THE DISMAL SCIENCE Sermon delivered 4/18/04 by Kenneth W. Phifer Copyright 2004, Kenneth W. Phifer, All Rights Reserved Forty years ago I accepted a position as a teacher of history, government, and economics at a school in Honolulu. Well versed in the first two subjects, I was completely ignorant in the third. I decided to use the textbook my predecessor had used and stay one chapter ahead of my students, learning economics as I taught it. It was all I could do to stay awake in my own classes. "The dismal science" (see footnote at the end of the sermon), I decided, was aptly named. Charts, graphs, incomprehensible sentences, " a reasonable man" who seemed anything but, and global theories about human behaviour that excluded a lot of how we actually act. I simply had to find a better way to teach this subject. I did: Robert Heilbroner's book THE WORLDLY PHILOSOPHERS, a biographical history of the great economists and their theories. Economics was now not only not dismal, it was interesting. Because it was interesting, I began to see the importance of it, an importance clearly shown in how much of our news is devoted to economic matters. The president's economic advisers rank only slightly below national security advisers in the White House pecking order. When one of them, Alan Greenspan, sneezes, the whole world says, "Gesundheit." Bill Clinton is not the only presidential candidate to discover that "It's the economy, stupid." Like theology in the Medieval period in Europe, today economics is the queen of the sciences. I am not one of the courtiers of this queen, but I certainly recognize how much a part of our lives economics is. Things like tax cuts, interest rates, trade, profits, pension funds, COLA's, and other things that are the stuff of economics matter to me as they do to you. Discussing what economics is and why it matters and what a good economic system might look like is of significance to us all. Economics is about the production and distribution of wealth. Heilbroner says that the "search for the order and meaning of social history" is at the heart of economics. It is his contention that economics only became important when "the struggle for riches became general, ubiquitous, and patently vital to society." First in the British Isles, then in America and on the Continent, it became possible for not just the wealthy but for numerous others—the so-called middle class—to aspire to at least a degree of wealth. The wealth of an entire nation, not just the wealth of rulers and landowners, became "vital to society." Such were the concerns of Adam Smith's classic WEALTH OF NATIONS, published in the same year as the American Declaration of Independence, 1776. Smith presented a theory of how society works to the benefit of all through the market. Markets are as old as humanity. They are a way and a place for people to exchange or to sell and purchase goods. E-Bay, farmers markets, Middle Eastern bazaars, airline websites, weekly car sales to used car dealers, grocery stores and drug stores, the labor market, wherever goods and services are traded for other goods and services or for cash or its equivalent, there is a market. Smith proposed a simple mechanism by which free markets operate to the benefit of all. The mechanism is rooted in our self-interest. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their self-interest, " Smith wrote. Self-interest guides us to work that society will pay for. Competition regulates self-interest. If you raise prices too high, someone else will undersell you. If you produce too much, the public will be satiated and look elsewhere till the surplus is gone. Make incomes too high and others will rush to get the high-paying jobs till the incomes come down and people leave for other better-paying work. This model or some version of it has guided the capitalist world for the past two centuries. Its proponents often overlook Smith's strictures against monopolies and the strong case he made for humanity countering its selfish interests by our ability to put ourselves in the place of another person and thereby develop a moral sense about how to act. The great virtue of market theory is liberty, the presentation of choices for individuals to make about what they will purchase, and thus how they will live their lives. Smith's capitalistic free market vision is one of the two great competing ideas of the past century and a half. The other is Karl Marx's version of communism. Two notions are essential in Marx. One is that society is built on an economic base, that material interests and material welfare are the real motivators of human behaviour. All else—like religion and morality-- is part of a superstructure built on materiality. This is in contrast to Smith's notion that society is built on a moral base, with material interests being the superstructure on top of it. Marx's second great idea was the notion of a class struggle. "History," he said, "is a pageant of ceaseless struggle between classes to partition wealth." The theory of dialectical materialism revealed this struggle, which had resolved itself in the 19th century into warfare between capitalists—the thesis of the historical Dialectic—and the proletariat (workers)—the antithesis of the Dialectic. The synthesis would be in time a classless society in which each would contribute what that person was able to give and take what that person needed. The great virtue of Marxism—which inspired millions and still is compelling for many people—is its notion of equity in the sharing out of society's resources. We strive not for self-interest but for the common good. The fervor with which these great ideas have been held over the last two centuries can accurately be described as religious. This should not be surprising given the state of religion in that time. Scientific findings had undermined many religious doctrines and most importantly the Bible from which they had been drawn. If the basic texts of Christianity and its most fundamental dogmas were shown to be false, in what could people have faith? The idea of a heavenly afterlife slowly melted away in the western mind to be replaced by visions of a life on this earth that would be, if not paradise, nonetheless very pleasurable. Smith and his successors offered us the wonderful world of the free market with "the invisible hand" guiding its operations to a happy outcome for every one willing to participate in it. Marx and his successors offered us the inevitability of history ending the warfare between the bourgeoisie and the proletariat in a classless society. Robert Nelson published a book several years ago, ECONOMICS AND RELIGION, in which he took up this theme of economics replacing religion. Nelson suggests that when religion began to lose some of its authority, that authority was transferred to science. The physical sciences have nothing to say about human life, but the social sciences have a great deal to say. Salvation shifted from heaven beyond to earth here and now. Of that kind of salvation, economics could speak with great force. The Marxist idea was an updated, detailed version of the ancient Jewish vision of a Messianic Kingdom where lions and lambs would lie down together and no one would study war any more. The collapse of Soviet and Eastern European communist societies has damaged if not destroyed any faith in such an eventuality. Faith in the other great economic idea has only grown apace. The invisible hand of the free market has been equated with the deity and interference with it an attack on "the divine plan." The pursuit of money and wealth has been likened to "the work of the Lord." Reflecting wryly on this, John Maynard Keynes wrote that someday the love of money would be regarded as "a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease." But Keynes went on to say this: "But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone else that fair is foul and foul is fair, for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still." If a way could be found to provide people with the means to obtain all the necessaries of life and a few pleasurable things in addition to that, we would be in a state of paradise. Maybe there is, maybe there is not some afterlife full of rewards for those of us burdened by life. But for sure there are possibilities in the world we know for truly divine pleasures. In the capitalist world, now dominant everywhere on the planet, the market mechanism serves a religious purpose. The self-interest at the heart of the free market is blessed because it helps, in Nelson's words, "to ensure maximal efficiency in the use of the material resources of society, and thus rapid movement of…society along a route of economic progress in this world." So important has self-interest become that in one of the religious wings of modern economics, the so-called Chicago School, "altruism, love, political ideology, and other such ideas in the mind …(are) part of a grand social illusion…secondary to the more fundamental workings of underlying economic forces in society." Interestingly, that is the argument Karl Marx made and one that Adam Smith would have rejected. That notion of the illusion of altruism and love is one marker of the change from a spiritual understanding of salvation to a material one. It is an indicator of the religious power of economics in our day. Is this a good thing? Is the dominance of economics helping to make our society more just? Given the vast abundance of material prosperity in America, are we a happier people? As has been asked of other religions, so we can ask of economics: is this religion good for us? The answer is Yes and No. The answer is Yes because however one views the current economic scene, no one can deny the enormous productivity of our society and of so many societies in the world. We produce more than adequate amounts of food, clothing, housing, transportation, and medicines. Ordinary people in America and Europe and some other places live better today than royalty did but a couple of centuries ago. Materially we have so much that it can get in our way—too much junk in the attic or basement, too many medicines in the medicine cabinet, too much food in the pantry and refrigerator, in restaurants and at coffee breaks. The production problem is solved, and for some of us the distribution problem as well. Yet there are hundreds of millions in our land and in many other countries who are suffering grievously because of the economic system that provides so bounteously for us. Inequity is a still very much a factor in our economy. The current discrepancy in pay between CEO's and the lowest paid workers in American companies is more than 400-1, a ratio that has not declined even in the wake of the scandals of the past few years. Louis Uchitelle pointed out in the New York Times a few months ago that "this economic recovery is distinctly unkind to workers." It is, he wrote, "a recovery for profits, but not for workers. Walden Asset Management Fund's Semi-Annual Report for last fall noted that there are three million fewer people working today in America than in February, 2001. The percentage of taxes paid by corporations has dropped in the last 50 years from 41% to 20% while individuals contribute 80%. In a recent year 63% of corporations paid no tax at all. Tax cuts that give advantage to the wealthiest individuals add burdens to middle and lower income people. We have turned over health care to profit-seeking individuals and corporations while tens of millions have no insurance and more tens of millions have poor insurance and all of us have insurance that mostly we do not understand. Meanwhile, farmers in the Philippines are going broke because they cannot compete with the subsidized agricultural products of major economic powers. Cash crops in too many countries take over fields where much needed food could be grown. High-efficiency machines replace workers everywhere in the world. Joseph Stiglitz, a Nobelist in Economics, says that the dream is a world without poverty. The reality is 1.2 billion people living on less than a dollar a day and 2.8 billion people on less than $2 a day. The global economic system is not working for half the human beings on the planet. Despite this grim reality, many corporate leaders and politicians and investors believe, and act on their belief, that as long as there is a profit to show to the shareholders, such stark facts are simply part of the cost of doing business. Because in so many businesses, especially large corporations, the bottom line weighs so heavily, damage to the lives of people is not always an important factor in decision-making. Because business does not think well long-term, damage to the earth and to future generations of humanity likewise is not often enough considered to be of importance. Another point made by Stiglitz is the application of a one-size-fits-all strategy of financial reformation, ignoring the variant cultures and conditions of different places on the earth. The problem, as Wendell Berry and Wes Jackson as well as Stiglitz have pointed out, is the incapacity to think locally, the rush to make money, and the ideology of the free market without refinement or subtlety. And yet. Vaclav Havel reminds us, "Though my heart may be left of center, I have always known that the only economic system that works is a market economy. This is the only natural economy, the only kind that makes sense, the only one that leads to prosperity, because it is the only one that reflects the nature of life itself. The essence of life is infinitely and mysteriously multiform, and therefore it can not be contained or planned for, in its fullness and variability, by any central intelligence." It would be a mistake to give up the great liberty that the free market offers. It would also be a mistake to worship the free market and refuse to think about how we might set up our market systems so that they are genuinely fair for all people. What can we do? A place to begin is by asking different questions when we are setting up our markets, whether for a given enterprise like the buying and selling of automobiles or the devising of a trade system between nations or any other. How to make money is an important question, but it should not be the only important question. Howard Zinn offers these fundamental queries: "What is economic justice? What are the proper goals of a good economic system?" How do we curb the injustices of our present system and design one that will minimize unfairness. Equally fundamental is the environmental question. What will be the impact of our business or our proposed market on the environment both natural and human? What will happen if we pave over our farm land and tear down our rain forests and pollute our air and contaminate our water and undermine ancient cultures? If the only way to make money is to do these things, is it worth it? Are there institutions and systems that are so vital to the common good that we cannot trust them to the whims of the market? Our health care? Our utilities? Our prisons? Our military? Our retirement security? Will the common good be protected if people use these and other important aspects of our social system for their own financial aggrandizement? How much regulation is needed to keep the market fair? Alan Greenspan admitted to Congress a few years ago, prior to the scandals in the deregulated accounting industry, that he had assumed that "regulation by government was utterly unnecessary and, indeed, most inappropriate. I was wrong." Since too much regulation can be stifling, it is important to figure out how much is called for. These and other questions all too often get short shrift in legislative halls, in governmental executive decisions, in courtrooms, and in the world of corporate decision-making. If we care about justice, if we care about something other than money, we need to put more emphasis on these kinds of questions. A second thing we can do is to look differently at the systems we now have in place to see where they fail and how they might be repaired. Paul Hawken and Amory and Hunter Lovins, in their book, NATURAL CAPITALISM, speak out of first-hand experience in the business world: "Capitalism, as practiced, is a financially profitable, nonsustainable aberration in human development. What might be called 'industrial capitalism' does not fully conform to its own accounting principles. It liquidates its capital and calls it income. It neglects to assign any value to the largest stocks of capital it employs—the natural resources and living systems, as well as the social and cultural systems that are the basis of human capital." Marjorie Kelly, a small business owner and writer on business affairs, argues for a complete reformation of corporations to allow for more democratic practices within the corporation, for more emphasis on corporate responsibility for the public good, and for employees and the community to have rights, financial and administrative, at least equal to the rights of investors. More than 1200 companies are in business today where these principles are in use, and a majority of our states have new laws that redefine fiduciary duties. Amartya Sen, the 1998 Nobelist in Economics, in his splendid book on DEVELOPMENT AS FREEDOM, teaches us that while capitalism is a marvelous system for generating economic growth, economics is not about just the numbers. It is about women having rights and equality. It is about education that real people are able to obtain and jobs that grow out of that education. It is about clean water and adequate medical care and time off to enjoy life free of the burdens of labor. Judge an economic system, a market, by how well it provides for these kinds of substantive freedoms. If we seek a just society, we must ask new questions and look seriously at new ways of structuring our economy. When a system is and is perceived as fair, those touched by that system will be happier and more productive and they are more likely to share their good fortune. That is a description of a good society, in which economics would no longer be dismal but very happy indeed. That is a worthy goal for which to strive. FOOTNOTE While preparing for this sermon, with Tawnya's help I located on the web an article—The Secret History of the Dismal Science by David M. Levy and Sandra J. Pearl—that explained the origin of this phrase. It was coined by Thomas Carlyle, but not, as most people thought (including myself till I read this article), in response to the gloomy predictions of Thomas Malthus--that population grows geometrically (1,2,4,8,16…) while resources grow arithmetically (1,2,3,4,5,6…). Instead it had to do with Carlyle's opposition to the abolition of slavery. The phrase was first used in an essay by Carlyle in 1849, "An Occasional discourse on the Negro Question." Carlyle denounced the economists who were making claims for the equality of all men and women—and thus supporting abolition of slavery—and was most angry at John Stuart Mill. It was he who was the main target of that essay. Here is a brief quotation from that writing: "Not a 'gay science,' I should say, like some we have heard of; no, a dreary, desolate, and indeed quite abject and distressing one; what we might call…the dismal science. These two, Exeter Hall Philanthropy and the Dismal Science, led by any sacred cause of Black Emancipation, or the like, to fall in love and make a wedding of it,--will give birth to progenies and prodigies; dark extensive moon- calves, unnamable abortions, wide-coiled monstrosities, such as the world has not seen hitherto." Fortunately Carlyle—and such associates as Charles Dickens and John Ruskin—lost the argument about the abolition of slavery. But his phrase, "the dismal science," proved to be lasting. BIBLIOGRAPHY 1. Benjamin Barber, JIHAD VS. MCWORLD, Times Books, 1995. 2. Wendell Berry, CITIZENSHIP PAPERS, Shoemaker and Hoard, 2003. 3. Paul Hawken, Amory Lovins, and L. Hunter Lovins,, NATURAL CAPITALISM: CREATING THE NEXT INDUSTRIAL REVOLUTION, Little, Brown, and Company, 1999. 4. Robert L. Heilbroner, THE WORLDLY PHILOSOPHERS: THE LIFE, TIMES, AND IDEAS OF THE GREAT ECONOMIC THINKERS, Simon and Schuster, 1961. 5. Marjorie Kelly, THE DIVINE RIGHT OF CAPITAL: DETHRONING THE CORPORATE ARISTOCRACY, Berrett- Koehler Publishers, Inc., 2003. 6. David C. Korten, WHEN CORPORATIONS RULE THE WORLD, Berrett –Koehler Publishers, Inc., 1996. 7. Robert Kuttner, EVERYTHING FOR SALE: THE VIRTUES AND LIMITS OF MARKETS, Alfred A. Knopf, 1998. 8. John McMillan, REINVENTING THE BAZAAR: A NATURAL HISTORY OF MARKETS, W.W. Norton & Company, 2002, 9. MONTHLY REVIEW: AN INDEPENDENT SOCIALIST MAGAZINE, February, 2004. 10. Robert H. Nelson, ECONOMICS AND RELIGION: FROM SAMUELSON TO CHICAGO AND BEYOND, The Pennsylvania State University Press, 2001. 11. Kevin Phillips, WEALTH AND DEMOCRACY: A POLITICAL HISTORY OF THE AMERICAN RICH, Broadway Books, 2002. 12. Amartya Sen, DEVELOPMENT AS FREEDOM, Anchor Books, 2000. 13. Joseph E. Stiglitz, GLOBALIZATION AND ITS DISCONTENTS, W.W. Norton and Company, 2002. 14. Howard Zinn, "Economic Justice: The American Class System," pages 147-181, PASSIONATE DECLARATIONS, Perennial, 2003.