A different economic thinking and economic activity are essential

A different economic thinking and economic activity are essential

by Karl Müller

In early 2014 business students from 19 countries (by now students from 30 countries) have published an “International student call for pluralism in economics.” (www.isipe.net for further information on this initiative). Until today, more than 230 teachers of economics have joined this call.

A call of students from 30 countries

The call starts with the statement that there is a crisis of global economy. This is not only true for the global economy but also for the science whose subject of study is the economy and which should provide the theoretical underpinning for practical economic as well as economic, financial and monetary policy acting: This science is economics, which is taught at the universities. The effects of this crisis reach “far beyond the university sector” according to the call, because: “It is not only the world economy that is in crisis. The teaching of economics is in crisis too, and this crisis has consequences far beyond the university walls. What is taught shapes the minds of the next generation of policymakers, and therefore shapes the societies we live in. We, over 65 associations of economics students from over 30 different countries, believe it is time to reconsider the way economics is taught. We are dissatisfied with the dramatic narrowing of the curriculum that has taken place over the last couple of decades. This lack of intellectual diversity does not only restrain education and research. It limits our ability to contend with the multidimensional challenges of the 21st century – from financial stability to food security and climate change. The real world should be brought back into the classroom, as well as debate and a pluralism of theories and methods. Such change will help renew the discipline and ultimately create a space in which solutions to society’s problems can be generated.”
It is a call for a change of course and it points out that: “We do not claim to have the perfect answer, but we have no doubt that economics students will profit from exposure to different perspectives and ideas. Pluralism will not only help to enrich teaching and research and reinvigorate the discipline. More than this, pluralism carries the promise of bringing economics back into the service of society.“
The appeal calls for a re-orientation of the study: “… economics education should include interdisciplinary approaches and allow students to engage with other social sciences and the humanities. Economics is a social science; complex economic phenomena can seldom be understood if presented in a vacuum, removed from their sociological, political, and historical contexts. To properly discuss economic policy, students should understand the broader social impacts and moral implications of economic decisions.”

Many economic, financial and monetary policy mistakes

So far, the call of the students has been discussed in our mainstream media only rarely, if at all. However, it has become apparent in the years 2007 and 2008 that our current economic practice and its underlying theory do no longer serve the public interest and that also the relevant policy decisions have gone in the wrong direction.
So there are almost no examples of economic, fiscal and monetary policy decision in the western world in recent years, which did not infringe fundamental ethical principles and that have not triggered new “crisis”. This could not be better illustrated as by two recent headlines of the German newspaper “Frankfurter Allgemeine Zeitung”, dated 24 January 2015, which is certainly not renown for its critical attitude towards society: “The ECB’s monetary policy makes rich people richer”, and: “More than 3 million employed [in Germany] below the poverty line.”

Instrumentalisation of sciences for a wrong policy

The very recent results of the elections in Greece demonstrate that the affected people no longer accept this development – regardless of one’s assessment of the election result in this country.
None of the current trouble spots in the world can be attributed solely to decisions that evolve from our economy and our use of money. But in all these trouble spots the related “interests” and their accompanying policy play an important role. And that currently economics are what they are, as the students and many teachers of economics from all over the world complain, has tangible reasons and fatal consequences: The mainstream thinking on economics in our universities has been degraded to become a justification doctrine for the interests and policies of those in power.

A personalist approach to economics

 “Pluralistic economics”, as demanded by the students, must include a “personalist approach to economics”, i.e. a scientific approach that orients the economies of the people and states and their handling of money towards the social nature of man and towards human dignity and that is committed to ethics that places man and his natural rights at the focus.
The social teaching of the Christian Churches and the doctrine of Natural Law have developed a mature economic ethics. Johannes Messner in his fundamental work “Naturrecht (Natural Law)” (7th edition, 1984) dedicated almost 250 pages on this issue. Economy without ethics has led the world into a dead end.
Secular experts on economic ethics (for example, Peter Ulrich: “Integrative Wirtschaftsethik: Grundlagen einerlebensdienlichn Ökonomie (Integrative Economic Ethics: Foundations of a Civilized Market Economy)”, 4th edition, 2008) have called for an economic system that is based on the self-determination of the peoples and nations and is therefore democratic. This is particularly important when the stock market and the securities prices are trying to determine policy and  to lever out the democratic will.
Even the United Nations took up the basic interpersonal principles of cooperative ideas and assigned them a central role in solving the problems of the world economy (cf. cooperative Current Concerns): “We set up a cooperative – We live together and act for each other”, 2014 ). The cooperatiive researcher Helmut Faust wrote in his book “Die Geschichte der Genossenschatsbewegung” (The History of the Cooperative Movement, 3rd edition, 1977): “As long as people inhabit the earth, they worked together in groups or communities whenever it was necessary to satisfy economic or other needs exceeding the forces of the individual. The rise of the human race from the dark state of nature to the light of civilization and culture has only become possible by forming societies and with their division of labor.” Insights like that need to be incorporated into economics.

Human values versus the spirit of speculation and accumulation of money

The spirit of speculation, the pure monetary expansion and the pure profit motive must be replaced by an ethics that strives to provide all people with subsistence goods and services.
The “Human Values” of entrepreneurial activity (see Rainer Gebhardt, Eberhard Hamer. “Humanwerte der Betriebstypen (Human Values of Company Types)”, 2005) must be at the core.
It is not yet clear where people are being led to with the ongoing economic, fiscal and monetary policy mistakes and the underlying flawed economic theory that has justified these decisions. The state of Europe and the Western-oriented world is currently not giving rise to expect a good outcome.
The more important is the request to support all initiatives that pave the way that support man and his natural dignity by a just economy and a sensible science of economics.

Historical experiences

During the Second World War, when the European economy had to put all ethics aside and had exclusively to serve the war, economists of the “Freiburg School” around Walter Eucken, Alexander Rüstow and Wilhelm Röpke – all economists who understood themselves above all as ethically oriented social scientists – were in search for an economic model that would serve peace inside and outside the country. During and after the post-war years they laid the foundations for the idea of the social market economy.
Why have so many forgotten what Wilhelm Röpke wrote in his book “Jenseits von Angebot und Nachfrage (Beyond Supply and Demand)”, 1958: “Self-discipline, a sense of justice, honesty, fairness, chivalry, moderation, common sense, respect for the human dignity of others, firm moral standards – these are all things that people need to bring along when they go to the market and enter into competition with each other. They are the indispensable pillars that protect them from deterioration. Family, church, genuine communities and tradition must provide them with them. People need to grow up under conditions that favor such moral convictions. Conditions that promote cooperation, respect tradition thus embedding the individual in a natural order.”
Today, the task is to bring together, to revise and prepare the intellectual foundations for a manner of economic activity that is more just and humane and that can be applied to practical proposals. Tomorrow or the day after tomorrow one must and will come back to and draw on these new foundations.     •

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