When American President Barack Obama appointed his administration’s first Economic Team, one thing was clear to all informed observers. The young President had thought very deeply about both the Economy and Economics. The fact that his father had a PhD in Economics could account for part of such an exceptional interest, for a lawyer, but not for all of it.
As an African student in the United States, in the early 1970s, I had come to know that there were three key Schools of Economic Thought in America. There were the monetarist; whose patron Saint was Adam Smith, and Dean, then, was Milton Friedman. Their cathedral was at the University of Chicago. There were the Marxian, to whom Karl Marx was Guardian Spirit, and whose People’s Auditorium was at the University of California, Berkeley. Herbert Marcuse was Comrade-Dean. And, finally, there were the Keynesians. The disciples of John Maynard Keynes had their Temple at Harvard, where Kenneth Galbraith presided as Dean. With this in mind, it was natural to try to second-guess Obama’s Economic Thinking, by noting the schools from where he got his Economic Advisors.
He came to the White House from Chicago; so, Chicago people came with him, naturally. He was, also, a Harvard man. So, when Larry Summers whose uncle; Paul Samuelson of Pennsylvania, wrote the most famous Economics book of all and his entourage came from Harvard, it was expected. When Christina Romer was appointed Chairperson Council of Economic Advisors, from Berkeley, it was unexpected. The American Press discussed it, and noted that more than ‘gender balance’ was involved in the appointment. For the first time in American History, perhaps, all the schools of American economic thought were gathered as one team to deal with an impending economic disaster; related to the Great Recession of 2008, which the President Bush administration bequeathed Obama.
As I watched Obama form his Economic Team, I drew some inference about his ideology. Obama is an all-American, non-doctrinaire, pragmatist. William James, John Dewey and other American philosophers of Pragmatism would approve of his style. Following from that, he believed that desirable aspects of the individual schools of American economic thought could be blended to synthesis a grand ‘Economic-solution-machine’ … Obamanomics. Obamanomics solved one Herculean problem; pull-back the tottering American economy from the edge of the abyss. Those who cannot appreciate this fact cannot be helped. That the Auto-workers Union appreciated what happened is, to my mind, a key factor in Oboma’s re-election in 2012. But, then the coalition that brought him to power had diverse worldviews and expectations. Nothing is as hurtful to an elected leader as ‘under-satiated over-expectation’.
It is within this context that the result of the November 2014 mid-term election, which was, unfairly, considered a referendum on the President’s economic programme, can be understood. Obama came to power with the powerful message of ‘Change’ powered by ‘Proactive Hope’. Young Americans, who backed him with social media and widow’s mite, are now in the ‘Occupy’ movement. They seek an alternative economic model; beyond Obamanomics. American minorities are, also, alarmed about the emerging prospect of a ‘promise deferred’. The Presidential speeches’ emphases on ‘pulling-up the American middle class” seems to exclude them; the under-class. The ‘Audacious Hope Orchestra’ he conducted has some of its instruments sounding worn and forlorn.
The situation reminds one of the angst of the Jew, when the long expected messiah arrived Jerusalem astride a borrowed ass; instead of on a war-horse or chariot, leading a cavalry of horse-warriors. Like at the Jerusalem event, there has been misunderstanding on all sides in America. A recent commentator observed that Obama is better understood and admired in Canada than in the United States. Which, of course, is not much help to his position as American President.
President Obama is the brave, well-meaning, captain of an economic ship whose compass is deranged, and anchor broken. To get to harbor? Bravery is not enough, and goodwill is not enough! The ship? No, not the American economic ship, alone; the world economic ship is floundering. Obama thought he could fix the periled ship with obamanomics. The level of his success, as Americans see it, is reflected in the verdict of November 4.
The heart of obamanomics is, logically, Keynesian welfarist Economics. That is the Economics Keynes developed at Cambridge University, England, in reaction to the Great Depression of early 20th Century. But Keynesianism was best popularized by Harvard University at Cambridge, New England. But what the world’s dismal economic situation calls for is ‘Economics beyond Cambridge’. A new paradigm of economics that does not ignore the first law of thermodynamics; ‘nothing comes out of nothing’, as the current dominant paradigm does. Such an Economics will make one, intriguing, discovery; the current ‘book debtors’ on planet Earth are, mostly, the real creditors. The ‘book creditors’ are the real debtors! The only objective road out of the world debt crises is a universal, no-fault, debt jubilee.
The root of the problem is what has been called the ‘Mathew Effect’; observed by Jesus two thousand years ago, and recorded in the Book of Mathew. “To those who have, more is given. To those who have not, even the little they have is taken away; and given to those who have”. The result is what is, commonly, said “The rich get richer, the poor get poorer!” Appreciation of this perverse phenomenon explains Jesus’ hostility to the money-changers at the Jerusalem stock-exchange, during his visit to the Temple. Karl Marx, Christ’s much younger cousin, talked of the same phenomenon in the less poetic language of his writing, particularly in Das Kapital. Mathew Effect, also called Preferred Attachment, is the known tendency of new wealth in society to forcefully attach itself to the rich, while strenuously avoiding the poor.
Two French economists, Francois Bourginon and Christian Morrison, studied this phenomenon, and generated data for the whole World, from 1820 to 1990. Their results showed the persistent transfer of wealth from the poorer to the richer of the world. An interesting part of their data is that the top 20% of the world population were growing richer at, exactly, the same rate as the bottom 80% were growing poorer. The World is run by a Zero-sum economic force. Interestingly, it is through the Marginal Utility Laws of Keynes that a force, ‘Econo-sociofugal Force’, which effects this pervert wealth transfer; from poor to rich, can be gleaned. It tears society apart; the poor and rich, in chaos, flying continually in opposite directions.
Too much numbers tend to turn people off of economic discourse. But there is no finding solutions without numbers in this digital age of mass-numeracy. Income distribution to twenty percent segments, quintiles, of the Brazilian population in 1972; as reported in World Bank’s World Development 1984, shows the job of the Econosociofugal Force in full glory. With necessary rounding offs and adjustments, the ratio was: 2: -: 5: 9: 17: -: 65%. This is a punctuated sequence represented by the perfect geometric equation; 2n-1 + 1. The punctuation holes are where the numbers 3 and 33 should be. These holes tear Brazil into three distinct economic communities within the same State. The poorest quintile are underground, and the riches in the sky. All the efforts of the Brazil Workers Party, since President Ignacio Lula DaSilva; Bossa Familia, has succeeded only in pushing ‘2’ to position ‘3’, closing the little hole. The possibility of the opposition winning and re-opening this little hole, instead of closing the big one, at ‘33’, explains the bitterness of the recent Brazilian election campaign. It also explains the, otherwise, inexplicable, protest of many Brazilians against the World Cup; Brazil 2014. The rich, with their jets to fly to matches in every city, wanted it; the Favela poor, who lacked money to buy television to watch at home, were against. Most people in the World, still, cannot understand soccer-crazy Brazilians protesting against Brazilian World Cup! If people understand the socio-erosive power of the Econosociofugal force, they would understand this Brazilian quirk.
The Brazilian pattern of distribution does not occur in human society alone. It occurs also among corporations. In 1979, the nadir of the global competition between Adam Smith’s economic system and Marxian system, assets distribution among quintiles of top 500 United Corporations, to the nearest whole number, was as follow: 3: 5: 9: 17: -:65. Just like in Brazil, at about the same time, without the hole at position ‘3’. The problem is, therefore, a relational phenomenon that occurs within human societies, between human societies and between organizations.
The Econosociofugal force is at work in every single society in the world. The stable Nation States are those; like Japan, Germany and Scandinavian countries; mostly organic nations, which have significantly reined it in. In the World, as a whole, it is on the loose. The World income distribution is like in Brazil, except the poor are much poorer and the rich much richer.
Recently, an otherwise reserved, American Federal Reserve Chairman, Janet Yellen, had raised alarm during a visit to Massachusetts. Yellen said “the last several decades have seen the most sustained rise in income inequality in a century”. According to studies, the richest 0.1 percent of Americans have as much of the country’s wealth as the poorest 90 percent. So, this sinful income distribution is beyond race, religion, labour and good-luck or such other factors. It is the Econosociofugal Force gnawing at the heart of America.
It is this rising inequality, one thinks that Americans are appalled about. It is what is masking, and making hardly noticeable, the great reduction in unemployment under Obamanomics. Obama supporters had expected him to deal with this, from the initial ‘magic-man’ aura he projected. Most of the wealth created by the many employed are sequestered by the rich few. And Obama can do nothing about this. The rate of wealth disparity growth in the World is far much worse than the internal American situation. It is part of the life-blood of global terrorism.
The irony is that, as shown from the assemblage of his initial Economic Team, President Obama has, apparently, thought of the fundamental Economics Failure problem. It is doubtful if his Tea Party traducers are aware that there is a fundamental epistemological problem; that is the problem of all of us. That is beyond, self-righteously, chorusing ‘impeachment’ or insinuating ‘anti-Christ’ on the loose. Not to talk of Donald Trump; trumpeting his latest trumped-up charge against Obama, and, habitually, heckling the President from the sides.
There is a serious Economics Failure problem on the American and world stage. Obamanomics is, manifestly, not good enough for the job of, totally, healing the American economic malaise, not to talk of the World’s. Problem is; competing ideas seem less well thought out, and appear more likely to do more harm than good. A realistic solution calls for a New Economics beyond Cambridge.
Chidi G Osuagwu, PhD
Department of Biomedical Technology
Federal University of Technology, Owerri, Nige
