Humanist economics

BREAKTHROUGH - Elfren S. Cruz (The Philippine Star) - December 3, 2020 - 12:00am

The term “humanist management” is now beginning to be popular in academic circles. Even some business leaders, in the midst of the economic crisis caused by the pandemic, are exploring this idea.

One of the core issues in this debate, however, is the issue of economics and its goal. The traditional economists hold that the primary goal is to grow the economy and use the “gross domestic product (GDP)” as the barometer for economic progress. After the last global financial crisis, the mantra was to maximize GDP or “grow the pie.” The traditional thinking was that the bigger the economic pie, the bigger the portions of the “pie” could be shared with the common people. Traditional economists, therefore, focused on the aspects on economic thought that could grow the “pie.” This was the reason that market economy and globalization became the mantra for most economists.

The problem was that the concept upon which capitalism was based – “trickle down” – did not happen. The rich became richer and the poor stayed poor. Even incomes of the middle class stagnated.

At first, I was personally a believer in economic growth as the economic barometer for a country. People then were talking about economic “tigers,” and the Philippines was being seen as the rising tiger in this part of the world.

My journey to waking up begun with three things. The first was the GINX index which measured the level of income inequality per nation. The second was the rise of populism and the election of populist leaders even in democratic countries. The third was the initial writings of Pope Francis where he condemned the failure of the “trickle down” approach. He said, in his first encyclical, that this has never worked. In his latest encyclical, he again repeated that “trickle down” did not work.

I remember a lunch meeting of some members of a prominent business association where I brought up the topic that reducinuality was more important than economic growth. Nobody in that meeting voiced their support for my opinion.

I also began to hear the term Humanistic Management from persons mainly in the academe. Today I hear this term couched in other terms from even prominent businessmen. However, I believe that the missing ingredient is that humanistic management must go hand in hand with “humanist economics.”

Jay Preg wrote that Drucker was a humanist economist. In fact, Drucker started by teaching economics. His awakening was described by Jack Beatty, who wrote:

“During his four-year stay in England, Drucker sat in on John Maynard Keynes’ economics seminar at Cambridge University and made an important discovery. He suddenly realized that Keynes and all the brilliant economists in the room were interested in the behavior of commodities while I was interested in the behavior of people.”

Preg also wrote: “Economics is a social science. I tell students that repeatedly and make them think about those words carefully. Economics uses the tools of mathematics, physics, engineering and other ‘hard sciences’ in its models, but what economics is modelling is very human and very social behavior. Put differently, economists use mathematical precision to explain human behavior in the same way that particle physicists use it to explain the unobservable.”

The biggest resistance to humanist economics comes from the business circles. This sector is used to saying that government should leave business alone and they will become the engine of growth in the economy.

There is an interesting debate going on now in the United States and Western Europe. Large corporations that have problems of survival during these pandemic days are asking for government bailout in terms of cash subsidies. This also happened during the financial meltdown a dozen years ago. General Motors and the big banks received billions of dollars of bail-out funds so they could keep operating.

The argument now is that there are companies that are thriving in these pandemic days. If the essence of capitalism is the survival of companies in a truly market economy, then companies who cannot survive should be allowed to close. In fact, in a truly competitive market economy, companies that cannot survive should not be encouraged to continue. The problem, of course, is the plight of the workers.

Humanist economics will declare that the failing companies should not be subsidized, but it is the workers who have lost their jobs who should be subsidized.

In the economic team of Biden, there are economists, in the Council of Economic Advisers, who are humanist economists in the sense that they are more focused on addressing income inequality than economic growth. Within the Democratic Party, there are very strong groups who are advocates of democratic socialism.

I think that socialism is too identified with communism which prevents it from becoming an acceptable ideology to the majority of people. We may yet see the revival of “Social Democracy” which has often been seen as a pragmatic compromise between capitalism and socialism. This ideology prescribes the use of democratic collective action to extend the principles of freedom and equality valued by democrats in the political sphere to the organization of the economy and society chiefly by opposing the inequality and oppression created by laissez faire capitalism.

I look forward to the time humanist economics takes over from traditional economics as the main economic ideology for the global economy.

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An invitation for online writing classes: Young Writers’ Hangout, Dec. 5 with internationally published author Gail Villanueva & Dec. 12 with Mina Esguerra, 2-3 p.m.

Contact writethingsph@gmail.com. 0945.2273216

Email: elfrencruz@gmail.com

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