When Economists Blame Culture

2 July 2018 12:02 am - 0     - {{hitsCtrl.values.hits}}

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  • "The Great Depression in the 1930s, led to the emergence of Keynesian economics with social welfare policies, market controls and a greater role for the state in managing the economy"
     
  • "The key point here to draw from Schumpeter is that it is “only a small fraction of the population” that can be entrepreneurs "

 


After almost four decades of liberalisation around the world, economic development continues to fail. These failures have been characterised by increased national debt, mounting levels of unemployment and underemployment and large numbers of people living in poverty. Yet international agencies and national policymakers continue with neoliberal economic prescriptions of austerity and market-oriented economic reforms.   

These economic failures have serious political repercussions from the emergence of authoritarian nationalist regimes to creating the ground for anti-minority and xenophobic attacks. Yet economists of both the neoliberal and nationalist variety are unable to analyse the root causes of the failures much less find solutions to economic crises.   

In the past, such economic crises led to new avenues of economic thinking. The Great Depression in the 1930s, led to the emergence of Keynesian economics with social welfare policies, market controls and a greater role for the state in managing the economy. Similarly, the rural crisis in the developing world led to the emergence of rural sociologists and development economists who sort solutions through the mobilisation of local resources, investment in rural development institutions and land reform. But today, the mainstream is stuck in the straitjacket of neoclassical economics propagating free markets, privatisation and austerity, despite the tremendous political economic fallout of the Global Economic Crisis of 2008.   

 


Crass moralising   

In Sri Lanka, billions of dollars of development aid has been poured into building large infrastructure; from the Accelerated Mahaweli Development Scheme, to the new highways and now the Port City. The IMF over the decades in Sri Lanka has initiated many structural adjustment and stabilisation programmes linked to neoliberal economic reforms. However, when such investment does not yield returns and reforms do not contribute any positive results, the development “support” continues with more investment in infrastructure and the call for more neoliberal reforms.   
Eventually, when such neoliberal policies repeatedly and consistently fail, where do those economists turn to? These neoliberal economists suddenly transform into sociological and cultural analysts. They shed their so-called expertise on the factors of production and the dynamics of the market, and they spew out the most common cultural tropes about attitudinal problems, laziness and wastage in religious and community activities.   

This discourse of condemning the people and their culture on the other hand is confronted by the contemporary rise of authoritarian nationalists. They also condemn people and culture, but they put the blame on minorities, migrants and evil external economic forces from other countries. 
The fact is that the right wing nationalists are far better at this blame game as they target and attack sections of society both within and outside their countries, as opposed to the general rejection of people that is characteristic of the neoliberals. In the end, the result is the same, a crass moral discourse condemning people and their culture. The economic development model that is at the root of economic problems is conveniently avoided by the economists.   

 


Entrepreneurial silver bullet

This moral project of austerity, discipline and hard work is linked to a catch all solution of entrepreneurship. It is claimed that all people could become entrepreneurs from the small scale fishermen to the women involved in small holding agriculture. 
The market-led failures whether it is the lack of demand for certain goods or falling effective demand, it is claimed, could be addressed only if all people become entrepreneurs; people should innovate, adjust to the market and even create the necessary demand. Here, programmes of educational reform – the new arena of neoliberal interventions – are also geared towards producing entrepreneurs.   
In this context, I am not rejecting the concept of entrepreneurship alltogether, rather there is a need to contextualise the concept of entrepreneurship in the history of economic thought. It was the famous early twentieth century economist Joseph Schumpeter who wrote extensively about the theory of creative destruction in the capitalist system and the role of entrepreneurs working with the capitalists in creating innovations leading to both growth and crises in the economy.   

Schumpeter had the following to say about entrepreneurs in one of his important works:   
“We have seen that the function of entrepreneurs is to reform or revolutionize the pattern of production by exploiting an invention or, more generally, an untried technological possibility for producing a new commodity or producing an old one in a new way, by opening up a new source of supply of materials or a new outlet for products, by reorganizing an industry and so on. 
Railroad construction in its earlier stages, electrical power production before the First World War, steam and steel, the motorcar, colonial ventures afford spectacular instances of a large genus which comprises innumerable humbler ones—down to such things as making a success of a particular kind of sausage or toothbrush. 


This kind of activity is primarily responsible for the recurrent “prosperities” that revolutionize the economic organism and the recurrent “recessions” that are due to the disequilibrating impact of the new products or methods. To undertake such new things is difficult and constitutes a distinct economic function, first, because they lie outside of the routine tasks which everybody understands and, secondly, because the environment resists in many ways that vary, according to social conditions, from simple refusal either to finance or to buy a new thing, to physical attack on the man who tries to produce it. 

To act with confidence beyond the range of familiar beacons and to overcome that resistance requires aptitudes that are present in only a small fraction of the population and that define the entrepreneurial type as well as the entrepreneurial function.” (Schumpeter, J. A. 1943. Capitalism, Socialism and Democracy, Page 132)   

The key point here to draw from Schumpeter is that it is “only a small fraction of the population” that can be entrepreneurs. Furthermore, entrepreneurs for Schumpeter take many risks, swim against the current, have intellectual social capital and rely on the capitalists’ support to make innovations a reality.   

 

 

"The IMF over the decades in Sri Lanka has initiated many structural adjustment and stabilisation programmes linked to neoliberal economic reforms"

 


How did the contemporary discourse about entrepreneurship get it so wrong? When they push entire population to become entrepreneurs, the entire economic risk and burden are placed on those individuals and their households. When so-called entrepreneurship in the form of mono-cropping in villages for cut flowers or seaweed cultivation fails for such rural folk due to market fluctuations, they are pushed to utter poverty and even starvation.   

This is not just the creative destruction with business cycles leading to economic booms and downturns characteristic of the capitalist system that Schumpeter analysed, but rather the negligent and cruel abandoning of already marginalised sections of society to be drowned by market forces. Meanwhile, the neoliberal economists blame the people and their culture for their economic predicament, and avoid responsibility for their failed economic models of development.   

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