The Value of Nothing: How to Reshape Market Society and Redefine Democracy - Softcover

Patel, Raj

Softcover

ISBN 10: 031242924X ISBN 13: 9780312429249

Publisher: Picador, 2010

Synopsis

"A deeply though-provoking book about the dramatic changes we must make to save the planet from financial madness."--Naomi Klein, author of The Shock Doctrine

Opening with Oscar Wilde's observation that "nowadays people know the price of everything and the value of nothing," Patel shows how our faith in prices as a way of valuing the world is misplaced. He reveals the hidden ecological and social costs of a hamburger (as much as $200), and asks how we came to have markets in the first place. Both the corporate capture of government and our current financial crisis, Patel argues, are a result of our democratically bankrupt political system.

If part one asks how we can rebalance society and limit markets, part two answers by showing how social organizations, in America and around the globe, are finding new ways to describe the world's worth. If we don't want the market to price every aspect of our lives, we need to learn how such organizations have discovered democratic ways in which people, and not simply governments, can play a crucial role in deciding how we might share our world and its resources in common.

This short, timely and inspiring book reveals that our current crisis is not simply the result of too much of the wrong kind of economics. While we need to rethink our economic model, Patel argues that the larger failure beneath the food, climate and economic crises is a political one. If economics is about choices, Patel writes, it isn't often said who gets to make them. The Value of Nothing offers a fresh and accessible way to think about economics and the choices we will all need to make in order to create a sustainable economy and society.

About this title

About the Author

Raj Patel is an award-winning author, film-maker and academic. He is a Research Professor in the Lyndon B Johnson School of Public Affairs at the University of Texas at Austin. He worked at the World Bank and WTO, and has been teargassed on four continents protesting against them. A James Beard Foundation Leadership Award winner, he has testified about the causes of the global food crisis to the US, UK and EU governments, and is a member of the International Panel of Experts on Sustainable Food Systems. He is the author of Stuffed and Starved, the New York Times bestselling The Value of Nothing, and the coauthor of A History of the World in Seven Cheap Things, all of which have been translated and taught across the world, as have his scholarly publications in economics, philosophy, politics, and public health journals. His first documentary, filmed over the course of a decade in Malawi and the United States, is The Ants & The Grasshopper. He is a board member of the Deep Medicine Circle.

Reviews

Starred Review. Expanding on his analysis and recommendations in Stuffed and Starved, which located the horrifying imbalance in the world's food system in its profit-driven framework, activist and academic Patel critiques free market culture at a moment of universal crisis, both economic and environmental. Beginning with a historically grounded account of market society's operative assumptions, the way capitalism sets the terms of value, Patel takes aim at the notion of Homo economicus: a vision of human beings as self-interested utility-maximizers integral to market society's dollar-valuation of everything. Through a shrewd and absorbing discussion, Patel exposes the flaws in the model of the world in which people are... prepared to override their own better judgment in service of their selfish natures and the nominal separation of the economy and the state, describing the relationship as compromised but also more plastic then we are often led to believe. With due attention to the developing world as well as Europe and North America, the author offers examples of the countermovement underway and urges us to build on a vision of ourselves far more extensive, generous and hopeful than that confined to market society's Homo economicus. (Jan.)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.

Excerpt. © Reprinted by permission. All rights reserved.

The Value of Nothing

How to Reshape Market Society and Redefine DemocracyBy Patel, Raj

Picador

Copyright © 2010 Patel, Raj
All right reserved.
ISBN: 9780312429249

PART ONE

Nowadays people know the price of everything and the value of nothing.

—OSCAR WILDE, The Picture of Dorian Gray

(ONE)

THE FLAW

Now I a fourfold vision see,

And a fourfold vision is given to me;

’Tis fourfold in my supreme delight,

And threefold in soft Beulah’s night,

And twofold Always. May God us keep

From Single vision, & Newton’s sleep!

—WILLIAM BLAKE, "Poems from Letters"

If war is God’s way of teaching Americans geography, recession is His way of teaching everyone a little economics.

The great unwinding of the financial sector showed that the smartest mathematical minds on the planet, backed by some of the deepest pockets, had not built a sleek engine of permanent prosperity but a clown car of trades, swaps and double dares that, inevitably, fell to bits. The recession has not come from a deficit of economic knowledge, but from too much of a particular kind, a surfeit of the spirit of capitalism. The dazzle of free markets has blinded us to other ways of seeing the world. As Oscar Wilde wrote over a century ago: "Nowadays people know the price of everything and the value of nothing." Prices have revealed themselves as fickle guides: The 2008 financial collapse came in the same year as crises in food and oil, and yet we seem unable to see or value our world except through the faulty prism of markets.

One thing is clear: The thinking that got us into this mess is unlikely to rescue us. It might come as some consolation to know that even some of the most respected minds have been forced to puzzle over their faulty assumptions. Perhaps the most pained admission of ignorance happened in a crowded room in front of the House Committee on Oversight and Government Reform when, on October 23, 2008, Alan Greenspan described the failure of his worldview.

Greenspan was one of the acknowledged legislators of the world’s economy over the past nineteen years in his role as chairman of the Federal Reserve. A card-carrying member of the free market brigade, he used to sit at the feet of Ayn Rand who, although largely unknown outside the United States, remains influential long after her death in 1982. Her 1957 book Atlas Shrugged, in which heroic business moguls fight the scourge of government officials and union organizers, has once again scaled the best-seller lists. Regarding altruism as "moral cannibalism," Rand was the cheerleader for an extreme free market libertarian school of thought, which she called "Objectivism." Drawn into her circle by this heady philosophy, Greenspan earned himself the nickname "the Undertaker" for his jolly demeanor and dress sense. When Greenspan chose a career in government, it was rather like a hippie joining the marines, a lapse that his former friends could never forgive. Despite this, Greenspan remained largely faithful to Rand’s philosophy, continuing to believe that egoism would lead to the best of all possible worlds, and that any form of restraint would result in disaster.

At the end of 2008, Greenspan was summoned to the U.S. Congress to testify about the financial crisis. His tenure at the Fed had been long and lauded, and Congress wanted to know what had gone wrong. As he began to read his testimony, Greenspan looked exhausted, his skin jowly and sagging, as if the vigor that once kept him taut had all been spent. But he came out swinging. In the first round, he took aim at the information he’d been working with. If only the input had been right, the economic models would have worked, and the predictions would have been better. In his words,

A Nobel Prize was awarded for the discovery of the pricing model that underpins much of the advance in derivatives markets. This modern risk management paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades, a period of euphoria. Had instead the models been fitted more appropriately to historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today, in my judgment.1

This is a garbage-in-garbage-out argument: The model worked just fine, but the assumptions about risk and data, based only on the good times past, were faulty and so the output was correspondingly wrong. Greenspan’s nemesis on the panel, Henry Waxman, pushed him to a deeper conclusion, in this remarkable exchange:

WAXMAN: The question I have for you is, you had an ideology, you had a belief that free, competitive—and this is your statement—"I do have an ideology. My judgment is that free, competitive markets are by far the unrivalled way to organize economies. We have tried regulation, none meaningfully worked." That was your quote. You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying the price. Do you feel that your ideology pushed you to make decisions that you wish you had not made?

GREENSPAN: Well, remember, though, what an ideology is. It’s a conceptual framework with [sic] the way people deal with reality. Everyone has one. You have to. To exist, you need an ideology. The question is, whether it is accurate or not. What I am saying to you is, yes, I found the flaw, I don’t know how significant or permanent it is, but I have been very distressed by that fact.

WAXMAN: You found a flaw?

GREENSPAN: I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working.

GREENSPAN: Precisely. That is precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.

The flaw, to be clear, wasn’t a minor one of shoddy data. Nor was it the bigger Black Swan problem that writers like Nassim Taleb discuss, a problem of failing to account for highly unlikely events that, should they happen, involve catastrophic consequences. Greenspan’s flaw was more fundamental still. It warped his view about how the world was organized, about the sociology of the market. And Greenspan is not alone. Larry Summers, the president’s senior economic advisor, has had to come to terms with a similar error—his view that the market was inherently self-stabilizing has been "dealt a fatal blow.’ "2 Hank Paulson, Bush’s treasury secretary, has shrugged his shoulders with similar resignation. Even Jim Cramer from CNBC’s Mad Money admitted defeat: "The only guy who really called this right was Karl Marx.’ "3 One after the other, the celebrants of the free market are finding themselves, to use the language of the market, corrected.

The extent of Greenspan’s admission has passed most of us by. If you trawl the op-ed pages of the financial press, you’ll find plenty of analysis that fits Greenspan’s first gambit, with pundits offering stories about how risk was incorrectly priced (which it was), how the lack of regulation allowed the panic to feed back into the financial system (which it has), how the incentive structures rewarded traders who were able to push financial risk far into the future (which they did) and how free market ideologues removed the sorts of circuit-breaking policies that might today have helped (and they did that too). But these are all it-could-have-been-fixed-if-we’d-planned-better responses. I am not sure that we’re able to comprehend what Greenspan’s admission might really mean f

Continues...

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Edition details

• Publisher: Picador
• Publication date: 2010
• Language: English
• ISBN 10: 031242924X
• ISBN 13: 9780312429249
• Binding: Paperback
• Edition number: 1
• Number of pages: 256