Picture: ISTOCK
Picture: ISTOCK

TWILIGHT OF THE MONEY GODS: Economics as a Religion and How it all went wrong

John Rapley

Simon and Schuster

Tory politician Michael Gove declared during the Brexit referendum campaign that the British people had had enough of "experts" — by which he meant the economists who were predicting the disastrous consequences of the UK leaving the EU.

He was widely mocked at the time and the disastrous course of the Brexit talks suggests that the economists will have the last laugh, even though the damage awaiting the British economy will not be a laughing matter.

Even so, the thrust of John Rapley’s argument in Twilight of the Money Gods is that, however dishonest Gove may have been about the consequences of Brexit, he was right to query the credentials of economics as a discipline and the status of economists as prophetic seers. Under modern capitalism, Rapley argues, economics has replaced religion and economists have become its priests. Yet rather than leading us to the promised land, they have led us down the garden path.

Twilight takes readers on a fascinating journey through the history of economic thought. It’s a tour that, starting from Adam Smith and David Ricardo, meanders through the ideas of the "radical prophets" such as Karl Marx and Vladimir Lenin; their neoclassical critics who rejected their worldly apocalypse; the crisis in faith caused by the Great Depression that yielded the new testament of John Maynard Keynes; and the neoclassical reawakening led by Milton Friedman and Friedrich Hayek.

Economists then helped people to seemingly build a heaven on earth, a cornucopia of consumption

Rapley manages this in a remarkable manner, carefully spelling out the key ideas of the numerous (often obscure) economists he mentions, relating these to the problems and controversies of their age, and doing so in a manner that is fully comprehensible even to dull-witted non-economists.

This is text thankfully devoid of graphs and all the statistical wizardry that has become the economists’ stock in trade.

Accordingly, it should feature on the reading lists of not only social science undergraduates, but all who want to understand the mess that modern capitalism has landed us in. In short, it’s a damn good read, and an easy one, even for those who would be usually daunted by any prospect of "a history of economic thought".

Rapley’s argument rests upon two pillars. The first is the story of economics and its history is usually told from an Enlightenment narrative, in which science faces a heroic battle against ignorance and ultimately replaces religion in giving people codes by which to live.

His version is the functionalist argument that humans have always needed something in which to believe. Accordingly, as the economies of western Europe grew more rapidly over centuries, they posed questions that the old religions, which justified static, stratified societies, now found themselves unable to answer.

But the economists seemingly could, providing guidance on how to reach the promised land of material abundance and endless contentment. This "enlightenment" allowed humans to feel they had more control over their lives. As a result, they ascribed to economists the powers they had previously left to the gods. Economists then helped people to seemingly build a heaven on Earth, a cornucopia of consumption, new inventions and new delights — until it all went horribly bust in the recession of 2008, since when most people have witnessed their living standards decline. In response, the priests retreated to their cloisters, bickering among themselves, leaving humanity to seek new creeds to light paths to the future.

The second pillar of Rapley’s book concerns the false status of economics as a science.

Economists have sought to differentiate themselves from so-called "soft" subjects such as sociology, anthropology and history, claiming a far greater capacity to predict human outcomes with conviction and accuracy. Yet "if history teaches anything", Rapley writes, "it’s that whenever economists feel certain they have found the holy grail of endless peace and prosperity, the end of the present regime is nigh."

Irving Fisher advised people to go out and buy shares on the eve of the Great Depression; the Keynesians claimed that they had mastered the tools to prevent another depression; and the evangelists of the neoliberal era similarly assured people of their ability to deliver eternal stability in the run-up to the crash of 2008.

Economics has aspired to become like physics. But whereas scientists will say you can’t change the laws of nature, and that all you hope to do is to manipulate them as far as you can to human advantage, "economists don’t just observe the laws of nature, they help make them", according to Rapley. If the assumption is that greed is good, then don’t be surprised if people act greedily — yet it is only the blindly faithful who will really believe that this results in a better life for society as a whole.

Adam Smith and his disciples wrestled, "uncomfortably but honestly", with the issues of slavery and imperial exploitation. But their later descendants largely ignored them, presuming a free market in which individuals are liberated to pursue their self-interested goals will necessarily lead to just outcomes.

Rapley suggests that the hubris in economics came not from a moral failing among economists, but from a false conviction that their belief was a science.

He is surely too generous. As he elaborates in convincing detail, economists have had a habit of cosying up to political power, and western politicians have shown little compunction in using their so-called scientificity when and how it suits them.

Yet, today, as the direction of capital flows has switched from west to east, "the pursuit of self-interest has led to tribalisation in our politics — a politics of fear over hope, and of false hope over truth", he writes.

Rapley covers much familiar ground, outlining how the investment banks transformed the western capitalist economies into something resembling a raucous casino in the years leading up to the 2008 crash. It’s a sobering read, and one that reminds that "like any church", economics does its best work in opposition, when it is challenging received wisdom and speaking truth to power.

Yet while it is easy enough to preach the need for a new humility among economists, and for its purpose to become one of ethics rather than technocratic management, it is much more difficult to find an answer to his fundamental question: if we have lost our faith in economics as a religion that works for everyone and not just politically connected elites, in what should we
now believe?