Posts Tagged ‘capitalism’

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RedMenace

Branko Milanovic has put forward an idea he thinks “will gradually become more popular”:

The idea is simple: the presence of the ideology of socialism (abolition of private property) and its embodiment in the Soviet Union and other Communist states made capitalists careful: they knew that if they tried to push workers too hard, the workers might retaliate and capitalists might end up by losing all.

The idea reminds me of an argument Etienne Balibar made many years ago (unfortunately, I can no long remember or find the original source but here’s a link [pdf] to one version of it)—that the “European project” was more progressive during the Cold War in the sense that the welfare state was constructed, by forces from above and below, as a response to the Soviet model of socialism, in order to prevent the working classes from adopting a communist ideology. (Since then, as Balibar has recently argued, the European project has fundamentally changed, as it has been assimilated by globalized finance capitalism and, under German hegemony, a strategy of industrial competitiveness based on low wages.)

Milanovice discusses some recent empirical work on three channels through which socialism “disciplined” income inequality under capitalism: (a) ideology/politics (e.g., the electoral importance of Communist and some socialist parties), (b) trade unions (some of which were affiliated with Communist or Labor parties), and (c) the “policing” device of the Soviet military power. He then offers his own analysis:

Communism, was a global movement. It does not require much reading of the literature from the 1920s to realize how scared capitalists and those who defended the free market were of socialism. After all, that’s why capitalist countries militarily intervened in the Russian Civil War, and then imposed the trade embargo and the cordon sanitaire on the USSR.  Not a sort of policies you would do if you were not ideologically afraid (because militarily the Soviet Union was then very weak). The threat intensified again after the World War II when the Communist influence through all three channels was at its peak. And then it steadily declined so much that by mid-1970s, it was definitely small. The Communist parties reached their maximum influence in the early 1970s but Eurocomunism had already expunged from its program any ideas of nationalization of property. It was rapidly transforming itself into social democracy. The trade unions declined. And both the demonstration effect and the fear of the Soviet Union receded. So capitalism could go back to what it would be doing anyway, that is to the levels of inequality it achieved at the end of the 19th century. “El periodo especial” of capitalism was over.

He admits the implication of such a story may be rather unpleasant:

left to itself, without any countervailing powers, capitalism will keep on generating high inequality and so the US may soon look like South Africa.

This is not to suggest we need another Cold War for United States to move even closer to looking like South Africa. But it does mean there will be a significant move from above toward more democracy and less inequality only if there’s a real threat to move outside of capitalism from below.

absolut-capitalism

Clearly, Pope Francis’s criticisms of capitalism (as I have discussed here and here) have touched a nerve. They certainly have in the case of Harvard’s Ricardo Hausmann, who attempts to argue both that capitalism is not responsible for causing poverty and that more capitalism will eventually eliminate poverty.

Hausmann’s story is a very familiar one. What it comes down to is the idea that the majority of people before capitalism arrived one the scene were poor and as capitalism develops and more and more people became wage-laborers with rising real wages. But areas of the world still remain outside of capitalism and those people will remain poor unless and until capitalism is allowed to fully develop.

It’s a story that is as old as Adam Smith’s Wealth of Nations, and it’s been told and retold by generations of classical and neoclassical economists ever since.

Their story is certainly right about one thing: capitalism does create the promise of ending poverty.

The problem is, their story conveniently overlooks important aspects of the development of capitalism—all the ways capitalism has over the course of its history created more, not less, poverty. I’m thinking of four instances in particular.

First, Hausmann never examines the actual emergence of capitalism, the so-called primary of accumulation of capital, when noncapitalist producers (feudal serfs, members of family and tribal communes, and so on) were dispossessed of their land (as large landowners took possession of their lands) and then forced to have the freedom to sell their ability to work in both rural and urban labor markets.

Second, Hausmann fails to mention the working poor, all those people who work for someone else and yet remain (along with their children), because of low wages and intermittent employment, below the poverty line.

Third, there’s nothing in Hausmann’s story about capitalist instability and all the times (including, most recently, during the Second Great Depression) wage-laborers are thrown onto the unemployment lines and forced (together with their families) to try to survive on food stamps and other poverty-level programs.

Finally, Hausmann presumes all the poor self-employed workers in India and elsewhere somehow exist outside of capitalism, when in fact they are often producing commodities either for capitalist enterprises or for the other workers who are directly employed by those enterprises. They’re not outside capitalism; their work is inextricably connected to how capitalism operates, especially (but certainly not only) in the Global South.

Those are four main ways (and, of course, there are many others, which I don’t have the space to discuss here) capitalism does in fact cause poverty, in both the North and the South, now and over the course of its history

They are the reasons why, as Pope Francis said in a recent speech in Bolivia: “This system is by now intolerable: farm workers find it intolerable, laborers find it intolerable, communities find it intolerable, peoples find it intolerable.”

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I have to laugh when I read the back and forth about who sneered at whom in the battle over mainstream macroeconomics.

According to Paul Romer, Chicago’s rejection of MIT-style macroeconomics was a defensive reaction to the sarcasm of Robert Solow. Paul Krugman says no; Dornbusch, Fischer, and others at MIT tried to meet Chicago halfway but “Chicago responded with trash talk.”

Really?!

First, is anyone surprised that economists at Chicago and MIT engaged in sarcasm toward each other’s work? That’s what mainstream economists do all the time. They’re dismissive of the work in other academic disciplines. They ridicule radical and heterodox approaches within economics. And, yes, they engage in trash talk about mainstream theories other than their own. All the time. For as long as I’ve been studying economics. And of course even earlier.

Second, we’re going to now explain the pendulum swings of mainstream macroeconomics, back and forth between more Keynesian versions and more neoclassical versions, according to who sneered at whom? There’s a bit more going on here, including developments inside the discipline and events in the world beyond the academy. The trajectory of mainstream macroeconomics both influenced and was influenced by everything else taking place inside and outside the academy (and I doubt trash-talking between schools of thought had a whole helluva lot to do with it).

Modern Economics

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So, what did take place? Basically (and Greg Mankiw [pdf] is a pretty good guide here, at least once you set aside the silly language of scientists and engineers), mainstream macroeconomics (the blue and yellow bars in the chart above) was invented in the late-1940s/early-1950s as neoclassical economists (like Paul Samuelson and John Hicks) attempted to domesticate Keynesian economics and combine it with neoclassical economics, thus creating what came to be called the “neoclassical synthesis.” (In those days, the teaching of mainstream economics started with macroeconomics, thus reflecting the problems of capitalist instability that culminated in the first Great Depression, and then turned to the supply-and-demand framework of neoclassical microeconomics. These days, it’s the reverse: micro before macro.) Chicago, too, was part of the synthesis, to the extent that Milton Friedman and others spoke the same language, although of course they arrived at very different conclusions: while Paul Samuelson and Co. believed they’d solved the problem of instability, through active fiscal and monetary policies, Friedman and Co. preached the virtues of free markets and the problems created by government intervention. It was the visible hand of government intervention versus the invisible hand of laissez-faire.*

In the mid-1970s, a new approach emerged at Chicago—the so-called rational expectations revolution of Robert Lucas and Thomas Sargent—that is best described as neo-neoclassical macroeconomics. The idea was that, since on average economic agents had expectations that coincided with the “real” values in the economy (akin to the “correct” predictions of econometricians), including the outcomes of any and all economic policies, it was simply impossible to surprise rational people systematically. Therefore, government policy aimed at stabilizing the economy was doomed to failure.

The “new Chicago” economists then developed a whole series of macroeconomic models based on perfect information, rational expectations, and instantaneously market-clearing prices—whereby the only problems came from “exogenous shocks.” MIT (and Berkeley and other departments) responded by focusing on asymmetric information, “sticky” prices, and other market imperfections that might lead capitalist economies to less than full employment. It’s what we now call call “new Keynesian” economics.

Those are the limits of the current orthodoxy—the limits of the kinds of models that can be used and of the policies that should be adopted. They are the limits of the debate within mainstream economics.

And whatever sneering takes place between the two sides is, for those of us who practice a different kind of economics, merely a storm in a teacup.

 

*Here I’m referring only to mainstream macroeconomics. All the other approaches, from the Keynesian and Sraffian economics of Cambridge University through Modern Monetary Theory to Marxian economics, were then and continue to be simply sneered at and ridiculed by both MIT and Chicago.

washhands-1280

Noah Smith should stick to what he knows best, like translating Paul Romer. Because, on the rest, he seems to be way out of his depth.

Smith wades into the debate about capitalism and racism by asserting that “the idea that the only way that racial minorities will win true freedom is with a revolution that overthrows capitalism. . .is a trap that helps keep minorities down.” He then adopts what he considers to be a “historical perspective,” a story about Jews in Europe—what he considers to be the “model minority” strategy.

what will work? If history is any guide, the only option is to increase tolerance. I don’t pretend to know how to increase tolerance. For immigrant groups, it seems to naturally fade over time, especially if those groups 1) organize to fight discriminatory policy, and 2) make a bunch of money. For African-Americans, intolerance seems much more entrenched. I don’t pretend to know how to get rid of it, but I am pretty sure that a militant overthrow of capitalism would make things much, much worse.

Basically, Smith’s history is that Jews were “regularly attacked and massacred” but then moved to “more tolerant societies” (like the Netherlands and England, and eventually the United States) and then got rich. End of story.

He does admit that some Jews (like Marx and Trotsky) “took a different tack” and sought to move beyond capitalism. But the rest of the history of Jews—whether the mid-twentieth-century holocaust or the legions of socialist, communists, and trade-unionists who fought against capitalism, including in the United States—is simply erased.

And Smith never even attempts to present the history of blacks, Hispanics, and other minorities in the United States—beginning with slavery and immigration from Central America to a long if uneven history of poverty, unemployment, prison sentences, and much more in later years.

Perhaps most important, Smith never defines what he means by freedom. What kind of freedom does he have in mind? Sure, Jews have managed to find spaces in which to practice their religion (with, for the most part, less discrimination than they once suffered) and some have managed to become quite wealthy (including, along the way, appropriating the wealth produced by other Jews). But to what extent is that “true freedom”?

What Smith is referring to are particular kinds of freedom—the freedom to practice religion and the freedom to accumulate wealth. Blacks, Hispanics, and other minorities have come to be able to exercise those freedoms, too, albeit to a lesser extent, at least as social groups. (Basically, Smith’s premise is they, too, will be able—eventually—to become Jews.) But those freedoms presuppose the continued existence of religion and of the inequalities inherent to capitalism. They are the freedoms defined by and specific to individuals—self-interested and self-serving individuals. Therefore, they do not represent the freedom from religion or the freedom from exploitation. They are merely the promise that individuals can observe religious practices and occupy a position in the unequal distribution of income and wealth (with a tiny minority at the top and the majority at the increasingly distant bottom)

In that sense, Smith’s freedoms do not promise an end to the kinds of racist inequalities that have long been associated with capitalist exploitation. I’ll admit, getting rid of capitalism will probably not eliminate all forms of racist intolerance. But moving beyond capitalism will certainly take away one important determinant of the way racism has historically played out in the United States.

If and when that happens, everyone will be able to enjoy true freedom.

capitalism-crash

The other day, I expressed my doubts about Paul Mason’s arguments about postcapitalism. But others see his argument in a much more positive light, including some friends of mine, Jenny Cameron, Katherine Gibson, and Stephen Healy [ht: sk].

They, too, however, assert that “technology does not in and of itself guarantee a better future.” What are needed, and which they see emerging in the midst of capitalism today, are “explicit ethical commitments that are developed independent of online apps and cyber networks.”

Technology is augmenting relations of care for others. Technology does not bring these relations into being.

In our research on the diverse economic practices that exist outside the purview of mainstream economics, we find people are forging new types of economies around six ethical concerns:

  • What do we need to survive well?
  • What happens to surplus, or what is left over after our survival needs have been met?
  • How do we act responsibly to those whose inputs help us to survive well (whether other people or the environment)?
  • How much and what do we consume in order to survive well?
  • How do we care for the commons – the gifts of nature and intellect that we rely on?
  • How do we invest so that future generations can also live well?

I think they’re right: we do need to be aware of the ways the existing set of relations—the relations of capitalist commodity production—not only create capitalist subjects, but also noncapitalist subjectivities.

The way I’ve put it in my own writing, capitalist commodity production both presumes and constitutes particular kinds of individual subjects (which Marx referred to as “commodity fetishism,” i.e., particular notions of “freedom, equality, property, and Bentham”). But it also brings into existence new collective subjectivities—new ways of “being in common”—that can transcend capitalism.

A concrete example might help here. The existence of capitalist healthcare (of healthcare providers as well as healthcare insurers) both presumes and supports the idea that healthcare is an individual concern: we are supposed to take care of our own individual healthcare (whether through the established healthcare system or via “alternative” therapies) and purchase healthcare commodities (again, either established or alternative) if and when they are necessary. But it is also the case that the existence of healthcare commodity markets also brings together providers and consumers—nurses, doctors, and patients—who have an interest in a different kind of healthcare, one that is less interested in profits and more in the well-being of both providers and consumers.

That alternative subjectivity—that “being in common” in relation to healthcare—can serve as the basis of a noncommodified, noncapitalist form of healthcare. And, pace Mason, new kinds of information technologies might even be useful for connecting producers and consumers in postcapitalist ways. There’s nothing automatic about it, of course. Still, both new ethical commitments and information technologies signal the possibility of ways of moving beyond capitalism.

The key is to find ways to combine those emerging technologies and ethical concerns in a political movement that is inspired by a fundamental critique: both what is wrong with the existing order and an imagining of a concrete alternative.

That’s what comes next. . .

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