Skip to main content Accessibility help
×
Hostname: page-component-78c5997874-t5tsf Total loading time: 0 Render date: 2024-11-09T23:59:35.898Z Has data issue: false hasContentIssue false

Chapter 25 - Neo-Classical Economics: A Trail of Economic Destruction

Published online by Cambridge University Press:  13 April 2024

Erik Reinert
Affiliation:
Tallinna Tehnikaülikool, Estonia
Get access

Summary

.. .soon or late, it is ideas, not vested interests, which are dangerous for good or evil.’

John Maynard Keynes, closing words of The General Theory (1936).

This chapter argues that the international financial crisis is just the last in a series of economic calamities produced by a type of theory that converted the economics profession from a study of real-world phenomena into what in the end became mathematized ideology. While the crises themselves started by halving real wages in many countries in the economic periphery, in Latin America in the late 1970s, their origins are found in economic theory in the 1950s when empirical reality became academically unfashionable. About half way in the destructive path of this theoretical tsunami – from its origins in the world periphery in the 1970s until today's financial meltdowns – we find the destruction of the productive capacity of the Second World, the former Soviet Union. Now the chickens are coming home to roost: wealth and welfare destruction is increasingly hitting the First World itself: Europe and the United States. This chapter argues that it is necessary to see these developments as one continuous process over more than three decades of applying neo-classical economics and neo-liberal economic policies that destroyed, rather than created, real wages and wealth. A reconstruction of widespread welfare will need to be based on the understanding that what unleashed the juggernaut of welfare destruction was not ‘market failure’; it was ‘theory failure’. Being a résumé of a larger research project, the chapter includes references to more detailed studies of these processes of ‘destructive destruction’.

Introduction

Two institutions established soon after World War II provided the conditions for a 30-year period of unprecedented increase in human welfare: The 1947 Marshall Plan, in the end re-industrializing not only Europe but creating a cordon sanitaire of wealthy nations around the communist bloc from Norway via Southern Europe to Japan, and the 1948 Havana Charter which established the rules of international trade that made this industrialization plan possible.

Both institutions were based on a key insight from Secretary of State George Marshall's 1947 Harvard Speech announcing his plan: that civilization had always been built on a particular type of economic structure.

Type
Chapter
Information
The Other Canon of Economics
Essays in the Theory and History of Uneven Economic Development
, pp. 719 - 736
Publisher: Anthem Press
Print publication year: 2024

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×