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Economics Unmasked: From Power and Greed to Compassion and the Common Good

Economics Unmasked: From Power and Greed to Compassion and the Common Good

by Philip B. Smith, Manfred Max-Neef

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The economic system under which we live not only forces the great majority of humankind to live their lives in indignity and poverty; it also threatens all forms of life - indeed life itself. Economics Unmasked presents a cogent critique of the dominant economic system in order to help transform our society into one in which all forms of life will be


The economic system under which we live not only forces the great majority of humankind to live their lives in indignity and poverty; it also threatens all forms of life - indeed life itself. Economics Unmasked presents a cogent critique of the dominant economic system in order to help transform our society into one in which all forms of life will be protected. The first part of this book is devoted to showing that the theoretical constructions that have been selected, work mainly to bring about injustice. The second part is concerned with what should be the foundations of a new economics where justice, human dignity, compassion and reverence for life must be the guiding values.

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“An inspiring statement that there is an alternative to the hollow dreams of globalisation.”  —Molly Scott Cato, economics spokesperson for the Green Party of England and Wales

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Economics Unmasked

From Power and Greed to Compassion and the Common Good

By Philip B. Smith, Manfred Max-Neef

Green Books Ltd

Copyright © 2011 Philip B. Smith & Manfred Max-Neef
All rights reserved.
ISBN: 978-1-900322-70-6


From knowledge to understanding

Life is an unending sequence of bifurcations: the decision that I take implies all the decisions I did not take. Our life is inevitably a permanent choice of one possibility out of an infinity of ontological possibilities. The fact that I was at a given place, at a very precise moment in time, when a given situation occurred or a given person appeared, may have had a decisive effect on the rest of my life. A few minutes earlier or later, or a few metres away in any direction, might well have determined a different bifurcation and, hence, a completely different life. As the great Spanish philosopher José Ortega y Gasset pointed out: "I am myself and my circumstance."

What holds for individual lives holds for communities and whole societies as well. Our so-called Western (Judaeo-Christian) civilization is the result of its own bifurcations. We in the West are what we are, but we could also have been something we are not. Let us then recall some of our decisive bifurcations.

Early in the thirteenth century, in Italy, a young man named Giovanni di Bernardone, while still very young and very rich, decides to radically change his life. As a result of his transformation, we remember him today under a different name: St Francis of Assisi. Francis, when he refers to the world, speaks of brother Sun and sister Moon; of brother wolf, and of water, fire and trees; and people as brothers and sisters as well. The world he describes and feels is a world where love not only is possible but makes sense and has a universal meaning.

Sometime later, also in Italy, we hear the resounding voice of the brilliant and astute Machiavelli, warning us that: "It is much safer to be feared than to be loved." He also describes a world, but in addition he creates a world.

The world we have today is not that of Francis, it is the world of Machiavelli. Francis was the route not navigated. The navigation we chose was that of Machiavelli, and inspired by it we have constructed our social, political and economic conceptions.

In 1487, another very young man, just 23 years of age, Francesco Pico della Mirandola, prepares himself for the public defence of his 900 theses about the concord between the different religions and philosophies. He refuses to enclose himself within the narrowness of just one doctrine. Convinced that truths are multiple, and never just single and universal, he longs for a spiritual renovation that can reconcile humanity.

Some years later Francis Bacon, a fervent believer in absolute truth and in the possibilities of certainty, invites us to torture Nature so that through the delivery of her secrets we can extract the truth.

Again, two worlds. One represents the route we navigated; the other the route we did not. We did not follow the way suggested by Pico della Mirandola. We opted for accepting Bacon's invitation, and, thus, we continue applying his recipe with efficiency and enthusiasm. We continue torturing Nature in order to extract from her what we believe to be the truth.

In the year 1600, Giordano Bruno burns at the stake, the victim of his pantheism, since he believes that the Earth is life and has a soul. All things, for him, are manifestations of life. Everything is life.

Three decades later, Descartes whispers: "Through my window, what I see are hats and coats covering automatic machines."

We did not navigate the route of Giordano Bruno. We chose that of Descartes, and, in that manner, we have witnessed the triumph of mechanism and reductionism.

For Galileo and Newton, the language of Nature is mathematics. Nothing is important in science that cannot be measured. We and Nature, the observer and the observed, are separate entities. Science is the supreme manifestation of reason, and reason is the supreme attribute of the human being.

Goethe, whose scientific contributions have been (unjustly) overshadowed because of his colossal achievements in literature and the arts, felt upset with what he believed to be the limitations of Newtonian physics. For Goethe, "science is as much an inner path of spiritual development as it is a discipline aimed at accumulating knowledge of the physical world. It involves not only a rigorous training of our faculties of observation and thinking, but also of other human faculties which can attune us to the spiritual dimension that underlies and interpenetrates the physical: faculties such as feeling, imagination and intuition. Science, as Goethe conceived and practised it, has as its highest goal the arousal of the feeling of wonder through contemplative looking (Anschauung), in which the scientist would come to see God in nature and nature in God."

Two worlds once more: another bifurcation. We are still under the spell of the overpowering lustre of Galileo and Newton, and have chosen not to navigate the route of a Goethean science. Feeling, intuition, consciousness and spirituality are still banished from the realm of science, notwithstanding some new enlightenment arising from the field of quantum physics. The teaching of conventional economics, which, as incredible as it may sound, claims to be 'value-free', is a conspicuous case in point. A discipline where mathematics has become an end in itself instead of a tool, and where only that which can be measured is important, has generated models and interpretations that are theoretically attractive but totally divorced from reality.

Johannes Brahms composed two concertos for piano and orchestra. Regardless of which of the two may be more to one's liking, it is the first that is fascinating. In fact, it is a splendid exposition of the route Brahms eventually decided not to navigate. We have been left forever with the curiosity of knowing how the other Brahms might have been.

That's the way it is. There is a route not navigated, remembered only by 'library worms', and a navigated route to which we attribute spectacular successes and achievements. The universities in particular have chosen the routes of Machiavelli, Bacon, Descartes, Galileo and Newton. As far as St Francis, Pico, Giordano Bruno and Goethe (the scientist) are concerned, they have remained as historical footnotes.

As a result of the navigated route, we have managed to construct a world in which – as suggested by the Catalonian philosopher Jordi Pigem – the Christian virtues such as faith, hope and charity manifest themselves today meta-morphosed as schizophrenia, depression and narcissism. The navigation, no doubt, has been fascinating and spectacular. There is much in it to be admired. However, if schizophrenia, depression and narcissism are now the mirror of our existential reality, it is because all of a sudden we find ourselves in a world of confusion. We are in a world of disenchantment, where progress becomes paradoxical and absurd, and reality becomes so incomprehensible, that we desperately seek refuge in a technology that offers us an escape into virtual realities.

Where have we arrived?

We have arrived at a point in our human evolution, the characteristic of which is that we know a lot, but we understand very little. Our chosen navigation has been piloted by reason and leads to the port of knowledge. As such it has been an overwhelmingly successful navigation. We have never in all of our existence accumulated more knowledge than during the last hundred years. We are celebrating the apotheosis of reason, but in the midst of such a splendid celebration we suddenly have the feeling that something is missing.

Yes, we can achieve knowledge about almost anything we want. We can, for instance, guided by our beloved scientific method, study everything there is, from theological, anthropological, sociological, psychological and even biochemical perspectives, about a human phenomenon called love. The result will be that we will know everything that can be known about love. But once we achieve that complete knowledge, we will sooner or later discover that we will never understand love unless we fall in love. We will realize that knowledge is not the road that leads to understanding, because the port of understanding is on another shore and requires a different navigation. We will then be aware that we can attempt to understand only that of which we become a part. That understanding is the result of integration, while knowledge has been the result of detachment. That understanding is holistic, while knowledge is fragmented.

At least we have reached a point at which (many conventional academics notwithstanding) those of us who, in Goethe's perspective, are concerned with the relationship between science and spirituality are finally becoming aware that knowledge is not enough, and that we have to learn how to attain understanding in order to achieve the completeness of our being and the completeness of our science.

We are perhaps beginning to realize that knowledge without understanding is hollow, and understanding without knowledge is incomplete. We therefore need to undertake, at last, the navigation we have so far postponed. But, in order to do so, we must face the great challenge of a language shift.

José Ortega y Gasset, the Spanish philosopher mentioned earlier, used to say that "every generation has its theme". We might add that, in addition, every generation, or historical period, is dominated by, or falls under the spell of, some language. That is the way it is, and there is nothing wrong with it, as long as the dominant language of a given period is coherent with the challenges of that period. The important thing to keep in mind is that language influences our perceptions and hence shapes our actions. Let us look at some examples.

During the first three centuries of the second millennium of Western civilization, the dominant language was of a teleological nature, meaning that human actions had to be justified in terms of a calling that was superior and beyond the needs of everyday life. That made possible the construction of the great cathedrals and monasteries, where time was of no importance. The construction would take 600 years? So what! Nobody was in a hurry. After all, they were constructing for eternity, and eternity is not infinite time, but timelessness. Thank God that the language of 'economic efficiency' had not yet been invented. The importance lay in the deed and not in the time it might take. It was a case of coherence between language and historical challenge.

The language dominating the nineteenth century was basically that of the consolidation of the nation-state. The great speeches of political leaders such as Disraeli, Gladstone and Bismarck are relevant examples. Without going into details, we may also say that the dominant language of the century was coherent with the historical challenge of the times.

It is only in the twentieth century, especially during the second half, that the dominant language is that of economics. A quick overview shows some interesting perspectives. The late 1920s and early 1930s, the time of the so-called great depression, coincides with the emergence of Keynesian economics. The Keynesian language is in many ways the product of a crisis, having the capacity of both interpreting the crisis and overcoming it. It is, again, a language (or rather sub-language) coherent with its historical period.

The next sub-language shift occurs during the 1950s and 1960s, with the emergence of the so-called developmental language. This was an optimistic, utopian and happy language. Economists writing in those days were mainly dominated by the feeling that, at last, we had discovered how to promote true development and overcome world poverty. It is unnecessary to reproduce the prescriptions here, but it should be pointed out that, although the hoped-for goals were not fully achieved, many things during those decades changed in a positive manner. This language was at least partially coherent with its historical challenges.

And then came the last three decades of the twentieth century, with the emergence of the neoliberal discourse. This is a language that still dominates, during a period in which global poverty has increased dramatically, the burden of debt has crippled many national economies and generated the brutal overexploitation of both people and natural resources, the destruction of ecosystems and biodiversity has reached levels unknown in human history, and the accumulation of financial wealth in ever-fewer hands has reached obscene proportions. The disastrous effects of this language, absolutely incoherent with its historical challenges, is clear enough to be seen by everyone, although decision-makers and holders of power prefer to look in the opposite direction and hold on to their pseudo-religious concoction.

Where do we go from here?

There is a tendency in the West to perceive ourselves as members of a successful culture. However, the truth is that no matter how much we extend the concept of success, we are still incomplete beings, materially overdeveloped and spiritually poor. And most probably it is that incompleteness, that poverty, which is responsible for the uneasiness and anxieties that permeate our existence in the world today. Perhaps the moment has arrived in which to rest and reflect. We have the opportunity now to analyse with true honesty the map that shows where we have navigated, with all its hazards and successes; all its tragedies and glories. And then it may be wise to unearth the alternative map of the route we did not navigate, and see whether we can find in it orientations that can rescue us from our existential confusion.

As a consequence of the unearthing of the forgotten map, perhaps it would make sense that we start seeing brothers and sisters surrounding us. Perhaps it would be good to believe in the possibilities of harmony between many possible truths. Perhaps it may be to our advantage that we dare to imagine and believe that the Earth has a soul and that everything is life. Perhaps it would be good to realize that there is no reason whatsoever to banish intuition, spirituality and consciousness from the realm of science. Or, to put it in Goethe's words: "If [we] would seek comfort in the whole, [we] must learn to discover the whole in the smallest part", because "nothing is more consonant with Nature than that she puts into operation in the smallest detail that which she intends as a whole."

Our passionate pursuit of knowledge has postponed our navigation towards understanding. There should be nothing to impede the undertaking of such a navigation now, were it not for an economics which, as practised under the spell of the neoliberal discourse, increasingly distorts reality, thus contributing to our confusion and to the falsification of knowledge itself.

No sustainability (which obviously requires understanding) will or can be achieved without a profound language shift. We need a new language that opens the door of understanding; that is, not a language of power and domination, but a language that may emerge from the depth of our self- discovery as an inseparable part of a whole that is the cradle of the miracle of life. If we manage to provoke such a shift, we may still experience the satisfaction of having brought about a new century worth living in.

Let us hope for a safe voyage and a fulfilling navigation towards the shores that may turn us into complete beings capable of understanding the completeness of life.


The function of economics in society

In the previous chapter we travelled through the bifurcations of our Western civilization in general. In the chapters ahead we will travel through the bifurcations that have affected the development of the discipline of economics.

We, the authors, hold that economics fulfils a function in society parallel with, and supplementary to, law: namely that of a bulwark of class structure. The class structure of society has always been supported and stabilized by the existing systems of law. This is an important raison d'être of all legal codes. The Codex Hammurabi (the oldest well-preserved ancient law code, dating to c.1792 BC in ancient Babylon, which scaled punishments depending on social status, e.g. of slave versus free man) was formulated explicitly to support the class structure and, although in other law systems this function is not explicitly mentioned, it is implicit in the legal codes. As the Western feudal period drew to a close, there appeared the need, in order to maintain stability, for more than a system based on the force of law. The outlines of this development are sketched below.

Justifying the status quo

One may divide the functions of law into protection of (the integrity of) life and limb on the one hand; and protection of privilege, especially (the possession of) property, on the other. The parts of law concerned with the former, and of the collection of customs that prevail in relations between individuals, are almost universally felt to be natural, and therefore need no justification. In the feudal period of Western history, the same naturalness was held – by those with authority – to be true of the laws relating to property. Feudal law governed the class structure and was all that was needed to specify societal relationships completely. These relationships were seen and accepted by all, including by the powerless and oppressed, as God-given. In the measure that the power and riches of the trading (and later manufacturing) class – the bourgeoisie – grew, bringing the feudal period to a close, the real, but hidden, conflict between the haves and the have-nots came into the open as a permanent feature of society. Machiavelli was the first to describe this basic dichotomy, using as an example his own city of Florence. In paragraph IX of The Prince he distinguishes in every city (i.e. society) two 'dispositions', the people and the powerful, and "The people are everywhere anxious to not be dominated or oppressed by the powerful, and the powerful are out to dominate and oppress the people." Where his own sympathy lies comes out clearly a few lines later, where he writes: "The people are more honest in their intentions than the powerful because the latter want to oppress the people, whereas the people want only to not be oppressed." In Chapter 3 of this book, where we present our own sympathies, it will become apparent that, as far as this ethical point is concerned, we are with Machiavelli.


Excerpted from Economics Unmasked by Philip B. Smith, Manfred Max-Neef. Copyright © 2011 Philip B. Smith & Manfred Max-Neef. Excerpted by permission of Green Books Ltd.
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Meet the Author

Manfred Max-Neef is a Chilean-German economist and environmentalist. He is Professor of Ecological Economics in the Southern University of Chile, and Director of the Economics Institute. His book "Human Scale Development" has been recognized by Cambridge University as one of the fifty most important texts in Sustainability.

Philip Bartlett Smith (1923-2005) was a Dutch-American experimental physicist who after his retirement devoted himself to studying economics and economic theories. He was co-author with S.E. Okoya, J. de Wilde and P. Deshingkar of "The World at the Crossroads: Towards a sustainable, equitable and livable world; A Report to the Pugwash Council" (Earthscan 1994).

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