Though divided on politics, they share a disdain for the market-first, globalisation policies that have dominated centre Left and centre Right parties for the last thirty years, which themselves were derived largely from mainstream economic theory. Populists are now being derided for being economic reactionaries: they are seen as having roots in the disenfranchisement of the poor and the acknowledged rise in inequality in the last forty years, but the mainstream message is that their economic scepticism is fundamentally wrong. If only we belatedly get the distribution right, the mainstream message goes, the market-oriented, globalised economy is still the best way to manage capitalism.
The message of Debunking Economics was and remains that the economic theories on which the alleged primacy of market systems in every social sphere were based were themselves unsound: they described a social system that did not exist, a mythical capitalism that always tends to equilibrium, and in which finance can be ignored. The so-called “gains from specialisation” are a myth, deregulated finance lead to Ponzi schemes and asset price bubbles and busts, and capitalism became more unequal to the benefit of bankers and the cost of everyone else as private debt rose and stifled the economy. Populism may lack an underlying economic theory, but it is rooted in the real-world experience of what happens when deregulated finance is allowed to rule an unstable capitalist system. The creative instability of industrial capitalism is replaced by the Ponzi behaviour of those whom Marx aptly described as “The Roving Cavaliers of Credit”.
Though it is still very hard for people raised in one manner of thinking to shift to another, as Keynes himself acknowledged, recent admissions by prominent Neoclassical economists like Olivier Blanchard, Narayana Kocherlakota, and above all, Paul Romer, that mainstream models are woefully inaccurate descriptions of capitalism. More significantly still, leading Central Banks—including the Bank of England, the Bank of Norway, and the Bundesbank—have declared that the mainstream model of money is wrong.
So there is progress, but as the philosopher of science Thomas Kuhn long ago observed, the development of a real alternative to an existing paradigm rarely comes from practitioners of that paradigm themselves. It comes from rebels, or from those from other disciplines applying their ideas in the anomaly-riven arena of the failed paradigm.
I’m now working with mathematicians, accountants, auditors, computer scientists, biologists and engineers, whose skills are far more relevant to capitalism than the 19th century skillset of mainstream economics, to develop that alternative. The most obvious product of this is the Open Source system dynamics program Minsky, which enables monetary dynamics to be modelled using double-entry bookkeeping (whose importance I’ve only come to appreciate while developing Minsky after I wrote the 2nd edition of Debunking). I’ve also developed an energy-aware model of production—bizarrely, the last school of thought in economics to properly acknowledge the critical role of energy in production were the Physiocrats, who lived a century before physicists discovered the Laws of Thermodynamics that cannot be broken, and yet which economists from Smith, Ricardo and Marx to Keynes, Samuelson and Lucas have ignored and violated in their economic models.
Rather than critiquing the mainstream, I am now focused on producing a genuinely dynamic, monetary theory of capitalism, which also acknowledges the economy’s fundamental dependence upon the exploitation of energy and its therefore subservience to (and dangers for) the Earth’s ecology. Ironically, I have realised that I have to do that outside the university sector, since forty years of Neoliberal economic policies applied to Higher Education have destroyed the space that used to exist for non-orthodox thought within Universities—hence my Patreon campaign. But at the same time, I’m delighted that students are now revolting against mainstream economic theory across the globe in the Rethinking Economics movement.
So there is a chance for progress, and there is less need for criticism of a failed paradigm. But if I ever do write a 3rd edition of Debunking Economics, its subtitle will be “The Naked Emperor Abdicates”.