A New Premise for Economics

By Colette Francis · 7 Apr 2009

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Picture: lucapassoni
Picture: lucapassoni

In my first year of business school I sat on a fold-down seat in a crowded lecture theatre, listening to a professor with a Texan drawl hammer home the central principle of modern economics. I looked around to see hundreds of eighteen-year-olds swallow his words like bait on a hook. Self-interest is good. Self-interest is better. Self-interest is best. Tentatively I raised my hand.

"Excuse me, sir,’ I asked. ‘Shouldn’t we care about poor people?"

He started up the stairs toward me. I went red in the face, blood was ringing in my ears, a thousand eyes were staring at me. Minutes went by and Prof. Hugh High was still yelling. Eventually I was able to concentrate on his words. There is no need for values in economics. Supposedly, through the complicated mechanisms of the clever free market, the benefits of self-interest will trickle down to the poor.

He wasn't teaching economics. He was teaching an ideology with no room for questions. The kids who were there went on to service financial institutions in Johannesburg and London. Many of them will have been in boardrooms on 6 October last year when the news broke of a meltdown in financial markets.

On that day, Joseph Stiglitz, winner of the Nobel Prize for Economics and former Senior Vice President of the World Bank, was giving a lecture in Geneva. According to a housewife in the audience, he was chuckling. Who can blame him? He’d warned of the dangers of unfettered ‘free market fundamentalism’ for years and was fired by The World Bank after he publicly criticised his employer and the IMF for financially bullying developing nations. That night he called for the traditional laws of economics to be scrapped. He went on to condemn the role of human vices like greed, pride and hubris in creating devastation in the lives of ordinary people. When the world’s top economist says things that hippies, communists, Christians, freegans, environmentalists, Buddhists, anarchists and Muslims have been saying for ages, namely that we should care for the poor, people everywhere sit up and start taking notes.

Clem Sunter said this years ago, "What we are looking for is an economic system which is built up around ordinary, decent human values, where the health of families and communities, and the environment they live in, is at the top of the priority list. Start with morality and the sanctity of individual human life and work outwards. Simple as this change in approach seems, it leads to lots of surprising conclusions which run totally counter to current economic practice."

Classical economics is being remodelled from the inside out, replacing its central tenet of self-interest with principles of social and economic justice.

What does this mean for South Africa?

Well, Trevor, it means your report card is due, and your results are not nearly as good as your fans in the corporate world would have us believe.

Economist Seeraj Mohamed says that South Africa’s economic growth of the past decade "was fuelled by wasteful, debt-driven consumption and the formation of real estate and financial asset bubbles."

South Africans are now deeply indebted. Sadly, this debt went to finance consumption and speculation, building service industries that can no longer fuel economic growth now that people are tightening their belts. During the boom years, productive, long-term investment in industry was low. Mohamed says that the South African economy may be worse off than it was before.

Instead of blowing his own trumpet, as he did in his budget speech, about the fact that our banks aren't in a mess, our finance minister needs to own up to the fact that our financial system, while avoiding the worst excesses of the North, has encouraged the wrong sort of investment. We need to restructure our financial system to facilitate long-term productive investment rather than consumption and short-term speculative behaviour.

In the future we must aim for the correct kind of consumption-led growth. We need a new industrial policy that develops downstream, labour-intensive industrial sectors. We need industries that add value to raw materials. We need a New Deal in health and education, creating thousands of jobs in these sectors. We need well-run, state-sponsored orphanages in rural areas for children of AIDS victims. We need food gardens in urban areas and massive investment in a zero-carbon public transport system.

"We have just been handed a once in a millennium opportunity to make high finance serve the public interest, on our terms, rather than the other way around," says Joseph Edozien, chairperson of the South African New Economics Network, SANE.

He argues that Africa should develop its own financial system, independent of the West. It must not be based on usury, as lending money on interest is the root of current problems and counter to African communitarian values. He warns of hard times to come.

"We will need gentleness of soul so that we don’t rip each other apart in our frustration and pain from broken material lives and dreams during the coming times of turbulence."

Edozien says that the second Great Depression is coming. Soberingly, he reminds us that what really pulled America out of the first Great Depression was not the New Deal. It was the Second World War.


Either the Great Depression 2 will go on for a decade or two, says Edozien, "or there will be a large and destructive war, the conditions for which are being laid now."

Throughout history government leaders have invented an enemy and turned to war as a means to camouflage or cure their nations’ economic ills. We can’t let it happen this time. Citizens of the world must refuse to buy into the notion that the enemy is someone of a different nation. We must inform ourselves and find creative forms of protest to force our leaders to face the real threat to our survival.

The truth is, we need to go to war, but not against each other.

George Monbiot has been saying for years that the only thing that will save us from the effects of climate change is worldwide mobilisation on a scale akin to that of preparation for war.

If we want to fight climate change, we will have to make sacrifices. Mobilisation against climate change could bring about a different attitude toward inevitable shortages. World War 2 cured the Great Depression in part because it changed Americans' attitudes to making do with less.

"The entire nation… seemed overnight to have snapped out of its Depression-era lethargy. Everyone scrambled to be of help. Rubber was needed for the war effort, and gasoline, and metal. …."

Instead of languishing in depression about shortages, suddenly Americans had a vision, a shared reason to sacrifice their comforts for ‘the greater good.

Soon butter and milk were restricted along with canned goods and meat. Shoes became scarce, and paper, and silk. People grew 'victory gardens' and drove at the gas-saving 'victory speed' of thirty-five miles an hour...America sacrificed."

Could we turn the Great Depression 2 into an opportunity to willingly give up our comforts in the cause of a combined war effort against climate change?

By Colette Francis. Francis is a novelist based in South Africa.

This article is distributed by the South African Civil Society Information Service. For information regarding permission to republish this article, please visit the Copyright section of our website.

You can find this page online at http://sacsis.org.za/site/article/262.1.

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