What is the economy for?

It is said there is no such thing as society, only the economy.

It sounds very much like a Thatcher quote. It isn’t, but is quite probably a silent Thatcher thought. Unsurprisingly it is wrong in all particulars.

First, even if we wished to return to being hunter gatherers we would still be a society – the Latin root socius just means companion. So unless we are all going to live as human ‘islands’ which all the evidence suggests we never have, then society is just living and cooperating with others. It is intrinsic to human life.

The economy was not a feature of hunter gathering societies. It arrives only with the specialisation implicit in a plant-based food production system. We still had society, but the economy describes things that refined and improved our cooperation. The economy arrives because we cannot otherwise acquire all the things that we need for a reasonable existence, when that existence has become better than hunter gathering.

The OED says the word ‘economy’ comes from Economos, the manager or steward of a household, so the household comparison runs deep, but lest we be encouraged to treat the economy itself as a household I prefer to look at the make up of the Greek word itself: Oikos (οἶκος)- which means family, family property or the family house Nomos (νόμος)- which means law, order or justice. There we have the property rights inherent in any functioning economy.

This still does not give us a purpose though. Sure, if we want an economy we’ve got to have the rule of law but the rule of law might be quite desirable for general well being in any case. Still society remains integral to life and an economy is now an essential for maintaining society’s more complex structure.

Inherently the economy doesn’t seem to be for anything other than this. It facilitates specialisation and is otherwise just descriptive of the situation in a society where its members are not factotums but specialists.

And yet in modern times the economy is treated as though it were the ecosystem under which society has to operate. It seems to be like the weather – just that economists, not the meteorologists will give you the forecast. Neither have control but both can issue amber or red warnings.

It was not always thus. John Stuart Mill discussed the “political economy”. Yet today the two hardly meet: there is politics and there is the economy – never the political economy. In fact the political economy is much more honest because it implies that the economy is Politicos – civic. As the rule of law is essential for a functioning economy the working of the economy was and is about politics.

In more recent times politics might be discussed but the ‘economy’ was barely mentioned in polite society until after the World War 2 and the first political manifesto to mention it was that of the Liberal Party in 1945 when it was referred to as the ‘national economy’, which still implies servitude to the nation. The Conservative and Labour manifestos never mentioned the economy at all till 1950.

How did we come to think of the economy as having such overbearing importance? It took hold I think, with ‘trickle down economics’, which deliberately implies the economy starts somewhere and so becomes its fount and foundation. That somewhere is those with more resources than the rest of us. The rich. The economy starts with them and they are its lifeblood (nobody thought to ask where they got their wealth) and thus we all become dependant on them.

Now we have had the 2008 financial crisis, which should have been the Economists’ Michael Fish moment. Yet few economists recognise their faulty forecasting and even fewer politicians. People in general are still sceptical of both weather forecasts and economic forecasts. The economy is, like the weather, something we just have to live with. The weather, like the economy, has laws but not ones humans have much control over. But in this muddled thinking the fact that the economy is a human social construct, which would collapse without the man made laws surrounding it, has been entirely forgotten.

By thinking of the economy as a force on a par with the weather the economy has acquired a subsidiary purpose. It has become the preserver of vested interests. Economics is seen as a science that only advanced mathematics can explain rather than the social endeavour that it is. If it is so scientific you would think that the biggest computer in Britain might be in the City of London or a university economics department somewhere, but it isn’t, it’s in the Met Office.

Which brings us back to the weather. Surely a much more apposite analogy for the economy is an air conditioning system, trying to keep a reasonable temperature in the light of changing conditions – and under human control.

By sketching the economy as an ecosystem separate from society the economy has acquired an additional use – we are encouraged to think that we are helpless to control it. There is no way of altering the way things are – such as wresting some wealth from those who have it – It’s the economy, stupid.

The economy becomes a useful adjunct to conservatism with both a large and a small C. By changing the metaphor, we would all know that the air conditioning has a thermostat. As long as we stick with the weather we cede all political control and when we allow that it means the economy becomes a version of Stockholm syndrome for the people.