Ideological clichés are deadly. In 1989, the end of the short twentieth century (1917 – 1989) with all its horrors, I thought this simple proposition was something that had been learned, broadly across the political spectrum . I was wrong, and the evidence has been overwhelming. This was my biggest mistake as a sociologist of the politics and culture.

When Soviet Communism collapsed, I thought it had come to be generally understood that simple ideological explanations that purported to provide complete understanding of past, present and future, and the grounds for solving the problems of the human condition, were destined for the dustbin of history. The fantasies of race and class theory resulted in profound human suffering. I thought there was global awareness that modern magical thinking about human affairs should and would come to an end.

My first indication I had that I was mistaken came quickly, December 31, 1989, to be precise. It came in the form of an op ed. piece by Milton Friedman. While celebrating the demise of socialism in the Soviet bloc, he called for its demise in the United States, which he asserted was forty-five per cent socialist, highlighting the post office, the military (a necessary evil to his mind) and education. He called for a domestic roll back of the socialist threat now that the foreign threat had been vanquished. Friedman knew with absolute certainty that only capitalism promoted freedom, and he consequentially promoted radical privatization as a solution to all social problems. This was an early battle cry for the neo-liberal assault of the post-cold war era.

The assault seemed particularly silly to me, and hit close to home, since I heard Friedman lecture when I was a graduate student at the University of Chicago, and even taught one of his true-believing graduate students when I gave a summer school course there on social problems in American society. Friedman and his student’s absolute conviction that the market is the source of all good perfectly mirrored my Marxist friends’ convictions that it was the root of all evil.

Today neo-liberalism and anti neo-liberalism are in an ideological dance. The Republican positions on taxation of the job creators, deregulation and the denunciation of standard social programs as socialism constitute one sort of magical thinking. Newt Gingrich is particularly proficient in spinning the language of this political fantasy and developing its newspeak (with his concerns about the United States becoming a “secular, atheist” country promoting sharia law, and the like). The criticism of neo-liberalism from the left too often present magic: dismantle capitalism and all will be well. As I see it, both propose a future based on a failed past, often with a certitude that is disarming and dangerous.

I wonder how people can imagine a systemic alternative to capitalism, when there is overwhelming evidence that it has never worked, in Europe or Asia, in Africa or Latin America. I wonder how Republicans can ignore the evidence that the market does not solve all economic challenges and social problems, and that sometimes, indeed, it is the primary cause of our problems, particularly evident in the shadow of the world financial crisis and the great recession.

Friends in the academic ghetto, on the cultural grounds of lower Manhattan and Brooklyn, Berkeley, Ann Arbor and Austin, imagine revolution with little serious consequences. On the other hand, the Republican market fundamentalists pose a clear and present danger. On the right, there is ideological tragedy. On the left, there’s farce, except to the extent that they enable the right.

I didn’t anticipate that market and anti-capitalist fundamentalism would have such a role in the twenty-first century. I also did not anticipate or understand the possibility of the replacement of the secular totalitarian imagination by religious ones, Islamic, but also Hindu, Jewish and Christian. “Religionism” is replacing “Scientism.” I didn’t see what was brewing on the religious/political front. The attacks of 9/11 and the American fundamentalist response forced me to pay attention, which I attempted to deliberately consider in The Politics of Small Things.

Chastened, I have become accustomed to the persistence of modern magic, of ideological thinking and its appeal, but quite uncomfortable. How can a thinking person accept and actually support the Bolivarian Revolution of Chavez? It and he are so transparently manipulative and fantasy based, so clearly squandering Venezuelan resources and not really addressing the problems of the poor. Yet, many critical people in the American left can’t bring themselves to observe that this king of the ideological left, this revolutionary hero, is naked. How can the sober Republicans believe what Gingrich and company say about the economy and also about international affairs? If they do so and prevail electorally, I am pretty convinced that they will preside over the decline and fall of the American Empire, what they claim to be most against. Perhaps that is reason for true-believing anti-globalists to support the Republicans.

P.S. As it turns out since 1989, I have been bombarded with evidence that ideological thinking is a persistent component of modern politics. It seems that everywhere I look its importance and its dangers are to be observed, but so are its limits. I am thinking again about my big mistake as I reflect on Occupy Wall Street and its prospects, and its extension to the New School. As Andrew Arato pointed out in his critique of the idea of occupation, there is a danger that when people, who speak ideologically for the 99%, will turn themselves into the 1%.  True-believers are convinced, but the rest of us in the end aren’t. Sooner or later the insights of ’89 prevail. On the bright side, from my political point of view, I think this is likely to apply to the Republican Party, with its true-believing, fact-free ideology. This is the major reason why I think that the Republicans will fail in the upcoming elections. I think this is why the Republican field is so dismal, as Paul Krugman has cogently observed. But I am trusting that ideology will end again.

The current economic slowdown constitutes a breakdown for advanced capitalism.  Its means of allocating capital – financial markets – froze up and would have collapsed completely if governments had not intervened on a massive scale.  The rates of growth of output and employment in most industrialized countries are anemic and persistent.  Does not the breakdown of capitalism require some fundamental rethinking of its explanation system, aka economic theory? Today’s troubles and the failure of most economists to predict them have given rise to a lively debate within the discipline about the sources of failure of economic theory and the ways in which it should be reformed. This is a good sign. But the current debate among economists is shallow and confined to a tweaking of its existing toolkit.  There is no indication that this debate will produce the intellectual revolution needed to respond to the theoretical and policy challenges facing industrialized countries.

The discipline of economics has been no stranger to methodological controversy. The Methodenstreit (debate over method) among German social scientists in the 1880s, the Keynesian revolution in the 1930s, the ‘F-twist’ debate in the 1960s over the importance of realism of assumptions, and the ‘Cambridge controversy’ over the meaning of capital in the 1970s are some of the most notable debates. But not all methodological discussions are created equal. Some are profound—questioning the very structure of the reigning methodology—while others are more superficial, aiming at incremental reform or merely cosmetic change. We find that the current discussion is for the most part quite shallow, and will remain so unless certain voices in the debate are given more emphasis.

The central problem is that almost nobody dares to rethink the nature of economic life and the proper scope of economic thinking. This deeper approach is precisely what we find in the Methodenstreit and in Keynes’ innovations. On its surface the Methodenstreit was a debate over whether concrete historical analysis or mathematical modeling was better suited to explain economics. But this question ultimately rested on the question of what the realm of political economy was actually like—i.e. whether it was comprehensible as a complex of generic building blocks at the level of individuals, or whether it was a network of irreducibly social institutions that individuals created and lived within. The debate led to revolutionary change —namely, a bifurcation of the discipline.  The Historical School’s philosophy of science—updated and improved by Max Weber—ultimately found a home in sociology.  The Austrian School, meanwhile, populated the burgeoning discipline of neo-classical economics, with its focus on the properties of a fully-decentralized competitive market system composed of rational and self-interested individuals functioning in a world of scarce resources.

John Maynard Keynes © IMF | imf.org

Keynes’s innovations were pitched at a similarly sweeping level, with the same revolutionary effect. Keynes introduced a new understanding of the concepts of time, uncertainty, and expectations. He argued that aggregate phenomena determine individual outcomes, a reversal of the direction of causality presumed in the dominant theory of his day. He established a new way of thinking about markets by showing how aggregate demand rather than wage flexibility created employment growth.  When wages fall, incomes and consumption drop, which can lead business to reduce rather than increase its ranks of employees.  Keynes showed how raising demand through real wage increases could thus increase employment.

The economic malaise since 2008 has generated a massive volume of criticism and self-questioning by economists in academic journals, newspapers and blogs.  But the discussion has been floating on a shallow level. Roughly, we can separate the positions in the debate into three categories.

A first group proposes that we ‘Do Nothing’ to change economic theory. This group, which includes such prominent macro economists as Thomas Sargent and Eugene Fama, claims that the theory of efficient markets has not been falsified by recent events. Either because the theory is about normal times rather than crisis, or because events don’t show any individual irrational behavior but rather a pattern of damaging economic policies, such as excessively high wages and money growth, leading up to the crisis.

The second group we refer to as ‘Add Finance and Stir.’ This eclectic group, which includes Robert Schiller, Paul Krugman, David Colander and Lance Taylor, sees the main limitation as the failure to link finance to macroeconomic theory. For this group, economics can be fixed by introducing a model of the financial sector that directly influences the ‘real’ sector of the economy.

A third group wants economics to be infused with more complexity and a richer understanding of institutions. This group ranges between those who propose more refined mathematical modeling to those who want to eliminate the use of mathematical formalization in economic theory entirely. We call it the ‘Add Institutions/Complexity’ group.

Unfortunately, these responses are shallow compared to the thorough debates of the past. They offer little hope that economics’ recent failures will be met with substantial reforms. True, some in the third group, for example Geoffrey Hodgson and Tony Lawson, are calling for a re-examination of the purpose of economics and its a priori commitment to the exclusive use of mathematical modeling to analyze economic life. But this view is not taken seriously within the profession.

It is certainly possible that the proper response to economics’ latest malfunction does not require a complete rethinking of the conceptual foundations. But we cannot simply presume that our current toolkit is entirely adequate. We need someone with Keynes’s radical spirit, including a willingness to look beyond the reigning way of doing economics. Refusing to do so is a recipe for superficial debate and cosmetic changes that simply kick the real problems down the road.