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TRANSITION ECONOMICS Transition to what? Reflections on Capitalism as an ideology David R. Harvey, School of Agriculture, Food & Rural Development & Centre.

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Presentation on theme: "TRANSITION ECONOMICS Transition to what? Reflections on Capitalism as an ideology David R. Harvey, School of Agriculture, Food & Rural Development & Centre."— Presentation transcript:

1 TRANSITION ECONOMICS Transition to what? Reflections on Capitalism as an ideology David R. Harvey, School of Agriculture, Food & Rural Development & Centre for Rural Economy, Newcastle University INTERNATIONAL CONFERENCE: CORVINUS, BUDAPEST, November 4 th, 2010.

2 Transition “The destruction of the Iron Curtain on November 9th 1989 is still the most remarkable political event of most people’s lifetimes…(But) Western capitalism’s victory..does not ensure it an enduring franchise from voters... the magic of comparative advantage can be wearing—and cruel. It makes the wealthy very wealthy.” {Economist, Nov. 5, 2009} Are we conceiving, teaching and promoting Economics (and Capitalism) properly?

3 Markets’ Evolution  Markets as an Evolutionary system  – socio-economic environment ‘selects’ (adopts) survivors (firms & products/services),  ‘profits’ ephemeral, unpredictable, accidental  But, imitation & innovation (conscious adaptation) enlarge the scope ⇒ Diversity, not homogeneity; difference is the driver – ‘level playing fields’ are not the point ⇒ ‘Optimality’ is a possible (but not guaranteed) result – not a driver of the process Refs: Alchian, 1950; Blume & Easley, 2002. (see, also, Larry Blume’s home page for more in the same vein) AlchianBlume & EasleyLarry Blume’sAlchianBlume & EasleyLarry Blume’s

4 Implications  Market systems are not necessarily optimal, and are volatile, even dynamically unstable  Require governance (or cultivation)  Capital & Labour are ‘natural’ attractors for necessary government ambitions.  Proposition 1: Useful Economics has to include Politics;  Corollary: We need a more common story of how this works.  Implication: without a more common story – we (social scientists) remain part of the problems.

5 A More Common Story?

6 Capitalism’s Evolution  Capitalism -> divorces ownership from operation & deployment of (physical) capital  Capital markets are inherently in perpetual disequilibrium  & are virtual rather than real  & shave margins from transfers of ownership  & enshrine the circularity of capital valuation (reflecting the endogeneity of the selection criteria) ⇒ Survival of the fattest, not the fittest, ⇒ with no (limited) supply response to demand shifts

7 Implications  Capital markets the critical link between current activity and potential futures  & capture the residual returns (profits) from efficient real (goods & services) markets  But have the least customer or citizen control or feedback (cf. current consumption decisions) ⇒ Suggests they need greater (not less) social control than real markets? ⇒ But how, and by whom? ⇒ Seeds of tomorrow are necessarily either destruction or sustainable prosperity – but which?

8 Questions arising:  How, exactly, does society benefit from survival of the fattest?  Do capital markets really provide: –more secure and stable savings opportunities? –more intelligent & productive investments?  If so, how, exactly, and if not, why not?  Is (any) conventional regulation likely to be a sustainable answer?  What are the roles of philanthropy (Gates & Buffet) &/or sovereign wealth?

9 The current ‘ common model’ Social Behaviour needs to reconcile private and public lives: With Economics being very distinctly limited in its scope.

10 Necessary Transitions? Social Behaviour needs to reconcile private and public lives: BUT some major institutions (negotiation systems) are MISSING:

11 Conclusions  Without a more convincing, comprehensive and compelling common story, our economics (and social sciences) will continue to be part of the problem rather than part of the solution  We need to change our perspectives, as well as our tools and rules  (Agri)cultural economists are – I suggest – well placed to do so.


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