Simple oeconomics

And the Weak Suffer What They Must?
Varoufakis, The Bodley Head, 2016

Viis Taloudesta! [Never Mind Economics!]
Christer Lindholm, Vastapaino, 2016 

I am not completely sure why I picked up these two popular science books on economics but I am certainly happy that I read them. Well, that’s not completely true. I have my reasons. Lindholm’s book I bought because I heard his interview on the radio. What comes to Varoufakis, thus far I have liked his public appearances and I wanted to know what he is really about.

Ah, a picture of an evil banker!
Lindholm writes about five interlinked myths that rule the public discussion on economics but have no good grounding in economic science. He presents nice and quick arguments why it is not the case that a) markets will solve everything, b) public sector is a problem, c) taxes are harmful, d) supply will create its own demand, and e) globalization is here to stay. Lindholm’s bold claim is that all these are neoliberal myths, with no solid basis in economic theory, that are built to dismantle democracy by moving political decisions out of the public sphere. Putting investors’ and corporations’ interests in the driver’s seat, in turn, erodes the viability of a welfare state and, ultimately, makes life worse for the most individuals.

Varoufakis restricts himself on a slightly more specific topic – the European economic crisis. I do not have the knowledge to really say how valid his claims are, but he does present a historically detailed and compelling story of how the Eurozone was born and how it includes fundamental structural problems. And the biggest of these is the lack of democracy.

There was nothing wrong with the idea of a single market from the Atlantic to the Ukraine and from the Shetlands to Crete. Borders are scars on the planet and the sooner we dispose of them the better, as the recent Syrian refugee crisis confirms. And there is nothing wrong with a single currency either. What was dangerously wrong-headed was the idea that we could create a single market and a common currency without a powerful Demos to counterbalance, to stabilize, to civilize them. (p.193-194)

It’s not all about the lack of democracy though. Varoufakis argues that the actual policies that the Troika (the European Central Bank, the European Commission, and the International Monetary Fund) entertains are disastrous. Austerity does not help economy but rather provides fertile ground for extreme nationalist movements and growing disillusionment on the whole European community.

In short, both authors argue that the current economic reasoning is fundamentally flawed – on many fronts and for various reasons – and this, in turn, causes immense suffering and can ultimately even lead to new wars. Here is a philosophically interesting point too. That is, the economic reasons/causes are taken to be the most fundamental reasons/causes. Although it is not state explicitly, it is easy enough to read between the lines that, for example, forms of identity politics are subordinate to whatever the current economic situation is. Then again, this might well be the case and it should not be surprise to anyone that left-leaning writers will take this line. Marx anyone?

Another interesting point is that both authors see increased democracy as a (partial) solution to the (economic) problems. I certainly agree that democracy is worth defending but I also think that democracy alone does not guarantee stable and civilized markets. For that we would need civilized voters too. Democracy itself as a decision-making mechanism cannot guarantee that the decisions themselves are any good.

In any case, I would certainly recommend both of these books. For someone like me, who has not read that much economics, they were extremely informative. Recommendable is also the theoretical route that both authors take: for the most of the time Lindholm and Varoufakis are doing what is called ‘intrinsic’ critique. They are arguing from within the economic sphere by using their terms and their laws and by showing how those who claim that there is no alternative are not basing their arguments on science – and this is so even before questioning how scientific economics is – but rather on ideology. Not that there is anything wrong with ideologies in politics. However, dressing them on the guise of facts and necessities is misleading at best and extremely destructive at worst.


4 thoughts on “Simple oeconomics

  1. Thanks Onni, just got around to reading this. Helpful little summary, and very interesting in light of the Brexit vote.

    On the priority of economics. The political class also take economics as fundamental. But fundamental with respect to what? You can also see it in the other way – as an abstract way of affecting populations with the least intrusion into the particularity of life. (This is how Hayek frames his theory – as the least possible amount of coercion because of its formalism).

    If you go this way, then identity politics becomes an attempt to shape the abstract level from something more particular: a region, language, etc. but in a way that seems blind to the levels that it crosses.


  2. Thanks Andrew! I’d guess ‘fundamental’ in the sense that economic considerations take the first seat and all the other decisions are made in the light of economics. That might not actually be empirically true though but I’m happy to leave it open here.

    The Hayek point is interesting. I’m pertty certain that Marxists would go on to say that any particular form of production (e.g. capitalist economics) is a form of life in itself. Thus – contra Hayek – it would be impossible to separate economics from the particularity of life and economic policies would in fact be about identities as well.


  3. Yes, but only abstractly so, right? That is, while there is indeed a life-content to economic policy, this is for the most part obscured.

    The sort of argument I have in mind here is that formalisations (eg. economic principles) have to be approached the right way and retain a sense of their origins in life, lest their obfuscations end up supporting injustice. Which in the end, is a kind of argument you get in Marx.


    1. Oh, right. Thanks. I think I might have misunderstood what ‘abstract’ meant in your first comment. Anyway, I’m totally on board with the ‘have to be approached the right way’ point.


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