Economics Opinion

Stepping in the mud with the barefoot economist Max-Neef

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The media’s trumping (excuse the pun) of economic growth over environmental concerns exemplified by the Autumn Statement, announcement by Chancellor Philip Hammond on 23 November, is a familiar narrative. The news from the government’s Office for Budget Responsibility (OBR) that growth forecasts for 2017 as a percentage of GDP are projected to fall by 0.8%, largely due to Brexit-related effects, was perhaps expected.

But what is rarely questioned by the media are the consequences this prioritising of growth as a central plank of the government’s economic strategy has for the medium to long term sustainability of the planet’s ecosystems upon which the well-being, and even survival, of humanity depends.

The Green MP, Caroline Lucas, raised her concern in the House of Commons that neither Hammond in his Autumn Statement – or any of his Tory predecessors “have ever mentioned the words ‘climate change’ in the year that’s the hottest on record and where parts of the country are under flood water.”

To all rational observers this is a particularly alarming state of affairs given that the government’s own 2015 National Security Strategy states that human-induced climate change is one of three tier-one threats – alongside international terrorism and cybercrime – that the UK currently faces. Subordinating climate change to a neoliberal economic growth model within a finite planet, amounts to willful ignorance and stupidity of the most serious and blatant kind; namely, because the consequences are potentially catastrophic for all living things.

Shifting the paradigm

Of all the recent discussions around the production of fake news, the inability of the mainstream media to bring the issue of climate change to the forefront of public discourse is probably the greatest dereliction of duty that can be brought to bear on the credibility of professional journalism.

But arguably just as unforgivable, is the media’s inability to bring political power to account in respect to the latter’s fetishisation of the current growth model and to shift the discourse from a paradigm where this model is currently regarded to be a panacea among large swaths of the public, to one where it is widely regarded as the death knoll for society and the planet.

The 22 November edition of BBC Newsnight featured an extended piece on the current Chancellor. Some of Hammond’s former school friends were interviewed, all of whom described him as a highly intelligent figure who, after having completed his class work before everybody else, would often put his feet up on his desk in lessons. Hammond was portrayed by his friends as being so clever that he regularly outsmarted his teachers.

Having made large sums of money as a music promoter soon after having left school, Hammond fulfilled his youthful boast that he would become a millionaire by the age of thirty. But although well-educated, wealthy and well connected, this former Oxford graduate like so many other chancellors before him who have gone on to be the pillar of the political establishment, continues to promulgate the deluded notion that sustained economic growth is emblematic of societal progress.

Hammond is part of a Tory establishment that continues to perpetuate the myth that the current economic growth model is the best way to curtail the threat posed from the likelihood of further economic crisis as opposed to recognising it’s the major cause. Consequently, Hammond will continue to systematically push for policies that fly in the face of all available scientific evidence.

Politician’s like Hammond know what is to be done but for ideological and dogmatic reasons they do the opposite. Rather than the global financial crisis of 2008 acting as a wake up call, Hammond and Osborne before him, continue with the same poisonous model until the next crisis comes along, by which time they will continue with it until the one after that. And so it goes on. This is the economics of the madhouse.

Radical visions – development not growth

What is required is a radical alternative vision for society – a break from the concept by which everything has become a commodity to be bought and sold for profit. But who, other than a handful of creative thinkers in the academic sphere, are proposing alternative, imaginative visions? One of the most ambitious thesis I’ve come across is that postulated by Pat Devine, who articulates in some detail the processes by which the development of a democratically planned socialist economy can come into being.

Arguably one of the most important critiques of the current system that I’ve read as a means of persuading people of the legitimacy of the planned socialist model, is the holistic philosophical approach of Chilean economist, Manfred Max-Neef. Probably the most creative and visionary of thinkers in this area, Max-Neef argues that the root of the existing problem stems from how establishment neoliberal economists (for whom politicians like Hammond share a worldview), envisage their academic discipline as being more important, and separate from the biosphere.

For Max-Neef, economists know nothing about ecosystems, thermodynamics or biodiversity. “I mean, they are totally ignorant in that respect”, he said:

And I don’t see what harm it would do, for an economist to know that if the beasts would disappear, he would disappear as well, because there wouldn’t be food anymore. But he doesn’t know that we depend absolutely from nature. But for these economists we have, nature is a subsystem of the economy.

Max-Neef argues that for the paradigm to shift, it is necessary for economics to be taught in a different way based in five postulates and one fundamental value principle:

  • The economy is to serve the people and not the people to serve the economy.
  • Development is about people and not about objects.
  • Growth is not the same as development, and development does not necessarily require growth.
  • No economy is possible in the absence of ecosystem services.
  • The economy is a subsystem of a larger finite system, the biosphere, hence permanent growth is impossible.

The fundamental value to sustain a new economy should be that no economic interest, under no circumstance, can be above the reverence of life.

The distinction Max-Neef makes between growth and development in point three, is particularly significant. As the economist from Berkeley points out:

Growth is a quantitative accumulation. Development is the liberation of creative possibilities. Every living system in nature grows up to a certain point and stops growing. You are not growing anymore, nor he nor me. But we continue developing ourselves… So development has no limits. Growth has limits. And that is a very big thing, you know, that economists and politicians don’t understand. They are obsessed with the fetish of economic growth.

This fetishisation of economic growth is arguably explained, in part, by the fact that the monetary offshoots that accrue as a consequence of this growth have, since the onset of ‘trickle-down’ neoliberalism, increasingly ‘gushed upwards’ towards the top of the socioeconomic pyramid. This is revealed by statistics which indicate that economic output (GDP) in the UK, adjusted for inflation, has more than doubled from £687bn in 1979 to £1,502bn in 2011. But over the same period income inequality, as measured by the Gini Coefficient, increased from 0.25 to 0.34. In other words, since the era of neoliberalism, working people who have created the sustained increase in wealth in society, have seen their slice of the pie reduced.

The threshold hypothesis

Max-Neef, being the brilliant thinker that he is, understands that this is what being obsessed with the fetish of economic growth results in. One of the later works he authored was the famous threshold hypothesis, which says that in every society there is a period in which economic growth, conventionally understood or not, brings about an improvement of the quality of life. But only up to a point – the threshold point – beyond which, if there is more growth, quality of life begins to decline.

According to Max-Neef the US, which he terms an “undeveloping nation”, is currently at this point. The UK is not far behind. This is reflected in the growing concentration of wealth towards the 1% at the expense of the 99%. The logic of diminishing returns applies to other parts of the system that eventually results in net costs over the long-term. Diane Abbott’s posting on Twitter on 23 November of an OBR sourced graph (see below) highlighting the impact of immigration on UK debt, is a case in point:

Diane Abbott MP ‏@HackneyAbbott 12h12 hours ago

“OBR has also shown immigration reduces Government debt, because it is a net economic benefit.”

UK debt is a case in point. The OBR (and Abbott) only present a partial truth. While Abbott is correct in stating that “immigration is a net economic benefit because it reduces government debt”, the analysis doesn’t take into account other factors such as the uneven distribution of wealth described which negate the benefits accrued, or indeed, other (social) indicators such as reduced quality of life resulting from, for example, a lack of school places or other pressures on public services that mass immigration potentially brings.

Walking barefoot with Max-Neef

It’s the apparent inability of politicians to view the economic growth paradigm as destructive that opens up spaces for alternative narratives of the likes of Max-Neef to fill. After winning the Right Livelihood Award in 1983, two years after the publication of his book Outside Looking In: Experiences in Barefoot Economics, the Chilean economist’s metaphor was inspired as a result of the ten years he spent working in extreme poverty in the Sierras, jungles and urban areas of different parts of Latin America. It was during this period that the economist from Berkeley began to view his profession in a different light. What subsequently happened was to change his life for ever.

“I was one day in an Indian village in the Sierra in Peru”, recalls Max-Neef:

It was an ugly day. It had been raining all the time. And I was standing in the slum. And across me, another guy also standing in the mud – not in the slum, in the mud. And, well, we looked at each other, and this was a short guy, thin, hungry, jobless, five kids, a wife and a grandmother. And I was the fine economist from Berkeley, teaching in Berkeley, having taught in Berkeley and so on. And we were looking at each other, and then suddenly I realised that I had nothing coherent to say to that man in those circumstances, that my whole language as an economist, you know, was absolutely useless. Should I tell him that he should be happy because the GDP had grown five percent or something? Everything was absurd.

He continued:

So I discovered that I had no language in that environment and that we had to invent a new language. And that’s the origin of the metaphor of barefoot economics, which concretely means that is the economics that an economist who dares to step into the mud must practice. The point is, you know, that economists study and analyse poverty in their nice offices, have all the statistics, make all the models, and are convinced that they know everything that you can know about poverty. But they don’t understand poverty. And that’s the big problem. And that’s why poverty is still there. And that changed my life as an economist completely. I invented a language that is coherent with those situations and conditions.

The ‘language’ Max-Neef refers to relates to the way that we as human beings in developed countries have lost the capacity to understand. Despite our ability to accumulate knowledge, this capacity, in the absence of empathy, love and understanding, is according to Max-Neef, insufficient:

You can only attempt to understand that of which you become a part. If we fall in love, as the Latin song says, we are much more than two. When you belong, you understand. When you’re separated, you can accumulate knowledge. And that is – that’s been the function of science. Now, science is divided into parts, but understanding is holistic.

As far as Max-Neef is concerned, in order for professional economists to understand poverty, it’s necessary they live among people who are poor. Only then can economists understand that in such an environment there exists a different set of values and principles that are alien to world of academia that cannot be learned or understood their.

“What I have learned from the poor is much more than I learned in the universities”, said Max-Neef. “But very few people have that experience, you see? They look at it from the outside, instead of living it from the inside.”

The economist from Berkeley continued:

And you learn extraordinary things. The first thing you learn, that people who want to work in order to overcome poverty and don’t know, is that in poverty there is an enormous creativity. You cannot be an idiot if you want to survive. Every minute, you have to be thinking, what next? What do I know? What trick can I do here? What’s this and that, that, that, that? And so, your creativity is constant.

In addition, I mean, that it’s combined, you know, with networks of cooperation, mutual aid, you know, and all sort of extraordinary things which you’ll no longer find in our dominant society, which is individualistic, greedy, egotistical, etc. It’s just the opposite of what you find there. And it’s sometimes so shocking that you may find people much happier in poverty than what you would find, you know, in your own environment, which also means, you know, that poverty is not just a question of money. It’s a much more complex thing.

What underlines Max-Neef’s message, perhaps more than anything else, is that the developed world that sees itself as sophisticated, educated and cultured, while pushing away to the margins the poor of the developing world by building walls, do so while forgetting that the kind of ‘progress’ the economists and politicians sitting in their plush offices aspire to, is in truth measured by the speed at which they are destroying the conditions that sustain life.

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