In science, a theory is abandoned or substantially modified if it does not concur with the emerging facts, fails to predict important events, or is contradicted by experiments. That, alas, does not seem to apply to economic theories.
Free-market (neo-liberal) capitalism has been the dominant type of capitalism for the last three decades; it failed spectacularly to predict the 2008 global economic crash, the second largest economic crisis in history, after the great depression.
Many of its adherents were asserting before the crash that the market had correctly valued property, shares, derivatives and other exotic products that the "moneymen" were engaged in trading in. You would think, wouldn't you, that those high priests of neo-liberal economics would now be contrite, admit that their models of the market and human behaviour are wrong, or at least are in need of serious modification. Not a bit of it, they just carry on regardless, as if the crash never happened.
This kind of tunnel thinking has even infected economics departments in universities, the very places where openness and intellectual objectivity should be their guiding principles. The Guardian, in an article entitled "Economic students aim to tear up free-market syllabus", reports that economics undergraduates at the University of Manchester are so disappointed with their courses that they have formed a "post-crash Society", and have established links with other universities, with the aim of forcing academics to explore other economic models outside the free-market brand that dominates their economics courses. The students are critical, rightly, that their courses have failed to explain the causes of the crash, and why the free-market model failed to predict it.
The use of the word "free' in free-market is a misnomer, and a better phrase that encapsulates this ideology is "privatizing profits [for the too-big-to-fail corporations] and socializing losses". As for the word "liberal', all it means is giving the super-rich the liberty to exploit people without due regard for their human rights, and to pay them poverty wages.
Here is Chrystia Freeland in a piece in The New York Times highlighting the power of the super-rich in the US:
"Even as the winner-take-all economy has enriched those at the very top, their tax burden has lightened. Tolerance for high executive compensation has increased, even as the legal powers of unions have been weakened and an intellectual case against them has been relentlessly advanced by plutocrat-financed think tanks. In the 1950s, the marginal income tax rate for those at the top of the distribution soared above 90 percent, a figure that today makes even Democrats flinch. Meanwhile, of the 400 richest taxpayers in 2009, 6 paid no federal income tax at all, and 27 paid 10 percent or less. None paid more than 35 percent."
Lest we forget, we the taxpayers have rescued the too-big-to-fail banks from the folly of their actions to the tune of hundreds of billions of pounds, only to see billions of that money paid in bonuses to the very bosses who were the architects of the mess in the first place.
Governments then had to cut their spending through austerity programmes that affect almost everyone, apart, that is, from those who caused the crash in the first place. The hardships and the misery of such cuts are particularly felt by the working poor, the disabled, and the vulnerable. Our young have paid a particularly heavy price through unemployment. The adverse effect of such unemployment on societies will cascade through future generations in the foreseeable future.
Ha-Joon Chang, a Cambridge University Economist, in his book "23 things they don't tell you about capitalism", emphasizes his enthusiastic support of capitalism, and frames his criticism of the free-market model with these words:
"Being critical of free-market ideology is not the same as being against capitalism. Despite its problems and limitations, I believe that capitalism is still the best economic system that humanity has invented. My criticism is of a particular version of capitalism that has dominated the world in the last three decades, that is, free-market capitalism. This is not the only way to run capitalism, and certainly not the best, as the record of the last three decades shows."
So why is this predatory form of capitalism that sucks the life out of everything around it for the benefit of the very few, still the only game in town? Noam Chomsky, in an interview reported in truthout answers thus:
"The basic explanation is the usual one. It is all working quite well for the rich and powerful. In the US, for example, tens of millions are unemployed, unknown millions have dropped out of the workforce in despair, and incomes as well as conditions of life have largely stagnated or declined. But the big banks, which were responsible for the latest crisis, are bigger and richer than ever, corporate profits are breaking records, wealth beyond the dreams of avarice is accumulating among those who count, labor is severely weakened by union busting and "growing worker insecurity," " So what is there to complain about?"
It is early days, but the fight back against this parasitic form of capitalism has started. For the sake of the planet and the billions of people across the globe, I wish it every success.