Neoliberal Economic Theory and the Pursuit of a Holistic Human Development

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Published on International Journal of Social, Politics & Humanities
Publication Date: May 7, 2019

Emmanuel Ndorimana & Jean Claude Nsabimana
Arrupe Jesuit Universty (School of Philosophy and Humanities)
Harare, Zimbabwe

Journal Full Text PDF: Neoliberal Economic Theory and the Pursuit of a Holistic Human Development.

One of the greatest influences of the contemporary world is the idea of economic growth. Nowadays, every nation strives to grow economically lest it be labelled as a poor nation. This presumes that the only measurement of development is the economic growth. That is why contemporary capitalists are more or less free to do whatever they want as long as they promise to achieve economic growth. However, does economic growth generated by capitalists enable individuals and societies to equally flourish? It does not. Instead of ensuring individuals’ wellbeing, contemporary economic system exploit them, taking them as means rather than ends in themselves. Moved by such a spirit, contemporary capitalists cannot generate a sustainable development for every person and society. Rather, they deceive people by exposing them to attractive choices in the production and distribution of goods and services towards mere ephemeral advantages. They disguise people with some freedom to interact with them, which experiences and researches detect as a mere opium. Yet, they need people for them to engender economic growth from consumption-production cycle, without which their transactions would be less effective if not ineffective. Consequently, they enforce the establishment of private spaces for their projects to succeed at a maximum level. Contemporary capitalists even go further to institute theories, which support their behaviors in attempt to freely pursue the greatest interest. One of their theories is the Neoliberal Economic Theory, which currently influences the whole economic enterprise. However, this theory already misrepresents people and their capabilities. How can people be rescued from this misleading relationship between capitalists and people or societies so as to attain a sustainable and justifiable economic growth for all? In his capability approach, Sen argues that we need to do away with mere economic growth, which seeks to undermine a sustainable inclusive development. In fact, sustainable development requires more than utility maximization and economic growth. It requires true freedom to do what one finds worth doing in order to enjoy the outcome of one’s labor. Thus, people need freedom to be and do what they have reason to value so as to generate holistic human development. For Sen, the real freedom is determined by social opportunities and rights. Hence, one needs capabilities to undertake what produces his/her wellbeing, and functionings to become what he/she wants out of participation in public endeavors. Still, Sen’s capability approach seeks to pursue individual freedom towards concrete holistic individual development. One can still wonder if individual privileges can be viable to the detriment of social privileges, given that every person is a social being. Individual freedoms need to be extended to social freedoms so that both individuals and society can grow equally. Thus, Ubuntu philosophy should be embraced alongside capability approach in addressing this triple challenge of individual, economic and social development. In fact, Ubuntu philosophy promotes holistic individual and societal development. Therefore, this paper argues that the integration of capability approach and Ubuntu philosophy can provide the best responses to the challenges of Neoliberal Economic Theory and prompt holistic human and social development.

Keywords: Neoliberal Economic Theory, Capability Approach, Ubuntu Philosophy, Holistic Human Development.

1. Introduction
Many people, both theorists and practitioners, think that human development emanates from feasible economic systems. The Neoliberal Economic Theory seems to promote this line of thinking. This current dominant economic theory encompasses three dimensions, namely, people’s selfishness, consumption factors and production dynamics, which appear to be the current ingredients of economic growth that is significantly influencing the world in one way or another. The Neoliberal Economic Theory holds that individuals should be left alone, for they know what they do; and governments should opt for free markets and privatisation. If this is the case, then the collapse of economy will imply the collapse of the whole viable social life, which is partly embedded in moral values, or vice-versa. In this sense, if humanity is currently undergoing moral issues, then people should question the nature of the present apparent economic advancement. Obviously, moral values are now being undermined by this superficial economic development. In fact, economic development does not necessarily entail holistic social and/or human development. In this line, Amartya Sen argues that human development does not result from mere economic freedom or growth, but rather from individual freedom to do or to be what one has reason to value. However, it seems that even his capability approach is not so effective in that matter, since it only focuses on the theoretical foundation of human development. If this is true, then the mere capability approach cannot effectively generate holistic human development. Ubuntu philosophy turns out to be the best support of Sen’s capability approach to tackle the Neoliberal Economic Philosophy, and thus prompt holistic human development. This paper unpacks the Neoliberal Economic Theory and discusses its challenges. Then, the paper will evaluate the relevance of the Capability Approach on the one hand and Ubuntu philosophy on the other, in addressing the Neoliberal Economic Theory towards generating holistic human development. Finally, it will demonstrate how, if fused, the Capability Approach and Ubuntu philosophy can ease the implementation of holistic human development at the expense of superficial economic growth targeted by the Neoliberal Economic Theory.

2. Defining Key Terms
The Neoliberal Economic Theory is the current dominant economic theory, which encompasses three dimensions, namely, people’s selfishness, consumption factors and production dynamics. The capability approach refers to a real opportunity or freedom to choose what one has reason to value, to be, or to do, which is also called potential functioning—what one actually manages to achieve or do—and the list of functionings is endless (Marovah). For Alkire, the capability approach is the moral framework, which proposes that social arrangements should primarily be evaluated according to the extent of freedom people have to promote or achieve functionings they value (6). Ubuntu is a traditionally African philosophy, which is based on the values of humanness, caring, sharing, respect, compassion, solidarity and related values, which are expressed through individuals’ relationship with others in the community (Kuhumba 137). Holistic human development stands for mental growth, physical, emotional and social development, which involves all the parts of a person (Hussain), and by extension, all the members of the community.

3. Examination of the Neoliberal Economic Theory and Its Challenges
Neoliberal Economic Theory pays much attention to the determination of goods, productivities and income distribution in markets through supply and demand models. Such a determination of goods, products and income distribution is generally ensured with two hypotheses. First, it is seen through a hypothesised maximisation of utility via income tamed by individuals. Second, it is perceived in the implicit maximisation of profit by firms in fixing the costs of production (Yanis 116-130). In this sense, Neoliberal Economic Theory seems to focus on the principle of individual inviolability and the idea of entitlement both pointed out by Robert Nozick. For him, people are naturally born with basic individual rights, such as rights to their lives, liberty, and the fruits of their labour. These rights are of the greatest importance and thus, there is no need for a system to achieve moral equilibrium. He goes further to suggest that individuals should act so that they treat humanity, whether in their own person or in that of another, always as an end and never as a means only (Nozick 31-33). Thus far, contemporary capitalists believe that they generate morality in commerce by using the available information on consumption and exchange factors in accordance with people’s rational choice principle.
According to Neoliberal economists, the focus on economics has been shifted from production to consumption and exchange (Chang 127). In order to have a well-shaped market for transactions, Neoliberal Economic Theory reflects three major characteristics. First, there is a demand that aims at explaining the behaviour of the consumer. Second, there is a supply model that assesses the factors of production. Third, there is a firm model that studies the behaviour of firm owners. Its three major hypotheses particularly concern consumers. Firstly, contemporary capitalists assume that people have rational preferences between the outcomes of their choices associated with their values. Secondly, they assume that individuals always act for utility maximisation, while firms act profit maximisation. Thirdly, they assume that people act independently with full and relevant information about their needs. Behind all these characteristics and hypotheses, a neoliberal economic argument is that people are selfish, consumers and not workers. They all strive for utilities and profits maximisation in order to improve their lives. Thus, there is a utilitarian argument that lies behind the logic of the Neoliberal Economic Theory.
Neoliberal economists argue that if individuals are left alone, then they make use of rational choice principle in making economic decision. Rational choice principle sets factors for consumption-production cycle. Therefore, freedom is the basis of consumption and production factors. This argument implies that consumers are the ones to shape the market and economic progress. In other words, individuals are guided by rational choices and selfishness in seeking to increase their happiness while making economic decisions. Such rational choices entail consumption and production factors. Yanis states that “instrumental rationality demands that our choices are consistent with our preferences. Thus, the same preferences must produce the same actions given the same information” (55). In contrast, Sen argues, “there has been some confusion because of the misreading of the tradition of consumption theory of taking utility to be simply the numerical representation of a given person’s choice. That is a useful way to define utility for the analysis of consumption behaviour of each person taken separately, but it does not, on its own, offer any procedure whatever for substantive interpersonal comparison” (79). For Sen, it is not necessary, in any case, to make use of the interpersonal comparisons of utility while describing exchange.
Neoliberal economists maintain that if there is no consumption, then there is no need for production. Thus, consumption is the core instrument of production. More production brings about economic growth. Therefore, consumption is the engine of economic growth. The core idea of this argument is that people’s happiness is equated to commodities for consumption. People need to get information on what is available for consumption. Still, the information they get can be relevant or irrelevant to their expectations. It is the nature of their information that guides them whenever they are to decide on what they desire. For instance, “shopping is equally central to understanding how economists think. Modern economics is built on theories of ‘rational choice’, which is supposed to be the kind of choice made by consumers when they shop” (Aldred 11). We agree with Aldred because we admit that individuals know what they want while shopping; and more choices are far better than less not only for them, but also for the firms.
Moreover, contemporary capitalists take consumers as being sovereign due to the assumption that they make use of rationality in choosing one product over another. However, their rational choice can only be effective if they are fully informed about what is offered to them. Yet, consumers can make rational choices without ever having full and sufficient information about production (Yanis 96). Again, consumers, whether taken as sovereign or not, do not intervene in fixing prices of the commodities. Capitalists think they are promoting morality in taking rational choice as a major factor of the consumption-production cycle. However, not everyone would agree with them on such a view. For example, Aldred argues that “many economists are profoundly cynical about human behaviour and the motivation that underlies it. Morality, they seem to suggest, is for losers: real people are almost always selfish” (11). The more assumptions are considered, the more markets for further transactions are created. However, such an attitude of economists can inconvenience them because consumers can sometimes change their mind-set. They are not always consistent in making choices, given the circumstances and what they encounter on the market ground. Hence, some economic policies can be irrelevant to the cultural dimension they are applied to.
In Neoliberal Economic terms, economic growth makes individuals’ lives go best. Happiness is a prerequisite of individuals’ well-being. Therefore, economic growth is a measurement of individuals’ well-being. This argument implies that economic growth buys people’s well-being. For instance, the more production declines, the more demand increases. Yet, higher consumption seems to imply, at the same time, higher production. In other words, when there is little supply, the demand grows, while as the demand increases, supply grows and focuses more and more on the demand. Consumers play an important role in shaping the market; and, for this reason, they are even taken as sovereigns. Aldred points out what the sovereign consumers do in economics. He states that “the sovereign consumer is the actor, a person who is fully informed, knows what they want, and never makes mistakes in getting it. In economics, the sovereign consumer is very much in control of their life” (12). It follows that if the supply in the market is not well-balanced with the demand, automatically prices will go either high or low depending on the demand level.
Accordingly, people will be better off, just because of the balance between consumption and production. However, one may want to know whether this will always be the case for all commodities. Aldred answers this question saying that “some early investigators of relative position assumed that only relative consumption levels matter for some goods while only absolute consumption matters for others” (57). For instance, a sick person does not have full information about medical care. He has to wait for the doctor’s prescription in order to get what he needs for his health care. If the doctor makes a mistake, the consequences will fall on the sick person whereas the latter has already paid all the medical services. In this sense, consumers are not in control of their lives and never fully informed. Consumption is just perceived in a very relativistic manner by contemporary capitalists. It is ineffective and cannot be generalized in sectors like education and medicine. These two sectors need more attention in order to make sure that they are benefiting everybody within the society.
Neoliberal economists hold that the consumers’ intention is to buy a certain quantity of products at the lowest possible price. In contrast, the intention of producers is to sell a certain quantity of products at the maximum price. Neither side is interested in generating a middle ground where supply and demand will be coordinated fairly (Yanis 17). For example, when there is more supply of commodities in the market, and yet the demand is not balanced with the supply, prices will go low for the sake of utility maximization. Instead, if there is less supply, prices will go high for the sake of profit maximization. The satisfaction of consumers and that of producers will not be equally appreciated. In this case, utility becomes actually the major factor of consumption and production cycle. The quality of life seems to remain the same, because there is no accurate cooperation when both consumers and producers act for their own sake. Individuals do not get their happiness in maximizing utilities or profits; maybe they get it because of some other behaviors. There must be something more than utility and profit maximization for the people to be happy. Hence, the idea that the utility and profit maximization in economics makes people happier is a deceiving position to hold, because happiness cannot be quantifiable in terms of utilities and profits only.
In fact, Aldred states that “firms will always try to subvert competition by colluding or establishing monopolies. Free markets, left alone, hardly ever stay free” (84). From this firms’ behavior, two questions arise. First, without any given standard on quality production, one may want to know how much to produce for the least costs. Second, without any given standard on quantity production, one may want to know how much to produce for profit maximization. In this case, the assumption that people act independently of the basis of having full and relevant information about the producers cannot hold. In fact, whatever happens in the market is what goes on in the mind of firms. Firms are the only ones in control of whatever happens in the market given the quality of their services. Consumers cannot do anything in fixing lower or higher costs of commodities. They are somehow manipulated. Thus, consumption sovereignty is just an internal and confidential game among firms and its story is, in this case, a deceiving one.

4. The Capability Approach’s Response to the Neoliberal Economic Theory
Sen’s Capability Approach does not constraint freedom in people’s doings but in people’s beings in terms of functionings and capabilities. However, he states that “In modern use of ‘utility’ in contemporary choice theory, its identification with pleasure or desire-fulfillment has been largely abandoned in favor of seeing utility simply as the numerical representation of a person’s choice” (Sen 67). Sen’s Capability Approach challenges utilitarianism on the basis of a primary information for evaluating individuals’ well-being and capabilities with the aim of individual and social advantages. He argues that “Utilitarianism values only pleasure, without taking any direct interest in freedom, rights, creativity or actual living conditions. Preference fulfillment may have some obvious attraction in dealing with one person’s individual needs, but it does little, on its own, for interpersonal comparisons, central to any social evaluation” (77). While neoliberal economists advocates for independence of economics, Sen realizes that there is a problem with the independence of economics. He contends that there is need for unity between ethics and economics. For Sen, economic growth and individual income should aim at focusing on ends and not merely on means. Thus, he advocates for ends of freedom rather than means of freedom.