Economics of the 1%: How Mainstream Economics Serves the Rich, Obscures Reality and Distorts Policy, by John F. Weeks

Ioana Negru on a work that challenges macroeconomic assumptions and policies after the financial crisis

June 26, 2014

“Why, I asked myself, are many people ignorant of simple aspects of our economy? To me, a professional economist for almost fifty years, the answer to that question is simple. It is the motivation for this book. Mainstream economists have been extraordinarily successful in indoctrinating people to believe that the workings of the economy are far too complex for any but experts (i.e., the economists themselves) to understand.” Thus writes John Weeks, emeritus professor of economics at Soas, University of London, in his preface. Although his book has a distinctively Keynesian flavour, he is writing primarily in the tradition of radical economists such as Thorstein Veblen, Joan Robinson, John Kenneth Galbraith and Gunnar Myrdal in his quest to expose economic myths. In clear and straightforward language, he unpacks the assumptions of mainstream economics in a bid to show how modern economists have inculcated in non-economists the erroneous belief that such theories are inspired by reality.

The conception of the economic world as described by mainstream economists is entirely fictional: it starts with the syllogism that the resources of the world are insufficient to meet human needs and decisions on how to allocate scarce resources among competing interests “dominate human existence”. We are given an incorrect and incomplete vision of markets and competition, in which the system is entirely harmonious, the laws of demand and supply always hold, everyone gains from free trade, and taxes and government are a burden to individuals, consumers and taxpayers.

Perhaps of greatest interest is the book’s second part, which considers macroeconomic assumptions and policies in light of the current economic and financial crisis. The modern conception of macroeconomics is posited on full or near-full employment and the accompanying notion that there is no involuntary unemployment – which, of course, bears no relation to economic reality. This view further holds that the main “plagues” in the economy are inflation (with the rich and the poor losing out) and the existence of public deficits and debts. Weeks sharply contests the measurement and reporting of indicators such as the national deficit, which serves only to stoke hysteria around the implications of such a debt for the economy and taxpayers, and helps governments in the US, UK and the eurozone to justify austerity policies for whose success there is little empirical evidence. With an economic model based on full employment, it follows that any state expenditure will be inflationary, but Weeks makes a counter-argument for Keynesian policies, where governments can spend to raise demand and lift economies out of recession.

Drawing on a range of data, Weeks insists that policies arising from modern mainstream economics benefit only the richest – the 1 per cent – at the cost of increased inequality and misery. In the past 30 years, economists have abandoned scientific rigour and behaved instead like astrologers or alchemists, using tautological rationalisations and refusing to change their theories in the face of evidence. For a decent society, Weeks argues, what is needed are economic policies that benefit the rest of us – the 99 per cent.

These arguments are not new, but Weeks ably reiterates important ideas that many scholars, myself included, have explored. First, he insists that the economic discourse around macroeconomic policies, which has not changed significantly since the Great Depression (“cuts versus stimulus”), must be reconsidered. Second, it is essential to communicate to the public and policymakers the existence of a plurality of economic ideas and alternatives, rather than simply accepting what the “econ fakers” have to say. For all our sakes, we must build democracy in the market of economic ideas.

Economics of the 1%: How Mainstream Economics Serves the Rich, Obscures Reality and Distorts Policy

By John F. Weeks
Anthem, 246pp, £13.99
ISBN 9780857281081
Published 20 January 2014

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