Serving the interests of capital: the role of economics as an academic discipline.

Photo by 401 (K) 2012

Two months ago, I sat in the coffee bar of the Quinn Business School, University College Dublin in the Republic of Ireland. While responding to some emails, I happened to overhear the conversation of some excited students at the neighbouring table. They had just learned about how private equity (PE) firms can come in, buy up ailing companies and still make high profits when they get rid of these companies again, even if these companies should ultimately fail. There was no concern about the implications for the workers of these companies, who would be made unemployed in the process. There was no concern for the wider community around this company, suffering from high unemployment in the area as a result of the PE firm’s involvement. In this blog post, I am reflecting on the role of economics as an academic discipline resulting in an education of this type. In particular, I will argue that instead of being an academic discipline focusing on the critical enquiry of societal developments, economics has deteriorated into an ideology in the service of capital.

Economics can be sub-divided into three different sub-disciplines, microeconomics, macroeconomics and business studies. The role of microeconomics is to teach students that egoistic behaviour, being only motivated by self-interest, is ethically perfectly o.k. Drawing on Adam Smith’s notion of the invisible hand of the market, students are taught that if everyone focuses on their own interests, almost by magic the free market will ensure that this is automatically at the best interest of society overall. As Marx had already noted in the Grundrisse, ‘the economists express this as follows: Each pursues his private interest and only his private interest; and thereby serves the private interests of all, the general interest, without willing or knowing it’ (Marx 1939/1993: 156). In short, microeconomics teaches students to think only about their own interests. The plight of others is of no concern.

Macroeconomics, in turn, provides the legitimacy for the current capitalist economic system. Abstract, highly complex theoretical models are developed in order to show that the capitalist economy and its current neo-liberal variety ultimately operate at a beneficial level for the whole of society and the global political economy in general. We only need to think of free trade theory, still strongly influenced by David Ricardo’s theory of comparative advantage. If every country focuses on what it is best at producing and trades for all the other necessary goods, then the overall global economy will be at its most efficient and everyone involved will benefit. And yet, it has been clearly shown that this free trade ideology is not born out in practice (e.g. Hart-Landsberg 2006). Rather than benefitting all countries involved, if countries at a lower level of industrial development are forced to open up their markets, the result is generally deindustrialisation (War on Want 2009). Free trade tends to tie developing countries into relationships of unequal exchange with industrialised countries, in which the latter reap super-profits at the expense of the former. Nevertheless, again, the purpose of macroeconomics is not to analyse critically current economic and political developments. The purpose is to legitimise the overall economic political direction regardless of the fact that its complex models bear little relation to the empirical realities on the ground.

Finally, business studies has the purpose to teach students how it is really done, how super profits can be extracted within the current capitalist system. Here, students are shown what strategies can be adopted in order to generate profits. This is where the role of PE firms comes in and the way they asset strip the companies they buy up and then get rid of again afterwards. This is where students learn about the practicalities of ‘transfer pricing; and other creative accounting practices used by large corporations to avoid paying taxes. Here, students learn how they need to structure business proposals in order to maximise profits regardless of the working conditions of employees or the potential negative consequences for society and the environment. Business studies is the discipline, which shows students how to apply their self-interest. As an insider has recently remarked appropriately, 'in the business school, both the explicit and hidden curriculums sing the same song. The things taught and the way that they are taught generally mean that the virtues of capitalist market managerialism are told and sold as if there were no other ways of seeing the world' (Martin Parker, The Guardian, 27 April 2018).  

It would be unfair to say that there are no economists attempting to chart a different course. Within macroeconomics, post-Keynesian and heterodox scholars still attempt to think about the wellbeing of societies as a whole and what role the state could or should play in order to ensure a more socially just society. Critical industrial relations scholars often find a niche in large Business Schools, as there is still a perceived need of teaching students the basics about how workplaces and industrial sectors are institutionally structured. And there are some colleagues, who attempt to bring in ethical considerations through a focus on concepts such as ‘social corporate responsibility’. Overall, however, they are in a clear minority.

As a whole, economics as an academic discipline has deteriorated into a mono-theoretical approach around neo-liberal economics. It has turned into an ideology rather than an academic subject, but an ideology with a clear purpose, the support of capital’s interests. Capitalism as a mode of production depends on egoistic individuals engaged in the relentless search for new investment opportunities and higher profits.

If there is hope, then it mainly rests with younger colleagues and students. At my own institution the University of Nottingham, it is some Ph.D. students in the School of Economics, who try to reach beyond the standard, neo-liberal models through an engagement with heterodox approaches. It is these students who join our Marxism reading group in order to engage with alternative perspectives. Moreover, in October 2013 students at Manchester University rebelled against the uncritical, free market focused curriculum at their University and demanded a broader theoretical and disciplinary approach (The Guardian, 24 October 2013). This resulted in the establishment of the Post-Crash Economics Society and the publication of a detailed report Economics, Education and Unlearning in April 2014 on the failings in the education of economics and what should be done about it. Along similar lines, young economics students set up the network Rethinking Economics in June 2013 to challenge the predominant neoclassical/neoliberal discourse in economics, as it is taught at universities. Their most recent initiative is the publication of a Rethinking Economics textbook in 2018.

With ongoing neo-liberal austerity increasingly perceived as failing, global inequality on the rise and our natural environment exhausted, it is these young economists, who may show their discipline a way back into the academy. It may be these young economists, who are able to re-cast economics as an academic discipline able to assist humanity in understanding the challenges of the 21^st century.


Andreas Bieler

Professor of Political Economy

University of Nottingham/UK

Andreas.Bieler@nottingham.ac.uk

Personal website: http://andreasbieler.net

29 April 2018