Thursday, January 20, 2011

Economic Theory, Development and Values

Right now I'm in Iringa, Tanzania studying and teaching a module on economic anthropology at Ruaha University College. There are many students here who have come to study business. I hope to learn from them about their own economic values and what they have taken away from studying economics. Does it fit with their existing views? Does it change the way they view economic relationships? I have already seen that while the traditional culture is built on extended family and community, the society seems to be becoming more individualistic. How much of this could be due to the assumptions of neo-classical economics that have been introduced through policies and education? I hope to empower the other students to think critically, question economic theories and consider equally the economic values of their own culture, especially when they graduate and become leaders in the Tanzanian economy.

I'm interested in the studying the social changes that accompany development, not because I think that traditional societies should be preserved in a ‘natural’ state and protected from change, but because in many cases development happens according to policies devised by powerful, industrialized nations that ignore local desires (e.g. World Bank and USAID projects). The word ‘development’ itself includes a value judgement, assuming that we in the industrialized world have ‘made it’ and that all societies must follow the same economic path.

Even if we could prove that the economic system of the industrialized nations was ideal – which is made more questionable given the recent economic stagnation in Europe and the United States – it can be argued that development programs facing countries in Africa and Latin America are based on economic policies that we do not adhere to ourselves. Many, for example Joseph Stiglitz, have criticized the free market policies of the World Bank and IMF because developed countries still practice some aspects of economic protectionism. Others, like Karl Polanyi, pointed out that when developed countries first industrialized there were a number of protective measures in place (that are currently denied to many developing countries).
It is also possible to question the soundness of the underlying assumptions that led to theories of market equilibrium and the notion that free markets will result in desirable economic development. While a critique of general equilibrium theory can be made directly through economic analysis, my aim is to question some of these assumptions through the study of economic anthropology. Existing works in economic anthropology already address some assumptions, for example in Stone Age Economics by Marshall Sahlins, it is possible to see that levels of demand are culturally determined and the notion of profit seeking is not innate, but seems to be an aspect of the modern economic system.

There has also been criticism of the current metrics used to measure development, with a focus on overall economic growth as measured by GDP and other similar figures. Even if a free market system is more efficient, as claimed by economic theory, and leads to overall economic growth, there is nothing within economic theory to account for the equity or distribution of that growth. Structural adjustment programs are known to cause hardships for the poorest people, whom development is often supposed to help most. The recent financial problems in the US, for example, have also proved that it is possible to have economic growth without job growth and in fact increase both the wealth gap and poverty.

The financial crisis in the US and the wide-spread economic stagnation that has resulted may also indicate that our economic system is not ideal. If this is the case, then perhaps we can learn from the economic values of people in other societies. And certainly, we should not impose our values on others if they have not proved to be sustainable here. My question for future research is to understand how modern economic theory may actually be performative. That is, in what ways does the study and application of neo-classical economics actually change the way people view and interact with the world around them?