Shocking Revelations at the Institute for New Economic Thinking
17 April 2010
Second Thoughts from a Financier
George Soros, who made himself rich by shorting the currency of economically marginal nation-states (and therefore making them even poorer, if only for a time), has found a little project. Like Enlightenment-era benevolent tyrants with their claque of hired intellectuals, Soros has assembled some economic claqueurs to applaud the performance art he has made of his career as a financier. Since today the preferred form of intellectual society is the think tank rather than the salon, Soros’ claqueurs have been dutifully assembled as a think tank, and the new think tank has celebrated its introduction to contemporary intellectual society with a conference at King’s College Cambridge.
An aging merchant of the Middle Ages, sumptuous in his gold and furs but having second thoughts about his soul, would endow a monastery, or perhaps even take the habit himself in his dotage and confer all his properties to the institution that takes him in as a simple friar by way of atonement for his sins of covetousness. Well, Soros isn’t quite ready to go that far, but since religious houses were essentially medieval think tanks, by a quirky logic we might convince ourselves that economic think tanks are the religious houses of our day.
It is difficult to say which is more laughable: Soros’ think tank or the ability of these established, reputable economists of entertaining new ideas. I am reminded of a scene near the end of My Fair Lady (I’m thinking of the musical version with Rex Harrison and Audrey Hepburn). Eliza Doolittle’s father, previously a self-justifying slacker, is headed to a church to marry his common-law wife. He says to Eliza, “Now I’m respectable, she wants to be respectable.” Who doesn’t want to be respectable? Soros wants to be respectable, and to that end, by way of intellectual atonement, he has endowed a think tank. But respectability is a sworn enemy of creative, innovative thinking. True novelty in thinking comes with a willingness to not be respectable. Since think tanks are all involved in an elaborate dance with other entities that both crave and confer respectability, the entry of a think tank in the ranks of the reputable means a systematic cultivation of respectability in all opinions. This is one of the reasons that think tank publications usually read with all the gripping intensity of an editorial written by a committee.
In the Financial Times story, Economists clash on cause of crisis, Chris Giles wrote that, “Many of the world’s top academic economists agreed yesterday that the financial and economic crisis had exposed fatal flaws in their subject and ideas were urgently needed to keep economics relevant. While this represented an unusual consensus, the eminent economic brains lived up to their stereotype by disagreeing on what policies, if any, should be adopted to prevent a repetition.”
In any case, and despite any disagreements, they’ve got their ducks all lined up: a think tank, several Nobel laureates, a conference at King’s College Cambridge, and a website. I guess that makes it official. The website has a nice little introductory video with the director, Robert Johnson, George Soros himself, and several others offering soundbites. I was particularly intrigued by the soundbite from Soros. The patron of the new Institute for New Economic Thinking has delivered himself of this nostrum:
“Keynes has really had an insight, but after a while the economics profession rejected it and returned to classical economics, so this became the neoclassical school. And that neoclassical view of markets has become dominant, and this view has proven to be false in the recent financial crisis. So it’s appropriate in looking for new ways in interpreting financial markets the conference should be held where Keynes was teaching.”
This quote is in a short video that you can view by clicking on “Kickoff Conference” and then clicking on “Kicking off INET”
This particular statement resonates with me as I have in this forum several times addressed the idea of historical falsification both left and right. It has become a commonplace on the right that the collapse of the Soviet Union was a decisive historical refutation of Marx, while it has equally become a commonplace on the left that the recent financial crisis was a decisive historical refutation of free markets. While I do not deny the possibility of history falsifying theory, I do not believe that either of these instances are good cases, and neither of them prove the point their advocates wish to prove. I take the collapse of the Soviet Union as proof at tyranny cannot long endure, and the recent financial crisis as proof that irresponsible lending practices cannot long endure.
With apparently sanguine ease, if not sang-froid, the leftists of today overlook Marx’s “falsification” by history, just as the contemporary right will soon overlook the “falsification” of capitalism by history. Recently I was reading the Infinite Thought blog and saw a piece about an upcoming conference on historical materialism. The call for papers reads (in part):
“Notwithstanding repeated invocations of the ‘green shoots of recovery’, the effects of the economic crisis that began in 2008 continue to be felt around the world. While some central tenets of the neoliberal project have been called into question, bank bailouts, cuts to public services and attacks on working people’s lives demonstrate that the ruling order remains capable of imposing its agenda… Whether their focus is the study of the capitalist mode of production’s theoretical and practical foundations, the unmasking of its ideological forms of legitimation or its political negation, we are convinced that a renewed and politically effective Marxism will need to rely on all the resources of critique in the years ahead.”
It has long been a joke that the only Marxists left in the world are teaching in universities, and here we see that the old buggers still dream of a “renewed and politically effective Marxism.” Hope springs eternal in the human breast.
I continue to believe (as I argued previously, though I don’t recall exactly where) that the soul-searching within the economics profession as a result of the recent financial crisis is not function of the depth or totality of that crisis, but rather a function of the fact that elite professionals in banking and economics who had seemingly secure positions paying six figures in the financial industry suddenly and rather rudely found themselves without work, or knew someone who lost their job under traumatic circumstances. Previously this was unthinkable. In all the recessions since the Second World War, it was mostly, almost exclusively, the lowest tier of workers who lost their jobs. Thus the “unthinkable” proportions of the immediately past crisis was largely a result of over-representation of these elite classes in the professions, in the media, and in academia.
I‘m not terribly concerned about the future of capitalism, because, as I have stated many times, capitalism isn’t a theory as much as it is a weed: it crops up anywhere that it isn’t eradicated. Capitalism is simply what people do when they are given freedom to trade. Marx called free trade “that single, unconscionable freedom.” I’m not exactly sure why free trade is unconscionable, but I am sure that if you give people every freedom except the freedom to trade, you create a black market. There is still capitalism, but it is hidden, concealed. If you regulate trade, the ingenuity of the individual will do everything within the power of its imagination to circumvent, by hook or by crook, the regulations to the degree possible. As interdiction creates a black market, so regulation creates a gray market.
So bring on the regulators and the Keynesians and the disgruntled and the thwarted: if they have their hour in the spotlight, they will also most assuredly have their hour of reckoning. If they enjoy the approbation of the public at the present moment, they will also eventually experience the backlash of the public. And, whatever people happen to be saying, they will all the while be involved in the ordinary business of life, and they will seek to conduct the ordinary business of life as freely as they can.
In the meantime, I won’t be expecting any shocking revelations from INET.
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I previously discussed Soros in Humbug at Davos.
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