Aftermath: A New Global Economic Order?

Chapter 16. A Year after the Acquittal in the Impeachment Trial

240 Galbraith Here is my suggestion. Plainly we need an objective, dispassionate , thorough, and scholarly inquiry into the sociopathology of modern academic economics. How was it that an entire discipline managed to be overrun by a radical cult, its interests perfectly aligned with predatory financial power, which staged a colossally successful assault on the citadels of academic prestige and which at this moment holds all power of significant appointment, significant publication, and significant recognition in the discipline? By what technique was an ideological monopoly akin to the Soviet nomenklatura established in the American university? It is not of course the case that no economists foresaw the crisis. Followers of John Maynard Keynes in the analytical traditions of Wynne Godley and Hyman Minsky foresaw it clearly and were on top of events in real time, as were those working in the Veblen-Galbraith-Galbraith tradition of institutional analysis, especially the criminological allied field pioneered by George Akerlof and Paul Romer and by William K. Black.13 I have surveyed this work in detail14 and will not repeat that here. What is true is that these traditions are totally outside the present academic mainstream in economics. Not a single article forewarning the crisis appeared in any so-called leading journal in the field, excepting possibly Raghuram Rajan’s carefully worded warning at the Jackson Hole meetings of the Kansas City Federal Reserve Bank.15 No specialist in these areas holds a post in any so-called leading department. None will be named president of the American Economic Association, nor (I am willing to bet) will any be awarded the so-called Nobel Prize. Nor is there any sign that this situation might change. Truly this is a strange situation, in which, under conditions of advanced academic freedom, there emerges a pensée unique—a single approved line of thought—from which any deviation produces exile to the intellectual Siberia of liberal arts colleges and second-tier state universities . Surely there must be some contrasting intellectual structure— perhaps in, say, sociology?—that is capable of yielding a more diverse, robust, and superior result? Or perhaps not. Charles Sanders Peirce, let me remind you, already analyzed this situation in his famous essay “The Fixation of Belief.” Here is what he wrote:16 The method of authority will always govern the mass of mankind, and those who wield the various forms of organized force in the The Great Crisis and the Financial Sector 241 state will never be convinced that dangerous reasoning ought not to be suppressed in some way. If liberty of speech is to be untrammeled from the grosser forms of constraint, the uniformity of opinion will be secured by a moral terrorism to which the respectability of society will give its thorough approval.17 I leave you with that thought, and to your duty. This page intentionally left blank Notes 243 Notes Notes to the Introduction 1. Joseph Stiglitz, a Nobel laureate and former World Bank economist , has stood out among the most visible dissidents. See Globalization and Its Discontents (New York: Norton, 2003). But if Stiglitz is the most famous insider to question the dominant orientations of the Washington Consensus, critical examination has been more enduring and often more penetrating from a number of “heterodox” economists outside the centers of US academic economics and Washington policy, who are increasingly influential. And though there are debates about how deep the change is, the World Bank itself has renounced some of its former official views. 2. On this topic, the work of Carlotta Perez stands out, especially Technological Revolutions and Financial Capital: the Dynamics of Bubbles and Golden Ages (Cheltenham: Edward Elgar, 2002). See also Naomi R. Lamoreaux and Kenneth L. Sokoloff, eds., Financing Innovation in the United States, 1870 to the Present (Cambridge, MA: MIT, 2007). 3. See, for example, Erik Reinert, How Rich Countries Got Rich and Why Poor Countries Stay Poor (London: Constable & Robinson, 2007). See also the complementary neo-Schumpeterian work of Perez, Technological Revolutions and Financial Capital. And see Ha-Joon Chang’s chapter here and his book Kicking Away the Ladder (London: Anthem, 2002). 4. Rogers Brubaker, “Economic Crisis, Nationalism, and Politicized Ethnicity,” in The Deepening Crisis: Governance Challenges after 244 Neoliberalism, ed. Craig Calhoun and Georgi Derluguian (New York: NYU Press, 2011), chapter 4. 5. For in-depth analysis of Russia’s...