Thursday, January 10, 2008

European economics & the hatred of capitalism

French and German school students are being educated on the horrors of capitalism. This stems from state-mandated school curricula that fixate on the role of the nanny state and the imperfections and adverse consequences of markets. Economic progress is the cause of society’s ills, the class struggle determines social outcomes and the way to deal with unemployment is to improve the dole. Markets are intrinsically evil.

‘Students learn that private companies destroy jobs while government policy creates them. Employers exploit while the state protects. Free markets offer chaos while government regulation brings order. Globalization is destructive, if not catastrophic. Business is a zero-sum game, the source of a litany of modern social problems’.
These bizarre cultural beliefs drive social and economic outcomes - low levels of innovation, low entrepreneurship and high unemployment. It is frightening and an abyss social democrats can fall into unless they maintain a sense of perspective. One does not need to be a rabid supporter of Chicago School free enterprise economics to see the virtues of markets and entrepreneurship.

A 'slippery slope' argument often advanced by libertarians is that any intervention in free markets provides a precedent for unlimited public intervention in an economy and ultimately loss of both freedom and economic prosperity. I strongly disagree. One can respect the efficacy of private markets and the overwhelming value of personal freedom while recognising a limited case for public intervention based on market failures and fairness in the distribution of income. Indeed its what I was taught in Economics 101 and which I still believe.

The key issue is not whether markets fail or the distribution of income produced by markets is unjust but whether or not public interventions can improve things. Often they cannot and we need to live with capitalism's hiccups.

See also the discussion by Henry over at Crooked Timber.


stephen said...

While not in the same league, the High School economics course here in Victoria is not exactly a model of 'good economics' and free of bias.
I assisted my daughter with an economics essay a few years ago. The topic - to discuss why full time employment in Australia was being destroyed and replaced by short-term, part-time jobs that make workers unhappy. This was the line being run in the textbook.
It only took about 10 minutes to look up the relevant RBA statistics and a few university research papers to show my daughter that the basis of the topic was wrong (there has been no long term movement to part time jobs over full time, and certainly no fall in full time jobs) and that the 'happiness' conclusion was at best ambiguous if not wrong.
My daughter's logical response: "Thanks dad, but I want to pass this subject". So she parroted the textbook and got an A.
Oh yes, she also gave up economics as soon as possible!

hc said...

Stephen, That's incredibly sad. I have also examined the economics syllabus in Victoria and noticed with concern the lack of material on microeconomics and markets.

Students are taught the economy is a government-managed macroeconomy and don't get a sound grounding in market mechanisms and supply/demand theory.

The only university involvement in preparing this syllabus seems to be from the University of Melbourne. I don't know what the syllabus designers are up to but it is a disgrace.

I spoke out about it a few years ago but got nowhere.

Anonymous said...

Even their right wingers are a worry,21598,23031616-5005520,00.html


hc said...

Observer, That's turning firms into a cross between corporations and worker's co-ops. It's also a bit like a tax on profits.

softech said...

Interesting… I might try some of this on my blog, too. It’s quite interesting how you sometimes stop being innovative and just go for an accepted solution without actually trying to improve it… you make a couple of good points.

part time worker