PRAGOTI

In 2011 the Nobel Prize in Economics has been given to two macroeconomists Thomas Sargent and Christopher Sims. Giving justification of this award Royal Swedish Academy of Sciences in a press release dated October 10, 2011 stated that ‘The laureates’ [Sargent and Sims] seminal work during the 1970s and 1980s has been adopted by both researchers and policy makers throughout the world.’ At the juncture of deep economic crisis worldwide; particularly in North America and Europe what is the contemporary relevance of Sargent and Sims’ ‘seminal work’ in 1970s? Does the Nobel Committee try to prove any point regarding the burning issues centering global economic crisis? To get an answer we have to analyze the Nobel in Economics from its historical perspective.   

Background

The late repentance of Alfred Nobel for his killer innovation of Dynamite led him to donate his lifetime accumulation to start an annual award for Nobel contributions for the cause of human life. Since 1901 onwards Nobel Prize has been given each year to five subjects’ viz. literature, medicine, Physics, Chemistry and Peace following his will. There was no mention of Economics in Nobel’s will. This was why the Nobel Foundation could not start ‘Nobel Prize in Econmics’. Strictly speaking Economics Nobel Prize is not a Nobel Prize at all. The Central Bank of Sweden introduced ‘Bank of Sweden Prize in the memory of Alfred Nobel’ on ‘Economics Science’. However, this special prize is regarded as a Nobel Prize in Economics as the Nobel Committee follows same procedures and celebration in giving the prize to awardees like other subjects. Above all the money value of the prize is also same with other subjects.   

To give justification to Neo-liberalism

Initially there was some doubt about the motive of such prize, but gradually it became quite clear. Peter Nobel, a descendent of the Alfred Nobel family who is also a human right activist described the motive with his own clarity, ‘a PR coup by economists to improve their reputation … most often awarded to stockmarket speculators’.                                                  

Though the discipline Economics embraces many schools of thought who are conflicting in nature, the US imperialism extends its support and blessing to a sole theoretical paradigm – Neo-classicism. The latter obscures itself with cumbersome mathematics and complicated models, which creates smog for common people in understanding the national and world economies. An artificial isolation from common people is purposefully constructed as the imperialism can successfully operate the bulldozer of neo-liberalism throughout the world. In fact neo-classism and neo-liberalism are very much compatible to each other.

The imperialist game has not only been confined to alienate the people from (neo-liberal) economic affair, but also to make the people respectful from far distance towards (neo-liberal) economists who act as the imperialist agents. In this way the dissenting voices against reactionary economic policies can be weaken to a great extent. It is not at all surprising why Nobel Prize was introduced not merely on ‘economics’ but on ‘economic science’. As if there would be no distinction between an economist and Albert Einstein so long as the former one practice some incomprehensible mathematical models. Of the economists received Nobel Prize so far, more than 90% of them grossly belong to ‘mainstream economics’, above 50% of them were either US citizen or resident. Within the developing nations only Amartya Sen and Arthur Lewis received the Nobel Prize, but their workplace were also United Kingdom and United States.

Weapon against Left and Progress

Economists with soft corners about socialism did not receive Nobel Prize, not to speak about Marxist and Communists. For example Marxian economist Paul Sweezy and Maurice Dobb (who was incidentally a Ph.D supervisor of Nobel Lauriat Amartya Sen) did not receive this Prize. Michal Kalecki a great Macroeconomics and also an architect of Economic Planning in Poland did not receive the same. Nobel Prize did not go in favour of Joan Robinson, Nicholas Kaldor, both were respectful about socialism. Even a theoretical descendent of Ricardian economics Piero Sraffa did not receive the Nobel Prize.

We have witnessed the anti-Left preference of the Nobel Committee in the Chilean context. Allende led socialist regime came to electoral power in Chile with a thumping mandate in 1970. He started to nationalize the Chilean industries from the grips of the US multinational companies. The CIA made conspiracy and overthrow the Allende government by a military coup. The date September 11 has become famous for obvious reason. The global media highlighted the September 11, 2001 and made a complete blackout of September 11, 1973, the day when Allende along with many of his civilian supporters were killed in Presidential Palace of Santiago. Dismissing Allende, CIA brought General Pinochet in power. Taking an upside down policy Pinochet gave back all the nationalized industries again in the hands of corporate and US multinationals. Milton Friedman was appointed as Chief Economic Advisor of Pinochet, so that Chile could not be slipped from the tight grip of US controlled economic policies. As a fall out of that Milton Friedman were given Nobel Prize in 1975. Many peace loving people and intellectuals became vocal and raised their protest against such a choice of the Nobel Committee.    

Nobel in Economics: A leap forward from Welfare state to free market

Who is that Milton Friedman? What was the background behind his rise? During the great depression in 1929-33 Keynes suggested for greater state investment. In fact Keynes prescribed that even if there is no space for state investment; government should dig the holes to fill it up. This would create enough employment opportunity, which in effect would create fresh effective demand and further scope for new investment and employment opportunity in a multiplier mechanism. The corporate world of US and Europe had to swallow the bitter pill of Keynsian state interventionism. But they were very eager to come out from this ‘suffocative’ paradigm of welfare state. After the Second World War they looked for a prophet who can direct a great leap forward from welfare state to unfettered market. The search ended at Milton Friedman. Milton Friedman’s ‘Monetarism’ advocated that state’s role is utterly limited as it cannot generate employment by raising money wage through money creation. The state led employment creation may work in the short run. But in the long run the employment becomes stationary at a ‘natural rate’. This is because the labourers become rational in the long run. They become conscious in the long run about the fact that though their money wage increases, their real wage becomes unchanged. Therefore they prefer leisure to labour at the unchanged real wage. This is quite unrealistic argument.  As a matter of fact not only in the developing world but throughout the first world the ‘involuntary unemployment’ is the predominant nature of the labour market. Eligible unemployed people are looking for the job but they find nothing but a ‘no vacancy’ placard before their nose. But Friedman is saying that the labourers are not willing to accept employment as they become lazy, and so they ‘voluntarily’ choose leisure. The Nobel Committee provided Nobel Prize to Friedman for this unrealistic theory. The Department of Economics of the University of Chicago which was the workplace of Milton Friedman subsequently became a fortress for practicing conservative Economic ideas. Following Milton Friedman’s Monetarism the same department gave birth of far more conservative and reactionary ideas namely ‘rational expectation’ and ‘real business cycle’. The Nobel Committee in a benevolent manner had distributed 11 Nobel Prizes to this single department; that generates a new phrase: ‘Stockholm-Chicago Express’. It might be noted that in 2011 Nobel Prize was given to two economists for their contribution in 1970s on ‘rational expectation’.

The rational expectation is treated as an appendix of Milton Friedman’s Monetarism. According to this theory not only in the long run, the labourers exhibit their laziness by preferring the leisure to labour even in the short run. This is because the labourers become rational also in the short run; and therefore they can understand the true nature of state interventionist attempt to raise money wages. They rationally judge the situation and can understand that this is only a monetary expansion as their real wage becomes unaltered. Therefore they become non-interested to supply more labour and some level of ‘voluntary unemployment’ becomes permanent in the market. This kind of Macroeconomics is therefore treated as ‘supply side macroeconomics’ as against ‘demand side macroeconomics’ in the framework of Keynes-Kalecki and Marx. Nobel Committee provided Nobel Prize to Robert Lucas, one of the pioneers of the ‘rational expectation’ in mid 1990s. Again in 2011 in the midst of a big crisis of capitalism Nobel Committee has decided to give Prize to two architects of the rational expectation Thomas Sargent and Christopher Sims for their work in 1970s.

At present when in the midst of economic crisis one after another industries shut down, the workers are largely fired out, in many localities of North America the food is distributed among hungry people like the catastrophic victims, and above all inferno of Anti Wall Street protest has swallowed the first world; what points the Nobel Committee tried to prove by giving Nobel Prize to two conservative architects of rational expectation? Is workers laziness the prime reason behind worldwide economic crisis? We don’t think right at this moment even the American imperialism is thinking so. On the verge of collapse Obama administration is compelled to be surrounded by all Keynesian economic advisors instead of neo-liberals. When everybody has witnessed emperor named ‘neo-liberalism’ is naked, Nobel Committee by giving the Prize to neo-liberals would make the last attempt to demonstrate that the emperor’s cloth is so thin except the Nobel Committee none else could see it. It is really the greatest joke of the millennium.

Some exceptions

There is no doubt about the fact that the Nobel Committee in order to develop their ‘impartial’ image occasionally gave Nobel Prize to a few economists with relatively progressive views. Professors Amartya Sen and Joseph Stiglitz are two examples. However, they are after all supporters of the neo-liberal economic order. They believe that a big state intervention is also needed along with market led liberalization. Only then neo-liberalism can obtain a human face. While we are respectful to these economists but at the same time the leftists deviate from them in the sense that neo-liberalism cannot have any human face.

[Some information used in this article draws from ‘The Nobel prize for economics may need its own bailout’ by Jayati Ghosh, The Guardian, 9th October, 2009, p.38. web: www.guardian.co.uk]   

The author teaches Economics at Vishwa-Bharati, Shantiniketan