The Colonisation of Political Economy as a Subject Field and its Reduction to Finance
This is the first part of a series of essays which lays out an account of education relating to human development. It takes the view that bringing disciplines together deepens the knowledge of each individual discipline and facilitates the production of contextualised knowledge.
Contextualised knowledge affords greater cross referencing and more profound problematisation of arguments and ideas which I feel is a good thing in working towards increasingly reliable knowledge and ideas. The more a society is unable to value interdisciplinary syntheses of knowledge, the more fragile and lost it becomes from its immediate experience.
Contextualising Human Activity
The environment may be understood in at least two categorical ways – the culture of humans, and the landscape within which humans enact that culture. Beginning with the culture of humans, concepts like money or politics are – to my knowledge – not found independently of human beings and so only occupy the interests of human beings.
The culture of humans has so significantly impacted on the landscape that the impacts extend far out beyond the bounds of human activity onto other species. This cannot be said about the converse arrangement. The sum environment includes everything which exists beyond human culture too. In this way, money and politics are of no relevance beyond the collected existential lives of human beings.
To gain perspective on what is happening in the big picture it is helpful to hold in mind that we, as human beings, are primates; homo sapiens are a species of social mammal which have evolved in a particular habitat which has shaped the attributes of body, mind and behaviour.
Taking a third person perspective is helpful to escape the subjectivities of human culture allowing us to view the collected behaviours of our species in clearer ways. It is an attempt to escape the gravity of the human mythos it has created for itself opening space to apprehend new narratives which are not found represented in the old.
- Humans are a species of social mammal which live on the earth
- The third person perspective helps us see beyond our own context
The Instrumentalising Euphemism Of The Marketplace
Instrumentalisation refers to the process of treating persons merely as a means to achieving something. They become a tool to be used devoid of considerations which recognise the independent sentience of the being.
In this essay I shall be examining the economic instrumentalisation of humans and other species as a diminishment of their existences from the holistic sentient beings they are to products and tools used for consumption and wealth extraction via the euphemistic ‘marketplace’. Beyond the practical utility of the market as describing the practice of mutual exchange and barter of goods and services, ‘the market’ has become a term to separate the abstract consequences of economic activity from the responsibility of the owners and actors involved.
I argue that it is through this abstraction that many kinds of immoral and damaging actions are justified by referring to the market as something which is outside and beyond the individuals involved.
The following quote brings into sharp relief the impacts of humans on other living species and the geological environment. A chief reason for doing this is to articulate that what we have heaped upon other animal species is also heaped upon our own highlighting the interconnected nature of humans and the environment.
“In the current century, although cruelty persists, and although huge numbers of animals continue to be used for food and other purposes, we have arguably moved into a third stage. We now see that the burgeoning human population is having vast, unintended effects on the non-human inhabitants of the planet. We affect animals by destroying their habitat, polluting their environment, introducing invasive species into their ecological systems, building structures in flight-paths, tilling the land, cutting trees, driving cars, burning fuel, and on and on.” (Mellor, Hunt, & Gusset, 2015).
Mellor, D. J., Hunt, S., Gusset, M., (201S), ‘Caring for Wildlife: The World Zoo and Aquarium Animal Welfare Strategy’, Gland: WAZA Executive Office, 87, Page 6: http://www.waza.org/wp- content/uploads/2019/03/WAZA-Animal-Welfare-Strategy-2015_Landscape.pdf
- The effects of human culture affect the well-being of homo sapiens and the habitat which sustains them
- Humans have evolved with and rely on the physical and social environment
The Origins Of Political Economy
I will be examining how this instrumentalisation has been effected by examining the changing nature of the way that our societies have been governed through the subject lens of Political Economy. There is arguably no more potent force in policy and practice of human affairs today than that which stems from this field of knowledge. Analysing the historical trends associated with the field is a key step we need to undertake to understanding our current context of consumerism before understanding in turn how we are affected by a particular way of viewing human activity.
The original root of the word ‘economics’ stems from the Greek ‘oikonomia’ meaning “household management, thrift”; it is related etymologically to ‘oikonomos’ meaning “manager, steward”, and to ‘oikos’ meaning “house, abode, dwelling”. The roots of economics as a modality of thinking ultimately comes from understanding how to manage our home such that it provides for our needs. The notion of household or home is important in this formulation as it places personhood and ownership in the needs being addressed.
The renowned political economist Alfred Marshall famously stated in 1890 about this field: “Political economy or economics is a study of [hu]mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing” (Marshall, 2013).
Marshall, A., (2013), ‘Principles Of Economics’, Houndmills, Basingstoke, Hampshire: Palgrave Macmillan. http://www.library.fa.ru/files/Marshall-Principles.pdf
As social mammals the companionship of society is vital for our health and wellbeing which I hope to demonstrate in a later related essay. Much of what is taught or discussed today as economics is more concerned with finance than wellbeing. This is in contrast to the study of the holistic interplay of human beings and functional relationships working to live in ways which coalesce with wider societies and environs, than we find in finance alone. Finance is the study of money and how it is used, a single strand of a much more multi-dimensioned enquiry associated with wellbeing.
Political economy as a discipline originated as a social science studied in the academic department of geography which was dedicated to the study of the lands, their features, inhabitants, and the phenomena of the planet Earth. It was not until the 1700s that the subject started to be systematised by thinkers such as Richard Cantillon in his ‘Essai sur la Nature du Commerce en Général’ [published 1755], who was to influence François Quesnay and the Physiocrats.
Cantillon wrote about interrlationships which could be understood in terms of cause and effect, the influence of the supply of money, entrepreneurialism as associated with risk, and the economics of the spatial distribution of goods, services and resources. His systematic treatment of the subject was a key influence on the Physiocrats who were French economists who put forward ideas that all wealth came from the land through its agriculture and development (Neill, 1949)
Neill, T. P., (1949), ‘The Physiocrats’ Concept of Economics’, The Quarterly Journal of Economics, 63(4), 532.doi:10.2307/1882137,
François Quesnay, who was one of the most well known of the Physiocrats developed the Tableau Économique to communicate a systemic view of economic interrelationships. He drew this systems approach from the advances of the medical schools of 18th century France.
Ultimately Adam Smith, famous for writing the landmark work ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ published in 1776 (Rutherford, 2012), was influenced by the approach of the Physiocrats. With origins as a moral philosopher under the tutelage of Francis Hutcheson, he wrote ‘A Theory of Moral Sentiments’ in which he explored how people decide what is right and wrong in a study of morality. To the end of his life, after the great success of the seminal work abbreviatedly known as ‘The Wealth of Nations’, he put all his economic work aside to return to developing his ‘Theory of Moral Sentiments’ to bookend his intellectual legacy.
Rutherford, D., (2012), ‘In the shadow of Adam Smith; Founders of Scottish Economics 1700-1900’ New York: Palgrave Macmillan, Page 2
https://books.google.com/books ?id=_VIHuAAACAAJ&source=g bs book other versions r&cad=4
Coming out of an age of Mercantilism Smith drew together various social-economic understandings stewarding the subject of what was to become Political Economy. So the academic discipline in its origin had been organised through the writings of various theoreticians and merchants across the ages. It was from these collections that 18th century Enlightenment thinkers drew together understandings of functional relationships from amid the factors of land and society to coalesce a distinct field of study.
- The prehistory of political economy as a subject is in management of the home
- “Political economy or economics is a study of [hu]mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing” – Alfred Marshall 1890
- Political Economy was originally a social science subject discipline of Geography
- The prehistory of economics were found as fragmentary analyses over thousands of years
- Richard Cantillon was an early systematiser of economic thinking in 1755 publishing his ‘Essai sur la Nature du Commerce en Général’
- Cantillon influenced Francois Quesnay and the physiocrats who developed a system of economic activity relating wealth to land and the use of land
- Cantillon and the physiocrats influenced Adam Smith who is recognised as the great systematiser of political economy publishing ‘An Inquiry into the Nature and Causes of the Wealth of Nations’ published in 1776
- Smith was a moral philosopher under the tutelage of Francis Hutcheson at University of Glasgow whos first and last work was ‘A Theory of Moral Sentiments’
The Effects of Mathematical Abstraction
I argue that later Neoclassical Economics started to become increasing abstracted through the application of pure mathematics to dynamic, complex, living systems. A significant point in development can be traced to William Stanley Jevons who published ‘The Mathematical Theory of Political Economy’ in 1874 (Jevons, 1874).
Jevons, W. S., (1874), ‘The Mathematical Theory of Political Economy’, Journal of the Statistical Society of London, 37(4), 478. doi:10.2307/2338697, https://www.jstor.org/stable/2338697?seq=l#metadata_info_tab_contents
This indicated a shift of the social science from political economy towards the symbolic world of mathematics moving attentions from the nuanced and embodied realities of the factory floor (for example) towards two dimensional cyphers of what is happening in the world.
The well respected sociologist Norbert Elias described ‘hierarchies of legitimacy’ which reflected caste systems within knowledge cultures. It can be argued that the impetus of Jevons in committing political economy to the abstraction of mathematics was an attempt to improve its status – and thus cultural respect – as a field of knowledge. The fetish for seeking proofs for social sciences in the form of mathematics can be understood as gaining authority through proximity with a more culturally established discipline.
“As a rule, higher ranking and more powerful disciplines can impose upon those who rank lower their own method and categories of thinking as a model to be imitated…. Sociologists work within a setting where one of the most powerful and most successful groups of scientific establishments, whose members rank high in the academic status hierarchy, that of physicists, have formed an idea of science in their own image; they have succeeded in propagating the belief that their own method of setting and solving problems is the only scientific method and that research not undertaken in accordance with their prescription ought not to be accorded the status of scientific research.” (Elias, 1982)
Elias, N. (1982). Scientific Establishments. Scientific Establishments and Hierarchies, Dordrecht: Reidel 3–69. doi:10.1007/978-94-009-7729-7_1 Page 21 – 53
John Maynard Keynes made a point that economics should avoid attempts to turn it into a pseudo-natural science because unlike the typical natural science the phenomena to which economics is applied is, in too many respects, not ‘homogenous through time’. The application of the natural science process to researching phenomena other than those for which they were developed (the regularities of the physical universe) is problematic. Social phenomena are not, in Keynes’ phrase, “homogeneous through time”.
The application of the natural science process to researching phenomena other than those for which they were developed (the regularities of the physical universe) is problematic and Moggridge (1976) quotes Keynes as saying “It seems to me that economics is a branch of logic, a way of thinking”.
Moggridge, D. E. (1976). John Maynard Keynes. Harmondsworth, Eng: Penguin Books. https://books.google.co.uk/books/about/John_Maynard_Keynes.html?id=U8ldAAAAIAAJ&redir_esc=y
In some ways, the reformulation of political economy in the abstract marked the beginning of a significant reduction of the complexity of human affairs on a grand scale. I argue that human life was being re-cast through terms of demand and supply where people feature as consumers and raw resources whose chief concern was to maximise personal satisfaction.
A principle discussed by the economist John Maynard Keynes examined the problems which arise around corporate behaviour and the distance between the owner and enterprise: “The divorce between ownership and the real responsibility of management is serious within a country, when, as a result of joint stock enterprise, ownership is broken up among innumerable individuals who buy their interest today and sell it tomorrow and lack altogether both knowledge and responsibility towards what they momentarily own” (Keynes, 1933).
Keynes, J. M. (1933), “National Self-Sufficiency,” The Yale Review, Vol. 22, no. 4, pp. 755-769.
- William Stanley Jevons ushered in Neoclassical Economics by publishing ‘The Mathematical Theory of Political Economy’ in 1874
- The mathematical treatment of the social science had the effect of abstracting the expression of interrelationships found in classical economics
- Norbert Elias describes ‘hierarchies of legitimacy’ in how subject disciplines are valued
- Jevons’ impetus to abstract the social science of economics was to establish its legitimacy
- Keynes identifies problems which arise between the abstracting forces of distance between the owner and the enterprise
- Keynes relates economic thinking as a branch of logic and a way of thinking
From Laissez Faire Economics to the rise of the Chicago School
We can see the peaking of the second industrial revolution of the late 19th and early 20th century intersect with the rise of the Chicago School of Economics which fostered free market ideology confluent with the technocratic laissez faire business schools which were proliferating (Page xii, Locke & Spender, 2011).
Locke, R. R., & Spender, J. C., (2011), ‘Confronting Managerialism: How The Business Elite And Their Schools Threw Our Lives Out Of Balance’, London: Zed Books: https://books.google.co.uk/books/about/Confronting_Managerialism.html
This mix of cultural developments against the backdrop of two world wars gave rise to the voicing of a kind of ‘Capone Economics’ which aimed to reframe classical political economy perspectives to positions which amount to might-is-right, pay-to-play and small government.
Through these particular ethereal and unbounded macroviews of the world, ‘the market’ is presented as the mechanism which always gives rise to the ‘right decision’ in collective human affairs. In the playing out of this cultural configuration, those with the greatest finance have the biggest stake hold in decision making.
Paul Howard Douglas taught economics at the University of Chicago and wrote about the changing experience of teaching there in his memoirs:
“I was disconcerted to find that the economic and political conservatives had acquired an almost complete dominance over my department and taught that market decisions were always right and profit values the supreme ones. The doctrine of non-interference with the market meant, in practice, clear the track for big business. Inequalities of bargaining power, knowledge, and income were brushed aside…
…the state seemed to be a good agency for widely needed reforms, in health, housing, education, conservation, and recreation. The opinions of my colleagues would have confined government to the eighteenth-century functions of justice, police, and arms, which I thought had been insufficient even for that time and were certainly so for ours. These men would neither use statistical data to develop economic theory nor accept critical analysis of the economic system…
…increasingly out of tune with many of my faculty colleagues and was keenly aware of their impatience and disgust with me. The university I had loved so much seemed to be a different place. Schultz was dead, Viner was gone, Knight was now openly hostile, and his disciples seemed to be everywhere. If I stayed, it would he in an unfriendly environment. I felt stifled and did not think I could live in that atmosphere“ (Douglas, 1972).
- After the peaking of the second industrial revolution of the late 19th and early 20th century we see the rise of the Chicago School of Economics
- The Chicago School of Economics fostered free market ideology which held that ‘the market’ would always arrive at the best outcomes
- This period was during the era of the mob rule of Al Capone who was imprisoned for tax evasion by the Federal government of the United States.
- During the same period technocratic laissez faire business schools proliferated which espoused methodologies of ‘scientific management’ for running industries
- A type of ‘Capone Economics’ reframe classical political economy perspectives to views of ‘small government’ which amount to might-is-right and pay-to-play
- Those with the greatest finance have the biggest stake hold in decision making.
- Paul Howard Douglas taught economics at the University of Chicago at the time: “I was disconcerted to find that the economic and political conservatives had acquired an almost complete dominance over my department and taught that market decisions were always right and profit values the supreme ones. The doctrine of non-interference with the market meant, in practice, clear the track for big business. Inequalities of bargaining power, knowledge, and income were brushed aside”
The Regulation of Society by the ‘free market’
I have included this introduction and lengthy quote to illustrate the doctrine and atmosphere which had become dominant in what we could argue as globally the most influential school of economic thought relevant to the era we now live through.
Associated with this period we see the upsurge of elite business schools whose spread in the 20th century has been associated with the rise of a kind of managerialism which paralleled the growth of the reductionist free market economics of the Chicago School of Economics.
Together they shared a propensity to translate the living landscape into mathematical and positivist term of finance with accompanying claims that this made their practice more scientific – therefore robust – than other approaches.
Professors Robert Locke and J. C Spender chart the rise and influence of these business schools and practices of ‘scientific management’ in their book ‘Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Our of Balance’. In the book they present the case that:
“Because management schools existed in the USA and nowhere else, only there in the 1960s was it possible for a group of reformers to set about the education of a general management caste in business schools following a positivist science format.
The principal issue raised in this study, then, has not been whether people in management should learn mathematics, technology, and/or science in school, but whether management, as a general function, can be treated as a rational science in management praxis or in business schools. The answer the book has given is that it cannot, and thinking and acting as if it could has created lives out of balance…” (Page 178, Locke & Spender, 2011).
Locke, R. R., & Spender, J. C., (2011), ‘Confronting Managerialism: How The Business Elite And Their Schools Threw Our Lives Out Of Balance’, London: Zed Books https://books.google.co.uk/books/about/Confronting_Manage rialism.html?id=rwpkDgAAQBAJ&redir_esc=y
- Professors Locke and Spender documented the rise of the use of mathematics to manage human systems in ‘Confronting Managerialism: How the Business Elite and Their Schools Threw Our Lives Our of Balance’
- Locke and Spender argue that this reductionist approach has created a managerial cast based on the abstraction.
The Flow of Capital and the Movement of Free Market Ideology into Tax Havens
This is a bullet point timeline of some significant events which influence the world economically and in the world of finance. This is a brief supplement to the main narrative of the work which has had its focus on establishing the history of the subject of Political Economy and its abstract expression through mathematics.
The narrative recapitulates the prehistory of fragmented writings often of merchants until the systematising of the writings into Classical Economic thinking which expressed functional relationships as a social science. Then I argue that Classical Economic thinking became Neoclassical Economic thinking through the expression of the functional relationships in mathematical terms. From Neoclassical Economics I look at the narrowing of the teaching of the subject in the Chicago School to Free Market Economics, which takes a singular view of political economy – namely, one of small government and market decisions shaping society.
This short timeline highlights significant political economic events to chart the development of a kind of financialism which I argue comes from the simplification of the social science to abstract representations of human activity in numbers (i.e. money and speculative financial instruments). To read a fuller narrative around these events you can visit the link in the reference below which leads to an essay on this:
Dunedin, A., (2018), ‘Action Research: Outputs, Outcomes and the Political Setting’, Retrieved from internet 5. 5.19: https://www.raggeduniversity.co.uk/2018/12/03/action-research-outputs-outcomes-and-the-political-setting/
- 1944 Bretton Woods conference: Robert Skidelsky later writes on Churchill vs Hitler – John Maynard Keynes vs Harry Dexter White; The International Monetary Fund, World Bank and US Dollar as world currency are some of the eventual outcomes
- 1946 Keynes died 21 April at the age of 62 from a heart attack
- 1948 Harry Dexter White accused of spying for the Soviet Union dying from an overdose of digoxin in hotel room
- 1957 The Treaty of Rome is created forming the European Economic Community and the creation of the European Economic Community
- 1961 creation of London Gold Pool to underpin Bretton Woods System of fixed rate convertible currencies
- 1968 The folding of the London Gold Pool
- 1971 Richard Nixon unilaterally uncouples the US Dollar from the gold reserves; fiat currencies
- 1973 Bretton Woods system de facto replaced by freely floating fiat currencies without any intrinsic value
- A period of deregulation of international financial transactions marked the growth of offshore finance and tax havens
- 1999 repeal of the Glass–Steagall Act by the Gramm–Leach–Bliley Act (GLBA) which had previously separated retail and investment banking
- 1999 the amount of futures which investment banks could own was lifted
- 1999 the European Roundtable of Industrialists earmark education as a market opportunity
- 2008 The worlds largest ever wheat harvest
- 2008 The Food and Agricultural Organisation of the United Nations reports on the artificial inflation of staple foods by the stockmarket
- 2008 The Financial Crisis strikes and the public bail out of the banks
Education and Human Capital: The Changing of Public Goods to Private Products
Relating this to the context of education, we can see by looking at Google Ngram Viewer (Figure 1 below) the rise of the phrase ‘student as consumer’ started to occur in the mid 1960s. This marks a considered strategy to redefine education in terms of market values and a concerted effort to unsettle theory of public goods and ownership. It was from the mid 1960s onwards that we start to see the meteoric growth of business schools and the creation of a managerial caste affecting nearly every walk of life.
Appendix 1: Google Ngram of the rise of the use of the phrase ‘student as consumer’
Whilst beyond the scope of this particular paper, it is important to briefly allude to other related magnitudinal shifts in political economy which I have written about in more detail elsewhere (Dunedin, 2018). Critical to understanding our economic environment is the deregulation of global finance as seen in the neutering of the Breton Woods system of economy that linked the gold reserves with currency underpinning a fixed rate of exchange.
Dunedin, A., (2018), ‘Action Research: Outputs, Outcomes and the Political Setting’, Retrieved from internet 5. 5.19: https://www.raggeduniversity.co.uk/2018/12/03/action-research-outputs-outcomes-and-the-political-setting/
In the same period we can see that the rise of the use of the term GDP (gross domestic product) (Figure 2 below) closely correlates with the rise of the use of ‘student as consumer’. Joshua Cohen of Forbes business magazine (Cohen, 2018) illustrates how abstract mathematical figures are in use and openly acknowledged as proxys for “wellbeing”. He goes on to break down what is represented in the figure: “GDP represents the market value of all goods and services produced by the economy, including consumption, investment, government purchases, private inventories, and the foreign trade balance”.
Cohen, J., (2018), ‘Measuring Well-Being: It’s More Than GDP’, Forbes, https://www.forbes.com/sites/joshuacohen/2018/10/15/measuring-well-being-its-more-than-gdp/
Appendix 2: Google Ngram of the rise of the use of GDP
In her book ‘Creating Capabilities; The Human Development Approach’ Martha Nussbaum scrutinises how the narrative of wellbeing (aka welfare) gets articulated through obfuscating devices such as GDP thus hiding a series of poverties and pathologies. She cites Charles Dickens who wrote about the problem of notionalising distribution of wealth in his 1854 book Hard Times and how wealth, and ultimately the welfare of all people is identified with the financial averages which are manufactured from the collection of statistics:
“Charles Dickens portrayed a dassroom in which children were taught the standard approach. Circus girl Sissy Jupe— who has only recently joined the class is told to imagine that the classroom is a nation, and in that nation there are ‘fifty millions of money.’ Now, says the teacher, ‘Girl number twenty’ (in keeping with the emphasis on aggregation, students have numbers rather than names), ‘isn’t this a prosperous nation, and a’n’t you in a thriving state?’ Sissy bursts into tears and runs out of the room. She tells her friend Louisa that she could not answer the question, “unless I knew who had got the money and whether any of it was mine. But that had nothing to do with it. It was not in the figures at all.” (Page 14, Nussbaum, 2013).
Nussbaum, M. C. (2013). Creating capabilities: The human development approach. https://books.google.co.uk/books/about/Creating_Capabilities.html?id=c_1Y-RJFlQAC&redir_esc=y
This is a key way that the welfare of the population in a nation has been depicted as wealthy through the use of mathematics and finance in expressions which do not reflect the realities of the majority of people’s circumstances.
- From the 1960s we see a rise in the use of Gross Domestic Product to represent the wealth and well-being of a nation
- Martha Nussbaum problematises use of GDP as a financial average
- Nussbaum cites Charles Dickens who wrote about the problem of notionalising distribution of wealth in his 1854 book Hard Times and how wealth, and ultimately the welfare of all people is identified with the financial averages which are manufactured from the collection of statistics