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Bismillah Say, my Lord! increase me in knowledge. - The Noble Quran

Failures of the Invisible Hand (Part 1) : Self-interest as a virtue

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In the film Jerry Maguire, when the hero shares a mission statement about how self-interest has replaced love as the reason to do business in the sports industry, he receives a standing ovation from his colleagues but is fired by the management later the same day. Many experience Maguire’s dilemma at the workplace where only the “converts” who can veil their innermost truths and align without flinching to the vector of capitalism are considered winners. Some of us resort to the unfortunate conclusion that cold selfish behaviour is “natural” for human beings in economic situations. This is false. The real reason for moral ennui at the workplace is buried in mainstream economic theory.

Mainstream economists are the high priests of the modern economic superstructure. They receive an extraordinary moral education in which they are taught to believe that self-interested behaviour is virtuous. This idea is often called the doctrine of the “invisible hand” and incorrectly attributed to the Enlightenment philosopher Adam Smith. The doctrine has a modernist interpretation that is a hostile takeover of Smith’s original idea. The modern version states firstly that human beings are exclusively motivated by self-interest in market economies and secondly that they should be because the invisible hand of the market guides self-interested agents towards the common good of society. The first part is a positivist assertion about human behaviour and the second is a normative endorsement of selfishness. The first gives the theory its falsity and the second its perfidy.

Mainstream economic theory has conjured up a behavioural specie of humans known as homo-economicus – economic man, who is assumed to behave with the sole motive of profit maximization in strategic and even social microcosms. Evidence, however, points to the non-existence of homo-economicus both in laboratory and realistic settings.

The ultimatum game for example, an experimental instrument to understand economic behaviour, strikes at the heart of microeconomic theory by showing that people are often concerned about fairness and dignity over profit. In this two player game, a 10 dollar bill is placed on the table and the “proposer” makes a take-it-or-leave-it (ultimatum) split to the “responder.” The responder can either accept in which case he gets his proposed share or refuse and get nothing. The prediction of economic theory is that the proposer offers the split ($9, $1) . The idea being that the proposer should offer the least amount of money that the responder will accept and the responder, if he is homo-economicus, should accept any offer greater than zero. This prediction of economic rationality bears no resemblance to actual outcomes. A substantial number of proposers (though still a minority) offer a 50-50 split ($5, $5) based on considerations of equity and fair play, even though this is not their best economic move. Low offers are frequently rejected by responders who act against their own best interests and refuse the money to chastise the proposer for making an ‘unjust’ offer.

These results, while perfectly sensible to ordinary people, were so offensive to economists that no major journal would publish them for a long time. Their main criticism was that the stakes were not high enough for homo-economicus behaviour to kick in. Prof. Lisa Cameron tested this with subjects in Indonesia where the participants could receive the equivalent of 3 month’s salary in the game. She still found no evidence of participant behaviour approaching the selfish outcomes.

How did this happen? What makes economists insist that everyone is selfish and that
selfishness is good, when this is obviously and demonstrably false. We have to turn to the
history of Western Europe for the answer. The term laissez-faire meaning “let go,” was coined during the French Revolution to call for the freedom from tyrannical control of markets. The initial idea was a principle of non-interference by the state in the private affairs of citizens but today it is the moral license for indiscriminate free market capitalism. Like Smith’s “invisible hand,” this term also became decontextualized from the historical occasion and engendered the corporate control of government, a reality that is the converse of the original vision! The cry of liberty for all became a free pass for the rich.

Laissez-faire sounds appealing because nobody is obligated to “serve the public interest” and can focus exclusively on themselves in their enterprise. The problem is that it takes away the critical responsibility of the rich to meet the needs of the poor. Today, the poor man is only “free” to sell his labor and his dignity, while the rich man is free in the desirable sense, that is to do whatever he pleases. Friedman’s Free to Choose is a perfect example of rhetoric which makes what is good for the rich appealing to the poor so that the poor vote for their own exploitation.

Friedman sought to abolish the Food and Drug Administration because he thought the
government had no business interfering in people’s right to consume things that could be
harmful for them! Back then, this proposal was against big government but today it is clear that it would be for big business. Milton Friedman received the Nobel Prize in economics in 1976.


There is no place for government to prohibit consumers from buying products the effect of which will be to harm themselves.

Free to Choose TV Series, 1980, vol. 7 transcript, Milton Friedman

After the Global Financial Crisis of 2008 that academic economists failed to predict, the cult of greed that is the modern economic order has led mankind into an unprecedented moment in all of human history – COVID-19. Drug companies were aware of the threat of COVID-19 and had the necessary resources and information to have prepared early for a pandemic but did not do so because it was not considered profitable. This self-interested decision in flagrant disregard for the foreseeable negative social outcomes has to be accepted (and lauded!) by everyone including the government because the economic ideals enshrined in the law protect their “freedom” to act this way. Asked about what can be learned from COVID-19, Noam Chomsky pointed to the failings of the existing economic order.

One lesson is that it’s (COVID-19) another colossal failure of the neoliberal version of capitalism. Massive failure. … After the SARS epidemic in 2003, the scientists knew perfectly well that there were other pandemics coming, probably of the coronavirus variety. It would have been possible to prepare at that point … It wasn’t done. … Drug companies: they have the resources, they’re super-rich because of the gifts we lavish on them. They won’t do it. They observe market signals. Market signals tell you there’s no profit to be made in preparing for catastrophe down the road. And then comes the neoliberal hammer: that governments are not allowed to do anything, that governments are the problem, not the solution.

Noam Chomsky, interview on Efe

Before the spread of COVID-19, the theoretically optimal decision was to not do anything which eventually turned out to be the wrong decision. After its spread, while theory would have us continue running the economy, we have decided instead to sacrifice growth to protect something intangible – human life. The economic decisions around COVID-19 show that neoclassical economic theory is neither a good prediction of human behaviour nor is it necessarily good for society.

By removing the restrictions on capitalists, economic theory has allowed them to prey on every vulnerability of the human being in the name of “freedom.” David Courtwright at the University of North Florida writes about “limbic capitalism” which exploits the addictive propensity of youngsters to keep them hooked to gaming, pornography, and mobile devices despite the fact that psychologists have recognized them as being addictive in the same way as narcotic drugs. Shoshanna Zuboff talks about “surveillance capitalism” in which the goal of tech-giants is to convert human experience into monetizable behavioural data jeopardising en masse the privacy of millions and enabling the profiling of people for political gains by collusive parties. Sociologist Zygmunt Bauman has warned us that capitalism “wants us to remain single” because data shows that singles consume more than their familial counterparts. It is profitable for the populace to be single and thus it is sold as being “sexy.” Getting marriage and having children is now regarded in many metropolitan cities as a radical choice in life.  Primatologist Dr. Jane Goodall has shown that the consumption by the richest 10%,  and not overpopulation, is the driver of climate change. 

Humanity is being turned into a horde of addicted, dependent, insecure and mindless consumers most of whom would deny that market forces shape their behaviour at all. In fact, many swear by the “freedom to choose” and believe it to be the foundation of their liberty and happiness and are willing to vote for war against other ways of life to defend these ideals. This is Foucault’s power-knowledge at work where unsuspecting masses insist on their own exploitation. The co-occurence of helplessness and entitlement in people is one of the greatest ironies of modernity. 

The astonishing thing is that neoclassical economic theory with the doctrine of the invisible hand as its centerpiece continues to be taught at leading economics programs worldwide as required core curriculum. Academic economists sometimes even despair that they teach in the classrooms the ideas they are questioning in their research at the same time! The reason behind this dichotomy is that the criticism of neoclassical economic theory so far has not been driven by the search for alternatives. Curriculum remains stuck in the past because nobody has yet proposed a new set of ideas about how human beings actually behave. We have to find answers to the question: what, if not self-interest, is the ultimate desire of man? 

Questions in Islamic Economics: Connecting Spiritual Growth and Economic Theory

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I recently read a status update on LinkedIn by a disappointed man who found himself in a shared taxi with two professional managers. He heard one of them complain to the other about the loss of productivity due to employees taking religious holidays. When he could not take it anymore, he turned around and said: “Be human before being manager.”

Many professionals today experience a dilemma where they must make a choice between being good humans and being good at their job. They are left to wonder how the principles of love, generosity, fairness, reciprocity, and trust that they know to be true about life in general, do not apply at work. Some resort to the unfortunate conclusion that cold selfish behaviour is “natural” for human beings in economic situations. This is false. One of the prime reasons for moral listlessness at the workplace lies buried in mainstream economic theory.

Economists, managers, consultants and the ilk go through a program of indoctrination where they are taught that when it comes to business, it is war, not love. They learn to “let the numbers talk.” This has resulted in a cultural movement of “hard” economics in which people who are believers, empathetic, dreamers, and hopeful are brushed under the rug as being “touchy-feely.” The Graduate School of Business at Stanford University runs a course that is informally known as “touchy-feely” in which management students are taught the value of interpersonal dynamics in business. It has been voted the top elective course for 45 years running. Unfortunately, statistics of this sort have not really shaken the economists out of the delirium of utility-maximization. The curriculum of the overwhelming majority of economics programs across the world remains unmoved by facts. Is it possible that there is really no need to separate love and business – those two momentous human ventures? In this article, I want to ask the following question: Can Islamic economic theory provide the critical missing link between spiritual growth and economics and what are the obstacles in this path?

Have you ever performed an act of kindness even though it meant incurring a personal loss? If your answer is yes, your behaviour is not explainable by modern mainstream economic theory and you are considered a deviant from the norm of rational behaviour. Modern economic theory is founded on the neutrality of the marketplace from higher ideals like altruism, compassion, love and cooperation. The way economic theory is taught and professed, it is subtly fed to the minds of students that these higher ideals do not operate or are relevant in the market. The name given by the theory to a human being in the market is homo economicus – economic man, a behavioural specie that is entirely self-interested with no regard for spiritual growth.

How did this theoretical schism between markets and morality arise? Is it true that one simply cannot mix matters of the heart with business? These questions are critically important for Islamic economists because it is incumbent upon anyone who chooses to connect morality with markets to define how the two are related. I explore four questions that shed light on this subject.

Is spiritual growth relevant to economic theory? Why or why not?

If we ask this question with mainstream economic theory in mind, the answer is no. To see why, we have to turn to a period in European history that witnessed the politico-religious movement called the ‘Reformation’. It was a time of violent fighting between the Catholics and the Protestants. The relentless sectarian conflict led to disillusionment with the idea of religion altogether. The philosophical movement which is known as the ‘Enlightenment’ followed. Through this movement, Western Europe ideologically eliminated religion and the associated concepts of God and the spirit from public life 1. The separation of Church and State was founded on the division of human life into two spheres, the socio-economic sphere on the one hand and the spiritual sphere on the other. Under such a system, the economic realm is outside the confines of religion and is governed entirely by market concerns. Economic theory therefore needed to only be concerned with the totally self-interested man, homo-economicus, because the altruistic, generous, compassionate and spiritual man never enters the market.

Surprisingly, all economic theory is based on the assumption of selfish self-interested human behavior, even though it has been manifestly proven false by huge amounts of empirical evidence.

Does Islamic economics offer a way to link spiritual growth to economic theory?

The spiritual development of the individual and the society are central to economics from the Islamic perspective. Islamic economists have thus far shown a deferential attitude towards all ideas proposed by Western economists on account of the awesome scientific achievements of modern Western civilization. This has led to a situation where instead of rebuilding ideological foundations from scratch, they have taken Western ideas as given and tried to reconcile them ex-post with Islamic principles. A good example is the idea of the “free” market. Technically, Islam allows free markets but the free markets of Islam strike a balance between profit and purpose in contrast to the free market of modern economic theory where profit reigns supreme. In the free market of Islam, acquiring wealth at the expense of others is not allowed and destroying the environment to make profits is not allowed. In contrast, there are no such stipulations in Western economics. The central difference is that Islam puts social responsibilities above individual freedom, while Western economic theories do the opposite. What is needed is not the Islamization of economic knowledge but a complete ideological reversion in which social responsibility and individual liberty occupy their correct places.

The effects of unchecked profit maximization on the society and the environment are obvious to everyone except for some economists who are applying the same theory that is the cause of the problems to come up with the solutions.

Why then does modern economic theory continue to be accepted and taught?

While the advancements in science and technology are undeniable, the failure of modern economic theory is obvious to all. During the global financial crisis, the Queen visited the London School of Economics to ask them why they were not able to anticipate the collapse of the economic system. Yet, the very same theory that failed completely during the financial crisis continues to enjoy great prestige and what is more puzzling is that governments continue to run their programs based on it! Why is this so? The reason is that it is in the interest of power and against the interest of the disempowered.

The fundamental theorem of welfare economics implies that self-interested behaviour and free markets are actually good for society and therefore should not be regulated. It is easy to see how this serves the interest of the powerful. It gives them a license to continue their quests for domination while maintaining a narrative of the greater common good. Modern economic theory is an instrument of gaining the consent of the weak and powerless to opt into their own exploitation. Michel Foucault talked about “power knowledge,” the idea that the most lethal weapon of the powerful is not guns but the shaping of minds.

Why do some Islamic economists continue to justify modern economic theory using the Quran and Sunnah?

The answer again is the perceived infallibility of the West. People who send rockets to the moon cannot make mistakes. Take the example of scarcity – a central idea in modern economics. The first generation of Islamic economists, the likes of Maulana Mawdudi, completely rejected the notion because they had only been trained in the Islamic tradition and they knew from the Quran that the rizq (provision) of every human being is promised by Allah. The second generation of Islamic economists received Western education and succumbed to the indoctrination. They tried to figure out ways in which the Western notion of scarcity could be fitted into the traditional Islamic framework. As it stands, the field of Islamic economics is largely (i.e. not wholly) dominated by ideas that are really the accommodation of Islam to Western perspectives. As Islamic economists, we must work to develop consensus that there is a principal conflict between Islam and the modern economic theory in that Islam orients man towards spiritual growth at the expense of material wealth whereas modern economic theory, as embodied in homo economicus, does precisely the opposite. There is no way to reconcile exact ideological opposites and Islamic economics can only proceed from here on by rebuilding ideological foundations ab initio. Modern economics idealizes worship of nafs as the epitome of rational behavior, and to construct a genuine Islamic Economics, this must be rejected.

This article is based on a Radio Islam interview with eminent economist Dr. Asad Zaman.

Originally published by the Islamic Economics Project.

Talk: Islamic Economics at University of Indonesia: Parts 4 of 12 Part Video Series

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This is the second post that will cover a 12 part video series containing an invited talk by Dr. Asad Zaman on Islamic Economics at the University of Indonesia. The first post is here.

In Part 4 of the talk, Professor Zaman comments on value – a concept of seminal importance in economics. How do we value a human life? The message of Allah to humanity is that each life is precious and unique and that each human being is as valuable as the whole of humanity. On the other hand, the message of modern mainstream economics is that the value of a human life is merely equal to the value of what it can produce or consume. According to this materialistic view, humans are not beings but they are resources. All of modern economics follows from this unfortunate ideological error. An error that has ironically caused us to incur enormous losses as a human race. Listen to the rest below.

Dr. Asad Zaman, Talk on Islamic Economics at the University of Indonesia, Part 4 of 12.

You may listen to the full talk by Dr. Asad Zaman on YouTube.

Talk: Islamic Economics at University of Indonesia: Parts 1-3 of 12 Part Video Series

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This is the first post that will cover a 12 part video series containing an invited talk by Dr. Asad Zaman on Islamic Economics at the University of Indonesia. Part 1 and Part 2 contain the beautiful inaugural ceremony of the gathering.

The talk begins near the end of Part 3 of which we will present a gist. We must understand that economics is the new religion of mankind and therefore when we start to study it, we must understand first what we are studying and why we are studying it. It is quite natural for people to experience what is called cognitive dissonance when they hear something new or strange. As people, we tend to understand something new in terms of what we already know. To appreciate Islamic economics, we must first become comfortable with the idea that most of what we know might be challenged and the quest for economics actually starts with an inquiry into who we really are. Please watch the video here:

Dr. Asad Zaman, Talk on Islamic Economics at the University of Indonesia, Part 3 of 12.

You may listen to the full talk by Dr. Asad Zaman on YouTube.

Gödel’s Theorems and The Limits of Reason

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The central aim of the Enlightenment (read the Age of Reason) was to achieve a moral inversion and place humanity above Deity and correspondingly, reason above Revelation. Reason alone was sufficient, according to the Enlightenment philosophers, to decide all matters. Descartes said in his discourse on the scientific method that he would take nothing for true except that which “he knew to be such.” This is to say that the mind of man, aided by its principal faculty of reason, is the vessel in which the verity of transcendental truths would be established. Their ideological nemesis was to demonstrate that the instruments of reason, observation and logic, were powerful enough to encompass all of reality. Liebnitz struggled with this for years while professing the virtue of the infinitesimal calculus. The testimony of history is that the finitude and insufficiency of reason has been repeatedly established across many disciplines even in times before the Enlightenment. The most recent and perhaps most decisive arguments in recent times are the assertions of Gödel about the inherent limits of mathematics.

Gödel’s theorems on the incompleteness and undecidability of mathematical systems are among the deepest and most significant discoveries of the twentieth century. They represent a dramatic failure of one of the fondest hopes of European Enlightenment philosophers. This was their core faith that all human knowledge can be obtained by using observations and logic; in particular, revelation, tradition, and received wisdom are nothing but an accretion of superstitions which must be discarded to make progress. Our goal in this essay is to explain how Gödel’s results represent a mathematical tombstone for these hopes.

Geometry was the first rigorous intellectual discipline to be developed by the ancient Greeks. It is a testimonial to their brilliance that Euclid’s methods are still taught to our children, twenty four centuries after their discovery. The axiomatic-deductive methodology of mathematics leads to logical certainty without requiring empirical confirmation – we do not asses the validity of the Pythagorean Theorem by drawing triangles and measuring their sides. It was entirely natural that the same axiomatic and deductive methodology was adopted to study natural science by the Greeks. Unfortunately, this turned out to be a big mistake. Unlike mathematics, scientific hypotheses require empirical observations for validation.

Axiomatic deductive methods lead to a deadlock in a controversy that lasted for centuries: does the eye generate the light with which we see objects, or does light come from the object to our eyes? Mathematical style proofs were available for both propositions, and there seemed to be no logical way to resolve the controversy. Then Ibn-ul-Haytham (born 965) used a dazzling series of observations, including the fact that eyes get burnt from staring at the sun, to definitively resolve the dispute. Replacing logic by observations laid the basis of the scientific method, and has been called the most important discovery of the second millennium by historian Richard Powers.

The natural methodology for science is empirical and inductive – it is based on observing patterns of nature and guessing at the causes which create these patterns. Scientific hypotheses (like gravity) represent our best guesses at explaining what we observe (like the falling apple). It is only after we abandon the quest for logical certainty that it become possible to make progress in achieving scientific knowledge. Even though Aristotle was among the most brilliant humans to walk on this planet – his writings are still studied at leading universities today – he failed to understand this difference between natural science and mathematics. After coming to the wrong conclusion that heavier stones would fall faster than lighter ones, he never picked up two stones and dropped them to test his theory. Observational tests are essential for science, but not part of the methodology of geometry.

The bitter conflict between science and the Catholic Church that resulted from the burning of Bruno at the stake, and the trial of Galileo, led to an extreme antipathy to religion among European scientists. A concerted effort was made to prove that science led to certainty, whereas religion was mere superstition. This effort, which became known as the “philosophy of science”, initially concentrated on the problem of induction. If we observe a pattern in the real world, can we be sure that this pattern will continue? For example, having observed sunrise every day for millions of years, can we confidently predict sunrise tomorrow? After much effort, it was discovered that this problem cannot be solved. Despite repeated strong empirical confirmations of patterns, exceptional and unexpected events – sometimes called Black Swans – can always arise. After centuries of stability, a one-time earthquake or volcano can destroy everything.

Failure to solve the problem of induction led the “logical positivists” in the early twentieth century to a new approach to proving the certainty and superiority of scientific knowledge. They argued that science appears to be based on induction, but we can reformulate it to make it follow axiomatic deductive methodology of mathematics which does lead to certainty. Logical positivism was spectacularly successful and succeeded in dominating the philosophy of science in the second quarter of the twentieth century. Later, in the second half of the 20th century, it had an equally spectacular crash, when many of its basic ideas were disproven. Even A. J. Ayer, one the most enthusiastic exponents of positivism, eventually had to admit that “it was all wrong”. Current consensus among philosophers of science is that uncertainty is an inherent feature of scientific theories.

Among the many fronts on which logical positivism failed, one of the most crucial was mathematics itself. Discoveries in physics led to the understanding that the real world is wild and wacky, with particles and phenomenon that defy common sense: Quantum jumps from one state to next without passing intermediate states, spontaneous emergence of matter from nothing, backwards motion in time, particles randomly choosing slits to pass through and many other baffling concepts are routinely used by theoretical physicists. While logic and observations might fail in this wild real world, surely in the stable and sedate world of the natural numbers 1,2,3,4 … logical reasoning would lead to us to certainty and complete truth? The attempt to prove this intuition engaged the efforts of several mathematicians and logicians in the early part of the twentieth century.

German logician Kurt Gödel finally achieved spectacular and entirely unexpected results in this area. His first result was the Incompleteness Theorem. This showed that no matter how we formulate the axiomatic-deductive machinery, there will always exist true statements about numbers which this machinery cannot prove. This means that the “whole” truth about numbers will forever remain out of the grasp of logical reasoning. The second was the Undecidability Theorem, which proves that logic cannot be used to decide the truth or falsity of certain statements. One famous example is Euclid’s Parallel Postulate. Whether it is true or false is a matter of choice, not logic. If we choose to deny this postulate, we create a non-Euclidean geometry which has its own valid and useful insights, quite different from the Euclidean world we studied in school.

The Enlightenment hopes that man could reach truth purely by observations and logic, cannot be fulfilled even in the limited domain of mathematics. Gödel proved what poets have always known, that transcendental truths are beyond the reach of reason:

Iqbal easily transcended the realms of logic
But he could not plumb the depths of the mysteries of love.

==(free translation of couplet from Allama Iqbal, Poet Laureate of the East)

Published in The Express Tribune, April 12th, 2015 by Dr. Asad Zaman: author page on LinkedIn. Links to Other Works: Index.

Godel’s Theorem and the Limits of Reason

Successful Development Strategies

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If an alien species were to descend on Earth today hoping to learn about economic development from the human species, what would they take away from us? If they were rational, they would sift through history and take the bits that were the most successful in producing results. It follows that we should be doing the same thing to develop our own strategies for development going forward but for reasons that we explain in this article, we are not doing that. We continue to try and implement economic theories that have repeatedly failed and ignore the ones that have produced provable results. Why?

History is the conquest song of the victors. Since ancient times, these songs have glorified victors and grossly exaggerated their virtues, while denigrating and vilifying the losers. From them, the defeated learn an extremely biased picture of the world which prevents access to the truths necessary for liberation.

In graduate school, we learnt about Rostow’s theory of the stages of economic development. This theory places all existing non-European civilisations at ground zero and argues that development will require them to imitate the path taken by England in the 18th century in the course of its rise to global world power. This idea is patently absurd. Current global conditions bear no resemblance to those faced earlier by European countries. Contrary to the idea of ground zero, India had advanced shipbuilding, glass, and textiles industries. De-industrialisation took place as many of these industries were deliberately destroyed during the process of colonisation. Economic theory was used as a weapon to argue that India’s comparative advantage lay in supplying raw materials to British industry.

Another reason the comparison is flawed is political realities; European countries enjoyed a degree of sovereignty not available to current developing countries. Weak and corrupt governments and massive debt burdens allow rich countries to set policy. How can one make effective development policy while paying billions in interest on non-productive loans? Rostow’s prescriptions for growth do not take current political circumstances into account and are uninformed by history.

Despite numerous flaws, Rostow’s ideas undergird modern economic growth theories. This is a testimonial to the power of victors to dominate discourse. The spectacular accomplishments of the losers of World War 2, Japan and Germany – who went on to become economic superpowers – receive no mention in economics courses. Similarly, very little attention has been paid to the experience of the East Asian tiger economies, which accomplished something unprecedented in history: sustained rates of growth of seven per cent per annum. The famous Industrial Revolution that we struggle to replicate à la Rostow had growth rates of only 1.5 per cent, tripling the previous historical average of 0.5 per cent. This seven per cent growth rate has been justly labelled the East Asian Miracle. Their experience is far more relevant to modern development strategies than the 18th century experiences of England.

Not a single Nobel Prize has been awarded to an East Asian economist. Instead, it is deeply ironic that Milton Friedman, the prophet of the free market, received the Nobel Prize. Policies designed and supported by him were implemented to the last detail over a period of 20 years by a group of economists known as the ‘Chicago boys’, under General Pinochet in Chile. Despite Friedman’s repeated assurances that these would bring about an economic miracle, Chile experienced high unemployment, a sharp increase in income inequalities and poverty and a highly erratic economic performance. The Economist, a magazine which ardently supports free market policies, had to confess that the “hair of the Chicago boys has gone grey, waiting for the free market to give results.” Pinochet eventually fired the Chicago boys.

A similar disaster occurred in Russia, as a result of the implementation of Friedman’s ideas. After the collapse of communism, there was widespread agreement on the need for a transition to free market policies. The debate was only between the gradualists and those in favor of a rapid transition. Supported by the IMF, the ‘shock treatment’ party implemented a sudden shift to free market policies. As a result, production in Russia fell by 50 per cent in one year. In an economy previously able to feed its population, extreme poverty and starvation occurred on a large scale, accompanied by the creation of a new small group of billionaires.

Instead of looking to those responsible for numerous crises, including the recent global financial crisis, wouldn’t we be better advised to consult those few countries, including China, that have been success stories of development over the past few decades?

Published in The Express Tribune, November 2nd, 2010 by Dr. Asad Zaman: author page on LinkedIn. Links to Other Works: Index.

Successful Development Strategies