Friday 12 February 2010

John Milbank on the economic crisis

In December, Luke Bretherton organised a conference on the church's response to the economic recession. This is part of a wider – and much needed – initiative, to mobilise the churches in an anti-usury campaign. (Incidentally, since entire Christian denominations are driven by a commitment to usury, we can hardly become a credible witness until we get our own house in order. Whether the churches worship God or Mammon is still very much an open question.)

At the conference, John Milbank's address was entitled "The Moral Market is a Freer Market". It's a very lucid analysis of the economic crisis – especially the "crisis of abstraction" – and of the way Christian theology can shape economic thinking. Here's an excerpt:

"The point about talking about a culture of trust is not some kind of moralistic wishful thinking; the point about a culture of trust is actually that an entrepreneurial culture needs trust. Even if you believe in the free market, it turns out that the model of individualist utilitarianism that goes all the way back to Adam Smith is actually the wrong model. Itʼs the wrong model for the free market itself because if you have endless checking up on people, if you donʼt have trust, that actually inhibits initiative, risk and creativity. This is why the Italian economist Stefanos Zamagni is saying we need to return to the principles of Italian political economy, not Scottish political economy, because the Italian political economists from the 18th century onwards saw sympathy as part of contract itself, not as standing outside contract.

"In the end Adam Smith subordinates sympathy to self-interest and he says that if your butcherʼs selling you meat heʼs not doing it out of the goodness of his heart. But this is untrue. In fact people do enter into economic relationships at the local level for social reasons, for personal reasons, and Zamagni argues in a really powerful way that the more we have relatively informal contracts between people, the more itʼs based on trust, the less you need the intervention of state law on the one hand, or of inner control by firms on the other hand. So this is a different way of thinking about the free market. The market would actually be freer if it was a moral market....

One of our legacies in the West is the division between self-interest on the one hand and altruism on the other. But altruism is not a Christian term. It was invented by the atheist Auguste Comte. Charity is always reciprocal, charity is never a one-way gift, itʼs always a matter of give and take. If it has sometimes to be a one-way gift thatʼs in exceptional circumstance, because the point of charity is mutual bonding."
You can download the full transcript of Milbank's address from the Faith and Public Policy Forum.


Anonymous said...

"the point of charity is mutual bonding"

What a quote! I had never thought of that before.

Frank Knight said...

"Ever since the 1970s neoclassical economics has been in crisis, neoclassical economics was simply about markets, it was about market equilibrium, it was about the idea that markets automatically record exact information. But ever since the 1970s that model of modernist economics has broken down in favour of post-modern models. Itʼs parallel to whatʼs happened in physics. Once upon a time you had the stable Newtonian universe where everything was in a kind of balanced harmony, then people introduced time and entropy and contradiction. Just the same thing has happened in the discipline of economics, people have introduced the factor of time, the fact that no system is in the long run stable, there are always factors leading to degeneration and collapse in the end."

This isn't true I'm afraid. By most mainstream accounts, the 1970s was the time when neoclassical economics, of a specifically neoliberal bent. 1971 marked the year of the publication of Milton Friedman's Monetary History of the United States, 1867-1960, which was considered the final nail in the 'empirical' case for Keynesianism. If anything the 1970s was a period of huge expansion of the supposed expiatory power of neoclassical models as applied to more traditional social sciences, Gary Becker's work on 'economics imperialism' from 1976 onwards is a prime example: bold neoclassical models applied to subjects as diverse as the family and crime. He mentions here entropy, which is ironic, as the predecessors of this, dynamics, had already been incorporated into economics at the very birth of the neoclassical models in the late 1870s, and that the whole of 20th century economics, in collaboration with actors such as the RAND Corporation working on information systems are borrowings from thermodynamics. Overall approaches to economics that claim that economies are intrinsically unstable, and, say, don't always return to an equilibrium point, those using chaos and complexity for example, are woefully underrepresented, even now. As for 'postmodern' economics, this term, occasionally used by the likes of Deirdre McCloskey is again, hyper-marginal, and tends to repeat neoclassical tropes in rather fuller language.

"Finally there has been an unravelling of the Hayekian point that markets somehow give you perfect information about whatʼs going on."

I don't quite know what Milbank is getting at here, but this isn't Hayek's point at all. His point is that actually, actors in the market are subject to a huge asymmetry of information. No actor has perfect information about what is going on, which is precisely why the market is useful - it is a grand information processing tool that allows these partial bits of information to be coordinated, which is why the state is bad for him, why he argued that 'you canʼt see everything from the state', as it cannot possible know enough to plan as well as the price system. If he is saying that price information contains all the information an economic actor requires, and that therefore markets are efficient, then this might well be right, but this is the result of the information asymmetry. But economic actors having perfect knowledge of market conditions is a neoclassical axiom, not a Austrian economics one.

"Why then do we hear so much, ever since Margaret Thatcher, about free markets economics, about the return of the neoclassical model?"

Well, Thatcher was much more interested in the Austrian models of Hayek. That is one thing. And there has been no break in neoclassical models being the mainstream economic models. From the end of historical economics and myriad other forms after World War I and neoclassicism has risen to absolute ascendency in the Anglo-American academy. And at the same time, in parallel, Austrian economics have been a foil for this, pretending there was a debate going on.

Frank Knight said...

"the whole point of going for the big society and subordinating government and the market to the big society"

Interesting how this parallels the language of one David Cameron, leader of the United Kingdom's Conservative party.

"In a bizarre way it makes us far too primitive, it treats us and then it makes us behave as if a kind of sheerly animal self seeking was the prior thing. Of course this is massively forwarded by the influence of Darwinism in the 19th Century and this part of the reason for the popular return of Darwinism today."

To be fair, both modern Darwinism have plenty of place for reciprocity and mutual support, and community, and that alongside the 'evolution as competition' there has been a parallel 'evolution as cooperation' stream, prefigured by the likes of Peter Kropotkin in his well known book Mutual Aid: A Factor of Evolution.

This said, his points on economics and anthropology are certainly interesting, since pre-capitalist societies and anthropological work shows things such as prices, wages etc are utterly alien and indeed, gift economy is the norm.

Anonymous said...

To further this discussion,I would like to ask the theologians out there what they think it would or should mean in today's world to take all thought and understanding, in this case economics, captive to Christ (2 Cor 10)?

janicer said...

How can we be sure this isnt the work of Alasdair Maclagan

darren said...

"Incidentally, since entire Christian denominations are driven by a commitment to usury..." What does this mean? Are you talking about "health and wealth" denominations (if there is such a thing)? Or do you just mean denominations that tend to be okay with the markets as they are?

Gavin Kennedy said...

Smith's point in the 'butcher, brewer, baker' example is you cannot rely on benevolence to feed you (and everybody else), unless you are a beggar. In practice, you must address the butcher's, and etc.,'s interests not your own.

This is not a disavowal of benevolence - there is not enough of it to go round, so to speak. If everybody relied on benevolence for their daily needs, from whence would the objects of such benevolence come from?

This is clear from Smith's Moral Sentiments too. The divine has everything in his benevolent gift - the entire universe in fact - and still more than is needed by all of mankind. Mankind cannot match that degree of benevolence; its wants are many, its access to the means is limited; nature is niggardly, and so is mankind.

Anonymous said...

Milbank here sounds like Michael Novak or one of the free markets + 'Christian morals' activists from the Acton Institute. His point is not a new one (i.e. that transactions can be made fair by moral sentiment held in place by some deist supreme being). Unfortunately, it presumes that the problem with political economy is a subjective one.

I like what Zizek wrote about 'charity' in the LRB a few years ago, which I think works at both the local and global level:

"...the ruthless pursuit of profit is counteracted by charity: charity is part of the game, a humanitarian mask hiding the underlying economic exploitation. Developed countries are constantly ‘helping’ undeveloped ones (with aid, credits etc), and so avoiding the key issue: their complicity in and responsibility for the miserable situation of the Third World."

Unknown said...

To my mind, churches have little place issuing "responses" to usury, unless it's occurring within its common life. That, like any sin in her midst, needs to be dealth with.

It doesn't seem from this quote that Milbank's "moral market" is thinly veiled Christianism (or Acton Institute sentiments); I take him simply to be extolling the virtues of small, local and free markets, not least those of (in my view) labor-union-based syndicates (as opposed to merely cash-based, for-profit enterprises). This may just be me reading what I like into Milbank, not knowing his personal views on the matter, etc.

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