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Reshaping Europe requires rethinking economics

When in 2007 the subprime bubble in the USA burst, economics students were being taught at university about the efficient and informative role of speculation, the existence of perfect competi-tion and the neutrality of money. Essentially, no direct references – and if so only very vague ones – were made to the crisis which was in the making. Almost immediately, groups of students began to critically discuss the way economics was taught at university, starting with the protest of Harvard students against professor Mankiw’ s lectures in November 2011.

Shortly after, a similar movement saw the light in Europe. Actually, already in 2000 students of the Post Autistic Economic Movement in France circulated a petition calling for the reform of their economics curriculum, complaining about the dominance of the neoclassical approach, the absence of empirical studies and the distance from concrete realities. Their ideas were similar to those expressed twelve years later by students in Manchester, who in 2012 founded the Post Crash Society. Subsequently, in 2014 an international network of students, thinkers and citizens called Re-thinking economics was created to demystify, diversify, and invigorate economics. In the spring of 2014 they launched an international student call for pluralism in economics (ISIPE) supported by 65 associations of economics students from 30 countries. A considerable part of this network  consists of European groups, such as Netzwerk Plurale Ökonomik in Germany, which organised the network’s first conference at the University of Tubingen,  PEPS (Pour un Enseignement Pluraliste dans le Supérieur en Économie) in France and organisations in Spain, Italy, Austria and elsewhere.

In their open letter, students called for a change of course, with the introduction of

three forms of pluralism at the core of curricula: theoretical, methodological and interdisciplinary, since they be-lieve that pluralism carries the promise of bringing economics back into the service of society. Two of the first universities positively reacting to this call, were the University of Kingston and the University of Greenwich. Both recently have revised their economics programmes by introducing two compulsory courses: Economic History in the first year and History of Economic Thought in the second year, with the aim to approach in all courses real world problems from the perspective of different theories, both old and contemporary, comparing, contrasting, or at times synthesizing them.

Also UCL London is nowadays promoting a new curriculum, based on the work of professor Wendy Carlin who is in charge of the CORE project, teaching economics as if the last three decades had happened, promoted by INET, the institution created during the crisis to broaden and accelerate the development of new economic thinking that can lead to solutions for the great challenges of the 21st century.

Moreover, in many other universities around Europe, students have been involved in the organisa-tion of seminars and didactical activities intended to stimulate discussions and bring heterodox and alternative theories inside the classrooms.
Despite these positive developments there are still few results; the political and economic debate, especially in Europe, is firmly occupied by many zombie ideas that reflect a composite mixture of neoclassical and ordoliberal approach.

One idea above all, survives solidly above the ruins it has caused: austerity. As comprehensively explained by Mark Blyth in his book Austerity: The History of a Dangerous Idea (2013), austerity remains an ideology immune to facts and basic empirical refutation. This is why it remains, despite any and all evidence we can muster against it, a very dangerous idea.
In fact, if we observe economic performance of countries that have adopted austerity measures, we can easily see that all macro data have been worsening, with an increase in unemployment, fall in GDP and consequent rise in the ratio of debt over GDP. Yet, the “arm wrestling” between Greece and Europe about the conditions that the former has to respect for being financed, shows exactly how difficult it is to conquer this ideology. Still, the austerity myth, which has been refuted by empirical results officially recognised by IFM, is not the only myth that still occupies the political discussion in Europe.
Labour Market Rigidity is still recognised as one of the causes of unemployment, even if in the last twenty years most European countries have introduced a wide form of flexibility and have seriously reduced the protection level of labour.
The European Financial Transaction Tax still encounters much opposition and, in fact, its introduction has been postponed to the 1st January 2016, despite the significant role that speculation has played on financial markets in enhancing the instability and solvency problems of southern coun-tries. The primary objective of the ESCB to maintain price stability and especially to avoid inflation has not been challenged, despite the possible risk of deflation.

It is true that, under the presidency of Mario Draghi, the ECB has intervened much more actively on liquidity markets, but any possible enhancement of its tasks has not been seriously discussed.
The rise in inequalities at (global and) European level has not produced an effectively strong pres-sure for the introduction of a more progressive taxation together with a specific tax on capital.
However, as Joan Robinson explained in her review of The Trade Cycle by R.F. Harrod in the Economic Journal in December 1936, we should consider that every government that has both the competence and the will to remedy the major flaws of the capitalist system should have the will and the power to abolish it altogether.  Thus, there are many complex questions to ask. Which kind of economic system do we strive for? What sort of margins of action can we establish within the current economic system? Is it possible to overcome neoliberalism and develop (or rediscover) an alternative and dominant economic theory which fundamentally questions capitalism’s limitations?

None of these points will be really addressed, before a pluralistic approach to economics will be restored, not only at university but in public discussions and political committees. After several years of crisis, we have learned that simply the failure of certain policies and economic ideas is not enough to undermine their authority unless norms and interests they represent are not demolished as well. Moreover, year by year the logic of TINA (there is no alternative) is being assimilated by people. Therefore, the fight for a pluralistic approach in the teaching of economics should also be-come the fight for a new economic policy for Europe today. The current discussion about Greece and the future of the Union gives us the occasion to overturn concepts and build a new framework, bearing in mind historical lessons and trying to propose different policies to bring about recovery. We should start with the choice of concepts we want to introduce into our discussions: solidarity and trust instead of moral hazard, labour rights and dignity instead of labour market rigidity, public spending as expansionary policy instead of waste of resources, redistribution instead of competi-tion, people’s needs instead of market confidence.

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