The trajectory of mainstream economics can be understood in terms of how the discipline historically responded to moments of crises by attempting to 鈥渢heoretically fix鈥� the understandings related to five core 鈥渜uestions鈥� of capitalist political economy 鈥� namely land, trade, labour, state, and legal-institutional framework. This involved legitimising improvements in land that led to the dispossession and the destruction of the commons, justifying free trade based on comparative advantage as opposed to mercantilist state intervention, reducing labour to a factor of production that was supposedly rewarded based on its marginal productivity and hence not being exploited, legitimising state intervention to stabilise capitalism and developing a legal-institutional framework to protect markets from popular democratic pressures. These 鈥渢heoretical fixes鈥� served to ideologically legitimise, preserve, and perpetuate the core content of capitalist social relations even as it corresponded with the modification of the surface-level appearances of capitalism.

The history of mainstream economics is closely tied to the history of capitalist development. However, the discipline of economics attempts to obscure this relationship, mostly by asserting its value-neutrality through a positivist approach. Despite criticisms, mainstream economics continues to retain its core postulates by reasserting the naturality and inevitability of capitalist social relations by dismissing questions of political economy. The outsized influence of economics in policymaking necessitates consistent critique and engagement with the assumptions and implications of mainstream economic theories and models. There is a wealth of literature that critiques different aspects of mainstream economics from different perspectives (see Chang 2015; Fine and Milonakis 2008; Kvangraven and Kesar 2021; Lee 2009; Mezzadri 2020; Reinert, Ghosh & Kattel 2016; Selwyn 2016). This essay contributes to this rich tradition of critique and argues that the trajectory of mainstream economics can be understood in terms of five core 鈥渜uestions鈥� 鈥� namely land, trade, labour, state, and legal-institutional framework.

While these are not mutually exclusive questions and economic thought did not evolve in a linear trajectory, I argue that the discipline of economics responded to moments of crises by attempting to 鈥渇ix鈥� the existing theoretical approaches that underpinned the prevalent understandings of capitalist political economy. These 鈥渢heoretical fixes鈥� served to ideologically legitimise, preserve, and perpetuate the core content of capitalist social relations even as it corresponded with the modification of the surface-level appearances of capitalism.

But since the logic of capital expands to all realms of society and leads to new contradictions that cannot be permanently overcome (Harvey 2014), new problems inevitably arise for economics as a discipline. Highlighting how these questions were fixed in mainstream economics provides a better perspective on how to challenge its supposed value-neutrality as well as its dominance in academia and policymaking. The purpose of this essay is not to provide a linear historical account of the evolution of economic thought, but to historicise economic theories by situating them in their political-economic context, which helps make better sense of why mainstream economics evolved the way it did.

The land question

Land played a central role in the capitalist transition and continues to remain integral to contemporary accumulation (D鈥機osta and Chakraborty 2017). The classical liberals wrestled with the question of how to organise land reserves as capital was getting globalised through colonialism. Locke 鈥渇ixed鈥� this question through his labour theory of property which argues that land gets improved and hence creates value upon the application of labour (鈥渁s much land as a man tills, plants, improves, cultivates, and can use the product of, so much is his property.鈥� [Locke 1690, 1980: 21]).

Thus, Lockean theory posited that private ownership of land even if concentrated in the hands of a few is much better than the 鈥渨astelands鈥� that are left unattended or held under common ownership (Whitehead 2010). This justified not just capitalist landlordism in England but also settler-colonialism. North America with its vast reserves of land and natural resources epitomized the Lockean state of nature that needed improvement. In effect, this legitimised the dispossession and genocide of indigenous people (the primitive accumulation of capital) whose ways of living were not compatible with the emerging capitalist law of value. The Lockean theory of property rights underpins the modernisation paradigm that continue to structure mainstream development discourse 鈥� where the protection of private property rights at all costs is equated with developmental progress.

The trade question

Capitalist trade was fuelled by both market competition and colonialism, and classical political economists rose to the defence of the emerging industrial order. As the physiocrats grappled with the questions of value-creation by agricultural labour, Adam Smith advocated for a greater division of labour that he believed to have spurred productivity in the pin factories of his time. Smith defended free trade orchestrated by a nascent capitalist class as opposed to the excessive involvement of the mercantilist state and aristocratic privilege. Though Smith was apprehensive of the adverse effects of the division of labour on the human intellect and argued for the public provision of education for all (Thomas 2018), his idyllic account ignored both the violence of capitalist origins (Marx 1976 (1867): 873-77) and the necessity of centralised state intervention to create capitalist markets (Polanyi 2001 (1944): 146-47)

David Ricardo鈥檚 comparative advantage theory continues to have a much more decisive impact in structuring international macroeconomics, for example, through the Heckscher-Ohlin model. A country has a comparative advantage if it can produce a commodity at a lower cost than other countries 鈥� focusing on comparative costs thus leads to more gains from trade and hence, development. But this not only ignores how global development was structured by imperialism (Patnaik & Patnaik 2016) but is also at odds with how actually industrialised economies benefited from active state intervention. This is not just true of Ricardo鈥檚 own examples – English cloth and Portuguese wine were both outcomes of capital-state relationships (Peet and Hartwick 2015: 48-49) but late industrialisation was steered by the developmental state that defied comparative advantage and market signals (Chang in Lin & Chang 2009). 

The logic of comparative advantage continues to underpin the developmental idea that labour must be cheap in labour-surplus economies 鈥� this forms the basis of 鈥渟weatshop economics鈥� that justifies the deprivation faced by workers in labour-intensive sectors like garment production (Mezzadri 2020). Nevertheless, classical political economists who were trying to understand the emerging capitalist social formation wrestled with the questions of value and distribution, the social relations of production, and the tendencies of crisis and stagnation in capitalism. Smith and Ricardo advocated for a labour theory of value, and Marx insisted that we pay attention to the historical specificity of the emergence of the capitalist value form (see Chambers 2018). The question of labour becomes important in this context.

The labour question

Militant trade unions in alliance with a vibrant socialist movement highlighted how capitalist profit is built on the exploitation of immiserated workers. This compelled mainstream economists to address and theoretically fixthe question of labour through marginalist models. Mathematical formalism was used to delineate the market economy as a sphere insulated from larger socio-political questions: under neoclassical economics, the economy was all about the allocative efficiency of factors of production in contrast to classical political economy鈥檚 focus on classes and distribution. Allocative efficiency was to be achieved in correspondence with the marginal productivity theorem 鈥� where each factor received a return corresponding to their marginal contribution to production that was to be derived using differential calculus.[i]

The neoclassical model of production and distribution was riven with measurement problems as highlighted by the Cambridge capital controversy. Moreover, treating capital and labour as perfectly substitutable factors of production justified the existing distribution of returns as natural market outcomes 鈥� this effectively erased the prospects of accounting for class struggle in the economic model (Dobb 1973: 172). Additionally, the neoclassical model ignores how pre-existing social differentiation shapes market outcomes and thus cannot account for inequalities within the labour market. Moreover, if an equilibrium of allocative efficiency was achieved through the market (which itself was coordinated by utility maximising actors), then there is neither scope for regulatory intervention nor prospects for social change as it does not improve total utility (Clarke 1991: 150).

In effect, the marginalists in contrast to classicals refuted the validity of the labour theory of value (value instead corresponded with subjective utility) and dismissed exploitation (as returns to labour and capital were based on marginal productivity), but just like classicals, accepted capitalist social relations and market outcomes as a natural development. Economics got redefined as the study of preferences and utility maximisation of individuals (the reference point here was the 鈥渕ale breadwinner鈥�) given scarce resources and unlimited wants 鈥� while the social construction of these microeconomic variables was completely ignored. Mathematical formalism assumed that the real world was an aberration from the neoclassical model and that expanding the market would lead to general equilibrium. But this untrammelled faith in market self-regulation faced a crisis during the 1930s, which necessitated a state-led response.

The state question

While the market liberals argued for less intervention during the great depression, Keynesianism argued for state-led counter-cyclical deficit spending to spur aggregate demand in the economy.  Public expenditure will have a multiplier effect that will lead to a virtuous cycle reinvigorating private consumption and private investment. This was not a mainstream idea, but it became the dominant economic paradigm largely because the threat of socialism and the harms of fascism demanded that economists reinvent the idea of state intervention.

Thus, the Keynesian model鈥檚 greatest contribution is to legitimise the macroeconomic interventions of the capitalist state; this provided a theoretical fix to questions about both instability and inefficiencies of capitalism.[ii] Business cycles were to be tamed by state regulation and cyclical unemployment was to be addressed through public investment 鈥� Keynes was the answer to all apparent contradictions of capitalism. The post-war economic order helped realise the capitalist welfare state in the global north, but this did not overcome the internal social differentiations based on gender, race, and ethnicity (see Harvey 2014: 164-184). In fact, New-Deal era housing policies explicitly promoted segregation through redlining by extending mortgages only to white families thereby accentuating racial inequality (Rothstein 2021).  These issues of exclusion persisted in the international order as well – despite the prominence of the Latin American feminists, pan-Africanists like Du Bois, and environmentalism in transnational networks and the ILO鈥檚 Philadelphia Declaration, the Bretton Woods conference marginalised the concerns of gender, race and the environment (Helleiner 2022).

Keynesian models are intrinsically based on a commitment to the territorial logic of the nation-state and a class compromise within these borders. For Keynes, this meant a defence of the interests of the British state that was facing a crisis of hegemony during the Bretton Woods negotiations for a post-war global order. But this also meant – as Patnaik (2017) argues in her study on profit-inflation and Bengal famine – that even though Keynes was a liberal humanist, his policies served the interests of British imperialism and had disastrous effects in colonies. Moreover, North-Atlantic Keynesianism cannot be divorced from its connection with war-related spending (the warfare-welfare nexus) and the subsequent boom that led to the prison-industrial complex (Gilmore 1999). Nevertheless, the Keynesian imagination served as fodder for national-developmental projects in both advanced capitalist countries and postcolonial developing economies, but even the limited gains of a section of the working class from this class compromise were only a temporary achievement.

The legal-institutional question

As regulated capitalism collapsed due to a crisis of profitability in the 1970s and capital re-subordinated labour, a host of economic ideas justified the emerging neoliberal social order and discredited Keynesian-style government intervention.[iii] Milton Friedman posited that monetary policy was more instrumental in shaping inflation and business cycles, and hence public investment had to be reined in. Governments were expected to abandon full employment goals and implement austerity measures so that private investment does not get crowded out (for a critique of this argument, see Patnaik 2017).

James Buchanan argued that the government and bureaucrats cannot be trusted as they act to further their own interests and engage in rent-seeking (for a critical account of Buchanan鈥檚 influence on neoliberalism and democracy, see MacLean 2018). Supply-side interventions 鈥� most notably through tax deductions – became the preferred way to attract private investment. The Laffer Curve (named after Arthur Laffer, who is closely associated with Donald Trump) advocated for reducing taxes to optimise revenue collection, which was used to justify unreasonable corporate tax cuts. As capitalism financialised and informationalised, Eugene Fama posited through the efficient market hypothesis that stock prices are accurate representations of their fundamentals and that maximisation of the shareholder value of the firm was the best way to enhance societal well-being (Davis & Kim 2015).  

This motley crew of economic ideas broadly called for redefining state regulation to benefit capital, but also provided a theoretical fix to the question of democracy under global capitalism (see Brown 2015). Neoliberals like Hayek, Friedman, and Buchanan were committed to protecting democratic rights broadly defined as the protection of the rule of law that safeguards individual liberties against state intervention. But they were apprehensive of expanding democracy beyond this definition and argued for placing constitutional limits on legislative authority so that popular pressure cannot upend the market order. This included basic reforms like minimum wage hikes, which mainstream economists propagated would cause unemployment – Buchanan said that arguing for the opposite is akin to physicists arguing that water runs uphill (The Wall Street Journal 1996).

As Slobodian (2018) argues, the neoliberals were anxious about the democratisation brought about by trade union action in the global north and decolonisation in the global south. But instead of resorting to naked market fundamentalism, they envisioned a world where markets were encased by a legal-institutional order that did not violate the rights of capital (Slobodian 2018).  The human rights of property owners were to be protected against the threat posed by the passions of the masses (Whyte 2019). Thus, the economic arguments for central bank independence and rules-based monetary policy, supply side interventions, subordinating the welfare state in the name of financial restraint, and financial market efficiency in principle laid the framework of a legal-institutional order designed to fix the threat that bottom-up democratic forces posed against capital. This has given rise to the 鈥渁nti-state state鈥� (Gilmore 2011) 鈥� where the repressive apparatus of the state has grown while welfare systems remain systematically underfunded.

Emerging questions

Despite the 2008 financial crisis and the ongoing Covid pandemic, neoliberal capitalism has proven to be surprisingly resilient. Mainstream economics has still retained its core postulates, even as it has expanded into studying irrational behaviour of individuals and incorporating Randomised Control Trials into studying poverty (for a critique, see Reddy 2012). Even models of 鈥渋mperfect competition鈥� gained relevance through comparisons with idealised perfect competition, thereby ignoring the real conflict inherent to capitalism (Shaikh 2016).

But a concatenation of different crises (what is now dubbed the polycrisis) is posing new challenges for economic thinking. For instance, environmental degeneration is seen as a market externality, for which the market-efficient solution is that environmental costs should be priced and traded among producers to incentivise the transition away from fossil fuels.  In contrast, there is a growing demand for a green new deal involving public investment in cleaner energies at a scale similar to what was done in the 20^th century for establishing fossil-fuel based infrastructure. But this necessitates a shift beyond the neoliberal world order.

The global capitalist slowdown has also posed political questions that economics can no longer ignore. The rise of global authoritarian capitalism has highlighted the disjuncture between neoliberal political philosophy (as professed) and neoliberal political economy (as practiced). This also highlights how the state-market binary is not useful to understand contemporary capitalism. While neoliberals argue for market-oriented reforms against government failures, interventionists argue for public regulation to safeguard against market failures. Both camps miss how the state and market are dialectically intertwined, and how state intervention can only mitigate but not eliminate the crises tendencies of capital. That these effects are compounded in the global south where industrialisation and formal employment is not the norm necessitates a paradigm shift beyond the core tenets of mainstream economics in academia and policy-thinking. The growing demand to decolonise and diversify economics holds immense promise in this regard (Kvangraven & Kesar 2021).

Concluding remarks

This essay emphasised that certain intellectual turning points in economics were theoretical fixes that corresponded with political-economic shifts in capitalism. 聽This involved legitimising improvements in land that led to the dispossession and the destruction of the commons, justifying free trade based on comparative advantage as opposed to mercantilist state intervention, reducing labour to a factor of production that was supposedly rewarded based on its marginal productivity and hence not being exploited, legitimising state intervention to stabilise capitalism and developing a legal-institutional framework to protect markets from popular democratic pressures. This is not to say that all mainstream economists were dishonest and corrupt, but that the disciplinary postulates as well as the knowledge produced through the reconstruction of the core neoclassical models have served as an ideological justification of capitalism in its various forms.

By disregarding historical particularities, obfuscating relations of exploitation and domination, and naturalising social inequalities inherent in the market economy, mainstream economics education bolsters false consciousness regarding the workings of the world. If the principles of economics aligns with the requirements of the dominant social order, the various challenges to it from inside and outside the economy will be restricted to the margins. A situated history of the evolution of economic thought that pays attention to the political-economic shifts in society can thus demystify the discipline鈥檚 self-proclaimed value-neutrality and show how deviation from its core postulates is imperative in the context of a stagnant economies, rising social inequalities, and a political and environmental crisis. This necessitates a comprehensive shift in economic thinking that recognises that knowledge is shaped by power relations and that the capitalist order is neither natural nor eternal.

References

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[i] The concept of marginal product has no basis in reality even at the firm-level 鈥� a unit of a particular factor of production cannot be increased while holding other units constant (Moseley 2015: 107)

[ii] In reality, state intervention is not an anathema to any capitalist market. Neoliberals use this to distinguish themselves from laissez-faire economists (see Friedman 1951).

[iii] The antecedents of neoliberal economic governance can be seen during the inter-war period 鈥� this included not just international economic institutions 鈥渕eddling鈥� in domestic affairs of nation-states. (Martin 2022), but also economists advocating for austerity, especially in fascist Italy (Mattei 2017). ]

Aabid Firdausi (aabidfms@gmail.com) is a PhD student in the Department of Sociology at Johns Hopkins University. He tweets at .

Acknowledgement: The author thanks Alex M Thomas and Upasana Goswami for their comments. A preliminary version of this essay was presented at the Department of Economics, University of Kerala.

Photo: London School of Economics and Political Science

The Social Dilemma that is currently streaming on Netflix has garnered much attention by raising a single question 鈥� how have we come to accept as normal the fact that a few hundred tech-enthusiasts in Silicon Valley has had an unprecedented impact on billions of lives around the world? Directed by Jeff Orlowski, the Social Dilemma features tech industry insiders raising ethical concerns about business models that shape our everyday digital experience. 

Though the docudrama has topped charts, the narrative on reckoning with this digital Frankenstein moment is not new. For example, Black Mirror is a popular show streaming on Netflix that speculates on how unchecked tech developments can result in a dystopian world. What makes Social Dilemma unique is perhaps because it features an array of 鈥� usually white males who got rich working for big tech, but then got disillusioned and subsequently achieved 鈥渆nlightenment鈥�. 

The tech-bros point out that most platforms were started with good intentions to improve the quality of human lives. However, due to the advancements in AI, coupled with a shareholder model of revenue maximization, these platforms have become weaponized by those with nefarious interests. This has threatened liberal democracies, leading to political polarization. We are warned that a civil war is on the horizon, ironically triggered by social networks apparently aimed at bringing people together.

However, this oversimplified techno-determinist presentation of a social problem misses the wood for the trees. Can right-wing authoritarianism, xenophobia, fake news and mental health issues be boiled down to the business models of web-based platforms? Once we examine this basic premise, it becomes immediately clear that a lack of sociological nuance sends wrong messages. Apart from triggering moral panic 鈥� exemplified in that talk about wanting to throw away your mobile phone into the garbage bin – the documentary eschews a patient and critical examination of contemporary capitalism, which unarguably shapes the operations of digital media. To grasp things by the root, we need to understand what is actually social about the social dilemma.

What鈥檚 left unsaid?

The first major silence in the documentary is on the political economy of contemporary capitalism. Without such an understanding, the Social Dilemma gravely confuses correlation with causality 鈥� in at least two fields, viz. mental health and political trends. Jonathan Haidt, who is a prominent social psychologist, briefly appears to flag concerns about the 鈥済igantic increase鈥� in depression and anxiety among American teens, ostensibly due to social media. However, reducing a social phenomenon to a single factor is not particularly helpful.  The evidence is also , as a similar upsurge in suicide rates cannot be seen in several European countries despite high prevalence of phone usage.

The documentary also talks about young women facing 鈥淪napchat Dysmorphia鈥�, as they pursue unrealistic feminine beauty standards in their pursuit for validation. Here again, instead of questioning the patriarchal male gaze that has existed for decades, we are left with blaming the tools that make it possible. While cyberbullying has certainly become a cause of worry, we often forget that social media is also an effective tool for mobilizing and organizing resistance 鈥� as seen from Tahrir Square to the recent Pride Marches amidst the pandemic. 

The tech-bros express concern over society becoming more divided than ever. In India, commentators often speak as if 鈥淲hatsApp universities鈥� are the primary cause of political polarization. We are constantly reminded that the political sphere is a battlefield of ideas. However, this obfuscates the material structures that have fostered such anxieties in the first place. The pitfalls of liberalism lies in their ignorance 鈥� often deliberate 鈥� of the social structures that has enabled the normalization of unreason around the world.  

The last few decades have witnessed profound shifts in the balance of class forces through the dismantling of the welfare state, union-busting, liberalization of private capital, deregulation in the name of easing business and the financialisation of the economy. The decline of stable jobs, accompanied by the rise of what the late David Graeber called has created deep resentment among the working classes. Right-wing exclusionary ideologies prey on such economic anxieties to put the blame on minorities. We need to be clear that social media is not the cause for this, but certainly becomes a platform to project these economic insecurities as cultural anxieties.

The second major silence is on how technologies are produced in any society. We often turn a blind eye to the massive state involvement in producing several technologies from the touch screen to Google鈥檚 search engine algorithm, as has pointed out.  These same tech companies (including Netflix) are notoriously involved in , which has among other things fueled austerity policies that has hurt the working class. This brute fact not only busts the libertarian myths around private initiative, but also raises questions about the obscene wealth made by Silicon Valley executives. In the tech-bro narrative, technology appears to arise out of vacuum due to the brilliance of a few programmers. In reality, technology is socially produced.

More importantly, we often ignore the unpaid labour time that is involved in the production, consumption and distribution of information that is central to the everyday existence of web-based platforms. The documentary points out how targeted advertising has manipulated our psychological vulnerabilities. But what is left unsaid is how our seemingly mundane activities actually constitute 鈥榰npaid labour鈥� (called ), as advertising revenues constitute a primary source of profit for most web-based platforms.  Statements like 鈥渋f you are not selling something, then you are the product鈥� should be reinterpreted taking into account this unpaid labour. 

Society at crossroads

These two silences 鈥� on political economy as well as the social production of technologies 鈥� make The Social Dilemma analytically and politically impotent. Accumulation is inherent to the logic of capitalism 鈥� the business models simply reflect what is possible for capital at any given point of time. Seeing capitalism as an expansionary system for the pursuit of profit warns us against the futility of proposals that call for 鈥榖reaking up big tech鈥� 鈥� there is no reason why smaller facebooks or googles would treat data differently. The rampant trend of acquisitions by big tech only confirms the general tendency towards centralization in capitalism. 

That labour not only creates value, but also has the potential to shape and transform the world, is what makes the insights of Marx so relevant. This is true of cyberspace as well 鈥� which is merely a manifestation of a historically specific mode of organising production. This leads to more important questions. How can we strengthen alternatives to corporate social media that do not pursue profit from unpaid 鈥榣eisure鈥� time? How do we organize a truly democratic cyberspace based on collective ownership? More importantly, is this possible without radical challenges to the capitalist society we live in? It is high time we face the real dilemma that confronts us – which is social, not technological – lest we regress to barbarism. 

Aabid Firdausi MS is a research student at the Tata Institute of Social Sciences, Mumbai, India. He is interested in studying the social and spatial dynamics of contemporary capitalism.聽聽He tweets at