Trapped in the Economists’ World

Wednesday, February 5th, 2014

Despite recent disasters we are still trapped in the economists’ world:

But the moment you pull back and look at that world from a wider perspective strange things start to emerge.

When the neoliberal project first began in 1979 with Mrs Thatcher the idea was that politicians would give away power to the markets and the state would shrink. Over the past 15 years the idea of the “market” has been extended to practically every area of society — education, health, even the arts. But to make this happen those running the neoliberal project had to enforce it by creating vast and intricate performance indicators and feedback systems (which in many cases led to wide scale absurdities). And to do this they used the mighty power of the state.

The crucial thing is that these systems had practically nothing to do with the original idea of the “market”. They are actually a strange pseudo-scientific piece of planning engineered by politicians and groups of technocrats that borrowed far more from cold-war ideas of feedback engineering and cybernetics than from the risky roller coaster of the market. And to create the systems they had to greatly enlarge the state and the extent of its power, which is the very opposite of the vision of a free-market utopia.

And when you examine the roots of the neoliberal idea of the market it gets odder still. The ideas that rose up in the post-war years that captured the imagination of people like Mrs Thatcher are actually a very strange mutation of capitalism. If you listen to interviews with Friedrich Hayek he talks far more like a cold war systems engineer discussing information signals and feedback than Adam Smith with his theories of Moral Sentiment.

While the roots of the technical systems that the banks created to manage risk also lie back in the cybernetic dreams of the 1950s and 60s. Dreams not of progress through the dynamism of markets — but of using computers to create a balanced, almost frozen world. — just like in the Cold War.

Which raises the question — have we misunderstood what we have lived through since 1979?

We think it was the resurgence of capitalism. But maybe it was something very different? Something that we can’t see properly because we are still trapped in the economists’ world and their mindset.


  1. Toddy Cat says:

    Whether made by the left or right, predictions of the State “withering away” somehow never seem to come true.

  2. Anomaly UK says:

    Maybe just trapped in the wrong economists’ world.

  3. Magus Janus says:

    Labor upon gaining power in 1997 proceeded to ratchet up government spending (especially after 2000) such that by 2010 government spending as percent of GDP was right back to where it was in 1979 when Thatcher had begun her (necessary if flawed) reforms.

    Yes, there are plenty of other metrics to be used to gauge government intrusion into the economy, and on many issues the UK is freer than it was back then (state ownership of industry, capital mobility, etc.), but on others it is far less free (HR bureaucracy, aka affirmative action, sensitivity, etc., EU regulations, etc.).

    The notion that the UK somehow entered hypercapitalism under Thatcher is a bit laughable.

  4. Lucklucky says:

    The problem here is what we mean by Capitalism.

    Mercantilism was a non free market Capitalism, prefered by Fascists and Socialists.

    Communism is State Capitalism.

    The only thing that Thatcher achieved was to stop Socialism for 10 years. Thatcher was an exception, since most politicians on the Right are from the Socialist Right, like Bush, Cameron, etc. Every one of them is happy with the state putting hands on 50% of GDP.

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