The Coronapocalypse Part 16: Dude, where’s my economy?

One of the more interesting things about corona event has been the complete exclusion from the public debate of the economic costs of the measures taken. Of course, politicians always want to exclude discussion of the costs of whatever decision they are making to reduce resistance to those decisions. We rely on the two party system and a functioning media to bring those costs to attention so that the public can make a rounded judgement on an issue. But the costs of the pandemic response have not made it into the mainstream public discourse in any meaningful way.

The absence of a discussion of the economic ramifications is made all the more strange because, for as long as I can remember, the lead news story on any given day was almost always something about the ‘economy’. The rhythms of this news cycle demarcated our lives to a certain extent. The yearly federal budget formed the foundation of these rhythms. It was the kick drum to the snare driven backbeat of the GDP results, the fizzing hi-hat of the monthly jobs data and the inflation statistics while the meetings of the board of the Reserve Bank and the decisions on interest rates made up a nice tom fill with obligatory crash cymbal at the end of the bar. Over the top of all this racket the politicians were the lead singers wailing the high notes of growth, surplus and jobs. Like every AC/DC album since Back in Black, the formula hasn’t changed in decades. But it changed earlier this year as the GDP statistics were replaced by the infection numbers as the centre point around which our lives revolved. Where I live in Melbourne, our premier took on the guise of high priest whose daily press briefings often had a quasi-religious tone as he berated members of the public who had not behaved themselves and prolonged the punishment owing to them. The speculation about the cause of the movement in test positive numbers reminded me of the old speculation about why the stock market went up or down on any given day. That is, an ad hoc explanation for what was essentially a stochastic process.

The politicians have still been running the show, although the members of the backing band have changed from econocrats to health technocrats and the song has changed to a higher tempo and different key. Not the slow, steady, predictable rhythm of stadium rock but a tense, shrill, angsty indie number. Less AC/DC, more Radiohead.

The denial of the economic ramifications from politicians was understandable. What was more interesting and telling was the attitude of the public. This came out in some strange ways, at least in some of the conversations I have had or seen online. For example, I’ve heard a few people say that the solution to the unemployment caused by the corona response is a universal basic income. It’s not clear why that is. Are we unable to create jobs anymore? Do we now live in a world where jobs don’t exist and never will exist again? Once upon a time, our ex-Prime Minister, Julia Gillard, said work was our religion. Have we abandoned the faith?

Similarly, if you point out to some people the enormous budget deficits that governments are accruing to pay for the corona response, it’s not uncommon to hear that it doesn’t matter and budget deficits don’t mean anything anyway. That’s certainly news here in Australia where disagreement about the size of any budget deficit was one of the primary differentiating factors between the two main political parties. It’s probably not an understatement to say that elections have been decided because of the size of the budget deficit. But now we no longer care about all that?

This attitude of dismissing what were previously considered important economic metrics was summed up best in words that I actually heard with my own ears earlier in the year: “the economy is not real”. That would be a strange thing to say at the best of times but the statement was made only weeks after the infamous toilet paper shortages where we all experienced the sight of half empty supermarket shelves. You would have thought that an inability to buy food and groceries would have made the realness of the economy clear to people. But apparently not. To be fair, however, the word ‘economy’ was being used by such people in a different sense. In order to understand that different sense we need to take a lightning tour of the development of modern economics as a discipline and the corresponding semantic change it caused in the public discourse.

The word economy is from the Greek oikos – “house” and nemo – “distribute”. It means something like the administration or management of the household. That was the common meaning of the word economy in English right up to the 20^th century. Prior to that, if you wanted to talk about the distribution of wealth at the level of the nation, you were talking about the subject known as political economy and political economy was seen to be a sub-branch of ethics. Thus, Adam Smith’s famous work The Wealth of Nations was in the genre of political economy. In the early 20^th century, economics as the modern academic discipline we all know and love emerged. It was not a branch of ethics or a discussion of household management, but a social science. This ‘science’ eschewed the ethical discussion of political economy in favour of a mathematical approach which was popular in the social sciences of the time and which was driven by the phenomenon known as ‘physics envy’ i.e. the desire to make the study of society as rigorous and respected as physics.

Prior to the 20^th century, the statement ‘the economy is not real’ would have been equivalent to saying that the food on your table is not real or the clothes on your back are not real or your inability to buy toilet paper was not real. But what it means in the modern context is that the ‘science’ of economics is not real. Having done two years of university economics, I have a great deal of sympathy with this idea. In fact, I might go so far as to state that modern economics is completely useless as an area of study. Possibly my favourite example to illustrate that uselessness was a paper I once read on the fairly mundane topic of how consumers choose which petrol station to visit. The author of the study had visited a number of different petrol stations in an area and had noticed that they all had different prices for petrol. He wondered why consumers wouldn’t all go to the one with the lowest price because, even if you had to drive a little bit further, it would work out cheaper to do so. Nevertheless, there were customers at the more expensive stations. Why was this so?

In order to answer this question, he made a long series of arguments referencing other economics papers where theories were expounded about consumer behaviour. On and on it went and eventually he drew some kind of conclusion about the behaviour of consumers in the retail petrol market. But here’s the funny thing: the author could have just asked the motorists themselves. He had already visited the petrol stations to check the prices. Why not just go over and ask a random sample of motorists whether they knew they that the competitor down the road was 5c a litre cheaper? Why not ask them straight out how they decided which petrol station to visit? It would be quite easy to do and he would have got the answer straight from the horse’s mouth. Instead, he simply cited a bunch of other papers none of which contained any empirical studies. It was just a long chain of theories that at no stage bothered to check against reality. The whole thing was a giant exercise in armchair philosophy. This is typical of economics which deals in theory and mathematics without bothering itself much with the real world. (As a side note, within the other social sciences there was a backlash against this kind of thing and a movement towards ‘qualitative studies’ but these have their own set of problems, not the least of which is that they are not reproducible or quantifiable and therefore not really science at all. As far as I know, however, there was no such movement in economics).

If ‘the economy is not real’ means something like ‘economics is not a real science’ then I am in full agreement. However, I don’t think it is just a critique of economics that is meant by the statement ‘the economy is not real’. After all, the same critique could be made of sociology but that wouldn’t lead somebody to say that society was not real (unless they happened to be Margaret Thatcher). I think the rather flippant dismissal of economics we have seen this year is due to the use to which the discipline of economics has been put in the public discourse starting after WW2 but really ramping up in the last few decades. That use can only be described as propaganda.

As I alluded to above, economics has come to fill a central role in public debate. In fact, it’s all we ever hear about. At least, it was all we ever heard about before corona came along. As a (in my opinion) non-science, economics is full of abstractions and layered arguments that only somebody with the capacity for boredom required to sit through four years of university classes on the subject can understand. As such, it is perfectly suited as a tool to befuddle the public with airy abstractions, meaningless metrics and mysterious models all of which help divert attention from the underlying political issues. That is why politicians love economics. It’s an ideal tool of distraction.

At bottom, politics is a system for deciding how to distribute wealth. In a democracy, you vote for politicians who are going to represent your interests, chief among which are your economic interests. This used to be very clear and obvious. The Labor Party existed to represent the economic interests of labour, the Liberal Party to represent capital and the National Party to represent rural interests. Public debate explicitly focused on how decisions affected the economic interests of each of these groups. That changed around the time of the 80s when the Labor Party (and the equivalent parties in other western nations) essentially abandoned its constituency and bought into the neo-liberal agenda. That’s when globalisation kicked off for real and it’s also when economics as a discipline really started to dominate the public discourse and the ‘experts’ and technocrats came to dominate our lives. Appealing to expertise has clear advantages for politicians because it removes the political aspect to any issue. It’s not me as the politician making a decision to screw over a certain part of the population, it’s the science. Because it’s objective and it’s scientific, there’s no real alternative. This has given much of modern political discourse a sense of inevitability. There’s no point in arguing because the government can just appeal to the experts and as a layman you don’t have a leg to stand on. This sense of inevitability was captured perfectly by former Australian Prime Minster, Paul Keating’s, famous phrase ‘the recession we had to have’ or Thatcher’s ‘there is no alternative’. Gone are the debates of political economy and ethics. Gone even are the discussions of personal interest.

The abstractions used by economists work perfectly as tools of propaganda precisely because they are hard to grasp. If they meant something concrete, it would make it easier for the average person to understand and therefore to object. For this reason, economics was a favourite theme of the great Australia/New Zealand comedy duo Clarke and Dawe who mercilessly targeted experts as they appeared in the public discourse. One of my favourite examples of their work is this video where John Clarke plays an expert who is asked to explain the Australian energy market. It’s specifically relevant to the theme of this post because it juxtaposes the nonsense of the experts against the everyday reality of people having to pay more money for electricity (which is part of the real economics of household management). What the average citizen wants to know is why their electricity bills are going up. What they get is a bunch of abstract drivel which hides that fact that vested interests behind the scenes have stitched up the situation to their advantage.

So, perhaps the statement ‘the economy does not exist’ is really the rejection of the propaganda of economics. This makes a great deal of sense. It’s the public finally saying that they have had enough of the nonsense they have been fed for decades. This would tie in with the palpable but strange sense of relief felt by many people as corona kicked off. I’ve had the very strong impression that a number of people have supported the corona measures precisely because they represent a break with the past. The government finally did something. In this way, the rejection of economics might seem like a step in the right direction. Are we finally throwing off the shackles of expertise and returning to a proper political discussion based on interests and ethics where the interests of the public can be adequately represented in the discourse?

Sadly, not. All that has really happened this year is that one form of propaganda got replaced with another. The GDP statistics were swapped out for the infection statistics. The numbers are different but the game is the same. The politicians still appeal to ‘science’ to justify their decisions only now the science is not economics but epidemiology. The Queensland premier, in particular, has been fond of pointing out that all the difficult choices are really made by her chief medical officer and are therefore not even a matter of politics. Meanwhile, here in Victoria, our premier claims that all his decisions are based on ‘science’ and anybody who disagrees with him is, by definition, not being scientific. Again, the layman is left powerless in the face of expertise. Again, the sound of the church bells of ‘science’ ring loud and call the faithful to prayer.

“Do you hear that, Mr Anderson?”

Or, as the lyric from one of my favourite Who songs goes: Meet the new boss. Same as the old boss.

The irony of it all is that, just like the creator of GDP said that it should never be used as a measurement of economic performance, so too the inventor of the PCR said it should not be used as a diagnostic tool of viral disease. Logically this should be a problem. But when it comes to propaganda, meaningless numbers are a feature not a bug. If the numbers meant something, they could be argued against.

What the corona event represents is a ramping up of the propaganda to new heights. Coupled with the authoritarian turn in politics it presents a rather scary vision for the future. Will the old economics ever return as the propaganda tool of choice? Will we be permanently stuck with the new propaganda of corona statistics? It’s hard to say. A lot will depend on what happens with the real world that sits beneath the noise and which our public discourse seems to have less and less to do with.

None of that is much in the control of any of us. But there is one thing that is in our control and that is to rediscover the true meaning of economics as household management and to also rediscover political economy as a discipline of real economics founded in ethics. In other words, we can ask in what ways can we ensure a supply of goods to our own households (or produce them ourselves) and we can determine what our real economic interests are and whether there are any politicians who actually represent those interests rather than just spout propaganda. The real economy seems set for a period of rapid change. It would be wise for individuals to hedge their households against the risks of that change because no amount of propaganda is going to put food in the pantry.

All posts in this series:-

The Coronapocalypse Part 0: Why you shouldn’t listen to a word I say (maybe)

The Coronapocalypse Part 1: The Madness of Crowds in the Age of the Internet

The Coronapocalypse Part 2: An Epidemic of Testing

The Coronapocalypse Part 3: The Panic Principle

The Coronapocalypse Part 4: The Denial of Death

The Coronapocalypse Part 5: Cargo Cult Science

The Coronapocalypse Part 6: The Economics of Pandemic

The Coronapocalypse Part 7: There’s Nothing Novel under the Sun

The Coronapocalypse Part 8: Germ Theory and Its Discontents

The Coronapocalypse Part 9: Heroism in the Time of Corona

The Coronapocalypse Part 10: The Story of Pandemic