Can Economists Back Us Out From the Corner of Poverty They Helped Paint Us Into?

Cross-posted from the Dissent Magazine blog Arguing the World.

No matter how disastrously myopic they might be, it seems that economists can do no wrong in the eyes of many.

If there was one outcome of mainstream economists failing to recognize the multi-trillion dollar housing bubble of the past decade and being roundly blindsided by the most significant economic downturn in three-quarters of a century, you would think it would be a decrease in the amount of respect afforded to their “expert” opinions.

Instead, with a distressing lack of mea culpas, the economics profession—still dominated by neoclassical, “free market” assumptions—continues its march of progress. Ever greater swaths of public life and democratic decision-making are handed over to economists, and they continue to fearlessly propagate the idea that they are the right technocrats to get the job done.

Now, globetrotting liberal Nicholas Kristof of the New York Times has decided to give them a hand. In his column, “Getting Smart on Aid,” he offers—without irony or any mention of recent blemishes on their record—“a paean to economists.” He writes:

When I was in college, I majored in political science. But if I were going through college today, I’d major in economics. It possesses a rigor that other fields in the social sciences don’t—and often greater relevance as well. That’s why economists are shaping national debates about everything from health care to poverty, while political scientists often seem increasingly theoretical and irrelevant.

Economists are successful imperialists of other disciplines because they have better tools. Educators know far more about schools, but economists have used rigorous statistical methods to answer basic questions: Does having a graduate degree make one a better teacher? (Probably not.) Is money better spent on smaller classes or on better teachers? (Probably better teachers.)

If our society’s alternative to irrelevant political scientists is letting economists take over the university, I’d say we’re in big trouble. (I can’t help but recall Larry “Daddy Truck” Summers’ imperial move on the field of women’s studies, which, as it turned out, was not the most insightful contribution to feminist thought one could imagine.)

Yet, satisfied that the incisive thinking of the market-minded experts has punctured those pesky schooling problems, Kristof proposes that the experts be unleashed to solve the problem of global poverty.

Now, I’m not against the use of quantitative methods. And there are certainly left-leaning and heterodox economists who do good work challenging market-fundamentalist assumptions. But they are in the minority. The project of bringing economic reasoning to bear on social problems is usually loaded with neoliberal assumptions and ideological biases, and its boosters are distressingly naive about the past damage done in the name of applying market know-how. Dean Baker, one of the good guys—and one of the few economists to warn early and often about the housing bubble—thankfully pointed to at least of few of Kristof’s glaring oversights. As Baker writes, the columnist

…urges people who want to help the world’s poor to study economics and points to useful results that economists have uncovered. While the results he mentions are intriguing, Kristof somehow manages to ignore all the harm that economists have done in the developing world.

For example, the economists at the International Monetary Fund had routinely imposed structural adjustment programs that required that parents pay fees for their children to attend primary school. These agreements also often required fees for the provision of basic health services. This practice kept millions of children out of school and denied them basic preventive health care, since even small fees were unaffordable to many poor parents.

The practice was not changed voluntarily by the economists at the IMF.Rather it was a change that was forced on the institution by activists who were able to use their influence in Congress to require that the IMF stop making these fees a condition of getting loans.

In truth, Kristof’s proposition that economists should get more involved in solving social problems is not an uncommon one. It is part of the thriving field of “philanthrocapitalism.” Last year I wrote a review (with co-author Arthur Phillips) of Michael Edwards’ Small Change: Why Business Won’t Save the World. Arthur and I argued:

The activities covered under the umbrella of philanthrocapitalism are diverse enough to offer exceptions to any generalization about the category. But its practitioners would almost uniformly describe themselves as ‘results-oriented,’ implicitly critiquing the ineffectiveness of existing nonprofits and voluntary organizations. Their unifying idea is that business is more efficient and outcome-driven than government and civil society, and that unleashing market forces is the best means of addressing entrenched problems such as poverty, malnutrition, preventable disease, and poor education.

In Edwards’ words, ‘the basic message of this movement is pretty clear: Traditional ways of solving social problems do not work, so business thinking and market forces should be added to the mix.’ During his nine-year tenure as a director at the Ford Foundation, Edwards saw the popularity of this argument skyrocket. He writes, ‘if I had dollar for every time someone has lectured me on the virtues of business thinking for foundations and nonprofits, I’d be a philanthropist myself.’

….Ironically, in the wake of the recent economic collapse, an increasing number of such consultants are now offering their ‘services’ to civil society. Edwards quotes a leading Indian social activist, who spoke to him anonymously out of fear of retribution from funders, who argues, ‘In a world falling apart with the financial crisis, the nonprofit sector is a good haven for management consultants. Lots of money to pontificate about obvious things, very little questioning of the fact that you can cover your ignorance of fields and issues through management jargon, no accountability to anyone for mistakes arising from your lack of experience or plain ignorance, and plenty of arrogance to boot.’

In a slightly more philosophical vein, Alix Rule had a brilliant essay in the Spring 2009 issue of Dissent entitled “Good-as-money,” which very effectively attacks the theoretical underpinnings of the philanthrocapitalist school of thought.

Kristof’s argument about the work of economists is a little more specific than some of the broad claims about the power of business thinking. But the idea that global poverty persists because of a lack of econometric studies into its dynamics only serves to compound our problems. The injustices of unfettered capitalism are not an accident; they are a product of a system whose academic advocates have a lot to answer for. Economists have done enough of late. Let’s hold the paeans.

Mark Engler is a senior analyst with Foreign Policy In Focus and author of How to Rule the World: The Coming Battle Over the Global Economy (Nation Books, 2008). He can be reached via the website Democracy Uprising.