Humanizing the Economy

Economic systems that preceded the Industrial Revolution were inseparable from the broader realities of social relations; the regulation of markets was essential for the delicate balance between commerce and the social system that surrounded it. The same principle held true for primitive economies. The primacy of social relations and the individual’s identity as a social being was the basis of human society and the economic systems that sustained it. The conduct of economics as an expression of social values was also an integral part of the civic humanism that was epitomized in the great urban cultures of central Italy at the dawn of the Renaissance era. Three principles stand out in this conception of urban civilization: the social identity of the individual as expressed in the notion of citizenship; the sovereignty of the people in a free society; and the orientation of economic activity to the common good, which alone justifies it. It was this humanistic view of economics as a social good that was supplanted by the Industrial Revolution and the utilitarian philosophy of Bentham that was its intellectual expression.

During the late 1700s in England, there were regular outbreaks of riots when food prices transgressed these limits. As noted by E. P. Thompson, in the popular mind the prevalence of what he termed a “moral economy” still governed the rules of the marketplace. People expected to buy their provisions in the open market, and even in times of shortage they expected prices to be regulated by custom.

During the late 1700s and throughout the 1800s a stifling repression of both political and economic freedoms was the government’s primary means of enforcing the privileges of laissez faire for the propertied class. The Combinations Act of 1799–1800 made it a capital offence for workers to organize, trade unionism and the movement for political reform were driven underground, and in the early 1800s the overwhelming majority of executions in the United Kingdom were for crimes against property. Naturally enough, it was those who had most to gain from such a view that did their most to propagate it.

In the 19th century, there was a lively interest in co-operative theories of economics that blended social with economic values.15 William Thompson, perhaps the foremost intellectual figure of early socialism, formulated a political economy of cooperative socialism that provided a scathing critique of the capitalism of his day and a very different view of utilitarianism from that taught by Bentham.

That such a one-sided and impoverished conception of human nature should find such ready acceptance among economic theorists is itself cause for reflection. But its ultimate triumph as the cornerstone of conventional economic theory has provided intellectual cover to a revolutionary process of social engineering that succeeded in fundamentally changing both our notion of what it means to be human and the ways in which human life is lived.

Bentham at least meant well. He believed his philosophy would result in the greatest happiness for the greatest number. And this sounds very good. But in practice this means that actions are judged solely from the standpoint of their effects. The problem is that it is impossible to know what the effects of certain actions might be. What seems good in the present may turn out to be catastrophic in the long run. The practice of utilitarianism also allows the ends to justify the means. It instrumentalizes human beings.

The other influence that helped shaped the philosophic temper of the emerging economics was the English philosopher Thomas Hobbes’s deeply pessimistic view of human nature as essentially bestial, an aggressive, self-aggrandizing impulse that reduced the human community to “a war of each against all.”

Homo Economicus

In the view of Jeremy Bentham, the founder of this philosophy, the human individual is an egotistical, selfish, competitive being whose sole criterion for action is the maximization of pleasure or the avoidance of pain. All human motives are traceable to this impulse and its expression in the marketplace is the definition of rational choice.

No amount of evidence to the contrary could shake their faith. One could point to the growing disparities of wealth at home and abroad. One could cite the declining conditions of work, health, education and social welfare that plagued the very countries that followed the neo-liberal prescription. The obscene concentrations of power and money that were the predictable result of privatizing public assets in already impoverished nations were plain to see. None of this mattered. Always, it was dismissed as the harsh medicine that preceded the remaking of economies in the free market mould. As in all ideologies, the effects on actual people were secondary. What mattered was the advancement of the free market model. And if some became very, very wealthy in the process while others searched through heaps of rubbish for food, this was further evidence of the bounty for all that lay ahead.

The dogged allegiance of the free market faithful bore all the marks of a religious fervor — blind faith, supreme self-confidence, imperviousness to evidence, hostility to opposing views. Economics has, at the opening of the millennium, acquired the traits of a secular religion — a religion perfectly suited to a material age.

Indeed, the grand delusion goes even further. Not only does it hold that the free market operates in a perfect order of its own but that the market itself is the source of free and democratic societies. When left to operate without interference, the market functions as a perfect democracy with free choice in the marketplace representing the summit of human achievement.