Economics as a religion

2 06 2011

Back in the 20th century when the world had two competing ideologies, economics began lurching towards taking on a religious role. A subject that was once closer to science, started to drift in the direction of theology. What was once based on statistics and evidence now revolved around earlier beliefs set in stone and taken as ‘truths’.

This initially took place in Communist Russia as the cult personality of Lenin and Stalin ensured the economic doctrine of their version of Marxism became the only viable way. The democratic west snorted at this totalitarian vision of every detail in an economy being run from within the bowels of a building in Moscow. As we discovered in the late 20th century, Communism was a hugely inefficient way of running an economy. It had rotted away from the inside to the point where it collapsed, the only reason it kept going for so long was that it was propped up by those who believed religiously in its virtue and success.

Josef Stalin and Vladimir Lenin imposed Communism on Russia almost as a replacement for religion, mostly for their own political ends.

In the capitalist economies of the west those who called themselves socialists were dismissed by their opposites of clinging onto a discredited cult religion. They argued that trying to manage the economy was a disastrous approach, one that led to totalitarianism. Better instead to let the market economy run its course. Out of this idea was spawned a new belief by the very people who derided the assumptions and theories of their old enemies in the communist party.

This new idea of pure capitalism was developed most notably at the Chicago School of Economics and by its main cheerleader, Milton Friedman. In a nutshell, this idea worked on the assumption that markets will go up and down but will always find a level playing field. The market with hundreds, thousands or millions or transactions will always deliver efficiency and competitiveness to the economy that lets it operate and does not interfere. This became known as neoliberalism, these theories found favour at the end of the 1970’s when Ronald Reagan in the US and Margaret Thatcher in the UK picked up on these radical new outlooks for the western economies.


Milton Friedman, godfather of neoliberalism and the majority of current economic thought.

Over the next 30 years the introduction of market economics was introduced to nearly every aspect of industry and public services. Across the political elites of Europe and North America it has become the fix all answer to any of societies woes. If a publicly run service has problems at its core, privatise it and let competing private entities find that level playing ground and the service will now, completely naturally, run efficiently and cost effectively.

Politically there is no real trumpeted alternative to this, like communism before it, neoliberalism has passed into the realm of religious fervour. There is now a long list of test cases where market economics has been applied and utterly failed. Chile in the 1970’s, Russia in the 1990’s and the financial worlds of the US and Europe in the 21st century.

From the top of politics to the upper reaches of academic economics, right through to the most vocal media commentators, neoliberalism is alive and well. This despite the world being well into the aftermath of the second catastrophic failure of laissez-faire capitalism in under a century.

At this moment Greece, a country where the neoliberal crisis has caused the failure of its economy, is being given strong medicine to cure its ills, its called…… neoliberalism. The country is being told that privitisation and deficit reduction should be its main priorities. So it cuts government spending, which exacerbates the downward tailspin of the economy, resulting in less tax receipts and further burden on social spending, which results in a larger deficit. When the medicine does not work, it is told rinse and repeat again.

Greece in crisis as ordinary people suffer the economic catastrophe, but although neoliberalism has failed them, they must suffer for the sake of Europe’s failed neoliberal bankers.

Politics and economics now find themselves wedded to a religion, a sacred economic doctrine to which there is no alternative. Most of the top politicians and their economic advisers have been brought up in this church and in the cold hard world of evidence and statistics that don’t add up, they do not know where to turn.

We are at a turning point in political and economic history with leaders that are wholly unsuited to understanding where they are in this vacuum. Interesting times, but we have not heard the last from the school of neoliberalism, because as Albert Einstein once described insanity, “doing the same thing over and over again and expecting different results.” What else is a politician to do when he has never contemplated an alternative.

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