paper delivered to Ecopolitics X Conference, Australian National University, September 26-29, 1996.

Economic Rationalism as a Mental Disease

Richard Gosden


There are two major problems of Western civilisation that seem unlikely to be ever properly addressed by a market-based economic system. The first is the problem of global ecological degradation caused by unrestrained economic activity. The second is mass unemployment caused by the competitive drive to automate the work-place. The one erodes the biological support system of the planet while the other erodes the social structure by turning increasing numbers of workers into surplus labour.

Economic rationalism is an attempt to avoid facing these problems by turning towards the past and seeking solace in cultural fundamentalism. This impulse stems from a deep-seated anxiety that the cultural paradigm focussed on work, productivity and consumption is no longer tenable. If reality is demanding that the industrial nations now evolve into a post-capitalist phase -- of steady-state economics -- then the avoidance of this same reality, by the adoption of economic rationalism, could be interpreted as a symptom of mental pathology. Manifestations of this pathology can be identified in the statements and exhortations of economic rationalist advocacy by referring them to psychiatric diagnostic manuals.


My first encounter with full-blown economic rationalist ideology was in the late 1970s when I met an activist from John Singleton's Workers Party (later renamed the Progress Party). At first I thought I was in the company of a person who made sport of mixing together quaintly contrary political ideas so he could enjoy the consternation of his opponents -- a kind of politics of farce. It seemed fairly harmless fun to call what was patently irrational -- rational -- and for a lame duck political party, which celebrated the economic libertarian ideal of winner-take-all, to call itself a "workers party".

But I soon began to realise that this fellow wasn't a leg-puller -- he actually believed in the nonsense. And as time passed it became apparent that the Workers/Progress Party ideology was just the tip of an iceberg of insanity that was rapidly infecting the whole collective consciousness of the English-speaking world. How else, other than as a disease, could one properly describe economic rationalism? Websters Dictionary gives a number of definitions for "disease", among them; any morbid or depraved condition, moral, mental, social, political, etc.[1]

What Australians now call `economic rationalism' is best understood as a return to classical economic theory. Other names for the same phenomenon are `neo-classical economics' or `laissez faire'.[2] In English-speaking countries classical economic theory was the ideological driving force -- from the industrial revolution in the 18th century right up until the Great Depression of the 1930s. "It traces its parentage back to Adam Smith and his 1776 classic, The Wealth of Nations."[3] Classical economic theory argued that a nation is more economically efficient when the State minimises its regulation of markets and leaves decision-making to individuals, who should be free to respond to fluctuating market conditions.[4]

This ideology generally prevailed until the Great Depression when it became apparent that its continued application "aggravated rather than softened the economic debacle".[5] English-speaking countries then began to hurriedly replace it with a new pragmatic kind of economics developed by the British economist, John Maynard Keynes.[6] Franklin Roosevelt's New Deal programme in the United States is probably the best example of this policy turn-around.[7]

The shift from classical to Keynesian economics reflects a shift in the priorities of the ruling elite from `efficiency' to `stability'. The big shock of the Great Depression wasn't so much in the depth or the length of the event -- such occurrences were, after all, only to be expected as part of the well-established pattern of a fluctuating business cycle -- but rather the shock came from the extremity of the political movements that sprang up in response to it. In most of the industrialised countries there was genuine concern that revolutionary change might terminate the capitalist system altogether.[8]

The new Keynesian economics required governments to intervene in the economy in such a way as to ensure that stability was maintained in both the body politic and the market-place. This was basically achieved by increasing the overall purchasing power of the workers, and thereby enrolling them in the new economic ideology. In the 50 years or so of its practice this Keynesian pragmatism generally tended to reduce the distance between the rich and the poor by adopting such strategies as the introduction of progressive levels of taxation, setting and increasing minimum wages, the establishment of welfare safety-nets, the sponsorship of the trade union movement, the establishment of state-owned enterprises to provide key services and the regulation of the economy through strict controls over banking and financial services.

Retreat From Post-Capitalism

A conventional political/economic explanation of why there has been a return to classical economics in English-speaking countries over the last decade and a half is plausible enough if one doesn't dwell on the question of why the people of these countries have allowed so much of their democratic power to be transferred to capitalist elites. It's obvious the people have been sold-out. However, the sale has taken place right under their noses, and it is still going on, so why hasn't there been more popular resistance? To approach this question I want to return to my original theme of a "disease model" for economic rationalism.

To begin with, imagine a time-line of social development showing past, present and future. Back in Keynesian times, although the right-wing was anchored in the past and resisted change, the left-wing kept the body politic facing the future and slowly edging forward.

However, the reversion to classical economics has turned the body politic around 180 degrees so that now it faces towards the past instead of the future. In this reverse position the left-wing has become an anchor trying to conserve the present while the right-wing adopts the advocacy of progressive politics. But this progress of the right is towards the values and social organisation of the past, rather than the future. These new socio/political conditions are so confusing they have even produced that most oxymoronic of political entities, the progressive-conservative.

Now I want to propose that this curious reversal of roles is actually symptomatic of a condition of collective denial. It isn't so much that our culture is embracing the past as it is a question of us collectively denying the inevitability of the future. And sometimes the left seems to be as much afflicted by the impulse as the right.

Throughout the 1960s and 1970s social analysts were exceptionally busy trying to arrange social improvements to accommodate demands for racial and gender equality, an end to sexual preference prejudice, international peace and the building of a tolerant multicultural society. The post-Keynsian society has been able to address most of these demands fairly effortlessly, if only superficially, by making provisions for equal opportunity in the various social "markets" -- by the "new world order" hype surrounding the end of the Cold War -- and by encouraging the mass media to engineer a shallow mass culture to which everyone has equal access.

But there were two major problems that were identified in the 1960s and 1970s that have not been properly addressed -- and never can be by the capitalist system. These are the problems of global ecological degradation caused by unrestrained economic activity[9] -- and mass unemployment caused by the competitive drive to automate the work-place.[10] The one erodes the biological support system of the planet, while the other erodes the social structure by turning increasing numbers of workers into surplus labour.

The thrust of my argument is that economic rationalism is an attempt to avoid facing these problems by turning towards the past.[11] The reason for this is that there is a deep-seated anxiety that these problems cannot be solved within the capitalist paradigm. If reality is demanding that the industrialised nations now evolve into a post-capitalist phase -- of steady-state economics[12] -- then the avoidance of this same reality, by the adoption of economic rationalism, is therefore symptomatic of a pathological condition.

Economic Rationalism as a Mental Disease

The critics of economic rationalism are rapidly finding their confidence and are already hinting that there might be a pathological explanation for the phenomenon. They are calling it the "Anglo-disease",[13] "economic fundamentalism"[14] and a vehicle for celebrating individual greed as if it were a social virtue.[15] That "avarice is a form of brain disease and such people should be locked away in new asylums for the socially dangerous".[16] They say that "the unfortunate nation [Australia] has become split between virtually the entire people on the one side, and a narrow tripartite elite consensus on the other".[17] That economic rationalism has its roots in "a growing pessimism connected with anxieties";[18] and that "it involves a foolishness which comes from ignoring the lessons of economic history".[19]

But, perhaps like a family with a member behaving strangely, these critics are still reluctant to come out and actually state the obvious -- that economic rationalism is a form of mental disease that has been induced by an intense fear of the future. Fundamentalist movements -- whether Islamic,[20] Christian,[21] Hindu[22] or the English-speaker's version of economic rationalism -- are all cultural reflex conditions involving a withdrawal into traditional values so as to escape a confrontation with the new.

Once one adopts this point of view it is not very difficult to find evidence of economic rationalism's pathology. It seems our cultural tradition has always known that it is abnormal for people to retreat into the ideology of cultural infancy. Let me briefly quote from a psychiatric manual to demonstrate how well the typical economic rationalist has been described.

The American Psychiatric Association's Diagnostic and Statistical Manual of of Mental Disorders is the foundation-stone of orthodox psychiatric diagnosis in the United States and is used in Australia to supply the diagnostic codes necessary for lodging Medicare claims. It is a de facto international standard for diagnosing psychiatric complaints. The third edition of the manual (DSM III) identified a personality disorder which it called Compulsive Personality Disorder:

301.40 Compulsive Personality Disorder

perfectionism that interferes with the ability to grasp "the big picture"; .... Preoccupation with rules, efficiency, trivial details, procedures, or form interferes with the ability to take a broad view of things .... Although efficiency and perfection are idealised, they are rarely attained. Individuals with this disorder are always mindful of their relative status in dominance-submission relationships .... [23]

A more recent revision of the manual (DSM IV) has a slightly altered definition of the the disease and has codified the character traits:

Diagnostic criteria for 301.4 Obsessive-Compulsive Personality Disorder

A pervasive pattern of preoccupation with orderliness, perfectionism, and mental and interpersonal control, at the expense of flexibility and openness, beginning by early adulthood and present in a variety of contexts, as indicated by four (or more) of the following:

(1) is preoccupied with details, rules, lists, order, organisation, or schedules to the extent that the major point of the activity is lost

(2) shows perfectionism that interferes with task completion (e.g., is unable to complete a project because his or her overly strict standards are not met)

(3) is excessively devoted to work and productivity to the exclusion of leisure activities and friendships (not accounted for by obvious economic necessity)

(4) is overconscientious, scrupulous, and inflexible about matters of morality, ethics, or values (not accounted for by cultural or religious identification)

(5) is unable to discard worn-out or worthless objects even when they have no sentimental value

(6) is reluctant to delgate tasks or to work with others unless they submit to exactly his or her way of doing things

(7) adopts a miserly spending style towards both self and others; money is viewed as something to be hoarded for future catastrophes

(8) shows rigidity and stubborness[24]

For diagnostic purposes let us review a few randomly selected statements by past political leaders.

Bob Hawke;

We have pioneered the concept, and the delivery, of microeconomic reform -- seen by industry, rightly, as an essential means towards higher productivity and efficiency. .... We will press ahead with further reform, to increase competition and efficiency within Australia .... the lessons of international competitiveness must be constantly learned and relearned.[25]

Paul Keating;

the pursuit of trade and competition has instilled in Australia a thirst for greater efficiency at home and a larger dominion abroad. ... These new processes should see depreciation claims equilibrate quickly with the actual effective lives of assets.[26]

John Button;

Inefficiencies in our ports and transport system were masked by high levels of protection, complacency and inertia. .... Our strategies have been aimed at building a more productive culture within industry and the community generally ....[27]

John Hewson;

We want to give Australians more incentives and opportunities to get a job, to work harder and be rewarded for it, to save, to invest and to export. .... We want to let Australians show how they can match, and beat, the best in the world when the official, the taxman and the regulator get off their backs.[28]


A relentless obsession for economic competition appears to have already thoroughly infected the minds of the next generation. In the United States, for instance, "Between 1967 and 1990, the share of Americans entering college who believed it essential to be `very well off financially' rose from 44 to 74 percent. The share who believed it essential to develop a meaningful philosophy of life dropped from 83 to 43 percent."[29]

I'm not arguing that economic rationalists need to be lobotomised. My argument, which is confirmed by the psychiatric manuals, is simply that compulsive attitudes towards work, productivity and efficiency have long been officially recognised as symptoms of mental illness and its about time we began to view the doctrine of economic rationalism in this light. We need to recognise that proponents of economic rationalism are mentally disturbed regressives and that the elevation of this type of person to political leadership over the last decade and a half has led the whole nation into a type of collective delusion from which it has yet to emerge. And that until it does emerge the problems that are clearly pressing on us most closely, like the global ecological crisis, will be ignored in favour of pathological objectives.



American Psychiatric Association, Diagnostic and Statistical Manual of Mental Disorders, Third (1980) and Fourth (1994) editions, Washington.

Button, John, `Statement By The Minister For Industry, Technology And Commerce, March 12, 1991', in Building a Competitive Australia, Australian Government Publishing Service, Canberra, March 12, 1991.

Caravan, Bernard, Economists For Beginners, Pantheon Books, New York, 1983.

Carroll, John. `Economic Rationalism and its Consequences', in John Carroll and Robert Manne eds., Shutdown, The Text Publishing Company, Melbourne, 1992.

Daly, Herman E., Steady-state Economics, Earthscan Publications, London, 1992.

Davidson, Kenneth, `Defrocking the Priests', in Donald Horne ed., The Trouble With Economic Rationalism, Scribe, Newham 1992.

Durning, Alan Thein, How Much Is Enough, Earthscan Publications, London, 1992.

Freedland, Jonathan, `Christian soldiers marching to take the White House', Sydney Morning Herald, October 3, 1994.

Gorz, Andre, Paths to Paradise: On The Liberation From Work, Pluto Press, London 1983.

Greiner, Nick, That Obstructive Spirit of Provincialism Has Been Curbed, Federal Research Centre Discussion Paper, Canberra, January 1992.

Hamilton, Clive, The Mystic Economist, Willow Park Press, Fyshwick ACT, 1994.

Hawke, Bob, "Parliamentary Statement By the Prime Minister, March 12, 1991', Building a Competitive Australia, Australian Government Publishing Service, Canberra, March 12, 1991.

Hedges, Chris, `Cairo fights to stop school from turning out fundamentalist robots', Sydney Morning Herald, October 5, 1994.

Hewson, John, Fightback!: It's Your Australia, Parliament House, Canberra, 21 November, 1991.

Horne, Donald, `Its Time for a Think', in Donald Horne ed., The Trouble With Economic Rationalism, Scribe, Newham 1992.

Keating, Paul, "Taxation Measures', Building a Competitive Australia, Australian Government Publishing Service, Canberra, March 12, 1991.

Investing in the Nation: Statement by The Prime Minister, Commonwealth Government Printer, Canberra, February 9, 1993.

Kelly, Paul, The Hawke Ascendancy, Angus and Robertson, Sydney, 1985.

Keynes, John Maynard, Activities 1931-1939, World Crises and Policies in Britain and America, ed. Donald Moggridge, Vol. XX1, Cambridge University Press, 1982.

Maddox, Graham, The Hawke Government and Labor Tradition, Penguin, Melbourne, 1989.

Manne, Robert, `The Future of Conservatism', Quadrant, January-February 1992.

McBurney, Stuart, Ecology Into Economics Won't Go, Green Books, Bideford Devon , 1990.

Pusey, Michael, Economic Rationalism in Canberra, Cambridge University Press, Cambridge, 1991.

Salmond, John, The New Deal, F.W.Cheshire Publishing, Melbourne, 1970.

Seabrook, Jeremy, The Myth of the Market, Green Books, Bideford Devon, 1990.

Stern, Robert W., `India After Ayodha', Current Affairs Bulletin, July 1993.

Stillwell, Frank, `Economic Rationalism: Sound Foundations for Policy?' in Stuart Rees, Gordon Rodley and Frank Stilwell, ed., Beyond The Market, Pluto Press, Leichhardt, 1993.

Thatcher, Virginia S., Editor in Chief, Websters Encyclopedic Dictionary of the English Language, Consolidated Book Publishers, Chicago, 1971

Turner, Trevor, `Croesus and the crackpots', The New Internationalist, No.259, September, 1994.

Vintila, Peter, `Markets, Morals and Manifestos', in eds., Peter Vintila, John Phillimore and Peter Newman, Markets, Morals and Manifestos: Fightback! and the Politics of Economic Rationalism in the 1990s, Institute of Science and Technology Policy, Murdoch WA, 1992.

Wheelwright, Ted, `Economic Controls for Social Ends', in Stuart Rees, Gordon Rodley and Frank Stilwell, ed., Beyond The Market, Pluto Press, Leichhardt, 1993.

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