Transcript DRHReflections

INTERNATIONAL CONFERENCE:
CORVINUS, BUDAPEST, November 4th, 2010.
TRANSITION ECONOMICS
Transition to what?
Reflections on Capitalism as an ideology
David R. Harvey,
School of Agriculture,
Food & Rural Development
& Centre for Rural Economy,
Newcastle University
Transition
“The destruction of the Iron Curtain on November
9th 1989 is still the most remarkable political
event of most people’s lifetimes…(But) Western
capitalism’s victory ..does not ensure it an
enduring franchise from voters. .. the magic of
comparative advantage can be wearing—and
cruel. It makes the wealthy very wealthy.”
{Economist, Nov. 5, 2009}
Are we conceiving, teaching and promoting
Economics (and Capitalism) properly?
Markets’ Evolution
 Markets
as an Evolutionary system
 – socio-economic environment ‘selects’ (adopts)
survivors (firms & products/services),
 ‘profits’ ephemeral, unpredictable, accidental
 But, imitation & innovation (conscious adaptation)
enlarge the scope
 Diversity, not homogeneity; difference is the
driver – ‘level playing fields’ are not the point
 ‘Optimality’ is a possible (but not guaranteed)
result – not a driver of the process
Refs: Alchian, 1950; Blume & Easley, 2002. (see, also, Larry Blume’s home page for more
in the same vein)
Implications
 Market
systems are not necessarily optimal, and
are volatile, even dynamically unstable
 Require governance (or cultivation)
 Capital & Labour are ‘natural’ attractors for
necessary government ambitions.
 Proposition 1: Useful Economics has to include
Politics;
 Corollary: We need a more common story of how
this works.
 Implication: without a more common story – we
(social scientists) remain part of the problems.
A More Common Story?
Capitalism’s Evolution
 Capitalism
-> divorces ownership from operation
& deployment of (physical) capital
 Capital markets are inherently in perpetual
disequilibrium
 & are virtual rather than real
 & shave margins from transfers of ownership
 & enshrine the circularity of capital valuation
(reflecting the endogeneity of the selection
criteria)
 Survival of the fattest, not the fittest,
 with no (limited) supply response to demand shifts
Implications
 Capital
markets the critical link between current
activity and potential futures
 & capture the residual returns (profits) from
efficient real (goods & services) markets
 But have the least customer or citizen control or
feedback (cf. current consumption decisions)
 Suggests they need greater (not less) social control
than real markets?
 But how, and by whom?
 Seeds of tomorrow are necessarily either
destruction or sustainable prosperity – but which?
Questions arising:
 How,
exactly, does society benefit from survival
of the fattest?
 Do capital markets really provide:
– more secure and stable savings opportunities?
– more intelligent & productive investments?
 If
so, how, exactly, and if not, why not?
 Is (any) conventional regulation likely to be a
sustainable answer?
 What are the roles of philanthropy (Gates &
Buffet) &/or sovereign wealth?
The current ‘ common model’
Social Behaviour needs to reconcile private and public lives:
With Economics being very distinctly limited in its scope.
Necessary Transitions?
Social Behaviour needs to reconcile private and public lives:
BUT some major institutions (negotiation systems) are MISSING:
Conclusions
 Without
a more convincing, comprehensive and
compelling common story, our economics (and
social sciences) will continue to be part of the
problem rather than part of the solution
 We need to change our perspectives, as well as our
tools and rules
 (Agri)cultural economists are – I suggest – well
placed to do so.