – more or less at the outset:
The welfare of a nation can, therefore, scarcely be inferred from a measurement of national income as defined above. (page 7)
And he continues:
The abuses of national income estimates arise largely from a failure to take into account the precise definition of income and the methods of its evaluation which the estimator assumes in arriving at his final figures. Notions of productivity or welfare as understood by the user of the estimates are often read by him into the income measurement, regardless of the assumptions made by the income estimator in arriving at the figures. As a result we find all too commonly such inferences that a decline of 30 percent in the national income (in terms of “constant” dollars) means a 30 percent decline in the total productivity of the nation, and a corresponding decline in its welfare. Or that a nation whose total income is twice the size of the national income of another country is twice “as well off”, can sustain payments abroad twice as large or can carry a debt burden double in size. Such statements can obviously be true only when gualified by a host of “ifs.”
A detail, mentioned at the end of the report, is surely of special interest:
The individual industries included here are photography, undertaking, mausoleum and cemetery operation, social service agencies, athletic, yacht, and country clubs, Y.M.C.A.’s, Y.W.C.A/s, and other services not accounted for elsewhere. Most of these services are of a type not easily curtailed or dispensed with, while social and welfare agencies have had a special reason for increasing since 1929. The number of employees was about a quarter of a million in 1929 and probably increased, or at least did not decline greatly, during the 3 following years (see table 200). The estimated average compensation of employees is probably fairly near the actual situation for 1929 but the trend shown since that year, except that there was probably very little per capita decline, is open to question as far as the country as a whole is concerned. (page 140)
Well, perhaps this is what the briefing says???: “Think of your people and your countries economy and accept: poverty is good for you.” In plain language – and this is very much the underlying gist of IMF and World Bank politics – be nationalist and socially unjust.
I am sure, those who write those reports, will not face what poverty or lack of wellbeing etc. mean.
Of course, this is only the visible, more or less tangible part of the underlying misinterpretation of economics: While calculations may well be correct, fact is – as John Maynard Keynes convincingly wrote in 1936:

Too large a proportion of recent ‘mathematical’ economics are mere concoctions, as imprecise as the initial assumptions they rest on, which allow the author to lose sight of the complexities and interdependencies of the real world in a maze of pretentious and unhelpful symbols.

(Keynes 1936)

Still, if we look at the title of the quoted opus magnum presented by Keynes reads

The General Theory of Employment, Interest and Money

and we still may remain without considering the entire depth of reference. Of course, not every book can start with all the life stories …- but at least it should commence by focusing on the real life situation and the supply conditions and the relationality that is part of it. – Think about employment conditions that allow flexibility and reduction of working time without lowering wage and without stress caused by any fear, thus possibly causing the GDP to drop, but enabling employees to care for relatives, to be politically active, to follow their “intellectual needs” … As much as items expressed by GDP are mere means to an end, the same is true for employment, the ends not being products and services, the end not being income but “production and reproduction of the immediate life”.

Even Alfred Marshall, rightly criticised for his contribution to the mathematisation of economics, knew better than many who still highlight the centrality of employment today, (and here; and many could be added) knew better. As we can read in the Memorials of Alfred Marshall (edited 1925 by Arthur Cecil Pigou), Pigou states in his own contribution to the book (page 84):

Though a skilled mathematician, he used mathematics sparingly. He saw that excessive reliance on this instrument might lead us astray in pursuit of intellectual toys, imaginary problems not conforming to the conditions of real life: and further, might distort our sense of proportion by causing us to neglect factors that could not easily be worked up in the mathematical machine.

Acknowledging this, there would not have been any need to write to the Queen …



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