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Faith-Based Economics

Guest Column
John S. Reed

A religious doctrine masquerading as science has infiltrated our schools, our media and our governments. At this very moment its prophets are aggressively proselytizing around the world, seeking to convert all humanity to the one true faith. Is it creationism? No, creationism is small potatoes compared to this crusade. What is it?

Laissez-faire capitalism.

This claim may strike many as ridiculous since laissez-faire capitalism, the belief that the government’s only proper role in the economy is the protection of private property, has nothing to do with belief in a deity or an afterlife. But the religion of laissez-faire capitalism is more like that of the Jedi knights in Star Wars. Instead of “the Force,” faith is placed in the “invisible hand of the market.” Some will strongly insist that laissez-faire capitalism is based only on rationality and evidence, and not on faith in the supernatural.

“The invisible hand of the market” is just a figure of speech, after all. But in looking up the definition of supernatural on Athena, entry number one seems descriptive enough of the claims typically put forth by the followers of laissez-faire capitalism: “of or relating to an order of existence beyond the visible observable universe.”

In other words, the theories of laissez-faire capitalism often lack supporting evidence. The most blatant example of this is the frequent claim that free trade, as defined by treaties such as the WTO, NAFTA, and the FTAA, is the best or even the only way for poor developing countries to attain prosperity. This claim is weakened by the fact that not one major economic power in the world has become wealthy through the practice of anything remotely resembling free trade. This includes Japan, Germany, South Korea, Taiwan, and China, as well as those latter-day champions of laissez-faire, the United Kingdom and the United States. Neither the United Kingdom nor the United States became advocates of free trade until after they had achieved economic leadership. Is that just a coincidence, or were they on to something?

The wealthiest economies provide numerous examples of the effective use of protectionism, subsidies, and other forms of government interference in building economies, nurturing science and technology, educating the populace, and reducing poverty. The record of laissez-faire development policies is far more dubious, as no poor country has ever become rich by following them. In addition, they have been linked to some dramatic failures, like the 1997 Asian economic crisis. It is telling that countries which adhered closely to laissez-faire policies promoted by the International Monetary Fund (IMF) and the World Bank, like Indonesia, and Thailand, have experienced economic collapse. Those that didn’t, like China and India, weathered the crisis.

Due to the fact that the historical evidence supporting their position isn’t very strong, the advocates of laissez-faire often try to make appeals on a moral level. They’ll argue that property rights are the most sacred of rights, and for that reason we must have laissez-faire capitalism. Assuming this is the case for the sake of argument, one has to wonder why they consistently contradict themselves when it comes to environmental issues.

The laissez-faire view on the environment is usually along the lines of “pollute to your heart’s content,” even if most of the pollution ends up contaminating other peoples’ property and their bodies. To stop a polluter, they argue, it’s not enough to prove that their waste is flowing onto your property or even into your body. One must scientifically prove that a given pollutant is directly harmful to human health.

Unfortunately, part of that proof may require an illness or death on the part of the affected individuals. Even then, there will probably be so many confounding factors -- other pollutants for instance -- that getting conclusive proof will be difficult. If you throw in the fact that laissez-faire capitalists generally favor eliminating environmental protection agencies that could perform such scientific studies, as well as severely restricting the ability of the average person to file lawsuits, then the odds of successfully stopping the polluter under such a system probably would dwindle to near zero. It would seem that, despite all the talk of the laissez-faire capitalists, in this case it’s the environmentalists who are the true defenders of property rights and human lives.

Of course laissez-faire believers don’t demand that a heavy burden of scientific proof be applied to most other property violations.

No scientific study proving trespassing or graffiti is hazardous to human health is required to roust trespassers or bust graffiti artists. Nor is Adobe required to show that Dmitry Sklyarov’s encryption cracking code caused any illness or premature death in order to have him thrown in jail.

The iron fist is demanded against any eyesore or threat to the pocketbook, and laxity and tolerance is used on threats to human lives. Could this be because laissez-faire capitalists favor the interests of the rich, and the rich don’t have to live next to pollution-belching factories? I don’t know, but it often seems like they really are more concerned with protecting corporate profits then they are with protecting the private property of the average citizen.

It’s time for the separation of church and state to be extended to the realm of economics. The U.S., the IMF, and the World Bank should stop trying to foist faith-based laissez-faire economics on the world. What the world really needs is an empirical and less hypocritical approach that actually helps everyone, and not just the richest 1% of the population.

John S. Reed is a graduate student in the Department of Materials Science and Engineering.