Peace Economics and Occupy Wall Street

By Cheryl Duckworth

Although free market capitalism has been celebrated for decades by many in the United States as an expression of freedom, the 2008 financial crisis triggered a change in the way a lot of Americans perceive this laissez faire economic system. After living through the massive layoffs and financial turmoil that the U.S.’s deregulatory approach facilitated, the feelings of some citizens towards this system have turned sour—with an emerging disdain for capitalism manifesting recently in the Occupy movement.

In the wake of this shift in populist thought toward Wall Street economics, I would like to bring a bit of what is called “peace economics” theory to the conversation to help explain some facets of Occupy and to offer an alternative understanding of economics that might aid us in creating a better future for all.

While peace economics, as a relatively new school of thought, is still somewhat undefined, it might be delineated as the science and philosophy of what sort of economic values, metaphors and institutions would most prevent violent conflict and facilitate peace. Part of this involves putting in place systems, values, laws and maybe even institutions (I have elsewhere suggested Elizabeth Warren’s Financial Consumer Protection Bureau) that could foster peace and make it likely that we won’t end up with this kind of mass inequality again. One compelling feature of the field of peace economics, in fact, is precisely that it is based in “systems thinking”—that is, seeing the larger picture of how cultural assumptions and values, political regimes, economic systems and historical forces all interact to produce what we actually see on the ground. Or in Wall Street’s financial institutions.

(Photo credit: Adbusters)

Although peace economics is a newer field, one of its most valuable insights—that markets depend on a certain level of social trust and cohesion—is quite old. Remember, Adam Smith (terminally misused and misunderstood in my view) referred to himself not as an economist, but as a moral philosopher. This implies that the economy is part of an overall social, even philosophical, context. In this light, economics isn’t just the study of how economies work; it also encompasses ideas of how societies are best organized—although this realm of thought is more popularly associated with politics or the social sciences.

Peace economics theory takes this approach from traditional conceptions of economics and considers how social trust and cohesion impact markets. It’s clear from the rage expressed against Wall Street banks, which broke the economy with fraudulent mortgage securities, that this kind of trust—critical to a well-functioning financial system—has broken down in the United States. I also see its disintegration in the popular ideas that other people can’t be trusted to do an honest job without the threat of being fired and that the housing crisis was caused solely by greedy middle classers who just had to have a McMansion they couldn’t afford (the data doesn’t support this view, by the way, as a Congressional Budget Office report confirmed). I see it too from many prominent Republicans who, seemingly without having grasped that we have nearly 9% unemployment, suggest that folks who are struggling should “just get a job.” The recent LIBOR rate-fixing scandal is a further example that elicits distrust and is still unfolding, but which according to the most recent issue of The Economist (an obviously pro-market publication) may well undermine the entire global financial system. We cannot rebuild markets that work without some basic level of social trust. And so in moving forwards we need to work to reinstill trust, to regain faith in each other—albeit a critical kind of “faith” rooted in effective regulatory measures

Gandhi, though not someone usually associated with economics, gives us our next couple of principles of “peace economics.” He taught that “wealth without work” and “power without principle” would decay and ultimately destroy a society. Some peace economics theorists have invoked this first teaching in noting how important it is to distinguish between productive and unproductive parts of the economy. I hear echoes of this idea when people concerned about economic inequality note that the financial institutions most implicated in mortgage-securities fraud make money essentially by moving money around. Indeed, one primary concern of #Occupy has been the explosion of the financial products industry without investment in sectors that would enable the real economy to grow—hence the disconnect between Wall Street and the real economy, and hence our alleged “market recovery” as we still struggle with high unemployment and anemic growth.

In taking up this problem of unproductive wealth, peace economics advocates for a hybridity of economies with an emphasis on small-scale and local production where possible. Such an economy would reward authentic value as defined by a skill or good that meets a human need. Smith actually spoke to this reality when writing about the nature of value and fungible goods:

The real price of everything, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself and which it can impose on other people. That money or those goods indeed save us this toil.  They contain the value of a certain quantity of labour which we exchange for what is supposed at the time to contain the value of an equal quantity. (Smith, p. 26)

Now, we can’t accept every word of this passage. There is, for example, no productive value in imposing trouble on others. Yet Smith does speak here (and elsewhere) about the value related to providing things necessary for survival and also to the value related to what he refers to as “conveniences and amusements” (ibid). Importantly, Smith is suggesting that goods or services in the marketplace must have genuine value. Again, I’m reminded of the critique one often hears of the financial services industry that no authentic value is produced by simply shuffling paper money back and forth.

Occupy Wall Street protesters (and others) have also rightly criticized the mammoth size of the financial services industry as a part of our whole economy. This has been growing simultaneously with public sector lay offs and underinvestment in research and development, education, and health care—all of which are far more relevant to an economy centered around meeting human needs (that is, creating real value) than the financial services industry is. Therefore, a peace economy would be one that is reoriented towards the kind of productivity that meets real, local human needs—an economy that Occupy is calling for in its disdain of the Wall Street financial industry.

A further principle as we move towards a more formal theory of peace economics might be derived from a serious scrutiny of a concept that has only recently been challenged: the idea of the “economic man” (“homo economicus”). This is the concept, often associated with Smith, that people are completely (or at least primarily) driven by self-interest and will behave rationally in pursuit of what is best for them. Increasingly, science and economics are showing “homo economicus” to be false. Certainly people act in their own interest, but to put this claim forward as an unproblematic, uncomplicated truth is misleading. An increasing amount of research suggests that our cultural identity and emotions influence our decision making far more than those of us wedded to the “rational” West might be comfortable admitting.

Consider for example Lakoff’s The Political Mind (2009), which argues that we are shaped and motivated by images, framing, and symbols that, if not quite “irrational,” are certainly super-rational. In other words, motives like cultural identity, group belonging, and even our understandings of the things that we consider to be eternal shape our behavior at least as much as self-interest might. Along similar lines, Rifkin presents voluminous research in The Empathic Civilization (2009) that suggests the human mind is wired for empathy, connection and collaboration at least as much as it is wired for aggression.

In its exemplification of solidarity and local, participatory and collaborative democratic processes, Occupy Wall Street demonstrates the claims of these texts. So it is from these challenges to the concept of the “economic man” that our fourth peace economics theory building block emerges: human beings experience motivations that are far more complex than that of rational self-interest, and therefore we must reconceive of how we think about economics using the recognition that we’re not completely motivated by selfishness.

A fifth and final principle of any peace economics theory must be sustainability. Perhaps the best way to explain this is through an example: put bluntly, if it were up to the whaling industry, there would be no whaling industry because the population of whales would be extinct. There is a difference between what is profitable to one company and what is in the interest of an industry or society as a whole. This is to say, if economies are to be considered peaceful and largely beneficial, they must be sustainable. As peace economics theory continues to develop, it might do well to invoke this piece of Indigenous wisdom:

 Only when the last tree has been cut down,
only when the last river has been poisoned,
only when the last fish has been caught;
only then will you find that money can’t be eaten.

So-called “locavores” (those who advocate eating locally grown food) and environmentalists have been singing this song for some time. But it can be amazingly easy in hyper-developed, post-industrial countries to lose sight of how real our dependence on nature is. When researching the Indigenous land rights movement in Paraguay, as I did some food shopping at a market near the room I was renting, wandering past fruits and vegetables from the seller’s own yard and meat slaughtered only that morning, I was viscerally reminded that everything we eat comes from something plant or animal. It’s such an obvious statement—only someone from the developed world would be surprised by such a reminder!

With sustainability being so vital in incorporating peace into the economy, our detached mindsets need to change to encourage the practice of sustainable strategies across the globe. And wonderfully, united calls for economic and environmental change have already emerged, such as with the partnership between Occupy Miami and a large group of environmental activists.

This teaming is a great illustration of how the Occupy movement must seek an economic transformation that involves far more than just a drop in the unemployment rate. Having captured the world’s attention, the Occupy movement has also demonstrated an understanding of and commitment to principles shared by peace economics—perhaps instigating the beginning of a global economic revolution that enables human security and peace.

Smith, Adam. 2004 [1776]. The Wealth of Nations. New York: Barnes and Nobel Publishing.

Cheryl Duckworth, Ph.D.
Assistant Professor of Conflict Resolution
Nova Southeastern University, Florida
Visit NSU’s Peace and Conflict Resolution Education Working Group

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