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Tuesday, 19 July 2011

Review of Mary Mellor, The Future of Money and Hill and Myatt, The Economics Anti-Textbook

Mary Mellor, The Future of Money: From Financial Crisis to Public ResourcePluto Press, London, 2010. vii + 197pp.
£16.00 pb

Rod Hill and Tony Myatt
The Economics Anti-Textbook: A Critical Thinker’s Guide to Micro-EconomicsZed Books, London, 2010. Ix + 305pp.
£19.99 pb

These two books in different ways speak to the current global economic crisis – and contribute in different ways to our understanding of the causes and consequences of that crisis and what opportunities for transformation it presents. Rod Hill and Tony Myatt’’s book The Economics Anti-Text Book, offers a comprehensive and devastating critique of the dominant economic paradigm – namely neo-classical economics – which has so spectacularly failed. Mary Mellor’s The Future of Money focuses on the theory and practical dynamics of the financial system, the credit crisis and the relationship between the money and real economies. Both offer important insights into the ideological dimensions of the current crisis of capitalism and the importance of ideas, particularly around questioning hegemonic and authoritative capitalist understandings of ‘economics’ and ‘the economy’.

The Economics Anti-Textbook is an extremely timely, well-written and important piece of work in that it conclusively demonstrates the thoroughly ideological ‘pro-market’ character of the dominant neo-classical economic paradigm taught in both secondary schools and higher education. It is written in an very engaging style which sets out to mimic the presentation style of standard economics textbooks, goes on to reveal their normative or ideological underpinnings, highlight what these textbooks fail to include, before proceeding to deconstruct the main tenets of the standard neo-classical economic paradigm. In setting itself against the dominant paradigm this book is firmly within the growing body of heterodox economics literature that has burgeoned in the last number of years (Fullbrook, 2008; Keen, 2001; Quiggin, 2010).

What Hill and Myatt reveal in their book is on many levels frightening. The almost ‘full spectrum domination’ of the teaching of economics by the neo-classical paradigm means that every years hundreds of thousands of students across the world who read and learn about ‘economics’ from the many neo-classical economics textbooks available and are set as required reading are effectively indoctrinated. Students reading these textbooks and associated economics courses are systematically denied any exposure to alternative forms of economic analysis (whether that be Marxist, socialist, social democratic, feminist, green etc.). The almost complete absence of pluralism, debate and consideration of alternatives within these textbooks means that students almost cannot but come to the view that there is only ‘one’ or ‘true’ way of thinking about economics. That is of course that the free-market, capitalist status quo is not just the ‘best’ way to think about and organise the economy, but actually the ‘only’ way. As Hill and Myatt put it, “‘economics’ has come to be synonymous with the economics of a particular view of capitalism. It wasn’t always this way. At one time, economic textbooks routinely contained chapters on alternative economic systems, on the evolution of economic doctrines, and the advantages and disadvantages of the corporate form. In dropping these subjects perhaps mainstream textbooks have been ‘dumbed down’. Certainly, the range of thinking has been narrowed” (249; emphasis added). Along with this elimination of alternatives to capitalist economics, and perfectly in keeping with the ideological turn in the teaching of economics over the last three decades, Hill and Myatt identify another equally problematic and pervasive feature of the vast majority of economics textbooks. This is the downgrading of a number of key issues to being of marginal or second order importance or not worthy of consideration in terms of their role or place in understanding economics. These include the neglect of the distribution of wealth and income from economic activity, or where it is discussed, issues of the distribution of income and wealth are presented in terms of an inevitable trade-off between ‘efficiency’ and ‘equity’; the lack of empirical proof of some key neo-classical economic ideas and principles i.e. ‘real world’ economic activity does not conform to the mythical world of ‘perfect competition’; the consistent downgrading of the social context of economic activity and the centrality of community; and most glaringly, no analysis of power or the legal structures (such as private property, contracts, tort etc.) which underpin the ‘free market’.

Myatt and Hill exposes is the fundamental lack of critical thinking at the heart of the trashing of modern economics as well as the reduction of ‘economics’ to deregulated, free market ‘capitalism’. Economics textbooks are written by leading academic economists (mostly American it has to be said) and of course read by undergraduate or secondary school students as ‘authoritative’ since they generally lack the ability, capacity and skills to challenge what they read in these textbooks, and upon which they will be examined. The end result is the uncritical absorption of ‘economics is capitalism’ and the equally uncritical acceptance of the principles of deregulated ‘free market’ as the only way to organise the economy.

There are some common themes both books analyse. One is the role and function of the capitalist state in general and its relationship to corporations in particular. One the one hand Mellor reminds us that, “In capitalist economies, the state is a capitalist state and has always stood behind the capitalist financial system as the guardian of the money system, financial properties and contracts” (2). On the other Hill and Myatt point out that the orthodox economic paradigm views the state as “neutral, intervening to correct market failure, and to redistribute income so as to make market outcomes more equitable” (18-19), a misleading and deliberately false view of the reality of capitalism in which “The power of the largest corporations rivals that of the state; indeed they often hijack the state’s power for their own purposes” (19). In Mellor’s case she demonstrates how the current economic crisis located within the financial sector shows how the state in Europe and America especially was committed to the co-creation of a ‘too big to fail’ financial regime (52).

While for most readers of this website this will be met with a perhaps bored and impatient ‘And?’ or ‘so what?’, it is significant that this is being (finally) said in relation what is not covered in the textbooks that are routinely used to teach economics. A telling and very interesting point raised by Hill and Myatt – though insufficiency explored in my view – is that while more advanced postgraduate texts and monographs within the broad neo-classical economics paradigm (and indeed by some of the same authors of the standard undergraduate textbooks), do acknowledge (some of) the deficiencies of the simplistic textbook presentation of the free market model of perfect completion, supply and demand price equilibrium, voluntary exchange and so on, these are all routinely absence or downgraded within the textbook presentation. This of course means that the overwhelming majority of those who learn about economics are not exposed to these anomalies to the orthodox paradigm and (potentially) critical perspectives.

A second is that both books re-establish the case for non-market, explicitly political (and planned) ways of thinking about and organising the economy. Mellor makes the case for the democratisation of money creation. As she puts it, “At present, given that money is issued largely into the private sector, but has to be taxed back out again (with difficulty) for public use. Socially-issued money would go the other way round, prioritising democratically determined social relevant expenditure with the commercial economy having to earn the money into its sector thought carrying out socially relevant and ecologically sustainable activities” (163). She makes a strong and persuasive case for money issue and credit creation being treated explicitly as a public and commonly owned resource and “returned to public control” but notes that the latter does not automatically mean making money creation subject to state control. She outlines a number of non-state options here – publicly issued credit being made available to cooperatives and mutuals, a universal citizen’s income, an independent and democratic monetary authority with the power to issue credit, but independent from the state, and the participatory budgeting pioneered in Porto Alegre, Brazil (167-8).

Allied to this is the argument Hill and Myatt make about the relationship between innovation and the pro-market mantra of ‘perfect competition’. Quoting William Baumol they note that “the perfectly competitive model has almost nothing to say about the capacity of the market economy to innovate and grow because perfect competition is largely incompatible with innovation... oligopoly is where most of the innovation occurs. Oligopolistic firms have the most to gain, and are big enough to be able to afford the outlays” (134; emphasis added). This rejection of the myth of ‘perfect competition’ as the best guide to economic organisation is closer to the real-world reality of contemporary capitalism where innovation tends to occur in non-competitive, oligopolistic or monopolistic markets, as can quickly be seen in the software, computer, telecommunications or pharmaceutical sectors for example. Another benefit of this anti-perfect competition perspective is that it can be used to further defend the benefits of other non-perfect competition and non-market forms of economic organisation from worker-owned and managed cooperative firms to state-owned economic enterprises.

A third is the case for a ‘post-growth’ view of the economy. Both books make the case for the economic, political and ecological irrationality of the capitalist imperative for growth and capital accumulation. This is in part related to the debt and credit basis of contemporary capitalism. As Mellor puts it, “A fundamental problem of a debt-based money issue is that it creates a growth imperative within the economy…Debt has long been used as a means of trapping people into work as indentured labour” (25). The explosion of ‘credit card culture’ in the mid/late 1980s not only masked the reality of declining wages in western countries, or the elevation of finance capital and the financial services sector as the dominant sector of advanced information /knowledge based 21st century capitalism,

The Polanyian influence is clear in both books. Economies are - and ought to be – embedded in social norms and objectives and regulated politically (whether by the state or some other democratic public authority). Economies are also embedded in and dependent upon ecological systems. Both books, but especially Mellor, argue for the need for an alternative economic system to deregulated, neoliberal capitalism in which ecological sustainability is central alongside social justice, equality and a stress on quality of life/well-being rather than ‘economic growth’. In questioning orthodox, GDP-measured economic growth and the structural imperative within capitalism for constant expansion, the authors of these two books are part of a recent surge of books, reports and schools of thought. Examples of this ‘post-growth’ thinking includes Tim Jackson’s Prosperity without Growth (Jackson, 2009), Molly Scott-Cato’s Green Economics (2008), Boyle and Simms’ The New Economics (Boyle and Simms, 2009) to the ‘de-growth’ movement and emerging models of ‘green political economy’ based around replacing ‘economic growth’ with ‘economic security’ (Barry, 2012). For Mellor any post-growth, sustainable economy is based around ‘sufficiency’, social justice and a ‘provisioning economy’ (154-160), a central feature of which is the reclamation of money as a public good and brought under democratic control. Hill and Myatt are not as explicit as Mellor in outlining their alternative to neo-classical economics and its realisation in contemporary capitalism, but they do question the ‘growth fetish’ (151) and how within the orthodox economic paradigm the existence of ‘externalities’ (the imposition of a cost onto someone else and not reflected in the price) are not exceptions of the rule within capitalism, but constitute a major part of its modus operandi (153-168). This ‘post-growth’ perspective is explicitly linked to an egalitarian perspective, whether related to the inconvenient truth ignored by orthodox economics textbooks that what matters for individual well-being is relative not absolute consumption, income and wealth (Hill and Myatt, 158, 201), or that capitalist debt-based growth is a way of managing and masking inequalities rather than reducing them (Mellor, 141)

This leads to the necessity of a much wider conceptualisation of ‘the economy’ than either the dominant orthodox paradigm or indeed Marxist alternatives have presented. This is more evident in Mary Mellor’s book. From her broadly socialist eco-feminist position she argues we cannot understand either the current ‘economy’ or ‘economics’ or more progressive, just and sustainable alternatives without seeing the fact that economic relation are embodied (and gendered) and embedded (and ecological). This is what underpins her insight about the importance of adopting a provisioning and sufficiency perspective which recognises “all forms of beneficial work and activities” (7) and not just ‘employment’ and formal economic activities. For her what is needed is an “ecofeminist political economy [that] challenges the exploitative boundaries of the economy as defined by capitalist patriarchy” (158).

Mellor’s important book makes the strong case for the ‘re-embedding’ of the money and credit system within the ’real economy’ via democratic, political means. Her’s is an argument based on the reality that “in complex societies it is clear that a public money system is needed to enable production and exchange” (166), but a first step in transforming the current capitalist, disembedded, free-floating financial system is to politically put the financial genie back in the bottle as it were. Key here is to see that the essence of modern banking is to put people into debt rather than encourage them to save (61), and from this debt flows a reconfiguration of power relations which she describes as ‘debt-slavery’. This ‘debt-slavery’ of course has deliberate echoes of Marx’s notion of ‘wage slavery’, and perhaps is best seen as a more 21st century version of the latter, and in many ways much more powerful as a disciplining structural reality of the economy and people’s lives under neoliberalism.

Mellor offers a Marxist and Foucauldian based analysis of the ‘financialisation’ of societies in the last thirty years, the policies and impacts of the ideologically successful project of creating a ‘people’s capitalism’. At root the con-trick of financialisation for Mellor comes down to the inversion of the C-M-C relationship (commodities produced for sale in order to purchase another commodity) to M-C-M+ (where the intention of production is simply to make money) (20). As she puts it, “At the heart of financialisation was the assumption that money can be made out of money and that money in itself can secure a person’s economic life. Savings were no longer security for a rainy day, they were investments. A house was no longer a home, but a financial asset” (59). As well as the explosion of cheap and easy credit masking a decline in real wages, Mellor, here drawing on the work of Panitch and Konings (2009), demonstrates how lower income working class people were not only drawn into this ‘brave new world’ of ‘property owning democracy’ but were enthusiastic supporters of this move. As she notes “The financialisation of social life has seen people enticed into financialised capitalism through pensions and various forms of financial investments, including shares”, which was a calculated and managed transition such that, “Security has become based on investment rather than insurance and collectivised risk” (63). This is a measure of the (almost) complete success of this ideological project of financialisation over the past three decades, and one any serious anti-capitalist analysis needs to learn from and about.

What both books suggest is that from the current crisis within capitalism, whether at the level of ideas about economics or understanding the money and financial system, there are opportunities for reform and transformation. Against the individualised, financialisation of everyday life I completely agree with Mellor that, “economic security can only be achieved through public action and social solidarity, not through the market” (3). Against the presentation of one way of thinking about economics as ‘the truth’ and the explicit indoctrination of people (especially young people) into this ‘regime of truth’, we need, as Hill and Myatt propose greater pluralism, debate and critical thinking within economic analyses and models.

Both books, but particularly Mellor’s, show that what has happened in the past three decades has been the socialisation of risk, the ‘democratisation of debt’ but the continuing privatisation of profit and unequal distribution of socially created wealth. The public bailouts of the banking system across the core capitalist nations, which has led commentators to talk of ‘socialism for the rich, capitalism for the poor’, accurately captures the dynamic of contemporary finance-dominated capitalism. It denotes on the one hand the success of neoliberal market ideology and practice, ranging from the active creation of ‘neoliberal subjects’ and identities to specific neoliberal policies of deregulation, the creation of a constant state of insecurity for individuals and communities to the commodification of once public goods. On the other, in response to the global financial and economic crisis, ‘socialism for the rich’ denotes the transfer of wealth from the public, via the state to financial capital, while at the same time it is the most vulnerable in society who suffer from the public sector cuts of contemporary austerity politics. Both books make significant contributions to any progressive political analysis of how it has come to pass that a global crisis that originated within private finance capital has led to public sector cuts as the solution. Both chart different dimensions of the three decades of the birth and expansion of neoliberal capitalism – ideological indoctrination and a decisive success in the battle of ideas about the economy (Hill and Myatt), and the dominance of finance capital, and the related ‘financialisation’ of society and credit card capitalism and debt-based consumerism and individualised insecurity (Mellor). And both establish the case for a new political economy in response to neoliberalism, in the conjoining of some very old socialist ideas (the collectivisation of security, non-market forms of economic organisation, the importance of socio-economic equality) with some newer or different ones (a ‘post-growth’ economic vision, a focus on well-being rather than income, the creation of a ‘provisioning’ economy based on principles of sufficiency rather and efficiency and maximisation). While it may sound touchingly naïve and insufficiently theoretically ambiguous to reflect the multiple complexities of the current crisis of capitalism (as opposed to simply being a crisis within capitalism), what I take from both books is that it is upon this new political economy –allied to a political strategy based on eco-socialism (Wall, 2010), radical green political economy (Barry, 2012) and/or materialist ecofeminism (Salleh, 2009), amongst others – that progressive politics will be based in the 21st century.


Barry, J (2012), The Politics of Actually Existing Unsustainability: Human Flourishing in a Climate Changed, Carbon Constrained World (Oxford: Oxford University Press).

Boyle, D and Simms, D (2009), The New Economics: A Bigger Picture (Cheltenham: Edward Elgar).

Fullbrook, E (ed) (2008), Pluralist Economics, (London: Zed Books).

Jackson, T (2009), Prosperity without Growth: Economics for a Finite Planet, (London: Earthscan).

Keen, S. (2001), Debunking Economics: The Naked Emperor of the Social Sciences, (London: Zed Books).

Panitch, L and Konings, M (2009), ‘Myths of Neoliberal Deregulation’, New Left Review, 57, pp67-83.

Quiggin, J (2010), Zombie Economics: How Dead Ideas Still Walk among Us, (Princeton: Princeton University Press).

Salleh, A (ed) (2009), Eco-Sufficiency and Global Justice : Women Write Political Ecology (London: Pluto Books).

Scott-Cato, M (2008), Green Economics: An Introduction to Theory, Policy and Practice (London: Earthscan).