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Economism and Critical Silences in Development Studies

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Economism and Critical Silences in Development Studies ThirdWorld Quarterly, Vol 16, No 2, 1995 Economismand critical silencesin developmentstudies: a theoretical critiqueof neoliberalism JOHNBROHMAN Because ofthe recentness of neoliberalism’ s rise inpopularity within develop- mentstudies, it has onlybeen in the last few years thatit has beensubject to closescrutiny in the development literature. Moreover, much of thecriticism of theneoliberal approach has beenfocused on the immediate consequences of structuraladjustment and other neoliberal policy instruments on Third World countries.However, there is alsoa theoreticalcritique that can be applied to neoliberalismwhich can help explain the root causes ofmany of its shortcom- ingsas adevelopmentstrategy. Given the close links between neoliberalism and neoclassicaltheory in general, much of this theoretical criticism concentrates on basicproblems of theneoclassical framework. This paper particularly focuses on theproblem of economism and the consequent neglect of three important areas ofdevelopment studies: sociocultural and political relations, the intersubjective realmof meanings and values in development, and the environment and issues ofsustainability. The narrownessof homo economicus and associated neoclassical assumptions Themultifaceted and dynamic nature of development processes makes it necessary totakean interdisciplinary approach to thestudy of development, one thatincludes sociocultural, political, and environmental factors as wellas those economic.However, neoliberalism and other mainstream development frame- worksthat draw their conceptual roots from neoclassical theory have virtually omittednon-economic factors of development from serious consideration. 1 As Hirschmannotes, `The discipline became professionally more narrow at pre- ciselythe moment when the problem [of development] demanded broader, more political,and social insights’ . 2 Characteristically,neoclassical theory treats people as atomisticindividuals whoare boundtogether only through market forces. People are reducedto isolatedcreatures of the marketplace, devoid of history, cultural traditions, politicalopinions and social relationships beyond simple market exchanges. 3 The conventionalassumption is thatnon-market relations and institutionsÐ the broaderenvironments within which economies operateÐ are universal,unchang- ing,and have no signi® cant impact on economic activities. 4 Economiestake on anahistorical, static nature and economic change becomes solely the result of exogenouschanges in tastes andtechnology. 5 Strippedof their social relations 0143-6597/95/020297-22 Ó ThirdWorld Quarterly JOHN BROHMAN andhistorical dynamism, economies are reducedto simpletechnical devices for allocatingscarce resources.The consequences are oftenunrealistic and trivial resultsderived from narrow, simplistic analyses that ignore the complexities surroundingThird World economic realities. Thegap between theory and reality within neoclassical economics is largely rootedin aseries ofunrealistic assumptions, especially those linked to the homo economicus postulate.The concept of homoeconomicus ®rst emergedwith the birthof marginalist or neoclassical economics, as itbecame known, around 1870.From its origins, neoclassical theory has basicallyconceived of a world composedof scarce means andunlimited desires, within which individuals must makechoices. The role of homoeconomicus withinthis world becomes one of de®ning the `best’ choices, ie thosethat maximise an individual’ s endsgiven the limitedmeans available. Homoeconomicus performsthis function as a`rational, self-interested,instrumental maximizer with ® xedpreferences’ . 6 Socialprocesses are reducedto a universalpsychological endÐ utilityÐ which supposedly moti- vatesall economically rational behaviour. Homoeconomicus ,then,represents yet another universalistic Western con- cept:economic behaviour in all places at all times follows the strictures of economicrationality. This universal rule of economic rationality determines whichchoices are best(ie which maximise utility) in allsituations. Barnes notes that homoeconomicus providesneoclassical theory with a methodological agenda`based upon reducing the complexity of economicevents at any time or placeto the universal trait of rational choice making; a traitthat, because of its deterministnature, is easilyrepresented in a formalmodel’ . 7 Inthe end, such reductionismmeans that homoeconomicus existsneither in thereal world of the Southnor the North. The real world is insteadcomposed of individuals and socialgroups whose behaviour may change across timeand space accordingto complexinterconnections between individual attitudes, beliefs and motivations, onthe one hand, and the in¯ uence of historically constituted societal structures andrelations, on the other. Ultimately,what neoclassical theorists have to understand is thatthere is no independent,universal sphere of economic rationality that is explicableby equilibriumequations and formal models based on assumptionsof individualistic exchangerelations. By precluding attention to elementsof humanbehaviour that donot® titsnarrow de® nition of economicrationality, neoclassical theory leaves itselfno mechanismfor understanding and explaining the often messy empirical worldthat so de®es itsmodels. Moreover, even rational behaviour (eg the pursuitof pro® ts) cannotbe understood without paying attention to non-market values,rules, relations and institutions. Development is notsimply economic growth,but also involves critical changes in social relations and institutions. Changesin practices spring from mutual actions and relations among classes and socialgroups; they cannot simply be understood as aggregationsof isolated individualactions, as is positedby neoclassical theory. 8 Inevitably,neoclassical theorists pay a heavyprice for the simplicity and eleganceof their models: empirical ignorance, a misunderstandingof socioeco- nomicprocesses, and,as aresult,the advocacy of unrealisticand bizarre policy recommendations. 9 Inorder to explain how actual economic activities unfold in 298 ECONOMISM AND CRITICAL SILENCES INDEVELOPMENT STUDIES theirreal-world settings, we must understand the local historical and geograph- icalcontext in which these activities take place. This means movingaway from universalmodels based on absolutes, such as the homoeconomicus assumption, towardsthe adoption of amorerelativist stance. A centraltenet of relativismis thathuman activities cannot be explained by recourse to theoretical absolutes, butneed to be examined within their particular contexts. This position is especiallyrelevant to the study of development processes inThird World countriesthat normally unfold in contexts that bear only a super®cial and often misleadingresemblance to their First World counterparts. Neglectof factors differentiating markets Because theirdevelopment strategies are basedon market-led growth, neoliber- als andother neoclassical theorists especially need to develop a betterunder- standingof thedifferent ways that markets work in developingcountries and the factorsthat contribute to these differences. It is normallyassumed thatmarkets are essentiallysimilar and that reactions to market signals by the private sector willbe equivalent from country to country. Indeed, the overall dependence of market-ledgrowth strategies on the `trickle-down’ mechanism assumes abasic uniformityin ThirdWorld markets based on open competition and economically rationalbehaviour by entrepreneurs.However, these universal assumptions about marketsand the private sector have little historical evidence to support them. Suchassumptions appear to be particularlyunrealistic for more underdeveloped economiesmarked by dualisticstructures in poorer,predominately rural areas of theSouth (eg much of Africa, South Asia). As Stewartcomments: `Traditional elementsin theeconomy have different organisation, operate in different labour andcapital markets, pay different prices for these resources, and have quite differentaccess totechnology, from ® rms operatingin the modem sector.’ 10 In thecase ofAfrica, for example, Havnevik states that`it is wrongto think that [Western-style]land, labour, credit, and product markets exist naturally ¼ Factor,product, and ® nancialmarkets [have been] historically rare inAfrica’ . 11 Itfollows that if development in these areas is toconform to neoclassical prescriptionsfor market-led growth in the Western image, new market institu- tionswill somehow need to be created and sustained in an environment likely tobe rather inhospitable. Thegeneral effectiveness of neoclassical trickle-down strategies also presup- poses thepresence of a capitalistclass thatis ableand willing to respond to marketincentives with investments and other accumulation activities. However, class differencesbetween countries may profoundly affect investment patterns andother key elements of theaccumulation process. Within developing econom- ies,domestic capitalist ® rms oftenplay a relativelysmall role in comparison to state-ownedand family enterprises, both of which normally make production decisionsbased on criteria that diverge from neoclassical assumptions of pro® t maximisation. 12 Moreover,particularly in Africa and Latin America, domestic capitalshave generally remained quite weak, while innovative entrepreneurs withsigni® cant investment capacities have yet to emerge in most countries. 13 Underthese circumstances, market incentives may be largely ineffective in 299 JOHN BROHMAN stimulatingthe investment capital needed to create added employment and
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