The Personal Responsibility Of an Economist

Towards a Just Economy edited by Raymond Pelly, published by the Combined Chaplaincies, VUW, 1991. p.11-20. (Revised version of a lecture given April 1991)

Keywords History of Ideas, Methodology & Philosophy

Just over a year ago, on my birthday, I visited Majdanek, near the Polish City of Lublin, 160 kilometres south east of Warsaw and 80 kilometres from the Soviet border. Majdanek was a concentration camp. Its dead from starvation, infection, and execution – included 150,000 Poles, 125,000 jews, 70,000 Russians, plus those of other nationalities, a total of 360,000 souls – the population of today’s Christchurch or greater Wellington. The main memorial at the camp is a giant urn containing 7.5 tonnes of human ashes. The inscription reads “Los Nasz Dla Was Przesthorga” – our fate is a warning to you.

The previous birthday, in 1989, I had been up on the Perry Saddle, and while that night the rain had beaten through the windows of the tramping hut – a hut more substantial than those at Majdanek – one never felt the weather on the Heaphy Track was evil. Nature is extraordinarily powerful and can be extremely destructive, but to the modem mind it is not malevolent. That is something reserved, apparently, for humankind.

I will not detail the obscenity of Majdanek; that must be an experience reserved for each of us when we visit a concentration camp . But I want to share with you the path that I was led down, as I mused about personal responsibility, particularly my own.

It is very easy to observe the terrible things at concentration camps like Majdanek, to condemn those directly involved in the atrocities, and to stop there. It is equally unsatisfactory to generalise vaguely that it shows all mankind is capable of committing atrocities, and we are all guilty. My concern was where actually does the responsibility stop?

Let me begin by saying that I am not concerned to blame the German nation as a whole, particularly those who were born or came to the age of responsibility after 1945. I do not believe that sin is inherited, and in that Germans stand with me and as vehemently condemn such behaviour as an abomination, they are no more guilty than I.

The line of thought began because the town of Lublin was so close that on an infamous day in November 1943, when 18,000 Jews were rounded up, herded into pits and machine gunned, loud music was played so the locals could not hear the execution. But over the years the citizens must have known, broadly, what was going on. How compliant were they? And in that they were compliant were they as guilty as the camp guards? I cannot answer such questions because I do not know the specifics. But I began to wonder who else were involved. It is easy enough to condemn the guards, but what about – say –the administrators back in Berlin? They presumably did not know much about the details with what happened, but did they understand the import of their involvement, did they try to find out?

Of course ones’ response to Majdanek was not solely an intellectual one. I wanted a prayer, or a karakia. Lines of poetry ran around inside me not quite saying it. I was reading Frank McKay’s biography of James K. Baxter, and I came across Baxter’s response to his visit of Hiroshima, an even greater oven.

Having seen an ocean of fire and then
An ocean of ashes, her mother’s head
On the ground in the pumpkin field, Eioka lies
Under a stone in Akagi. Not yet ten
She liked bean jam. You guardians of the dead,
Comfort this child, so young in your mysteries.

(Thank you Hemi, for saying it for me but better – again.)

And so my thoughts turned to an even greater oven of extermination, the bombing of Hiroshima. You will recall it was done by ‘our’ side, on people who were not of ‘our’ ethnicity. Again I do not feel personally responsible for the dropping of the atomic bomb, but I have pondered on where that responsibility stopped. For instance did it include the refuellers of the B29s which dropped the bombs? Did it include those in the airbase cafeteria who fed the refuellers ?

One helpful answer, albeit from a much less significant instance, was told to me by a friend whose brother had been in a partnership with a lawyer who embezzled his clients. When the Law Society investigated the brother, it being necessary to do this because lawyers can be liable for the debts of their professional partners, it was shown that the brother had regularly attempted to check on the partnership’s financial integrity. Being deceived himself the brother was found not liable for debts the embezzlement had incurred {and so the debts were covered by the collective Law Society indemnity fund).

The point is the test was whether the brother had taken reasonable steps to prevent the fraud. The instance also clarified for me that other people in the law office – such as the secretaries – were not culpable either because they were not in a position, nor had the expertise, to detect the peculation. Of course if they had learned by chance occurrence of the malfeasance that would change their obligations.

So there seems to be two groups associated with a particular responsibility issue, who may be readily exempted. Those who because of their position cannot be reasonably expected to be involved in the particular event. And those, who while more involved, actively attempted to prevent the immorality.

What was especially cathartic about Majdanek was that I was struck how the concentration camp initially started as solution to a production problem, of maximizing output for the resources available. I must have known it before, but somehow I had not connected that with the obscenities of the human indignities, the deaths, and the executions in concentration camps which I had also read about. Being there not only turned those horrors into a terrible reality, but connected the economics with the immorality.

We normally see concentration camps back to front in time. The first reports – not believed at the time – were when the camps were liberated. Then we have the records of a little earlier when the atrocities were at their worst. And we are so revolted by them that we cannot see before then, when the camps’ purpose was a means of increasing the economic performance of the warrior state.

Yet to the economist’s eye that economic motive dominated the structure of the concentration camp. That is why they were so quick to execute children under the age of ten – the age of Baxter’s Eioka. Children are not economically productive. In cold economic terms the discounted cost of maintaining them exceeded the maximum level of production that they could provide.

Once the concentration camps began down this path of economics before humans, the guards and the controllers became, step by step, inured to the human indignities that were being imposed. I suspect the same is true for those, who while not directly involved in the running of the camps, knew what was going on but did not protest.

If the atrocities had been executed at the beginning, there would have been a fierce reaction to them. But instead an economic theory was implemented, a theory which ignored human dignity, and steadily and relentlessly it was pursued to its final conclusion; a conclusion so terrible that we have almost forgotten the original theory and the original purpose of the exercise.

It matters little that the economic theory of concentration camps was not a very good theory, even in its own terms. The rightness or wrongness of a theory does not absolve the moral issues. In any case no theory is right. The best we can say is that some theory is less wrong than all the others, and this may well be true, on the balance of probabilities, for the theory we currently hold. But we need to be humble when we propose a theory, for it supersedes the theories of many men and women whose intellectual merit far outweighs ours. And anyway economic theories are amoral. We have to add something more to turn a theory into policy and operational reality. Even if the theory of the concentration camp had been correct in the lights of the day, the camps were still immoral – right from their commencement – because they denied human dignity.

I do not want to argue that concentration camps exist in New Zealand today. They do exist, or have existed in my lifetime, elsewhere – notably in Cambodia. I am not a specialist in such areas, and I do not believe I have any direct responsibility to seek such atrocities out. When I learn of them I am feel a bit like the lawyers’ secretary who learns by accident of the fraud, but has no law partner, no Law Society, no police to turn to. All I can do is to acknowledge heir existence by mentioning them in appropriate contexts – such as this one –and responding practically if I am asked for help.

It would be a crude sensationalism to say that we have obscenities like concentration camps in New Zealand. But for the economists, as probably for any professional person, there are situations where parallel moral issues arise.

Every day public policies are implemented, based upon theories which are to various degrees an account of how the world operates. Economists, and other professionals, may dispute to what extent they are the best theory for the given circumstances being a disputatious bunch we economists do. But by arguing about the theories we too often ignore the moral underpinnings which transform that theory into a policy with practical consequences for human dignity. At this stage it is easy to fail to notice properly these consequences. Theories, by their very nature, do not have an explicit moral dimension, so it is easy for us not to observe the practical consequences which involve this dimension. And so, step by step we become inured to any immorality of the policies, and we drift down the road towards a growing evil by failing to exercise our responsibilities.

I illustrate this with a concrete instance. I have chosen the issue of unemployment, because it is probably the most serious – in human terms – economic issue which faces today’s policy makers. I was tempted to chose poverty as my illustrative theme. It is a problem which I have been talking about for two decades, but the conventional wisdom has ignored the facts. Now we have precipitated the most serious poverty crisis in New Zealand in my lifetime. Perhaps because we did not face the poverty squarely, we drifted into an even worse evil today of severe unemployment, itself compounding the poverty problem.

Economists define unemployment as the phenomena of a worker without work, willing to work, and actively seeking work. Economic analysis does not consider the consequences of this unemployment on the person and the family, except where it feeds directly back into the economy. Thus economists recognise the consequences of the fall in income caused by unemployment on consumer spending and confidence, but we do not trace the psychological consequences.

Simplifying reality, particularly by ignoring phenomena which does not seem important in the context of the issues under investigation, is an inevitable part of any science. There is no need to apologise, for it would be god-like to have a comprehensive and all pervading theory. Omniscience is not a quality one expects in humankind, and certainly not from its economists.

However although economists may have a good justification for ignoring the personal, family, and social consequences of unemplovment in their theories of the economy, that justification does not carry over to the same neglect when the consequential policies are advocated and implemented.

To proved a context let me briefly summarise what we know about the consequences of unemployment. Most of the systematic research comes from overseas, and much is scientifically problematic. But such is the overwhelming weight of the evidence we can say, with as much confidence as a scientist may say anything about this world, that unemployment causes a deterioration in the welfare of the unemployed, and of their families, above the deterioration caused by the loss of income. Perhaps the best established result is that the unemployed are more likely to commit suicide, but numerous other indicators of physical, psychological and spiritual wellbeing also indicate that the unemployed are worse off.

Moreover there is evidence that the personal circumstances impinge on the rest of the family. Studies find that not only do long term unemployed men experience a higher level of illness, but so do their wives. Reading this research can be demoralising and depressing, though not as much as it is being unemployed, but it can also be touching and uplifting. As miserable is as the finding that unemployment impacts on the whole family, it shows the social health of one member transmitting to those they are close to. It is good for an economist to see that family is more than a means of consumer spending and worker reproduction.

There is less research on the social impacts of unemployment. For instance it appears that unemployment and crime may be related, but in a complicated way. Certainly we are not in a position to say that the unemployed invariably turn to crime.

What is absolutely clear to any economist reading through the massive research findings – variable in quality though they may be – is that unemployment causes a diminution in personal, family, and social welfare, which is not captured in the conventional economic measures such as gross domestic product.

How should an economist respond to this research? First, I think we are obliged to have a working knowledge of its broad implications. It is no good calculating the productivity of the concentration camp, and ignoring the human misery which goes with it, just because it is outside one’s expertise. For Christ’s sake, even economists are humans.

Second, economists are duty bound to explain the role of unemployment in , modem dynamic economy. At its heart is the process of redeployment, in which workers move from low productivity and obsolete jobs to high productivity jobs in new and expanding activities. In many cases the worke will do this at the same workplace, with little disruption. But sometimes th redeployment will involve moving to new worksites, new firms, new industries, and even new regions. On some such occasions the redeployment transition will involve a period of unemployment.

We may moderate the redeployment process, but as best we understand it, any moderation appears to slow down the process of dynamic change. This will not only slow down the growth of material prosperity, but the economy will lose its market share in the world, stagnate, and ultimately the nation will lose its economic viability.

You will notice that I am not arguing here for the need for a required level of unemployment to control inflation or offset the pressures on the balance of payments. Economists may dispute the need, and the magnitude, but these are using workers for other objectives, which can be pursued by other means. However in the case of redeployment I cannot see any realistic alternative.

That leads to the third step for the economist. Reluctantly – and it has to be reluctantly given a reading of the literature on the social consequences of unemployment – we have to confront the community with the choice between material prosperity with redeployment and some unemployment on the one hand, and economic stagnation on the other. Unfortunately we cannot be precise about the magnitude of that tradeoff, but it is there.

My guess is that when confronted with such a choice, the New Zealand community is likely to say that it wants the level of unemployment to be taken into account when setting economic policies, and would be prepared to make some sacrifices in other economic objectives to attain full employment.

By doing so the community would be implicitly critical of the policies of the last five years, because full employment has had a very low priority in the implemented policies. Advancing of full employment in the goal hierarchy would result in different policies. Full employment would not be an add on to economic policies, but would be an integral part of them.

Adopting this community set goal would provide a very real challenge for economists. Many of us have personal goals which do not conform to the community’s. There is nothing wrong with that; in a democracy the individual is entitled to their own views and objectives. What is unacceptable is the promotion of one’s personal objectives in the guise of djspassionate policy advice. There is no such thing as value free policies; what the public has a right to is value explicit policy advice. A good economist ought to be able to give advice in terms of objectives other than his or her own personal ones.

So the fourth step, for economists and others, is to discuss the meaning of full employment.

Even when registered unemployment was minuscule in the 1950s and 1960s, we know there were unemployed people. The point was they did not report to the Department of Labour. That was because being unemployed was not threatening to most of the unemployed. A situation where unemployment is non-threatening despite there being unemployment as a part of the process of redeployment, is probably the relevant notion for full employment. What that means operationally has to be worked through. While doing so economists would very soon realise that the conventional measures of unemployment are virtually irrelevant.

The percentage of the labour force unemployed is just that. It does not tell as the numbers who are experiencing, or are expecting, long periods of unemployment. It does not tell us whether particular groups of the community – by ethnicity, age, gender, region, or class are unemployed. It does not include those who are so discouraged by their job-seeking experiences, that they no longer actively seek work, even though they would seize a job if it were offered to them. And it does not include those who cling to the margins of the labour force, working a few hours a week, even though they desperately want a proper job, with proper working conditions and sufficient hours of work.

This definition exercise confronts the economics profession with the nasty realisation that the way economic theory models unemployment is almost totally irrelevant m terms of the social consequences. We just hope that reducing the percentage unemployed somehow impacts – sort of proportionally – in consequence terms.

And so we reach the final technical step as a professional economist, which is in two parts. One is to model better in economic theory terms the phenomenon of unemployment. The other is to identify those unemployed who are most impacted by the experience, and seek policies which moderate that impact

This is not the sort of agenda which would go down well in the economics profession because it challenges its conventional wisdom. (It is not the sort of agenda that would be too popular in government circles either. Not only does it challenge its economic policies but also it requires a genuine commitment to a social science research program.)

There would be considerable resistance. The line among some economists and politicians has been TINA: there is no alternative to present theories. Karl Popper says that if you see no alternative to your theory then “take this as a sign you have neither understood your theory nor the problems which it is intended to solve”. It is not merely a lack of imagination and understanding. TINA involves a shortsightedness of vision, for elsewhere in the world one sees all sorts of other policies being tried, in many cases much more successfully than the outturn in New Zealand.

But these technical arguments are almost irrelevant. It is like engineers discussing whether Majdanek was efficiently and economically designed. The human element is being omitted.

You see the technical arguments do not end the issue. A few paragraphs ago I talked about the final technical step of a professional economist. But does his or her responsibility stop there? Is there not a responsibility to speak out?

I am haunted by a statement of the Reverend Martin Neimoeller. Talking about the 1930s he said:

In Germany, they came for the communists, and I did not speak up because I wasn’t a communist. Then they came for the trade unions, and I did not speak up because I wasn’t a trade unionist. Then they came for the Catholics, and I did not speak up because I was a Protestant. Then they came for me – and by that time no one was left to speak up.

It is so easy to be silent when the government goes for. the workers, and deliberately creates more unemployment, or goes for the poor and deliberately creates more poverty, or goes for the trade unionists. But is it responsible?

As another reverend, John Donne, said in the seventeenth century:

No man is an Island, entire of itself; every man is a piece of the continent, a part of the main. …Any man’ s death diminishes me, because I am a part of Mankind; and therefore do not ask for whom the bell tolls, it tolls for thee.

Or take a different continent, a different agenda. You probably know the tune, Guantanamera. You may even know the Spanish version of the poem of nineteenth century Cuban, Jose Marti, one of the greatest writers in the Spanish language. He wrote them just before dying in an attempt to free his country from tyranny and imperialism. The last verse in English goes

With the poor of the earth/ I want to share m)
The streams of the mountains/ please me more than the sea.
(Guantanamera, guahira, guantanamera.)
Economists cannot claim we are the secretaries in the law firms of the economy. We are partners and have a responsibility to test our colleagues’ account of the world and their policy recommendations. Silence is unacceptable.

While we cannot expect everyone to be on the frontline: there are many ways to share the fate of mankind. Everyone in a profession has a personal obligation to seek a path which does this.

The professional costs may not be insignificant. As John Maynard Keynes commented “worldly wisdom teaches us that it is better for the reputation to fail conventionally than to succeed unconventionally”. But moral responsibility requires a willingness to commit oneself to truth, and to criticise in appropriate circumstances, despite the personal costs.

Of course the criticism needs to be constructive, acknowledging the good features in the proposal, and offering considered alternatives. As Popper indicates the critic needs to have a thorough understanding of the strengths and weaknesses of the theory being challenged.

And so despite, or because of, Keynes’ remarks there is a need for each profession to review and develop its members’ moral awareness. Take for instance the two disciplines that I have been referring to – economics and public policy. In their professional training where are the ethical issues discussed? Where are they reviewed after graduation? I wonder how many professions could be satisfied with their responses to those questions. The outsider has a role to press for such institutions, and support those who criticise – even though they may not support the details of the criticism.

Not facing ethical issues leaves us open to the possibility of the concentration camp, as we become insensitive to moral issues. I came away Majdanek with a greater resolve to take my partnership responsibilities even more seriously. However I must confess there was also the prayer that I should never have to face the moral pressures which they faced who knew about Majdanek: and if, oh Lord, I face such pressures I hope that I will bear them with courage, with truth, and with dignity.

Yet that is not my final image of Majdanek, for none of the horrors moved me as much as the statue near the gas chambers of a woman uplifting her child high in the air. The same statue is also a part of the monument at the Warsaw Ghetto remembering the genocide of the Jews in that city.

The statue commemorates the mothers holding their children high as the gas rose in the chambers, so the young could have a few extra minutes of life. Even near their death those women showed us that marvellous courage we call the human spirit, thinking of the well-being of others even though they were themselves doomed. Their fate is an inspiration to us.