SPEECH AT THE XIII INTERNATIONAL COLLOQUIUM, WAAS, LISABONA, MAY 2016

 

Aladdin and the Magic Lamp - Pleading for a new culture of "free market"

 

When we speak of a new economics theory, we think primarily about the need to develop a theoretical framework which keeps us in step with the present realities and prepares us for the future trends.

I think it is equally important to evaluate the past, to identify good things we lost along the way, things that ensured progress and civilization. The current economic crisis is not a result of technological progress, resources depletion, globalization or population growth, it is the result of losing the moral foundation on which economic development built on. In other words, it is not a financial crisis, but a profound moral crisis, where money transforms from means of business to meaning of business, where honest competition is replaced by speculation, where the greed and arrogance of corporations, the establishment, and the private media created a toxic triangle.

When a civilization is  reaching the stage of decadence, its salvation might be to return to its traditions, to science and culture and even to myths that tell us what we don’t know or have forgotten about ourselves.

Oriental imaginary which for centuries fascinated the Western World, has given us through Aladdin and the Magic Lamp a parable of the eternal search for material good (wealth) and spiritual good (love). The story of the poor youngster, who sees his desires fulfilled by a magician, then loses everything and in the end triumphs, recovering the palace and the princess, enchanted my childhood. It has a deeper meaning: success not built on own efforts is followed by the crisis of losing everything; the whole process though brings Aladdin in a higher spiritual place, giving him the strength and integrity that will ultimately make him succeed through personal merit. Beyond the metaphor of the magical powers of the master which have the meaning of knowledge, the metaphor of the journey meant as a study and the metaphor of the cave meaning tenebrous ignorance, we discover the role of knowledge: without it we can lose everything, on the other hand, once assimilated, knowledge helps us become our own master.

Economy and democracy are but two ways in which people have pursued for two millennia the tradeoff between the common good and individual interest. Both are challenging enterprises, where success is often accompanied by setbacks.

In the mid 20th century, Austrian economist and philosopher Friedrich August von Hayek proclaimed the inseparable trinity of civilization: legality, liberty, and private property. He argued that only their presence together in a society guaranties a good relationship between democracy and market economy.

A healthy democracy can not exist without a vibrant middle class. The existence of a critical mass of independent citizens, able to support themselves and willing to devote some of their energy to public affairs, is today as it was in the time of Pericle’s democracy, a condition for any form of participative governance. However, this may not be sufficient for the survival of the democracy, is only a necessary precondition for a democratic government.

Tragic experience of Germany in the 3rd decade of the last century, showed that the collapse of the middle class, after sanctions were imposed following the Reich’s defeat in World War I, put the German people in a position to choose between two suicidal alternatives: fascism or communism.

Closer in time, the experience of former communist dictatorships in Central and South Eastern Europe regarding the relationship between democracy and economy in the post-communist transition has not only local resonance, but it is of general interest because it shows that only the private property gives one’s measure for self value and protects one’s right to desagree with measures that harm individual interests.

On a larger scale, a free global economy can be regarded as a guarantor of world peace because it keeps in check the tendency of political leaders to promote aggressive nationalism, as long as the war would harm the business interests of their nations. At this point, the theory of "invisible hand" of Adam Smith approaches Hegel’s “cunning of reason” theory. Universal reason uses the selfish drive of political leaders to achieve progress in world history.

I am not a supporter of conspiracy theories. On the contrary, I believe that many of these theories are launched by people with limited understanding of the complexity of the phenomena, targeting an audience with the same inability to judge all aspects of life. However, I can not help noticing that the last global financial crisis, which began in 2007, was the result of several arrangements and collaborations, which led to collusive or fraudulent gains to the detriment of the economy and of citizens.

An unregulated market economy led by aim of economic growth as a target in itself, not as a consequence of a competitive process, leads to funding operations that are increasingly speculative and risky, misleading everyone outside the conspiration. A game is created where banks escape accountability, bribe rating agencies and government, entering into collusion with politicians to mask the lack of healthy economic foundation and tempting investment funds, followed by pension funds and insurance companies to join in, targeting greater profits and masking growing risks.

Western developed economies paraded their welfare and their technological superiority to the rest of the world to sell their recipe for success. After 2007 collapse, it is time for concern in the Western World to find a new economic model. Suggestions that appear in the new economic theories, however, are often detached from human nature and short-sighted. Their recommendations for a new global approach betray a superiority complex and are too utopian, with little chance of success beyond the conference halls or university auditoriums.

I can not help wondering what is meant by the phrase rational and equitable world order, so often present in the language of contemporary international bodies. If it means imposing a single model of good, then we should remember the world has been shaken by devastating wars and bloody revolutions, all conducted on behalf of the common good, which should prompt us to prudence. I suppose the proclaimed triumph of global democracy and market economy at the end of the Cold War can not be interpreted as an end of evolution, the installation of mankind in an era in which no value can be new, no new ideas can apear. On the contrary, at the beginning of the century and millennium we should be confident in our freedom to invent ingenious and creative new ways and means for developing the identity of each of us.

In my opinion, there are two major obstacles to the effectiveness of a new economic theory: first, ignoring the toxic triangle I mentioned at the beginning of my speech; second, formulating utopian goals for the new vision.

For the first obstacle we must find practical ways to overcome the corporate resistance to losing their speculative profits, fight the government inefficiency and corruption and stop media fixation on trivial topics  that favor profits rather than hosting serious debates.

For the second obstacle, I believe we should scrutinize ourselves in the mirror, and accept that the esential concept for a new business ethics is social responsibility. Conceptual modeling of economic relations is at its beginnings and it must be permanently bound in the context of a modern and technologically advanced society to moral doctrines and basic human nature.

We are summoned to answer the question: What is correct / right / ethical / moral in the economic environment?