Wednesday, July 15, 2009

Economic Crises and Anthropological Interventions

The current economic crisis comes as no surprise to many anthropologists. That doesn’t mean we were clever enough to protect our retirement accounts, but that we have long been talking about what now seems so revelatory to pundits and policy makers: that markets are social constructions that can create their own realities; that market transactions are laden with moral implications that go far beyond the material and financial; and that markets are instruments, to be formed and regulated as we see fit.

Our current financial woes offer a singular opportunity to introduce anthropological considerations into the making of markets and economic policy.

Markets are contrivances, as James Ferguson recently remarked. They are constructions, built upon particular political orders and social conventions. And while to anthropologists this might seem apparent, the prevailing popular and political discourse over the last couple of decades speaks of markets as something apart from human control.

Economist Timothy Taylor asserts that “markets are a force of nature--like a river, when there is an obstacle they will move around it.” Markets are even endowed with animate powers: Caitlan Zaloom found that commodities traders in Chicago speak of the market as a moral arbiter, rewarding and punishing depending on how it is engaged.

Adam Smith serves as the unwitting patron saint of free-market economics, his Wealth of Nations its often quoted Ur-text. Smith brilliantly argues for an invisible hand in free markets, showing how competition between actors pursing their own self-interests can better provision everyone. Smith was writing against monarchical, monopolistic power, yet belief in the powers of the invisible hand has led self-interest to become the secular ethic of our time. It has, until recently, been called upon unflinchingly by corporate executives and the editors of the Wall Street Journal not as a justification of last resort but as a badge of piety and fealty, a virtue as unassailable as the Golden Rule. This is an incredibly liberating and optimistic ethic–through the mystical transubstantiation of the invisible hand one’s personal greed coverts into the collective good. As a hegemonic ideology it is brilliant, no matter that Smith would have been appalled at the disregard for his concern with “fair” profits and sympathy for others.

Inspired by Ayn Rand as much as Smith, an exaggerated view of H. economicus driven by greed and self-interest and a belief in the power of markets to best provision the common good have had enormous influence in public discourse and policy.

Implicit in neoclassical utility functions is the notion that efficiency is “better”—if one’s goal is to maximize utilities, then one should try to do that most efficiently. As Weber foretold, judging economic behavior and public policy from this perspective becomes not a question of good or bad, but rather of efficient or inefficient. Efficiency is championed as the ultimate moral practice—producing the most goods for the most people (even if distribution is seen to be handled by the fundamental fairness of a free market). Efficiency itself becomes the greater good, the ends rather than just a means to an end. Yet, cautions Michael Sandel, economics is “a spurious science in so far as it is used to tell us what we ought to do” since such questions “are unavoidably moral and political.”

There is a self-fulfilling prophecy function to economic views of rational actors pursuing their self-interests. The discourses of rationality and efficiency have entered the public dialogue to an extent that economists can “discover” effects derived from their very postulates. Economics students, for example, compared to others cooperate less and more aggressively pursue self-interested maximization in economic games.

The current crisis pulls back the curtain of mathematical and ideological obfuscation of market workings. Warren Buffet now warns us to beware of “geeks bearing formulas” and even the likes of Alan Greenspan, Richard Posner, and other true believers are expressing their doubts in the power of free markets.

It is but a small step from such doubts to the realization that markets are cultural, social, political, economic constructions that have emerged of out of particular histories of property rights, monetary regimes, intellectual property recognition, tolerance for inequality, and social institutions that produce “rational” subjects to pursue certain ends and work out the “correct” solutions to cost/benefit analyses. Seeing markets as social constructions, rather than as the product of natural forces, allows us to treat them as such.

All of the “laws” and rules of thumb about the economy or the market are predicated on a particular political and social order that may not endure. In fact, history tells us that it will not. That doesn’t mean we are on the verge of Marxist revolution (despite what Rush Limbaugh may fear), but just that the order of things will change. If I had to bet, I would put my money on private property rights enduring through my lifetime, and that of my kids, and maybe even longer.

But all markets are contrivances, not natural outcomes of truck and barter. And there are other sorts of contemporary capitalist formations with different balances between private gain and public goods. Take Germany, Sweden, and the northern European model, or China with its hybrid economy. Clearly, there are many possible ways to construct market economies.

We must recognize the value in market efficiencies—the wealth market economies have produced, the quantity and quality of life they have increased. Yet we should not naturalize or deify markets. Keeping firmly in mind that they are social constructions allows one to see markets not as absolute, omnipotent forces but as tools, instruments, techniques in the social and political project of living together to the greatest mutual benefit (as we define that socially and politically). This means markets can and should be regulated to provide the greatest good for the greatest number. We need not put off difficult social and political questions about the quality of life onto simple material and financial cost/benefit analyses.

We have been too quick in recent years to disavow tough political (and moral) decisions (about who get gets what, what is a ‘just’ wage, and so on), leaving these to an almost religious belief in market forces to work out optimal solutions. Markets do lots of good, healthy market competition increases efficiencies, and we should let them do their work in the contexts they work best. But we should not let a notion of “natural” markets shy us away from making political decisions. The current crisis in the markets forces us—and policy makers—to see them as the contrivances that they are. Markets are neither inherently good nor bad—they are techniques and instruments that we can put to the social and political uses we see fit.

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