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A Developing Ideas series

DEVELOPMENT AT THE CROSSROADS

Part 1 of 4:

The Religion and the Heretic

With the millenium closing, people tend naturally to reflect on some of their most cherished beliefs. This may explain the current ruckus in development circles over economics - an academic discipline about weighing costs and benefits of using different resources that many have called the 20th Century religion. Economists have for decades dominated the agenda of world development, their ideas extending outside the ivory tower into influential fora like the UN, IMF and G-7 meetings. But now the eggheads are at loggerheads as social and environmental problems mount and a search for solutions demands new approaches.

A tour of some of the world's most influential centres of development thinking, specially undertaken for this four-part series, found plenty intellectual wreckage and lots of soul-searching going on. Pundits say the 21st Century will see the old gospel of global development rewritten and Adam Smith - history's archetypal economist - knocked off a hallowed pedestal. But if economists are falling off the perch, what will occupy the new intellectual high ground? And how will these changes affect normal people? This series searches for answers. But first, a trip to the intellectual battlefield to guage the casualties.

Signs the Era of Economics is ending are everywhere. World leaders like Canadian Prime Minister Jean Chrétien are making reform of economist-dominated international institutions like the International Monetary Fund and World Bank a top priority, claiming they are ineffectual in averting major fiascos like Mexico's recent currency crisis. Books like Englishman Paul Ormond's The Death of Economics paint economics as a dubious science, powerless at prediction and in deep though little publicized crisis. Universities are adding courses in sustainable, not just economic, development. International development agencies increasingly talk up their hiring of non-economists like sociologists and ecologists - even if crude comparisons at institutions like the World Bank still show economists outweighing ecologists and sociologists by a margin of ten to one. The problem, critics say, is this: Aside from the very notable success economists have had improving productivity and efficiency, the world's poor still get poorer and environmental degradation continues to worsen. Communism's demise may have added swagger to the step of our economist friends, but let's not settle for a case of the one-eyed leading the blind, they say.

Herman Daly certainly isn't. The maverick American economist - who quit his job at the World Bank non-plussed by its policies on the environment and free trade - is on a mission to give economics a heart. More conventional colleagues often call Daly a preacher, demagogue or blasphemer. But the intense emotions he elicits among normally 'hard-headed' colleagues suggest he has a point. Developing Ideas recently interviewed Daly in his new digs at the University of Maryland, College Park, where he spoke at length about his world view. ( Interview.) Economics, he charges, has to "move away from being a self-centred academic discipline interested only in working out the consequences of its own assumptions, to engage itself more in the world."

If Daly is a preacher, then the religion he is attacking is traditional or 'neo-classical' economics, its temple is the World Bank and its seminaries are the world's universities.

"University departments of economics are just wasting everyone's time. They keep themselves exceedingly pure just working out the logical implications of what they have taken to calling the canonical assumptions." Unfortunately, he says, these fundamental assumptions pretty much ignore all notions of community, whether social or ecological. What remains is "nothing but isolated individuals - Homo economicus."

Daly's criticisms are not exactly new. Environmentalists have been bashing the 'rational science' for years. But Daly's blows are aimed in a way that's hard to ignore. For instance, he goes straight to the source of learning - the basic textbooks - to lodge his complaint. "There's no environment, there's no social element in any of it," he charges.

Daly the heretic likens the World Bank to the "functioning Church in the world, out there trying to do good". But its economists got contaminated by the teachings of top-rate universities like Harvard, Oxford and McGill, he says. "I think the seminaries were teaching bad theology."

Over at Harvard's economics department, Daly has one sympathizer. Political economist Stephen Marglin says the prevailing philosophy on campus is more like, 'Whoever dies with the most toys wins.' The position that economic growth is harmful for the world is "not even a discussable view at Harvard," he says.

With events like the collapse of the Soviet Union and the rise of conservatives like Newt Gingrich in the US, Marglin is not expecting any miraculous changes of heart among his colleagues. "I'm not sure there is an intellectual higher ground in economics," he says, arguing that economists have an uncanny habit of shifting their theories to suit the prevailing political winds.

Thanks to Herman Daly and his ilk, however, the battle over the development agenda of the future - and the appropriate role of economics in it - is heating up. As Daly quite gleefully observes, "Some of the popes of the profession are getting rather defensive." It remains to be seen whether Daly's teachings will marshal a modern reformation.