Economics and Its Discontents

ATROPOS PRESS new york • dresden General Editor: Wolfgang Schirmacher Editorial Board: Giorgio Agamben Pierre Alferi Hubertus von Amelunxen Alain Badiou Judith Balso Judith Butler Diane Davis Chris Fynsk Martin Hielscher Geert Lovink Larry Rickels Avital Ronell Michael Schmidt Fredrich Ulfers Victor Vitanza Siegfried Zielinski Slavoj Žižek © 2015 by Jędrzej Malko Think Media EGS Series is supported by the European Graduate School Cover art: Adam Borowski ATROPOS PRESS New York • Dresden 151 First Avenue # 14, New York, N.Y. 10003 all rights reserved 978-1-940813-77-6 E conomics and Its Dis contents drzej Malko Acknowledgements: I am grateful to many for their invaluable discussions, insights, and VXSSRUW , ZRXOG OLNH WR WKDQN 0LNRáDM Borucki, Prof. Vivienne Brown, Prof. David Hawkes, Prof. Jerzy Jedlicki, Jakub Krzeski, Dr Bartosz .XĨQLDU] Prof. Germano Maifreda, Krzysztof Pacewicz, Tadeusz 7HOHĪ\ĔVNL and to Aleksandra Piejka, my love, for taking their time to read the early manuscript of this book and help me refine the argument. I am also very grateful to Elena Rozbicka for proof-reading the manuscript DQGWR$GDP%RURZVNLIRUWKHFRYHUDUWZRUNDQGWR3DZHá0DONRIRUWKH cover idea. I would like to express my gratitude to the internet communities of anonymous pirates and intellectual property thiefs who break copyright laws and let academic books and articles into circulation. Without you I would never have been able to do my research. Finally, I would like to thank my family and my dear friends for the support they gave me while I was working on these pages. Also, apologies are in place for all those times I lost myself in the library and didn’t show up when I should have. I owe you one! Contents : Chapter 1…………………………………………………………………..…………..11 In which the purpose of this study is outlined. Chapter 2…………………………………………………………………..…………..13 In which the analytical approach of discoursive materialism is explained. Chapter 3…………………………………………………………………..…………..19 In which the myth of barter is debunked. Chapter 4…………………………………………………………………..…………..23 In which the concept of debt regime is introduced. Chapter 5…………………………………………………………………..…………..29 In which the violent beginnings of the institution of money are recalled. Chapter 6…………………………………………………………………..…………..35 In which it is shown how Greek economic discourse was shaped by opposing political factions. Chapter 7…………………………………………………………………..…………..41 In which it is argued that the existence of a longing for the good old days doesn’t mean that they have ever existed. Chapter 8…………………………………………………………………..…………..45 In which we point out that economic growth is relatively new phenomenon. Chapter 9…………………………………………………………………..…………..51 In which the interplay between religious and economic discourses is introduced. Chapter 10…………………………………………………………………..…………55 In we recognize the institutional character of private property and visit time when it was of secondary importance to constellations of power. Chapter 11…………………………………………………………………..…………61 In which it is argued that the issue of usury was so dire because it violated the logic of arithmetical justice and endangered interests that hinged upon it. Chapter 12…………………………………………………………………..…………67 In which, by acknowledging the significance of Arabic economics, we pretend that this study is not so Eurocentric. Chapter 13…………………………………………………………………..…………71 Which puts Friedmanite monetarism in an appropriate, medieval, context. Chapter 14……………………………………………………………………………..77 In which a transition from feudal to capitalist Europe is sketched. Chapter 15…………………………………………………………………..………...83 Which shows how the market became a space of spontaneous order and how exchange ceased to be arithmetical. C hapter 16 …………………………………………………………………..…………87 In which it is shown how money became capital. C hapter 17 …………………………………………………………………..…………91 In which we s ee that the Italian R enais s ance didn’t give rebirth to humanity; nevertheles s it left offs pring in the form of modern bookkeeping. C hapter 18 …………………………………………………………………..………..99 In which historical, static patterns of consumption are explained, and then their breakdown, as well as legal attempts to defend them are presented. C hapter 19 …………………………………………………………………..………..107 In which we study an economic school that has never existed. C hapter 20 …………………………………………………………………..………..115 In which the emergence of population as an economic subject is considered. C hapter 21 …………………………………………………………………..………..119 In which the synthesizing effects of bodily and organic metaphors are explained. C hapter 22 …………………………………………………………………..………..125 In which the relationship between P rotestantism and the rise of capitalism is discussed. C hapter 23 …………………………………………………………………..………..129 In which it is explained that supposedly secular liberal political economics are more sacral than the economics of Aquinas ever were. C hapter 24 …………………………………………………………………..………..133 In which two main outlooks on international commerce are outlined. C hapter 25 …………………………………………………………………..………..145 Which shows how perilous passions were turned into legitimate interests. C hapter 26 …………………………………………………………………..………..149 In which iconoclasm as a mode of critique is critiqued. C hapter 27 …………………………………………………………………..………..153 In which an example of iconoclastic argument from seventeenth-century E ngland is presented. C hapter 28 …………………………………………………………………..………..157 In which we see that economic freedom was instrumental for the market equalizing machine. C hapter 29 …………………………………………………………………..………..165 In which we see the roots and fruits of the scarcity figure. Chapter 30 …………………………………………………………………..………..173 In which it is shown how liberal political economy was used to legitimize nineteenthcentury economic genocide. C hapter 31 …………………………………………………………………..………..179 In which a time is shown when everyone understood that economic and political freedoms aren’t the same. C hapter 32 …………………………………………………………………..………..183 In which we see that classic liberals were rebellious pro-statists. C hapter 33 …………………………………………………………………..………..191 In which impact of banking on the regime of debt is inspected. C hapter 34 …………………………………………………………………..………..199 A short but important chapter which shows how economics is blind to the political nature of money and its disciplining effects. Also, a chapter in which the worthlessness of the radical notion of value is outlined. C hapter 35 …………………………………………………………………..………..205 In which it shown how intellectual property was established by business fighting business in British courts. C hapter 36 …………………………………………………………………..………..211 Which argues that Adam S mith was not the father of economics. C hapter 37 …………………………………………………………………..………..215 Which shows that socialist and liberal economics are not that different. C hapter 38 …………………………………………………………………..………..221 Which inspects a few important tropes of labor struggles. C hapter 39 …………………………………………………………………..………..229 In which essential shortcomings of Marx’s economics are outlined. C hapter 40 …………………………………………………………………..………..239 Which explains why the “working class” can never win the “class struggle.” C hapter 41 …………………………………………………………………..………..245 In which we take look at the so-called “marginalist revolution.” C hapter 42 …………………………………………………………………..………..249 In which psychological premises and logical tautologies behind the figure of homo economicus are inspected. C hapter 43 …………………………………………………………………..………..257 In which the historical role of historical schools of economics is outlined. C hapter 44 …………………………………………………………………..………..265 In which mathematicization of economics and its use of abstract theorizing is criticized. Chapter 45…………………………………………………………………..………..273 Which shows why Keynes was no K eynesian. C hapter 46 …………………………………………………………………..………..279 In which it is explained why in the twentieth century the enthusiasm for central planning was shared on the both sides of the Iron C urtain. C hapter 47 …………………………………………………………………..………..283 Which shows that economic game theory is a war game. C hapter 48 ……………………………………………………………………………291 In which modern consumption is studied as a field of power and domination. C hapter 49 …………………………………………………………………..………..299 In which the sad frutilessness of the postmodern left is explained. C hapter 50 …………………………………………………………………..………..307 Notes ……………………………………………………………………………………311 B ibliography………………………….………………………………………………353 Chapter 1: In which the purpos e of this s tudy is outlined. Already too many spectres have haunted the people, and for too long the people have unreflectively worshipped various spectres. Countless manifestos have fruitlessly promised to lead the people on the road from serfdom, out of the dark tunnel of necessity, and into the daylight of abundance. And yet, few people have asked: what is this spectre? And how is it possible that the more unwaveringly it promises to unchain the people, the heavier are the shackles which ultimately bind them? There is an urgent need for a narrative on economics that will allow us to grasp the role it has been playing in the constellations of power throughout the ages. An attempt at such an analysis is the main purpose of this study. It should be noted that at no point is it postulated that all historical power struggles could or should be reduced to the realm of economy. The cognitive value of bringing all dimensions of social reality under one common denominator is negative. The search for any one prime mover, the true and hidden structure, or some general logic of history is always harmful. The attraction of simple answers lies not in what they reveal about the world, but in how much they hide from us, making life less complicated than it should be. That said, one doesn’t have to fall into traps of crude economic reductionism to acknowledge the role economics plays in modern systems of power. On the contrary, it is hardly possible to analyse the economics of power without appreciation for the power of economics. 12 Economics and Its Discontents Political struggles that shape worldwide economic infrastructures are largely informed by economic discourses, and the legitimacy of the decisions that affect the lives and livelihoods of billions of people and, ultimately, the natural environment of this planet are often derived from this or that economic doctrine. What’s more, in the course of this study it will be shown that today economistic narratives, figures, and modes of thinking have contaminated areas of life whose economic nature until recently had not been considered self-evident. Economics has burst its banks and spilled over a terrain so vast that today we don’t even speak about society, culture, and people, but rather about social capital, cultural capital, and human capital. Resources to be invested with hope for a nice rate of return. To challenge the status quo one has to first understand it. Without untangling the relationship between economics and other discourses, cultural formations, and institutions, there can be no meaningful response to problems arising at the multiple tangent points between politics, economy, and economics. Hopefully, this study will productively contribute to a debate on such a response, providing some insight into the basic dynamics of mainstream economics and its pivotal motifs. This historical perspective is meant to provide a much needed context for the most present issues. Only if we really grasp the fact that there has never been a critical difference between the main schools of economics, if we appreciate how much they are alike and recognize the synthesizing logic with which they operate, will we be able to cut through the threadbare and barren debates between left and right and work out a truly fruitful understanding of political economy. Chapter 2: In which the analytical approach of discoursive materialism in explained. In the past two or three decades, it has been often claimed that the discussion on economics is changing. The rigorous modernist claim that economics is a positive, norm-free science has been challenged numerous times. Klamer argued in 1990 that “seeing economy as a discourse and exploring its rhetorical dimensions, to which their works inspire, seems to bring new life to the conversation about economics.” 1And indeed, some discoursive analysis of the economic genre has been applied. Economists are not completely unaware of what poststructuralist theory has to offer, and they occasionally employ the devices of (a kind of) literary deconstruction or (a rudimentary) genealogical analysis. To name a few examples, there were attempts to apply poststructuralist critique to Marxist thought, 2 to treat neoliberalism with Gramsci, 3 to show foundationalism of liberal doctrines 4 and to apply rhetorical analysis to Friedman 5 or Keynes. 6 Henderson pointed to the potential benefits of conceptualising economics in literary terms, 7 while Klamer made a case for appreciating the discursive and rhetorical dimensions of economics. 8 McCloskey published several interesting books on the latter subject. All in all, economics is supposed to enter a “tempestuous season.” 9 Yet, this tempest seems to be ultimately a sort of dry thunderstorm, both in economic discourse and discourse on economics. Possibly it shouldn’t be surprising that mainstream economists couldn’t care less for some philosophical, epistemological quibbles. But not only the “interpretive turn” hasn’t reached mainstream economics, 10 but the challenges formulated on the margins of the discourse usually utilize poststructuralist arguments only as a way to establish themselves as the 14 Economics and Its Discontents new orthodoxy. It seems that the trench warfare between different economic schools continues, while all sides slowly learn to use new stylistic armaments. And as will be shown later, it is hardly a new thing in the history of economics. No comprehensive critique of economic genre has been formed yet. I would argue, that without providing a more general framework for thinking about economics, the cognitive value of discoursive analysis will be lost and will deteriorate into the very blind instruments of power it seeks to dismantle. Whilst deconstructing economic knowledge is certainly indispensible to understanding it, it needs to be a part of a much bigger project. Otherwise it may be that studying rhetorical devices used to established legitimacy for this or that theorem will end up just another way to publish an academic paper. The sole claim that “economists have become to some extent prisoners of their tools” 11 is as much true as it is analytically barren. Such comprehensive critique of economics must be based on a study of its history. Without proper historical context, it is simply impossible to grasp the dynamic of power struggles on a systemic level. Debord warns that: The precious advantage that the spectacle has drawn from the outlawing of history, from having condemned the recent past to clandestinity, and from having made everyone forget the spirit of history within society, is above all the ability to cover its own history of the movement of its recent world conquest. Its power already seems familiar, as if it had always been there. All usurpers have wanted to make us forget that they have only just arrived. 12 The analytical value of the idea of the spectacle will be discussed later (Chapter 27), but for now let us concur that oblivion of the past ensures that the present remains unchallenged. Even if one tries to do so, without the knowledge of the past he or she is stuck in the vicious circle of Economics and Its Discontents 15 repeating the same age-old arguments in the same age-old debates and making the same “groundbreaking” discoveries as had been made countless times before. Therefore, to a significant extent this is a historical study. However, it is neither a history of ideas nor is it purely a materialistic history of economic practices. As hopefully will be illustrated by this thesis, a proper examination of social phenomena needs to abandon the timeworn methodological dichotomy between spirit and body (which has typically expressed itself in the Christian preference for the former or the materialist for the latter). As Schmitt argues, constructing a contrast between these two spheres only to dissolve it by reducing one into the other must result in a caricature. 13 Thus, I will be looking for interdependencies between economic discourses, institutions, and practices, trying not to privilege any one of them. Study of discourse that disregards study of practice is rootless and toothless. Study of practice that doesn’t see its discoursive underpinnings is no study at all. Vries rightly complains that “historians are prone to labour under the misapprehension that one can answer fundamental questions about a phenomenon by seeking its origins. There one hopes to observe naked, innocent acts that reveal the true character of what is later shrouded in mystery.” 14 The search for such original sin is futile. Thus, instead of giving way to such archaic methodology and looking for points of rupture that put in motion successive historical periods, I propose to analyze history as a story about a multitude of discourses, institutions, and practices that dynamically change their configuration, forming various power structures. Perhaps it could be described not by a genealogical metaphor, which suggests themes of evolution, generational succession and family resemblances, but, if you forgive me this high-flown metaphor, as a history of constellations. Hardly ever does a really new 16 Economics and Its Discontents star appear on the night sky or an old one vanish from it, but each of the myriad stars pulsates with varying brightness, and time after time we decide to look at a chosen few of them as if they were somehow meaningfully connected. And, after all, on some level they really are interconnected, influencing each other constantly by their gravitational and electromagnetic forces. For some decades now, social theory has been growing in the climate of, to use metanarratives. Lyotard’s 15 clichéd expression, incredulity toward It is accepted to study localized politics of resistance, explore “the lonely struggle of the prisoner in his cell,” 16 to give voice to groups previously silenced and expelled to the margins. Narratives that are scaled to a more general level of analysis stink of sorcery, of crude Marxism, of Enlightenment hubris. But while distrust towards totalizing, or homogenizing narratives is understandable, it too often becomes an excuse not to think on a more global and general level. The justified hostility towards the way of thinking associated with grand narratives is too easily extended to the object of such analysis. Rejection of structuralist approaches too often leads to refusal to analyze global structures. I would argue that this is the equivalent of throwing the baby out with the bathwater. Today, to find our feet in the world, we desperately need narratives that are big, even grand, along with those that are small and localized. As long as we remember that they all have their blind spots and limitations, as long as we resist the temptations of reductionism, they can serve us well. What’s indispensable in this endeavor is a sort of intellectual humility that allows for no more than just pointing to some impermanent tendencies, shaky patterns, and a few cautious generalizations. As little as this. A much as this. Economics and Its Discontents 17 This discussion is not to be enclosed within one subdivision of academic field. It will bring in diverse issues, ranging from the military conquests of Alexander the Great to Elizabethan theater, from the scholastic stance on probability to the birth of modern consumer credit. However, it would be imprecise to say that the approach will be multidisciplinary. Rather, one can expect from this work an attempt at an unidisciplinary approach. It is not about bringing together various perspectives on one subject but proposing an analytical framework that could be used to further our understanding of various subjects. The book is structured around 50 short chapters, each of them tackling a specific topic and presenting yet another side of the problems at issue. The chapters are organized more or less chronologically, although that rule is sometimes bent. I recommend that they are read consecutively, however, the narrative is not strictly linear and at times a topic touched on in one chapter is picked up in another one. Such links are usually indicated by the number of the chapter put in brackets. The argument will proceed in a somewhat discontinuous way precisely because the broadness of the subject at issue renders linear narratives useless. Perhaps it cannot be cut open with a one-dimensional, however sharp, argument, but must be entwined by a net-like one. Hopefully, the insights we are fishing for will not slip through. Finally, I must acknowledge that the decision to operate on a level of general analysis in search of systemic interdependencies comes at a cost. Tackling a wide range of issues means that none of them is fathomed completely, and many are certainly treated with less attention than they deserve. This is also partly due to an attempt to make this work as succinct and to the point as possible. Writing lengthy papers is a threefold sin: of smugness, style, and lack of consideration for the reader. 18 Economics and Its Discontents Although I stand by my research and have put a lot of effort into ensuring that no factual mistakes were made, I accept that in many fields I remain an amateur. I therefore welcome all possible corrections and criticisms. My only hope is that these criticisms will not bring the discussion back to the level of particulars. Succumbing to the terror of details bars us from any chance of understanding the world we live in. To say that things are more complicated is always true, but only at times does it contribute to our understanding of the issues at stake. Thus, demolish my arguments all you want, but please, do it in order to go beyond them and not to step back. Chapter 3: In which the myth of barter is debunked. Barter (verb) mid-15c., apparently from Old French barater, to cheat, deceive, haggle Online Etymology Dictionary Few concepts are more central to modern economics than that of barter. After Adam Smith proclaimed that “the propensity to truck, barter, and exchange one thing for another” 17 is inherent in human nature, this claim has been repeated countless times, becoming “the great founding myth of the discipline of economics.” 18 The existence of barter has been often presented as a historical fact, usually in narratives telling stories of the gradual progress of humanity: once upon a time there was barter, which was natural, but very inconvenient, so people came up with money to supplant it. “It needed conscious reasoning power of Man to make the step from simple barter to money-accounting” tells Crowther, who was editor of The Economist from 1938 to 1956, in his Outline of Money. 19 This story has become a sort of common sense understanding. One can notice that in modern economic textbooks, barter is no longer presented as a stage in economic history, but rather as a imaginary figure. Graber collected several instances of this: “To see that benefits from a medium of exchange imagine a barter economy,” write Begg, Fisher and Dornbuch. “Imagine the difficulty you would have today, if you had to exchange your labor directly for the fruits of someone else’s labor,” propose Maunder, Myers, Wall and Miller. “Imagine,” suggest Parkin and King, “you have roosters, but you want roses.” 20 This move from grounding argument in historical narrative to abstract theorizing surely is linked with the general concession to abstract reasoning (see chapter 44), but it has another quality as well. Being solely an abstract figure in a thought experiment, it cannot be falsified with 20 Economics and Its Discontents historical evidence. This is priceless, because the fact is that there is no historical evidence that an economy sustained by barter has ever existed. Anthropologists have “discovered an almost endless variety of economic systems. But to this day, no one has been able to locate a part of the world where the ordinary mode of economic transaction between neighbors takes the form of ‘I’ll give you twenty chickens for that cow’.” 21 In the words of one Cambridge anthropologist: “No example of barter economy, pure and simple, has ever been described. […] all available ethnography suggests that there never has been such thing.” 22 Of course, there are specific cases in which barter exchange occurs, and does so on a significant scale. It is a legitimate form of settling accounts in all capitalist markets. In the 1980s around 40 percent of EastWest trade involved some degree of barter. 23 Inmates in many prisons use various barter systems to exchange items on a black market. However, it has never been employed as a regular way of handling economic interactions between fellow villagers. Abundant data on various exchange systems that could be labeled as barter shows that it only “takes place between strangers, even enemies,” 24 and “all such cases of trade through barter have in common that they are meetings with strangers who will, likely as not, never meet again, and with whom one certainly will not enter into any ongoing relations […] each side makes their trade and walks away.” 25 Confusion about the pervasiveness of barter amongst humans may have arisen from the fact that many regimes of exchange may appear to the unaided eye like barter systems, although in fact they are nothing of the sort. The prevailing system of settling accounts within European societies, a system that predated capitalist and even feudal modes of exchange and for a long time co-existed with them, was the system of Economics and Its Discontents 21 account money, which was “an ideal unit of measure that allows the evaluation of goods that are exchanged.” 26 It existed only in the mind and in writing. It was a measure of value used for accounting purposes, and the value of other commodities, including actual coinage, would be measured against this standard. The system of money of account most common in medieval Europe was that of pounds, shillings, and pence, which was based on multiples of twelve (the duodecimal system), as opposed to ten (the decimal system). It was introduced possibly as early as the seventh century, but given prominence by the financial reforms of the Emperor Charlemagne in the late eighth century. 27 - writes Wood, but account money and object money (see chapter 5) have been used long before the seventh century. It was used in ancient Egypt, where the unit was grain, whose value was subjected to careful regulation by administrative authorities. 28 One can also see in the Homeric epics that we all know from school that people measured the value of ships and armor in oxen, but of course they never actually paid for anything in oxen. 29 Davies argues that because the taming of animals preceded agriculture, cattle preceded the use of grain as the unit of account money 30 and have occupied a role so central in it’s evolution that etymologically the term “capital” is a derivative from cattle. 31 In early Germanic law codes, a monetary value was assigned not only to property but to people as well (“wergild”), detailing compensations due for various degrees of bodily harm, murder, and manslaughter, somewhat prefiguring modern insurance calculations that evaluate people’s health in terms of percentages of bodily damage. Everything and everybody quite literally had a price. For example, from the earliest known Anglo-Saxon laws, the dooms of Aethelberht of Kent (602–3) we read that “If anyone lies with a maiden belonging to the king, he is to pay 50 shillings compensation.” But of course 50 shillings would not have been paid, not just because the economy was largely nonmonetary at that stage, but because neither the shilling, nor even the penny, was then in circulation. 32 22 Economics and Its Discontents This imaginary money was used to settle accounts even in seventeenth century Europe, providing a matrix for economic exchange that had nothing to do with the direct exchange of goods for other goods and everything to do with communal debt regimes, which are the subject of the next chapter. Chapter 4: In which the concept of debt regime is introduced. The debt shall be paid, said Crito; is there anything else? Plato Many readers may remember that in the Homeric epics, which are set in a pre-monetary context, the exchange of gifts plays an important role in establishing relationships between the protagonists. 33 Another well-known, or perhaps even the best known, instance of gift exchange is the one between the Queen of Sheba and Solomon. 34 Although the figure of barter is so well-rooted in economic discourse that sometimes gift exchanges are presented as a yet another form of barter, 35 ever since Malinowski’s studies of the Kula ring in the Trobriand Islands and Mauss’s conceptualization of gift economies, there has been enough research on the structures of reciprocity that it is generally recognized as a separate institution, with its own specificities. Modern mainstream economists may still struggle with the very concept of giving gifts and consider it a wasteful ritual, hence “any transfer of resources which was not chosen by the recipient through the market will generally be inefficient.” 36 However, few would argue that gift economies didn’t exist, or that elaborate gift exchange systems didn’t play important social functions both within communities and in diplomatic encounters between them. For that reason, some radical thinkers look to “gift economies” as a potential site of resistance to capitalist ordering of the economy. However, gift systems have never constituted the primary regime of economic life. They are interesting institutions, certainly worth exploring, but all things considered, they should be rather treated as phenomena that 24 Economics and Its Discontents were historically of secondary importance to the distribution of power. Leaving aside the instances of Mesopotamian kingdoms and ancient Egypt where circulation of wealth was centrally managed with only an embryonic market system functioning on the sidelines of a highly regulated temple economy, 37 for a very long time, the majority of day-today dealings were not subject to administrative decrees or to the monetary market economy, but were part of a social debt regime. Debt regime can be understood as a system of recognizing mutual obligations within a given group that ensuries stability and the continuity of economic exchange by disciplining the parties engaged in it to abide by their agreements. And the fact is, that long before the establishment of monetary economy, through the Middle Ages and even far into the eighteenth century, a majority of everyday transactions operated on the basis of personal credit, through the use of imaginary account money as well as with the aid of various tallies, tokens, and ledgers. 38 The commonly repeated narrative of the credit system being a late development in the history of economic exchange, which supposedly moved from the most concrete forms (barter) to the most fictitious ones (financial derivatives), a story about the victory of abstract over concrete, 39 is simply not true. Credit was central to everyday communal life constituting “a complex and intricate network of personal ties, […] based on personal agreements, many of which were struck verbally in face-to-face interactions.” 40 And it was central to wholesale trade and manufacturing as well; “wholesale trade in wool, cloth, wine, tin and so on […] all stages in the woolen clothing industry […] sales of land and of rents […] were commonly conducted through extending credit.” 41 English merchants, shopkeepers, farmers, manufacturers, and consumers had developed an elaborate credit network based on personal agreements. One historian estimates that by the first half of the seventeenth century, the Economics and Its Discontents 25 ratio of personal credit to coin transactions was 11:1. This statistic is further substantiated by Craig Muldrew’s study of how people in sixteenth-century King’s Lynn, a then-vibrant coastal town north of Cambridge, used a wide array of credit contracts, such as sales credit, bills, bonds, and pledges, to mediate their commercial interactions. The successful employment of such instruments generated an extensive web of credit that connected people throughout the community, sometimes as creditors and sometimes as debtors. 42 Discipline was ensured mainly by means of informal social control, and for a long time operated without appealing to the mechanisms of state violence such as police or bailiffs. That was especially the case in the Middle East, where after converting to Islam commercial classes largely dispensed with the state structures. 43 The livelihood of the masses depended in the first instance on such informal credit regimes and on the commons. The commons can be understood as an inseparable combination of a social practice and a resource that was both its condition of possibility and the object of this practice. It was an institution that forwent the regime of property rights, in which, for instance, a village cooperative communally used land on which (individually owned) cattle was herded. Collective management of the commons ensured that no “tragedy of the commons” (i.e., no depletion of the common resources caused by unrestrained individual usage) would occur, deciding on the rules and fines for breaking them, e.g. “when the increasing number of cattle raised the risk of overgrazing the pasture, the cooperative issued an ordinance for the pasture […]. It limited the number of cattle, impounding them if necessary and levied fines and enforced their collection.” 44 The regime of debt was enforced from within but was also influenced from above. The most important regulations were ones designed to counter the tendency to accumulate wealth in the hands of a small elite 26 Economics and Its Discontents and to protect debtors. Sumerian and Babylonian kings typically on assuming power and sometimes later over the course of their reigns issued declarations of “clean slates,” voiding all outstanding consumer credit, returning land to its original owners and freeing the debt-peons. 45 As Graeber notes, “the Sumerian word amargi, the first recorded word for ‘freedom’ in any known human language, literally means ‘return to mother’ – since this is what freed debt-peons were finally allowed to do.” 46 The Old Testament rule on the jubilee years served a similar role: every 7 years debt-induced slavery was to be annulled, and every 49 years all debts were forgone and land returned to its owners. 47 The deeply political dimension of debt regime was also appreciated by Solon, whose famous reforms laid foundations placing the political sphere above the most immediate financial interests of the lenders. 48 As Reddy writes: [Solon] set that society on the road to democracy by decreeing that debts could no longer be secured against the persons of Athenian citizens. Defaulting debtors who had been sold into slavery were immediately freed; others liable to the same fate were declared free of their debts. From this reform arose that stark distinction between citizen and slave in Athens upon which civil equality and popular sovereignty were later built. 49 Both in the case of communal debt regimes and the practice of the commons, there was some room for motives, practices and discourses that were not strictly economic. [C]ivic organization in the ancient world gave first place to non-economic relations, even in the case of commercial enterprises connected to the political-administrative sphere. This gave rise to a sort of personal relationship between authorities and citizens, due to a “civic sense” in the Greek polis, to ambition and patronage in the Roman Republic, and finally, in the Roman Empire, to the “benevolence/beneficence” of the emperors, who, whatever they did, were called benefactors 50 In Attic tradition “the city, although being a community, is treated ‘as a friend’, or, the benefited partner of the euergetic [characterized by generosity – JM] relationship between two individuals.” 51 These themes of friendship and solidarity were an important part of this discourse of Economics and Its Discontents 27 benevolence. However, perhaps to the disappointment of those leftist theoreticians who like to point to the commons as a new utopian project of social organization that could replace the discredited project of communism, we have to remember that the commons, as all institutions, were open to power struggles and practices of violent domination. Vesting power over one’s access to economic resources in the hands of the local community made for a very efficient disciplining tool that ensured one’s compliance with local social, cultural, and religious hierarchies. Neither social debt regimes nor the commons should be cast in the role of a horn of plenty that automatically brings about some version of an utopian future. Also, some neo-Keynesians utilize this history to claim that debt is a primordial mode of social being, its essence even, and that granting government the power to create money means simply reconciling the political sphere with the underlying economic structure. 52 This is perhaps an interesting, but ultimately a marginal approach. For our discussion, a more important stance on debt is that taken by mainstream liberal economists. And it is an approach marked by a hard-line hostility towards debt and a utopian vision of a society of individuals free from any obligations to each other and at liberty to settle all their accounts in cash (see chapter 34). It is, perhaps, precisely due to this hostility that the history of social debt regimes has been generally consigned to oblivion, since if it was remembered, it would certainly give the lie to liberal economic mythology. Chapter 5: In which the violent beginnings of the institution of money are recalled. Money, it’s a crime. Pink Floyd Although there is nothing universal about money – out of six “grand civilizations” in human history, the Sumerian, Egyptian, Minoan, Chinese, Mayan, and Andean, the last two developed highly sophisticated social structures without any use of coinage 53 – today money is instrumental to the modern debt regime and thus to all economic power struggles, so it is worth exploring its history. The first Lydian coins were struck out of electrum – a gold-silver alloy – during the 7th century, BCE. In Greece, as in India and China, coinage was probably invented and first manufactured by jewellers, but soon thereafter it was monopolized by the state. It is often argued that the biggest force behind the spread of coinage was warfare. 54 The invention of money correlates in time with changes in the techniques of warfare and the replacement of old armies made up of aristocratic warriors and their servants with trained professionals. This new class of mercenaries was paid salaries, not only the plunder and spoils of war. But plunder and pillage contributed to the development of coinage as well, as during wars, large amounts of precious metals, previously stockpiled in temples, were dethesaurized, as the economic historians like to say; [they were] removed from the temples and houses of the rich and placed in the hands of ordinary people, […] broken into tinier pieces, and began to be used in everyday transactions. […] How? Israeli Classicist David Schaps provides the most plausible suggestion: most of it was stolen. This was a period of generalized warfare, and it is in the nature of war that precious things are plundered. 55 It is telling that the Phoenicians, the greatest merchants and bankers of antiquity, didn’t strike coins until they were “forced to do so to pay 30 Economics and Its Discontents Sicilian mercenaries.” 56 Business could be and had been conducted using ingots and promissory notes. But warfare demanded coinage. Probably the single most influential event for the popularization of the institution of coinage was the military campaign of Alexander the Great, whose conquests led to “the most rapid extension of any single monetary system in world history – until the advent of euro in 2002.” 57 Not only had Alexander destroyed the ancient Mesopotamian debt regimes and dethesaurized gold held in their temples, but he also ensured that his coins were the only legal tender in his empire meaning that all taxes had to be paid in Macedonian drachmae. 58 This meant that civilians in the conquered lands found themselves in a position in which they had to accept payments in the currency of the conquerors. When Alexander’s army was fully engaged in Asia Minor, the total cost of his campaign reached daily payments of some half a ton of silver. 59 This meant around 120,000 drachmae transferred every day into a multitude of private, often armed, hands. Unsurprisingly, the coinage soon became accepted both as a concrete instrument of exchange and its abstract structure. As Davies writes: Coins followed – indeed accompanied – the sword; payment for troops and for their large armies of camp-followers was generally the initial cause of minting. Only the best was good enough for an all-conquering army, and what was good enough for the army, even if at first accepted through compulsion, was soon universally accepted by everyone with alacrity. Although armies could always take, or “requisition”, whatever they wanted, payment in good coinage was a better way of getting eager cooperation. 60 From that time, control over coinage became one of the first priorities to be assumed by any conquering army, even until this day, with the British Authority money in the Second World War or dinars issued by the Coalition Provisional Authority after the Second Gulf War. Issuing money always performed not only an economic role, but a political one as well. Austin and Vidal-Naquet show that “in the history Economics and Its Discontents 31 of Greek cities coinage was always first and foremost a civic emblem. To strike coins with the badge of the city was to proclaim one’s political independence.” 61 Emblems and symbols struck on coins were arguably “by far the best propaganda weapon available for advertising Greek, Roman or any other civilization in the days before mechanical printing was invented.” 62 And today, quite a bit of political energy is still mobilized around issues of currency sovereignty, for instance in European countries in which adoption of euro is debated, or in Central and Southern American countries which adopted the US dollar as their official currency. Wherever state coinage was imposed, it had to prevail over previously existing systems of exchange consisting of the abstract account money, social debt regimes, and finally, object money (sometimes described as “primitive money”). Davies gives us a whole alphabet of items used as object money: amber, beads, cowries, drums, eggs, feathers, gongs, hoes, ivory, jade, kettles, leather, mats, nails, oxen, pigs, quartz, rice, salt, thimbles, umiaks, vodka, wampum, yarns and zappozats, which are decorated axes – to name but a minute proportion of the enormous variety of primitive moneys 63 Setting aside the issue of gold being also a kind of object money used successfully (and without calling it “primitive”) by leading capitalist countries up until the twentieth century, it should be noted that the most successful object monies such as manillas – which were metal bracelets used as currency in West Africa – were in circulation even after the Second World War, and it took a long and painful struggle to displace them with British pounds. 64 In fact, an indispensable part of the European colonial enterprise was always a long and painful struggle to enforce new forms of discipline by drawing people into the cash-nexus and supplanting local exchange systems with state-money. It usually involved some sort of poll tax that had to be paid in cash, 65 and penalization of the 32 Economics and Its Discontents traditional rituals of gift exchange and conspicuous consumption. For instance, the 1927 Revised Statuses of Canada stipulated a penalty of no less than two months in prison for engaging in “any Indian festival, dance or other ceremony of which the giving away or paying or giving back of money, goods or articles of any sort forms a part.” 66 However, it always takes power to establish a monetary regime, and sometimes invaders found it impossible to achieve. At times shortages of coinage and other problems with establishing a generally accepted monetary system led colonists to officially recognize as currency object money of the conquered peoples. For an instance, in the seventeenth century, wampum was made legal tender in several American colonies, making strings of beads both a currency in dealings with indigenous communities and among the colonists themselves. 67 As monetary regimes are so closely interconnected with the political powers upholding these regimes, an essential part of a great number of modern revolutionary movements was the creation of revolutionary money. Two great revolutions of the late eighteenth century, the French and the American, were financed by experiments in creating inconvertible paper money: The first action of the second Continental Congress [a convention of delegates from the Thirteen Colonies that started in 1775, soon after breakout of the American Revolutionary War – JM] was to create an army. Armies have to be paid for and the Congress had no taxing powers. It therefore arranged for the issue of $2 million of Bills of Credit in June, and another $1 million in July. […]. Needless to say the Bills of Credit were not “as good as gold” but moral persuasion was used to induce people to accept them: Any person who shall hereafter be so lost to all virtue and regard for his country as to refuse the Bills or obstruct and discourage their currency or circulation shall be deemed published and treated as an enemy of the country and precluded from all trade and intercourse with its inhabitants. (Resolution of 11 January 1776) 68 Eventually, there was a complete default [of the revolutionary money]. Thomas Jefferson said that the public feared that this would shake the Confederacy to its very centre, but instead: Economics and Its Discontents 33 Their annihilation was not only unattended by tumult but was everywhere a matter of rejoicing and congratulation. Their great services as a support of the War were known and felt by all and all knew and felt their destruction was a certain public good…. In Rhode Island—an obstreperous little commonwealth—some Continental bills were buried with the honours of war. They were enclosed in a special repository, and over this a eulogy was pronounced as over the remains of a departed friend and benefactor. 69 The close relationships between war, debt, and money will be studied later on (chapter 33), but for now, let us note that exposing the bloody origins of coinage shouldn’t be taken as a proof that it is an essentially violent, oppressive institution. It seems to me that this is the mistake David Graeber makes in his otherwise captivating account of the social history of debt. The narrative on money that dominates economic discourse today is one that sees money as a sort of atemporal, natural, and neutral thing. Liberalism sees it often as primary to political institutions, while mainstream economics doesn’t see it at all (chapter 34). 70 Therefore, the challenge lies not so much in condemning money for its gory genesis, but rather in putting it in a historical context, seeing it as an institution and exploring the functions it played in the power struggles through the centuries. Economic reflection shouldn’t be concerned simply with the politics of distribution of money in a given society, but muat rather recognise the political dimension of the institution of money as such and study the various effects different exchange systems have. Chapter 6: In which it is shown how Greek economic discourse was shaped by opposing political factions. economy (noun) from Greek οἰκονομία, literally; management of the house, law of the house Etymology Online Dictionary The first Greek text on economy is Hesiod’s poem Works and Days, in which he argued against the admiration for war and martial virtues and praised the new ideal of peaceful husbandry. 71 The most important principle of Hesiod’s household economic teaching is the traditional, timeless order which: shows itself in the careful division of work according to the season. [e.g.] Wood must be brought from the mountains in winter, and even the age of people and animals is taken into account in the division of labor—the 40– year-old is the youngest able to dig a straight trench and not just look around. 72 Other themes of his teaching were care, which should be applied at all times, and neighborly reciprocity. He warned that profit can confuse the senses and bring out aggressive behavior in people. Nonetheless, he recommended that one should seek to increase household profit and engage in sea trade on a limited scale. 73 Hesiod also advised that since sea trade is hazardous, a man’s entire property should never be risked on a single ship’s excursion, 74 thus voicing around 700 BCE the intuition for whose mathematical formulation Harry Markowitz earned a Nobel prize in 1990. After Hesiod, bits and pieces of economic reflection can be found in philosophers such as Heraclitus and Democritus, but certainly the fullest and also most successful Greek economist was Xenophon. His Oikonomikos became a best-seller for generations, not only in Ancient Greece, but also in the Roman empire and long afterwards. 36 Economics and Its Discontents In the 15th century, it was streamlined into a separate Italian economic discourse, 75 but was influential on its own as late as 1652 (date of publication of Blith’s Dedication to the Nobility and Gentry) 76 or even 1727 (Bradley’s translation of Oikonomikos under the title of The Science of Good Husbandry). 77 Xenophon emphasized the same principles as Hesiod, praising order (“nothing is useful or fine for human beings as order” 78) and diligence. 79 In both Works and Days and Oikonomikos the household was conceived as a private sphere that was understood without reference to the local or national economy. However, this doesn’t mean that the Greeks were not capable of a more macroeconomic analysis. For instance, Isocrates’ Trapeziticus treats the specific situation of the Athenian economy, with its fiscal and monetary problems. 80 And Xenophon’s less known work, Ways and Means, also shows a general orientation to the economy of the whole polis and proposes a series of policies to promote trade, strengthen manufacturing, and attract capital from abroad. 81 In a proposal that could be called proto-Keynesian, if we were interested in such retrospective readings of history, he argues for a proactive stance of the polis in promoting industrial entrepreneurship and tries to calm objections that public initiative will have adverse effects on private business. 82 In his other work, Cyropaedia, he describes the division of labor, linking it (as Adam Smith would do later) to the size of the market. 83 And Aristotle’s abstract conceptualization of the geometric exchange matrix proved essential for scholastic economic theories (Chapter 15). There is a general tendency in economic historiography to exclude analyses critical of a given economic order from its body and focus solely on theories that accept it either openly or implicitly, by assuming that it is Economics and Its Discontents 37 morally neutral. Thus, the bulk of Greek economic theorizing is disregarded as moral philosophy and not strictly economic theory. 84 But, of course, all economic theories are, explicitly or not, moral and political philosophies as well. And the fact that the elite of Greek philosophy shared a distrust of economic motives and were wary of commerce does not mean that they didn’t theorize about them. Probably the most hostile attitude towards commercial society was Plato’s. He conceived economic activities as morally degrading and the profit motive as unacceptable. He especially held retail trade, which in his eyes was an unproductive speculation on goods, in contempt. He argued that politics must be purified from the polluting effects of the commercial mentality or otherwise, when “the desire for more growth has reached its technical limits, the feverish mentality of the opulent city sets loose the spirit of war with other city-states.” 85 Therefore, in The Republic he envisioned a society whose economic activities are regulated in great detail by a cast of ascetic philosopher-kings. If trade is left to be determined by hedonistic demand it will lead to a new ordering of the world, based on a “calculation, that could be handled mathematically and that [would] replace the traditional ordering of life forms according to various dimensions, with a one-dimensional measurement,” 86 alienating people from moral ideals and destroying the natural environment in the process. 87 Similarly, Aristotle goes into great lengths to describe misdevelopment of the polis into a commercial society animated by the “chrematistic spirit”: For him [Aristotle], the development of a monied market economy that prospers on commercial exchange between socially unrelated individuals and that is moved by a chrematistic mentality, would adversely affect the traditional values of the community and gradually undermine the public spirit of the polis and of its citizenry. 88 38 Economics and Its Discontents However, Aristotle was slightly less hostile to commerce than Plato. Indeed, he married Pythias, a daughter of Hermias, the powerful banker who ruled the polis of Atarneus and a close friend of Aristotle. 89 Philosophically, as always, he recommended the golden mean as the answer to economic problems. In his eyes both poverty and excessive wealth can be equally corrupting, and the possession of wealth as such is not something negative. However, as the gain motive theoretically can be infinite (and in practice often is), it cannot be treated with the golden mean solution, and thus is inherently harmful. 90 Also, Isocrates and Gorgias, Sophists who are usually treated as technocratic pragmatics, considered the commercial spirit it to be the source of injustice and corruption. 91 There has been a long-lasting dispute on whether the Greeks employed the notion of linear time at all (or perhaps it was a Judaic invention, and the Greeks followed a “more natural,” cyclical vision of time?), and if so, whether it told a story of advancement or maybe of progressive decadence. There are numerous examples in support of all three options, 92 and arguably this debate can be only resolved by discarding the idea of the homogenous “Greeks” to whom one or another world-view could be ascribed and acknowledging that there were numerous tensions in Greek culture, one of which concerned the issue of progress. The aforementioned authors (apart from Hesiod) all wrote in a rapidly changing social environment in which two political prospects contended for primacy: a commercially growing society based on trade against a traditional and static society based on agriculture – merchant classes supported by democratic structures against an aristocratic culture supported by the elites – the nouveau riches against the traditional Economics and Its Discontents 39 establishment. 93 The lines of demarcation, as always, were not clear, but one can see these two tendencies in the political discourse of Classical Athens. In Ancient Greece, this tension between “perfect gentlemanship” and the commercial spirit, between “love of honor” and “love of gain”, was perhaps overcome only in Sparta, where citizens were forbidden to have anything to do with money-making, leaving economy in the hands of enslaved helots. 94 In The Human Condition, Hannah Arendt liked to romanticize Ancient Greece as a place where public life was free from lowly economic concerns, which rightly belonged to the private realm. I would argue that she misreads some of the philopohical writings that constituted a conservative defense of the power held by the elites for the general climate of the era. For all Arendt’s originality, this mistake is surely of the most trite in the historiography of ideas, it almost falls in the realm of cliché. Chapter 7: In which it is argued that the existence of a longing for the good old days doesn’t mean that they have ever existed. I remember the time when a man who was a tolerable workman in the fields had generally, beside the apartment in which he carried on his vocation, a small summer house and a narrow slip of a garden, at the outskirts of the town, where he spent his Monday, either in flying his pidgeons, or raising his tulips. But those gardens are now fallen into decay. The little summer-house and the Monday's recreation are no more. John Thelwall, year 1795 Two of the tropes that appeared in the Greek debates described in the previous chapter made a terrific career in economic discourse. Namely, themes of nostalgia and moralistic anti-consumerism. One of the most widespread myths of the pre-modern cultures, the myth of the lost Golden Age, was also an important part of Greek culture. Originally, goods were abundant and people could obtain them without much effort, but eventually human pride and desire for knowledge led them to disobedience and a conflict with the gods. The consequent godly punishment sentenced humanity to life of suffering and poverty, made possible only by painful labor. In this respect, the biblical story of the fall from Eden closely resembles Greek mythology. Interestingly, these myths may have reflected actual historical developments, telling the story of the Neolithic Evolution, which by introducing new agricultural technologies enabled the birth of civilization as we know it, but at the same time most likely drastically degraded quality of life. 95 42 Economics and Its Discontents In any case, in many ancient texts: there is considerable nostalgia for the solidarity of the frugal agricultural society, content with its poverty. This mythical model is contrasted with the society of the time, in which trade had introduced a love of easy riches and, along with it, selfishness and a disdain for moral values. Roll reminds us that the biblical prophets expressed this nostalgia because they were witnessing the decline of the tribal economy and the rise of private property, which also brings trade, the division of labour, class distinctions, and poverty. A similar process took place in ancient Greece. 96 In Dicaearchus of Messana (c. 350 – c. 285 BCE) we find the first formulation of the theory of economic stages. History moves through a series of phases, each characterized by one main type of production. However, in his eyes, this was a theory of the decline of man and not of his progress. 97 Also, in Book I of Aristotle’s Politics, we can find a discussion on the dynamic of the decay “from an economy based on natural art of household management towards an acquisitive system stimulated by the profit motive.” 98 He makes a distinction between a natural and legitimate procurement of goods in order to live well and an unnatural management of goods oriented towards profit and the limitless increase of one’s estate. Regress from the Golden Age is said to be fuelled exactly by yielding to such low and artificial motives. One can see that this argument works only when a divide between natural and artificial needs is introduced. Natural is legitimate, limited, and simply good. Unnatural is artificial, threatening, and luxurious. Of course, these criticisms are necessarily divorced from any historical sense, as they fail to see that all traditional and natural goods were once considered unnatural novelties. 99 Nevertheless, they have found a place in the economic and political discourse for good. Economics and Its Discontents 43 As Perrota notes: The opposition between natural and “artificial’ needs (and consumption) has had an enormous success. It was repeated in the Middle Ages, by St Thomas among others. In the modern and contemporary age it has become, and still is today, the main argument of all the critics of increased consumption, of all those who are nostalgic for the simplicity – real or presumed – of the past. With this function it was adopted by the moralists of the seventeenth and eighteenth century; by Rousseau; by all kinds of Utopians in the nineteenth century; by the Marxists Baran and Sweezy in the 1960s; and, lastly, by many advocates of a conservationist reduction in con-sumption. Today this distinction is still part of the common culture of so-called “anti-consumerism.” 100 At times the division between acceptable and unacceptable consumption was voiced in explicitly political terms; for instance, Plato argues in Republic against unregulated economic development by warning that it leads to rising social inequalities and discord, whose effect is that eventually “the State falls sick, at war with herself.” 101 (For more on political regulation of consumption patterns see chapter 18.) But generally, the natural/artificial division was part of a moralistic discourse that sought to influence individuals for the sake of their own moral standing. If the “original affluence” was lost due to the sins of pride and greed, then perhaps it could be regained by turning away from worldly pleasures. Thus, affluence can be achieved only through individual restraint and asceticism. This idea has been repeated countless times over the course of history. Xenophon’s Socrates proclaimed that being controlled by the “harsh masters” of gluttony, lust, and foolish ambitions is no better than slavery. 102 Plato, of course, voices the same argument for moderation and restraint. The Stoics warned that one should never rely on more than is absolutely necessary (which, in their view, included possession of slaves). 103 Also, early Christians drew on the Stoic tradition, and the more radical passages of the gospel, to campaign for indifference towards 44 Economics and Its Discontents earthly goods. In the Middle Ages, the Aristotelian division between natural and unnatural wants was picked up by Thomas Aquinas, who explicitly repeated his calls for moderation. 104 Aristotle was used as a major point of reference long into the sixteenth century, 105 and later, the same tropes can be found in Montesquieu 106 and Adam Smith, 107 and in the twentieth century, in Keynes. 108 Marxist critics, even though they rise above the level of crude moralism, in their treatment of consumerism as a sort of false consciousness brought about by the media complex to manipulate consumers into buying things they don’t really need or truly want, also often presume this dichotomy between natural and artificial needs. 109 It will be seen in this work that the themes of nostalgia for the lost serenity of life and the moral discourse of individual restraint, often working in pair, are recurring elements of economic discourses through the centuries (Chapters 10, 18, 48). And in any case, this longing for the good old days seems of little analytical value. Nostalgia appears to be a constant trope in European culture, working rather as a mode of experiencing the present than as an approach to understanding the past. It can and often is mobilized by political (especially, but not exclusively, nationalistic) movements, but it is doubtful whether it can become a valueable feature of any analytical framework that would improve our understanding of power struggles. Chapter 8: In which we point out that economic growth is a relatively new phenomenon. It's a zero sum game, somebody wins, somebody loses. Gordon Gekko in “Wall Street” The conservatism of the Greek elites and their ascetic ethics should be put in the context of pre-modern economy, the most important characteristic of which was, perhaps, that it didn’t know economic growth. Product per capita was generally static. Until the eighteenth century, all societies were caught in a Malthusian Trap, in which increases in output translated into larger populations but no significant increases of wages or quality of life for the masses. Clark notes that the average person in the world of 1800 was no better off than the average person of 100,000 BC. Indeed in 1800 the bulk of the world’s population was poorer than their remote ancestors. The lucky denizens of wealthy societies such as eighteenth-century England or the Netherlands managed a material lifestyle equivalent to that of the Stone Age. But the vast swath of humanity in East and South Asia, particularly in China and Japan, eked out a living under conditions probably significantly poorer than those of cavemen. The quality of life also failed to improve on any other observable dimension. Life expectancy was no higher in 1800 than for hunter-gatherers: thirty to thirty-five years. Stature, a measure both of the quality of diet and of children’s exposure to disease, was higher in the Stone Age than in 1800. And while foragers satisfy their material wants with small amounts of work, the modest comforts of the English in 1800 were purchased only through a life of unrelenting drudgery. 110 The perception of steady progress through the ages comes from a cultural overrepresentation of the lifestyles of small elites, which indeed have been progressing, but constituted only a margin of the population. Jane Austen may have written about refined conversations over tea served in china cups. […] While even long before the Industrial Revolution small elites had an opulent lifestyle, the average person in 1800 was no better off than his or her ancestors of the Paleolithic or Neolithic. 111 46 Economics and Its Discontents As Malthus himself noted, “the histories of mankind that we possess are histories only of the higher classes.” 112 Economic activities in this pre-growth era were largely governed by tradition and custom. “It isn't the knowledge or the ignorance of the farmers that causes some to be well off and others to be poor,” 113 says Xenophon. This knowledge didn’t need to be written down or codified, as the rules of economic conduct were considered to be obvious. 114 For centuries the rhythm of economic life was set by weather cycles. Periods of famine were interlaced with periods of relative abundance, and the best one could hope for was a stable comfort of living. In such an environment, consumption patterns were very different from the ones we know today. The greater hazard to a community’s interests lay not in scarcity, but in surplus, as its unequal appropriation endangered the social cohesion of the group. Hence, in pre-growth economies, one can see so many rituals of collective feasting, destruction of goods in potlatches or religious sacrifices, and finally, burying goods in the ground as treasures. 115 Some of these rituals have survived to this day, e.g., the Christian customs of Easter feasting can be tracked directly to old Slavic rituals of gluttony. On the other hand, traits such as entrepreneurship or willingness to take risks were often considered to be unsavory or outwardly threatening in pre-growth economies. The Catholic condemnation of usury certainly was instrumental in securing the Church’s economic and political interests (Chapter 16), but one can also argue that in a pre-growth economy it contributed towards securing social (albeit feudal) cohesion. Following Piketty’s “r>g argument”, 116 that whenever rate of return on capital is greater than the rate of growth, inequalities must rise, it is easy to see that when g is 0, Economics and Its Discontents 47 any return on capital must result in a concentration of resources and an increase in economic inequality. The static economy accommodated static economics (Chapter 11). When economic growth was unthinkable, exchange was understood as a zero-sum game in which the profit of one party must cause the loss of another party. This is why Aristotle states that trade “is justly discredited (for it is not in accordance with nature, but involves men's taking things from one another).” 117 By definition, the accumulation of wealth led to the impoverishment of others and therefore was immoral. This was the meaning of Augustine’s warnings that “the superfluities of the rich are the necessities of the poor” or that “you possess what belongs to others when you possess more than you need.” 118 Mass enrichment was not possible. As Aristophanes observes in Plutus, a society can have general affluence only if it is built on the enslavement of some other group. 119 The moralizing discourses described in the previous chapter are best understood this context, perhaps put in the most concise terms by Seneca: “The objects of your desire […] cannot be transferred to one person without being snatched from another.” 120 In Malthusian economies, wages always tended to be low, no matter how much people worked or how productive they were. Good times could last only for short periods of time triggered by a new technique of production, intensification of labour or, most famously, as a consequence of famines, plagues and wars, which by decreasing the numbers of mouths to feed could temporarily bring higher real wages to those who survived the purge. But as the population grew, individual incomes fell back to subsistence levels. In this situation, the only possible welfare policy that could be implemented was one of work prohibition. In the 48 Economics and Its Discontents long run, it didn’t affect the production per capita and wages, but improved life quality by increasing leisure time. This was precisely the economic impact and social importance of the Catholic prohibition of work on Sundays or the Judaic Sabbath. 121 Finally, we should note that recently the very notions of economic growth and gross domestic product (GDP) as its measure have come under harsh criticism. Simplifying it a bit, GDP is an estimation of the total sum of money spent in a given economy within a given time. The conventional approach to it is that the higher GDP per capita, the more developed the economy and the happier the people. This alleged identity is so far-fetched that even some mainstream economists, such as Nobel prize laureates Joseph Stiglitz and Amartya Sen, argue that GDP “may be a poor measure of well-being, or even of market activity,” 122 as it fails “to capture some of the factors that make a difference in people’s lives and contribute to their happiness, such as security, leisure, income distribution and a clean environment – including the kinds of factors which growth itself needs to be sustainable.” 123 Thus, in recent years a number of other approaches to measuring economic and social progress have been developed, such as the United Nations Human Development Index or the OECD Better Life Index, that take into account factors such as life expectancy, education levels, or quality of the natural environment. However, none of these attempts have gained significant standing in mainstream economic discourse. Another criticism of relying on gross domestic product measurements can be the “gross” part of the formula. GDP is the ultimate economic aggregate, which amasses all economic activity in a given country and unifies it in one figure. This can have a dangerous effect, creating a perception of economy as a unitary entity in which all internal Economics and Its Discontents 49 tensions are synthesised out of existence. This is not inconsistent with the historical purpose of national accounting. From its very beginnings, it was devised with the aim of providing knowledge not about quality of life issues but about the total military potential of a given country. William Petty’s 1665 estimates of Britain’s production were to provide an assessment of British resources available for the Second Anglo-Dutch War, while Davenant’s 1695 measurements were explicitly called “An Essay upon the Ways and Means of Supplying the War.” 124 And the GDP itself was chosen over indexes that would be more focused on wellbeing than simply total output in 1942, when the US Government needed a basis for planning their military expenses during the Second World War. 125 This was done despite the fact that the economists who devised the GDP formula explicitly stressed the need for relying on other measures: It would be of great value to have national income estimates that would remove from the total the elements which, from the standpoint of a more enlightened social philosophy than that of an acquisitive society represent disservice rather than service. Such estimates would subtract from the present national income totals all expenses on armament, most of the outlays on advertising, a great many of the expenses involved in financial and speculative activities. 126 Chapter 9: In which the interplay between religious and economic discourses is introduced. Remember the Lord your God, for it is he who gives you the ability to produce wealth. Deuteronomy 8:18 To claim like Foucault 127 that economics is an atheistic discipline, a discipline without God, is an easily made mistake. Nevertheless, it is undoubtedly a mistake. It is a godly discipline in many respects. Some scholars argue that economics should be simply understood as a branch of religion. 128 Such arguments are probably meant to shake our faith in the scientific legitimacy of economics, and may be valuable as such, but it is doubtful that they really further our understanding of economic discourses and practices. One can always describe one discipline in terms of another, but such pleasures of redescription are vulgar. When Encyclopedia of the World’s Religions included dialectical materialism in its directory, 129 it was undoubtedly a way of discrediting Marxism, but the cognitive value of such a move was, at best, vague. Therefore, it is our job to study economics not as religion, but to explore the interplay between the two. One can see three main (though often overlapping) dimensions of this interplay: first, there is explicitly religious discourse on economy; second, there are ways in which economic discourse shaped religious dogmas; and third, there is economic discourse that is not strictly religious, but uses religious figures and formulas as a way of establishing its legitimacy. Many examples of religious discourse on economy can be found in the holy texts of all three Abrahamic religions. The ancient Persian discourse on economic justice and equity filtered by the rabbinical tradition appears as one of the main topics in prophetic books, with Amos, Micah, and Isaiah articulating radical critiques of economic 52 Economics and Its Discontents development that creates social inequality and fails to provide for the poor and the weak. 130 One can find in the scriptures several precepts designed to ensure a welfare safety net for the poorest strata of society. Consider, for example, Leviticus 23:22: “when you reap the harvest of your land, you shall not wholly reap the corners of your field when you reap, nor shall you gather any gleaning from your harvest. You shall leave them for the poor and for the stranger.” 131 Deuteronomy 24: 19-21: When you reap your harvest in your field, and forget a sheaf in the field, you shall not go back to get it; it shall be for the stranger, the fatherless, and the widow, that the LORD your God may bless you in all the work of your hands.20 When you beat your olive trees, you shall not go over the boughs again; it shall be for the stranger, the fatherless, and the widow. 21 When you gather the grapes of your vineyard, you shall not glean it afterward; it shall be for the stranger, the fatherless, and the widow. Or Deuteronomy 23: 24-25: When you come into your neighbor’s vineyard, you may eat your fill of grapes at your pleasure, but you shall not put any in your container. 25 When you come into your neighbor’s standing grain, you may pluck the heads with your hand, but you shall not use a sickle on your neighbor’s standing grain. In Chapter 4, we have already discussed the Old Testament rules on the jubilee years and their influence on the debt regime. In the New Testament one can find much more than simply a welfare safety net for the poor. In the parable about the rich man and Lazarus, Epistle of St James, and, above all, in the Sermon on the Mount, one can find an outward praise of the poor and an attack on the rich. A sharp contrast is outlined between material wealth and spiritual riches, and there can be no doubt which are favored in the eyes of God. As we noted in Chapter 7, a good Christian should have an indifferent attitude towards worldly prosperity. “The good man neither turns his head to wealth when he has it, nor seeks after it if he has not,” says Basil of Caesarea (330-379). The treatment of economic issues in the Quran was quite detailed and nuanced Economics and Its Discontents 53 as well (we will come back to the economic doctrines of the Levant in Chapter 12). Another aspect of the interplay between economics and religion is the impact of the former on the latter. Agamben argues interestingly, if not entirely convincingly, that in the first centuries of the Catholic Church, economic notions played a decisive role in shaping Catholic doctrine. 132 Trinitarian dogma is not a theogony, “a story about gods,” but an oikonomia: a form of articulation and administration of divine life. 133 Christian theology is economic-managerial and not politico-statist, because its god is not a sovereign governor of the world, but a deity who manages it through providential revelations. 134 God’s providence (pronoia) appears in a form of oikonomia, in which the world is not so much governed as it is managed. In this paradigm, suffering and evil can be explained in various theodicies as collateral damage, a part of the bigger picture of a world that is the best of all possible worlds. Agamben argues that modern democratic sovereignty is derived precisely from this sort of theological-economic-providential paradigm. 135 Although it is an ambitious argument that may seem a bit far-fetched, it is worth noting that Maifreda makes a similar case by pointing to the role of economic discourse in seventeenth-century Protestant disputes and showing how they influenced Hobbes’ theory of social contract. 136 The third dimension of the interplay between economics and religion is of great importance. Economic discourses that establish their legitimacy by explicit or implicit appeals to religious discourses, and the various effects these appeals have, will be discussed numerous times in this thesis, in Chapters 10, 11, 12, 14, 23 and 26, to list some of the more significant instances. Chapter 10: In we recognize the institutional character of private property and visit a time when it was of secondary importance to constellations of power. when you give to the poor, do not let your left hand know what your right hand is doing Matthew 6: 4 In feudal economy, private property as we know it today rarely existed. Land was allocated by a superior lord under certain conditions and in return for services, especially military ones. This was the very basis of feudal economy: no one actually owned land. Feudal tenure was the “antithesis of private ownership”: A tenant could not sell his holding without the consent of his lord, he could not leave it by will, nor did his family have any legal right to succeed to it. All that he had was “seisin”, or possession. The lord had lordship, or dominion, but unless he was the king, he was himself a tenant. 137 In England, it was only during the twelfth or thirteenth century that a sort of private ownership of land emerged, if not in theory, then in practice and in common law. 138 The most lush Medieval discourse on property was produced by the Catholic Church. This shouldn’t be surprising. This biggest land holder in Europe 139 had to reconcile its earthly economic interests with the radical calling of Jesus. In other words, Mammon and Jehovah had to become friends. The Christian discourse on property generally considered it to be a necessary evil, an unfortunate consequence of the shortcomings of men and of the original sin. By no means was it to be considered a value in itself, and as we have seen in the previous chapter, several reservations were made for the sake of the poor. “Since land and riches were considered a gift of God to humanity as a whole […] possessions return 56 Economics and Its Discontents to common ownership in case of need, when the survival of the pauper is at stake.” 140 The rationale for the Church’s dominion over so vast lands was the stewardship thesis: the idea that man’s resources were a trust of which he was a steward rather than the owner. 141 In Jerome’s (347-420) words: “your possessions are no longer your own, but a stewardship is entrusted to you.” 142 Wealth is given to the wealthy by God, along with the moral responsibility of administrating it, on God’s behalf, to promote godly goals. 143 In this way, the efficient administration of wealth was turned into a legitimization for possessing it. Already in the second century, Clement “the Consoler of the Rich” of Alexandria wrote a treatise on The Rich Man’s Salvation in which he sought to “free the rich of the unfounded despair they might have acquired from reading” 144 more radical passages of the New Testament, by explaining that “goods are called goods because they do good.” 145 As Aquinas later put it, “possessions are not merely private property for personal enjoyment,” 146 but their holder has a continual duty to administrate their wealth for God and for the common good of the Christendom. The logic of accumulation of power in hands of the Church was thus morally and religiously justified, while at the same time a disciplinary moralistic discourse that condemned particular excesses of this logic was brought to the table, decrying the capital vices of greed, gluttony, and envy. The system was legitimate, however, individuals were sometimes corrupt. The surest way to present oneself as a steward of God was to practice almsgiving, “a holy work which increases present merits, forgives sins, prolongs life, separates us from the devil, joins us to God, and calls his angels to our help,” 147 as Augustine described it. Wood succinctly portrays the situation: Economics and Its Discontents 57 Pauper had both logic and tradition on his side when he declared that “Withholding of alms from the poor needy folk is theft in the sight of God, for the covetous rich withdraw from the poor folk what belongs to them and misappropriate the poor men’s goods, with which they should be succoured.” The rich were worse than thieves; they were murderers. Ambrose had stated bluntly that those who do not feed the starving kill them. This was taken up by Pauper, who dealt with it under the Fifth Commandment: Thou shalt not kill. 148 The fifteenth-century theological treatise Dives and Pauper reads: “if any man or woman dies for lack of help, then all those who should have helped, or might have helped, or who knew of the person’s plight, but who would not help are guilty of manslaughter.” 149 At the same time, giving alms was presented as a good deal for the patrons. John Chrysostom (347-407), Archbishop of Constantinople, put it graphically: “You give bread and get back eternal life.” 150 The practice of almsgiving was crucial to the oft-repeated idea of Medieval Christendom – namely, that the rich and poor are indispensable to each other. The patrons and the paupers were said to be the opposite poles of the same ideal, harmonious order. 151 This paternalistic view was voiced already in the beginning of the second century in The Shepherd of Hermas, an anonymous text that many Church Fathers considered canonical. 152 Interestingly, from the fourth century the Church institutionalized the practice of almsgiving and started providing for the poor out of its own coffers, 153 thus making it no longer simply an issue of individual morality, but also a legitimization for collecting the tithe. Also, already in 435 another justification of economic inequalities is formulated – that without the consumption of the rich there would be no work for the poor, 154 an argument that would enjoy a great career in the next millennium and is still used to the present day. Such paternalist ideas were in no case a novelty. In the very first Sumerian legal code, issued around 2050 BCE, the king presented himself as the protector of the weak, the widows and the orphans, from 58 Economics and Its Discontents the oppression of the mighty. 155 Similar themes can be found in the ancient Egyptian tale of the Oasis Man, in which the Pharaoh is praised as the mediator between the greedy administrators and the humble peasants and as the protector of the latter. 156 It seems that paternalism has always been an easy answer of the elites to the social demands of the subordinated classes. Similar to the husband who loves his wife so much that he just can’t help but to beat her, for millennia the privileged loved to take care of the poor so much that they just could not stand the thought that they may cease to be poor, and were even eager to express that care as long as it ensured that their privilege seemed morally warranted. When in the late Middle Ages the changing economy (Chapter 14) started to produce greater social inequalities and more poverty, the discourse on almsgiving was adapted accordingly. The poor, rising in numbers, were still considered essential to God’s plan of salvation, but were also seen as a potentially threatening force. Thus: Donors of charity became more discriminating […] the needy came to be divided into the deserving – those like the friars who were deliberately poor, and those who had fallen into poverty blamelessly – and the undeserving, vagrants, lepers, the unemployed, and beggars, who were considered idle and degenerate. 157 Along with this new moral qualification of the pauper, in commercially more developed areas, public aid was also condemned, as it was said to discourage people from working. 158 It was also at around this time that a new discourse on the dignity of labor began to emerge. The mendicant orders took an entirely different and quite influential, if short-lived, stance on property. A rule of the Franciscan Order set in 1221 forbade the friars from receiving money in exchange for their work or to carry money on them: “If ever we find money Economics and Its Discontents 59 somewhere, we should think no more of it than the dust we trample under our feet, for it is vanity of vanities, and all vanity,” and “if any of the friars collects or keeps money, except for the needs of the sick, the others must regard him as a fraud and as a thief and a robber and a traitor.” 159 In practice, Friars Minor did control property, but since Innocent’s 1245 bull Ordinem vestrum, the formal ownership of all Franciscan property was vested in the papacy, allowing the Little Brothers to use it without officially owning it. 160 From the very beginning, mendicant orders were often perceived as a radical and politically dangerous movement. At the beginning of the fourteenth century, after a century-long struggle, John XXII relinquished papal ownership of Franciscan property and declared it a heresy to claim that Christ had owned nothing. Many Little Brothers were persecuted and the Holy Inquisition burned some of them at a stake. Nevertheless, it is today argued that the earlier solution of vesting Franciscan ownership in the hands of the Pope served later as a model for the English monarchy, in which the king became the steward of God on earth and ultimately had dominion over all English land. “Any property that priests, or indeed laymen, held was the result of a royal grant, and was held from the king, on condition that it would be used for the good of the realm, and on the understanding that the grant was revocable.” 161 In any case, it should be remembered that private property has always had an institutional character. Hence, its specific form and role in social order varied historically and geographically. It would be worthwhile to look beyond the current debate on the innate nature and inevitable effects of private property in which liberals claim that it is 60 Economics and Its Discontents essential to any just political order, while radicals respond that it is inherently corrupting. Particular institutional arrangements of property have different power potentials for different social actors in different institutional environments. Private property had qualitatively different meanings for the Cathars in feudal Europe, for the English poor during the enclosures, for the French bourgouise in the wake of the Revolution, or for a modern New Yorker influenced by consumerist culture. Thus, the effects of specific property arrangements have to be studied close to their historical contexts, without yielding to the temptation of easy generalizations. Chapter 11: In which it is argued that the issue of usury was so dire because it violated the logic of arithmetical justice and endangered interests that hinged upon it. How about murder? Cato the Elder, asked for his opinion on professional money lending The when and how of the invention of interest-bearing loans is unknown. There is some speculation that it was conceived as a way to finance long-distance caravan trade, 162 but we will never know for sure, as interest taking appears to predate writing. In fact, a common opinion on the invention of writing is that it was invented as a method of bookkeeping. 163 While its origins may be unclear, it has been one of the most controversial problems in Western culture. As Moser says, “in history of ideas, there are only a few questions that have occupied human minds longer than the question of the justification of interest taking.” 164 Most classical religious, moral and philosophical discourses on usury displayed a clear condemnation of lending with interest. One can find objections to the practice in Judaism, Christianity, and Islam, in Greek philosophy and Roman political tradition. Cicero quotes Cato the Elder, who, queried about professional money-lending, simply replied: “How about murder?” 165 In the Ancient world, perhaps only in the Mesopotamian societies was there no moral disapproval of the practice (although, as we have seen in Chapter 4, there were periodic legal actions aimed at curtailing debt-induced inequalities). 166 In the medieval Christian discourse, usury was seen as an especially disgraceful offense against the ethos of charity. Canon law, codified in the twelfth century, entailed a restrictive regulation of economic dealings and a strict economic ethic. Monks were barred from engaging in 62 Economics and Its Discontents commercial business as well as in banking activities, and stiff sanctions were introduced to enforce the regulation. 167 It was said that a loan should always be free and treated as an act of charity. To demand more in return than the original amount was a sin of avarice, covetousness, and cupidity and an attack on the natural order. The iconography of many medieval sculptures, surely more accessible and understandable to all than the scholastic treatises, portrayed the spectacular ways in which usurers would be tortured by Satan after their death. 168 A similar attitude was held towards trade (Chapter 8). To resell a good for more than it was bought for was to violate “natural equality”. 169 Unless the good was improved through labor, the merchant was always cheating if he demanded more than he paid for it. Augustine argued that Christians should not be involved in trade altogether, as it is impossible to avoid sinning when buying and selling. 170 In 1078, the papacy proclaimed that merchants are necessarily sinners and denied them the prospect of salvation unless they find another line of work. 171 Mercantile activity was thus at best seen as a necessary evil, perhaps indispensable for social life, but nevertheless a sinful and in no case legitimate practice. 172 The prejudice against interest-taking and trade can be surely better understood when it is put in the context of a pre-growth economy (see chapter 8) in which there was no concept of a productive use of wealth. In static economy, the need to borrow usually arose after some temporary hardship, such as sickness, a natural disaster, or a bad harvest. The lender, if he demanded interest, seemed to be seeking a benefit from the suffering of his fellow compatriots. 173 Economics and Its Discontents 63 Usury was often defined simply as “where more is asked than is given”: The requirement for a perfect arithmetical equality in the loan contract was clear and without exception. Equity and justice demanded that one who lent five pounds could receive only five in return. Such an arithmetical equality, so satisfying in its simplicity and balance, remained an ideal. 174 Today it is established that a lender can expect compensation for his loan, because he forgoes other use of the capital which may be productive. Aquinas explicitly denied lender’s rights to compensation for possibly lost profit, since he would then sell what had only a probable and not definite existence, and “one should not sell something which one has not yet got.” 175 The spheres of the real and the probable were strictly divided and shouldn’t be confused. 176 And one couldn’t legitimately seek reimbursement for the time one had to go without the lent amount, because as time belongs to God, it cannot be sold. 177 It can be argued that this early scholastic thinking operated in binary terms: either something does exist or it does not; either it brings salvation or it is sinful; it is to be praised or forbidden. Exchange is either natural, harmonious, and equal or it is usurious and wicked. Kaye, in his terrific book on Medieval economic episteme, argues that “overturning usury theory would entail overthrowing the theological edifice of sin, restitution, and penance that had been built upon it, as well as the ideal of ‘natural’ equality and justice at its core.” 178 He calls it an arithmetical model which grew out of a sense of natural balance and divine order based on knowable points and perfections, and it was understood to be regulated by a conscious process of addition and subtraction toward the end of finding a knowable point of ‘‘natural’’ equality. It was represented by the ancient model of adding and subtracting weights to a scale in order to reach the perfect balancing point between gain and loss. 179 64 Economics and Its Discontents One of the most influential and oft-repeated arguments of Aristotle was that of the sterility of money: as a measuring medium, money is barren and cannot breed money. It should serve as a medium of exchange and could never be legitimately rented or sold in itself – this would violate its intrinsic nature and purpose. As we shall see, the importance of this concept cannot be overstated. For Aristotle, society is held together by the exchange of goods and services. And this exchange is governed by the constant process of equalization in the marketplace: Money, then, acting as a measure, makes goods commensurate and equates them; for neither would there have been association if there were not exchange, nor exchange if there were not equality, nor equality if there were not commensurability. 180 For it is not two doctors that associate for exchange, but a doctor and a farmer, or in general people who are different and unequal; but these must be equated. This is why all things that are exchanged must be somehow comparable. 181 Kaye comments that in both Aristotelian and early scholastic economic worldviews, this desire to establish such equality was the only proper motive for exchange and its legitimate end. The search of equality, for the accurate proportionality, is the search for justice. If money is the medium through which this search takes place, it needs to be neutral. Otherwise, the process of measurement, commensuration, equalization through exchange would be corrupted. and 65 Economics and Its Discontents Aristotle arrives at this “figure of proportionality” as the conceptualization of such exchange: 182 “All things are measured by money. Let A be a house, B ten minae, C a bed. A is half of B, if the house is worth five minae or equal to them; the bed, C, is a tenth of B; it is plain then, how many beds are equal to a house, viz. five.” 183 This figura proportionalis was later adopted by scholastic thinkers and often was the only figure illustrating medieval Aristotelian manuscripts. To quote Kaye once again: “Since scholastic thinkers were every bit as concerned with the question of equality as Aristotle, the search for underlying principles of equality became one of the great shared themes of medieval economic and proto-scientific thought.” 184 This idea sits well with another Aristotelian/Thomistic premise which perceives all motion in terms of a fundamental deficiency and inadequacy of the moving object. Movement is said to be a manifestation of a need, symptom of a deficiency, and nature realizes itself through fulfillment of this lack. As war must be for the sake of peace, movement is for the sake of rest and tranquility. The purpose of motion lies in its completion, its termination. This theme seems to me one of the most prevalent motifs of the Western culture, surfacing time after time, infecting countless theories and practices. We will come back to this, to show how such ideas mystify the processes of exchange, cloud the practices of economic domination, and entice false hopes for emancipation (Chapter 34). Chapter 12: In which, by acknowledging the significance of Arabic economics, we pretend that this study is not so Eurocentric. If thou profit by doing what is permitted, thy deed is a jihad. Prophet Mohammed Today no serious historian disputes that Islamic contributions to the culture of Medieval Europe were some of the defining elements of the era. Certainly economic discourses were not free of such influences, and so, to understand the developments in Western economics one has to acknowledge and understand the impact Islamic economic theorizing had on scholastic thinking. It may be also worth taking a step back from the unfortunate eurocentrism of this thesis to recognize that from the perspective of any other religion or intellectual tradition in the world, the differences between Semitic religions are few and barely perceptible. And from the eighth-century Umayyad conquest of Hispania to the 1492 fall of the Emirate of Granada, large parts of the Iberian Penisula were part of Al-Andalus. Muslim Spain in Middle-Age Western Europe was Islamic Europe. Recently, it has become a commonplace element of Western chauvinist discourse on Islam to claim that it is inherently hostile to commerce and economic progress. The issue of linking economic prosperity to various religious ethics will be dealt with in Chapter 22, and an alternative explanation of the differences in economic performances across the world will be sketched in Chapter 24. For now, let us note that the premise of the aforementioned argument is simply not true: There has been simply no tendency for Islamic societies to grow less quickly than others over the past half-century. This result was established by Marcus Noland of the Peterson Institute for International Economics, one of Washington's most respected think tanks, in a study published in 68 Economics and Its Discontents 2003. His paper provoked a cacophony of yelps of surprise among fellow economists but no convincing refutation. Indonesia and Malaysia, for example, have been relatively successful. And when Noland looked at countries with both Islamic and other religious communities, such as Ghana – a good way of isolating the specific influence of religion on growth – he found no evidence that Muslims were doing badly. If anything, Islam appears to be good for growth. 185 Quranic verses regulating economic life, apart from sumptuary laws proscribing consumption of wine and pork, read more like a guidebook on business ethics than a rule of a mendicant order. 186 Certainly, there is a strong preference for social equity. For instance, riba (usury), is defined in Aristotelian terms as an unnatural offspring and is prohibited. Zakat, a tax on income and property for the poor, is recommended, and rules on inheritance generation. ensure 187 that property is broadly redistributed each Market transactions are to be monitored in order to curtail speculation and to ensure the quality of the standards of weight and length measures. 188 However, all things considered, when one compares the stance on trade and commerce of the Golden Age Islam and early feudal Christian Europe, there is little doubt that the former was more welcoming to money making both in practice and theory. 189 And Islamic economic theory was highly sophisticated. 190 Zaid Ibn Ali (699-738) differentiated between business credit and riba, opening doors to the concept of productive capital. Al-Ghazali (1055-1111) accepted the motive of self-interest and profit, and viewed the latter as a reward for taking risks – as we have seen in Chapter 8, a problematic idea in a pre-growth economy. Al-Dimashqi (1232-1310) offered “a coherent and complete formulation of the market mechanism” 191 and a price theory, in which he distinguishes between ordinary periods in which price is a derivative of the cost of production, and periods of scarcity or oversupply, when it is set by speculative forces. Ibn Taymiyyah (1263-1328) carried out an analysis of market mechanism which includes an Economics and Its Discontents 69 investigation of regulation and deregulation, a description of the law of supply and demand, and a discussion on price elasticities of various goods and services. Ibn Rushdi (1126-1198), in his extensive commentaries on Nicomachean Ethics and the Republic, analysed politics in terms of a conflict between social classes. When Aristotle’s economic theorizing was introduced to scholastic thought, it was Arabic Aristotle, re-worked and furnished with comments (and significant omissions) 192 by this Andalusian scholar. 193 Interestingly, in Ibn Rushdi’s comments on Metaphysics, he stipulated that an object’s measuring rod has to be the smallest of its own kind, theoretically opening doors for a marginalist attitude towards value. 194 Later this idea played some role in scholastic debates, but its real career was six centuries later, when a non-labor theory of value was needed that overcome Marxist critiques of capitalism (see chapter 41). Studying Islamic Golden Age economic thought is important for at least two reasons. First, as we have already mentioned, it had an influence on the evolution of Medieval economic discourse. Second, one can find ideas and theories in Islamic economic discourse that seem very close to modern economics, but which were rejected and appeared again only after many centuries. Thus, studying it helps to understand that the history of economics is not a story of a linear progress of science, nor should it be seen as a cyclical story about a scientific truth that is time after time discovered, established, rejected and forgotten, only to be rediscovered again. Rather, one can see how similar economic conditions accommodate analogous economic discourses, and how similar discourses legitimize analogous economic systems. If one looks for truth in economics, hostility towards usurious loans in a static economy is as much true as is a celebration of productive capital in a growing economy. 70 Economics and Its Discontents Truth about economy is not something outside of economic discourse, an objective reality it unveils. It is rather a condition produced by a successful combination of economic discourse and economic practice. Chapter 13: Which puts Friedmanite monetarism in an appropriate, medieval, context. The ancient coins are excellent […] yet we make no use of them and prefer those bad copper pieces quite recently issued and so wretchedly struck. Aristophanes, “The Frogs” One of the most heavily debated topics in economic history was the (il)legitimacy of debasement. From the twelfth century onward, the practice became commonplace both in Islamic and Christian Europe. The prince or a king periodically called in all coins, proclaiming the date after which they would lose all value as legal tender and an exchange ratio at which they could be exchanged for the coins newly minted by government-licensed moneychangers. 195 In France, in the period between 1337 to 1360 there were eighty-five such debasements, on average more than three a year. Taxation on income wasn’t very effective in feudal reality, thus rulers resorted to alternatives such as confiscation, selling state offices, or debasing the coinage. 196 Debasement, although not without its disadvantages, proved to be the most effective way of ensuring financial liquidity, often providing over half of the income for the authorities. In critiques of debasement, negative macro-economic and social effects were frequently attributed to the monetary variable, for example Copernicus wrote that: It cannot be contested that the countries which use good coinage excel [their] manufactures, have the best laborers and have everything in abundance. On the contrary, in States that use debased coinage, cowardice, sloth and indolence reign; manufactures and the cultivation of the spirit are abandoned, and the rankest poverty prevails. 197 72 Economics and Its Discontents And although today this argument is generally presumed to be correct, it should be noted that historical evidence does not support such unequivocal disapproval of debasement. 198 It is more accurate to argue that this policy had a wide range of short and long-term effects, some of which harmed the interests of the moneyed classes. Thus, one can find various attempts to delegitimize the practice both in Islamic and Christian monetary discourse. In Islamic doctrines, debasement was seen as both an individual sin and a social fraud. Individually, it was a transgression against a value system that was based on the intrinsic (i.e., imposed by God) value of gold and silver. 199 Socially, it was an abuse of the authorities who were supposed to foster monetary stability to ensure a predictable business environment. Debasing coinage was counterfeiting money, a misuse of political power, comparable to bribery and corruption. On the other hand, the political classes argued in Aristotelian fashion that money, as a medium of exchange, is only a conventional standard and has no intrinsic value. Along these lines a concept of valor impositus was developed, which put the right to change the convention and impose value on money in the hands of the prince or the king. 200 In Medieval monetary discourse, the interests of the moneyed classes were defended most notably by John Buridan (1295-1358), Nicholas Oresme (1300-1383), and Gabriel Biel (1415-1495). Their work was largely derivative from earlier Arabic doctrines 201 but certainly played a significant role in Christian Europe. Oresme, bishop of Lisieux and advisor to king Charles V of France, in his treatise On the Origin, Nature, Law and Alterations of Money denounced debasement as worse than usury, an unlawful hidden tax inflicted by a sovereign upon his subjects. 202 Tractatus de origine monetarum, translated into French (at Economics and Its Discontents 73 that time an exceptional measure that was taken explicitly to popularize its thesis), became the most influential work on the subject until the sixteenth century. 203 At a time when around 70 per cent of the fisc’s income came from debasement, 204 Oresme argued that “the amount of the prince’s profit is necessarily that of the community’s loss.” 205 Money is an instrument of mediation between man and the divine order 206 and “belongs to the community and to individuals” 207 and not the king. The sovereign can alter the value of money, and debase it in special cases, for instance, when a war is to be financed, but it is for the community to decide what constitutes an emergency, and the sovereign should act only as its representative. 208 In the historiography of economic ideas, there is a tendency to disregard such discussions as non-economic. As the issue of debasement seems to many to have been settled long ago, medieval arguments for and against it, with their references to divine order and Aristotle, are discounted as naïve and unscientific. This is clearly wrong. It makes no more sense than arguing that medieval wars were not wars at all because no one used jet fighters and machine guns back then. Of course, the acceptable frames of reference change over time, and ways of establishing legitimacy change accordingly. However, the need for this legitimization of economic practices remains the same. If we rise above superficial differences between debates on medieval debasement and modern monetary policy, it may happen that we will see them as not so different. Davies makes a good point, when he talks about the “quality/quantity pendulum”: 74 Economics and Its Discontents [in the history of money] there is an unceasing conflict between the interests of debtors, who seek to enlarge the quantity of money and who seek busily to find acceptable substitutes, and the interests of creditors, who seek to maintain or increase the value of money by limiting its supply, by refusing substitutes or accepting them with great reluctance, and generally trying in all sorts of ways to safeguard the quality of money. […] For long periods of history the most important net debtor has been the single monarch or the composite state, each possessed with a varying degree of sovereign power to determine the supply of money, though never with complete control over the acceptability of money substitutes. Not surprisingly when the state becomes a net debtor the pendulum tends to widen its oscillations. An indebted monarch or government is usually able not only to reduce the real burden of its own debt, but can as a bonus consciously or unconsciously court popularity with the indebted masses by allowing the net pressures of indebtedness to increase the supply of money or the acceptance of substitutes and so lift some of the heavy burden of debt from the shoulders of the poor masses – and from many up-andcoming entrepreneurs. There is therefore a secular tendency for money to depreciate in value, a tendency halted or partially reversed whenever net creditors, such as large landowners, rich moneylenders and wellestablished bankers, are in the ascendancy or can bring their usually powerful influence to bear upon governments.[…] [This is why] theories of money, despite being so confidently held at one time, tend to change so drastically and diametrically (and therefore so puzzlingly to the uninitiated) to an equally accepted but opposite theory. 209 Thus, for instance, modern debates between “Keynesians” or, more accurately, various supporters of quantitative easing as a way of dealing with the crises of 2008 and monetarists, who still claim that increase in money supply is tantamount to inflation and silent theft, can be seen as another instance of Davies’s quality/quantity pendulum. However, what should be remembered is the fact that it is not a matter of a tug-of-war between creditors and debtors. This conflict is always mediated through concrete institutional arrangements of the particular debt regime, and at times the pendulum’s swing in the “quantity” direction may actually serve the interests of the creditors. It is too soon to say anything definite yet, but this seems to be precisely the case with recent quantitative easing policies which may have “supported economic activity” 210 and 75 Economics and Its Discontents contributed conditions,” towards 211 “broad-based improvement in financial but evidence suggests that due to “chronic structural weaknesses and perverse regulatory incentives” prevailing in the banking system, this “economic activity” concentrated mainly in the financial sector, increasing speculative pressures and destabilizing peripheral markets. Thus, fresh money translated into “a new house price, commodities or stock market boom” rather than “output, investment and employment.” 212 In any case, the theological/metaphysical frame of reference to which medieval scholars often appealed in these debates on debasement shouldn’t confuse us. Whatever the language in which these issues were expressed, the stake has always been the same earthly economic power. And the conflicts over debasement can be seen as exemplification of the thesis that money is an institution (Chapter 5), and that the most fundamental economic struggle is not over who gets how many banknotes or coins, but over the characteristics of the structure that makes these bits of paper and metal meaningful. Chapter 14: In which a transition from feudal to capitalist Europe is sketched. Ora et labora Benedictine motto. The year one thousand, the twelfth century, the Black Death, the years 1500, 1650, 1800. These are only a handful of the answers to the question of the birth of capitalism in Europe. The exact date of the rupture between feudal and capitalist economy is a subject of many heated debates. What was decisive? The improvement of farming techniques (ca. 1000)? The creation of lay legal framework for economy (12th century)? The demographical revolution that ended serfdom in Western Europe (the Black Death)? The emergence of the capitalist world-system (ca. 1500)? The first capitalist nation-states (ca. 1650)? Or maybe the Industrial Revolution (ca. 1800)? Arguably, such discussions are futile. It can be said that such reasoning can be divided into two categories: one that seeks to divide reality into categories, and one that does not. The first tries to label historical periods, phenomena, and ideas, to delineate between them and organize them into alphabetical or chronological order. Like Borges’ Celestial Emporium of Benevolent Knowledge, it divides animals into “stray dogs, suckling pigs, embalmed ones, those that belong to the emperor, those that are trained, fabulous ones, those that, at a distance, resemble flies, et cetera.” The second style of thinking is perhaps a less ambitious one. It doesn’t promise an encyclopedic, spotless inventory of reality. It humbly accepts that history develops along multiple contradictory vectors in a heterogeneous and often chaotic way. It sees that at any given time a number of autonomous power structures exist, some of them at odds with each other, others indifferent or in symbiotic 78 Economics and Its Discontents relationships. Its aim is not chopping social reality into pieces and mummifying them in catalogues, but exploring the dynamic interplays between various social actors, practices, institutions, and discourses. When one puts this second mode of thinking to use, the search for points of rupture rarely looks like anything other than a farce. The proclamation of a radical break is usually nothing other than a discursive device employed to promote some political agenda. I feel no need to take part in such a hunt, but in Chapter 36 we will see how this mechanism worked in the process of crowning Adam Smith as the father of economics. For centuries, feudal structures coexisted with capitalist institutions, and the distribution of power in Medieval and modern Europe was influenced by both. And obviously, the situation varied geographically. For instance, in England serfdom started to radically decline already in the fourteenth century, while in Poland serfdom was formally abolished half a thousand years later, and latifundian structures were only truly closed down after the Second World War, when they were turned into socialist state agricultural farms. In the High and Late Medieval period, one can see several significant shifts in economic structures. A number of agricultural improvements had been spreading, such as three-field rotation, using legumes as a nitrogen source, or the horse-collar and a deep plough, all of them increasing productivity and allowing for a revival of towns, which in turn enabled the flourishing of new crafts, trade, and intellectual life. 213 Many inventions, both industrial and cultural, were imported from the Arab countries via the Iberian peninsula and the Italian maritime city-states. From the eleventh to the thirteenth century, scholars at Bologna University worked on a new lay legal framework that envisioned market processes as an objective, morally neutral, medium through which Economics and Its Discontents 79 autonomous parties are free to strike whatever deals they like. 214 The monetary economy was advancing, accompanying and at times supplanting trade in kind. 215 Black Death, the most deadly biological weapon used to date (it entered Europe during the Mongol siege of Caffa, when infected bodies were catapulted into the city), caused acute shortages of labor by killing around half of the European population. This strengthened the bargaining position of laborers vis-à-vis the landcontrolling class, adding new pressures to dispense with serfdom and turn from extensive, labor-consuming agriculture to intensive, capitalconsuming agriculture. It was still generally a feudal economy, and due to all these developments a prosperous one, but it was also a rapidly changing economy. And no one accepted these changes passively. Federici shows that: Contrary to the schoolbook portrait of feudal society as a static world, in which each estate accepted its designated place in the social order, the picture that emerges from a study of the feudal manor is rather that of relentless class struggle. As the records of the English manorial courts indicate, the medieval village was the theater of daily warfare. At times, this reached moments of great tension, when the villagers killed the bailiff or attacked their lord's castle. Most frequently, however, it consisted of an endless litigation, by which the serfs tried to limit the abuses of the lords, fix their “burdens,” and reduce the many tributes which they owed them in exchange for the use of the land […] Thus, in 13th century England, both on the lay and ecclesiastical estates, male peasants were frequently fined for claiming that they were not serfs but free men, a challenge that could result in a bitter litigation. 216 Although in scholastic economic deliberations the issue of just prices overshadowed the just wage theory (perhaps also “because scholastics were not usually wage-earners” 217), in the aftermath of the Black Death the landowning classes repeatedly tried to set the wage levels by passing legal regulations that appealed to the “right reason.” 218 80 Economics and Its Discontents In France and in Aragon, ordinances condemned the outrageous wages being demanded by laborers. The English Ordinance of Labourers and the Statute of Labourers of 1349 and 1351, respectively, tried to impose a wage freeze and to restrict geographical mobility. 219 Also new sumptuary laws (see Chapter 18) were passed to ensure that social hierarchies remain evident. Monetary exchanges were still held under suspicion, and money itself was often seen as a “disturbing and distorting element, an overturner of the social order, an instrument of chaos.” 220 Markets were quite rigorously regulated: “Both princes and city councils continued to regulate (often in minute detail) the quality, quantity, and, at times, the prices of goods in exchange.” 221 Especially in times of emergencies such as a famine, prices were to be controlled, for example, by Philip the Fair in 1304, Edward II in 1315, or Edward III in 1349. These regulations were rarely successful, especially when passed by central authorities and not civic councils, but the paternalist discourse (Chapter 10) demanded that they were laid down. Kaye argues that the failure of these laws was one of the bases for the recognition of the marketplace as a autonomous system, not easily bent to external control and direction. 222 The Catholic Church, the biggest benefactor of the feudal system, at first responded to these developments by stiffening its stance on commerce and money making. Throughout the twelfth and thirteenth century, the dogma became more dogmatic, 223 and the Church began to use the charge of heresy to attack all forms of political insubordination, as in 1234 when the Bishop of Bremen called for a crusade against his peasant tenants who refused to pay the tithes. 224 Moralists warned about the great variety of new ways by which usury cloaked itself, 225 and in 1179 usury was made a mortal sin, and usurers were excommunicated and denied Christian burial. 226 Economics and Its Discontents 81 The papacy tried to stop the wave of change, while a number a number of new religious movements thrived on it. Probably the most notable were the Cathars, a popular movement that flourished from the twelfth to the thirteenth century in northern Italy and southern France. Influenced by Persian Gnosticism and Islamic commerce-friendly doctrines, rooted in the most economically developed regions of Europe at the time, Catharism explicitly challenged the papacy and the feudal order in general: Against the strict dogma of the ecclesiastical authorities, prohibiting usury and financial dealings in general, the Cathars espoused a doctrine more in line with the growing commercialization of economic life. In their view the social novelty of the emerging commercial and democratic society was morally better than the exploitation inherent in the feudal structure. […] With a logic and propaganda understandable by the landless peasants and the rural artisans, they railed against the feudal lords who profited from the extraction of economic surplus under the form of seigneurial rent. In their eyes the feudal lords were the most shameless and rapacious usurers of all. 227 Unsurprisingly, Catharism was proclaimed “the Church of Satan” and a crusade was organized to crush the movement. During this very crusade, the infamous Massacre at Béziers occurred during which, in the words of the papal legate in command of the crusading army, it “spared no one, irrespective of rank, sex or age, and put to the sword almost 20,000 people. After this great slaughter the whole city was despoiled and burnt.” 228 Some years after the massacre, it was reported that the captives’ slaughter was commenced by an order: “kill them all, God will know His own!” Although there are serious doubts whether the papal abbot really said that, the phrase took root and has been repeatedly used as a proverb in recent wars in Vietnam and during the so-called War on Terror. Chapter 15: Which shows how the market became a space of spontaneous order and how exchange ceased to be arithmetical. Grates Domine Historians who romanticize the past often imagine the medieval world to be innocent of economic calculations, a place occupied by religious commandments and traditional customs. An oft-repeated example of this alleged ignorance is the scholastic concept of iustum pretium – the just price. It is thus usually presented as a “sister to usury theory, another manifestation of the medieval desire to control economic activity in the name of religious ideals and social equilibrium.” 229 This may have been to some extent true in the Early Middle Ages, when market simply didn’t play a big role in the distribution of wealth, but in the High and Late Middle Ages, this image of a naïve, adolescent medieval people turns out to be very naïve itself when confronted with historical sources. As Kaye observes, “in the majority of texts on this question from the thirteenth to fourteenth centuries the just price ‘was simply the current market price.’” 230 Medieval scholars were involved on a daily basis in the administrative tasks of their universities and parishes, so when the new marketplace reality began to emerge, they were the first to notice. 231 And when the new moneyed classes evolved into a considerable political power, several scholars lent a sympathetic ear to their concerns. 232 As we have noticed, at that time the major intellectual frame of reference was Aristotle. For this Athenian philosopher, economic exchange was a self-ordering process, a quasi-mathematical product of a geometrical equalization (see Chapter 11) in which individuals could 84 Economics and Its Discontents compare usefulness of exchanged goods. This trope was picked up by Thomas Aquinas’ tutor, Albertus Magnus, who then slightly modified the argument and said that it was not utility for the individual, but common utility that determines a good’s value. Thus, marketplace was presented as a sphere where the whole community can evaluate the quality or usefulness of any good or service. 233 Market price came to be seen as an aggregate product – the concrete (if ever-changing) numerical representation of a complex, supra-personal system. As the geometric figura of exchange was de-subjectified, it came to represent the marketplace as a kind of mechanism of equalization, in which the cross-conjunction of common estimation and common need ‘‘automatically’’ determined market prices. 234 Augustine already remarked that in the marketplace what is measured is not an object’s essential value but its value according to human use. This is why bread costs more than a mouse, although the latter is certainly more perfect in the eyes of God. 235 Or, as Aquinas said: In exchange, things are not valued according to the dignity of their natures. If that were so, a mouse, which possesses sensitive life, would be priced higher than a pearl, which is inanimate. But the price of things is determined according to how much men need them because of their usefulness. 236 Following this line of reasoning, the Languedocian Franciscan Pierre Olivi (1248 – 1298) offered a theory of supply and demand, in which he explained that value is “weighted up” when individuals evaluate goods and services on the basis of needs, scarcity, and taste. 237 Baeck noted that to explain the differences between prices across markets and time Olivi even introduced an “embryo of subjective marginal calculus.” 238 Earlier thirteenth century theologians stated that it is a shared responsibility of both buyer and seller to achieve a knowable just price. But later on, not only lay lawyers claimed that “things are worth as much as they sell for,” 239 but also some canon lawyers came to similar Economics and Its Discontents 85 conclusions. They started to treat just price as a price which is naturally produced by a supra-personal process of common estimation. It became a result of a dynamic and impersonal market mechanism in which needs and interests of both buyers and sellers balanced themselves out. 240 As Olivi argued: The judgment of the value of a thing in exchange seldom or never can be made except through conjecture or probable opinion, and so not precisely, or as if understood and measured by one indivisible point, but rather, as a fitting latitude […] within which the diverse judgments of men will differ in estimation. And such a latitude will therefore contain various degrees and little certainty, and much ambiguity attached to the estimates, with some greater and some less. 241 The same point was made by Aquinas when he wrote that: “The just price of things sometimes is not precisely determined but rather consists in a certain estimate.” 242 These were truly extraordinary ideas: estimation replaced knowing; probability took the place of certainty. Even qualities – and this was a serious departure from Aristotle – could be quantified and turned into continua with ranges and latitudes. 243 Oresme characterized this new worldview as a geometrical one and mocked the opposing “arithmetical” (Chapter 11) vision for “her short-sighted concern that God conform to her vision of perfection” 244 manifest, for instance, in a belief that God would dislike geometry for the reason that it posits irrational numbers. For Olivi and Buridan, exchange is caused by individual desire to get as much from the other as possible. It is no longer motivated by the parties’ wish to achieve balance and equity (see Chapter 11). Equality emerges as a by-product of the market mechanism and ceases to be its guiding principle. 245 Money, previously seen as a dangerous subversive force, was now appreciated as instrumental in this process of equalization. 246 Scholastics thus started to calculate the monetary value of 86 Economics and Its Discontents everything and anything. Now, even the value of a simple “grates Domine” (“thank you, sir”) could be estimated in monetary terms (it was said to be worth ten pounds). 247 Seen through this lens, market was autonomous and worked freely from any need for external ordering or intervention. The justice it produced was no longer a fairness of a judge who balances scales but a justice of an impersonal mechanism. 248 This was probably the first acceptance of the existence of an order which didn’t need to be ordered. Let us remember that for Aquinas the equation of order with ordering intelligence was so undeniable that it provided basis for one of his proofs of God’s existence. 249 Yet, the marketplace became a completely selfordering system. The movement of celestial spheres still required active intelligence, but letting people bargain freely was now seen to automatically produce fair results. Conflicting interests, mediated through the market, were necessarily reconciled. Intelligent order became harmonious discord. Chapter 16: In which it is shown how money became capital. Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, pays it. Albert Einstein The new geometrical vision of the world allowed for a break in the conceptualization of money. In the thirteenth century, the arithmetic theory of usury crumbled. Enrico de Susa (1195-1271), Raymond of Peñafort (1175-1275), and above all, Pierre Olivi proposed that charging interest is not usurious when the loan is commercial, i.e., when the money is used productively. Advancing the money to finance trade or other commercial enterprises involves an element of risk that should be appreciated and reimbursed. Moreover, the lender forgoes other potentially productive uses of money, so he is entitled to lucrum cessans, compensation for the lost profit. 250 These were revolutionary claims. They dispensed with the concept of economy as a zero sum game. They valued time as an economic resource and they accepted that money can be used productively. Money ceased to be a barren medium of exchange, as the exchange itself ceased to be perceived as barren. This new productive form of money was introduced by Olivi under a new term, namely “capitale.” 251 At first, the legitimacy (or even the existence) of this “capitale” seemed by no means to be self-evident or natural. It took a long and painful struggle to establish it as the new social paradigm. The older moral imperative to share occasional surplus with one’s community through festivities and almsgiving wasn’t naïve or idealistic – as we have seen, in pre-growth environment it made sense and served important social functions (Chapter 8). In the incipient commercial hubs 88 Economics and Its Discontents of the Late Middle Ages, surplus came to be employed to generate more surplus. The payment of interest could be legitimate, in Olivi’s words, “because capital, in itself, i.e. insofar as it is profitable and destined to trading operations, contains a certain profitable nature in addition to its nature as the same amount of mere money not destined to trading operations.” 252 Olivi argued that the probability of profit has real existence and value in itself – merchants measure this value on a daily basis and there is no reason to call this practice sinful or illicit. 253 This constituted a major shift from earlier Thomistic discourse on time, profit, and the division between the real and the merely probable (see Chapter 11). These theological developments went hand in hand with new lay legal framework which made room for charging interest. Basically, three tactics can be outlined. First, the Italian jurists admitted that divine law forbids interest but declared that natural law allows it because it recognizes men’s weakness. 254 Second, a harm reduction approach was proposed – without going into theological or moral disputes, it simply stated that from a pragmatic point of view, the sovereign should not waste his efforts on an endless struggle to eliminate usury, but rather limit himself to keeping the levels of interest within reasonable bounds. 255 The third way was to present no theoretical discussion whatsoever, but to simply devise various legal instruments and financial derivatives aimed at disguising commercial loans as legitimate deals. Interestingly, the legitimacy of the first tactic was in part accepted by Aquinas, who made a limited allowance for charging interest on the grounds that “if all sins were forbidden many useful things would be prevented.” 256 (More on the place of theodicy in political economy in chapter 23.) Economics and Its Discontents 89 However, these new practices and ideas were dangerous for the feudal order and the Church’s position in it. They were disturbing on a philosophical level and agitating in terms of power struggles. Although Olivi overtly opposed the Cathars as a heretic sect, his own branch of the Franciscan order, the Spirituals, held a quite similar stance on economy: it was keen on commercial classes and critical of the Church’s accumulation of wealth. Thus, in 1296 the Spirituals were declared to be a heretical movement and persecuted. Two years later, on Olivi’s death, his books were burnt and the friars were forbidden to keep them. His tomb was destroyed and his remains were scattered. 257 “His ideas were forgotten, and influenced only a few Italian Franciscans […] Duns Scotus soon restated the traditional definition of usury.” 258 The arguments in favor of the right to lend at interest were declared heretic by Clement V in 1311. The concept of “capitale” re-emerged in the fifteenth century, when other Franciscans, Bernardino of Siena and Antonino, the bishop of Florence, copied Olivi’s arguments without acknowledging the source. 259 The Vatican’s persecution of Olivi was so successful that it was only recently that he was recognized as the silent partner of these two scholars. And to this day, many of his works remain unpublished and still wait to be studied. 260 Only more than two centuries after Olivi’s death, in 1515, pope Leo X issued the Inter multiplices bull, in which he sanctioned the Monti di pieta, a sort of ecclesiastical pawn shop, which loaned at interest. The practice gained universal sanction, insomuch as it was necessary to cover the expenses of montes pietatis and to indemnify them against loss. Usury was now redefined, to use Leo’s phrasing, as “a profit that is acquired without labour, cost or risk.” 261 Thirty years later, in 1545, Henry VIII legalized payment of interest on all loans as long as the interest didn’t 90 Economics and Its Discontents exceed 10 percent per annum. 262 But the issue of usury by no means disappeared from the intellectual horizon. Even today there are still heated debates on the subject, and in many countries regulations are put in place to define “usurious” and thus illegitimate interest rates. But from the sixteenth century, the focal point moved from questioning the legitimacy of any interest at all to merely defining its acceptable rate. While the legitimation of the willingness to take risks as a source of income (in contrast to perceiving it as dangerous vice [Chapter 8]) provided advantages to the moneyed classes, the most significant change came with loosening the doctrine on the sterility of money. Once the medium of exchange didn’t have to be neutral, its owners could start to derive profits from all flows in the economy. This was, if not a fundament, then certainly an indispensible counterpart of capitalism: the legitimization of a systemic arrangement for smooth bolstering of economic power by means of economic power. Chapter 17: In which we see that the Italian Renaissance didn’t give rebirth to humanity; nevertheless it left offspring in the form of modern bookkeeping. And don’t tell me that one must put the common good before one’s own interests! Poggio Bracciolini In his nineteenth century essay on The Civilization of the Renaissance in Italy, the Swiss historian Jacob Burckhardt envisioned the Italian Reinassance as the great pivotal point in the history of humanity. He portrayed it as a long awaited spring that came after the long and harsh winter of the middle ages. Mankind suddenly woke up and begun to liberate itself from the chains of custom, superstition, and religious dogma. The potential of the individual was finally appreciated and set free to flourish. Contemporary cultural genres such as the portrait, the diary, and autobiography testify to this new perception of individuality as “the ego gloryfing its own being.” 263 Although this story is still commonplace in popular culture and schoolbooks, few serious historians would today back it up. Porter notes that “the tale has the ring of myth, even an air of soap-box rhetoric, especially when recounted as an epic in which the heroic self is portrayed as surmounting ridge after ridge until it reaches its peak of perfection in our own times.” 264 Burke states “the sociological problem: whose self? Burckhardt’s examples came from a tiny minority of Italians, generally upper-class males.” 265 Martin points to the conservative and nostalgic message of this thesis: [The individual] often meant someone accomplished and well-rounded: an Alberti or a Leonardo. Burckhardt’s approach to the development of individualism located it in the stratosphere of elite culture. He deplored what he viewed as the blinder and potentially demagogic forces of mass democratization and industrialization. Individual freedom for the masses, he argued, would ultimately be no freedom at all. 266 92 Economics and Its Discontents So a narrative about a radical break signified, as usual, more a political intervention than an attempt to really analyze the Italian renaissance society. Unsurprisingly, it has been shown that Burckhardt overstated the contrast between the Renaissance and the Middle Ages. 267 While we must abandon the idea that Renaissance humanism really meant a renaissance of humanism, several tropes of the era are undoubtedly still worth exploring. We have already noted that the marketplace had been previously seen either as a place where independent individuals engage in series of exchanges or a sphere where the communal equalization of goods and services takes place. In Renaissance discourses on economy, the latter approach certainly dominated. “The individual exchanger would be seen less and less as involved in a personal relationship but as confronting a system, a set of economic laws.” 268 Economy came to be perceived as an extensive structure which, in order to be apprehended, needed to be studied from, to use Bernardo Davanzati’s (1529-1606) words, a “very high peak.” 269 Interestingly, at the turn of the sixteenth century, a new kind of landscape also gains in popularity. In the major commercial hubs (e.g., Florence, 1470; Venice, 1500; Anwerp 1515), detailed birds-eye landscapes of whole cities were drawn. Compare this 1500 chorography of Venice with a typical medieval, much more schematic, representation of Constantinople: Economics and Its Discontents 93 94 Economics and Its Discontents This is, of course, not meant to prove that new economic concepts influenced these artistic representations of cities. Rather, both could be seen as two expressions of the same experience of living in an increasingly complex and interconnected urban reality. To the extent that Renaissance culture promoted individualism, it promoted self-interest. In 1428-9 Poggio Bracciolini wrote On Avarice, in which he vigorously defended the titular trait. “Who in fact would do anything unless he hoped to profit from it?” 270 If it wasn’t for avarice, “all the magnificence of cities would be removed, all culture and ornament would be destroyed, no temples would be built, no colonnades, no palaces, all arts would cease, and then confusion of our lives and of the republic would follow.” 271 “For indeed we undertake everything for money, and we are all moved by the desire for gain,” 272 “and don’t tell me that one must put the common good before one’s own interests [...] [for] I have met no-one who could afford to do so.” 273 It has been argued Economics and Its Discontents 95 that it was “the first real pamphlet in favour of monetary economy,” 274 or at least the first since limited defenses of earning were put forward by the Epicureans and the Sophists. 275 Already in the fourteenth century, Dante’s friend Bartolus praised the merchant classes and presented trade and commerce as the foundation of secular political power. As Wood argues, a prosperous merchant class came to be understood as the force of political progress, the two became linked, underpinning Italian humanism. 276 The fullest expression of this sentiment can be found in Alberti’s Libri della famiglia – Books of the Family. Written between 1433 and 1441, they presented profit and trade not only as a legitimate, but also an indispensible part of civic life, deserving of recognition and respect. 277 Thus, in 1458 Cotrugli writes about the “dignity of merchants” and argues that “the advancement, the comfort, the health of republics to a large extent proceed from merchants.” 278 “Neither kings nor princes nor any [other] rank of men enjoy as much reputation or credit as a good merchant.” 279 This is light years from the feudal disapproval of trade and profit (see Chapter 11). When Lorenzo Valla (1407-1457) declared that it is natural to desire more than is needed, 280 or when Giordano Bruno went against the nostalgic Golden Age myth by arguing that in the past man was no noble savage but rather a brute beast, 281 they proposed a fundamentally new vision of the world. Around this time, several novelties in the perception of time appear. If for Xenophon “it’s almost impossible for a human being to exercise forethought” 282 and for medieval scholastics time remained the domain of God, now “prophecies of the inevitable were replaced by prognoses of the possible. The future now appeared unstable, open to every possibility, subject to human manipulation […] There was a shift from a passive acceptance of change, for better or worse, to a will to make changes, from 96 Economics and Its Discontents determinism to voluntarism.” 283 Of course this new, secular mode didn’t supplant the old, millenarian one, but from now on they both coexisted, forming various constellations. 284 But the feelings of contingency and the need to plan for the future were qualitatively new. So was the concept that that the moneyed classes live in a different time dimension, in which time could be evaluated in monetary terms and sold with licit gain. 285 One can see that I sometimes use terms such as arithmetic and geometry in this book as broad categories depicting opposing ways of thinking. These categories are not my invention. In the Late Middle Ages and Renaissance, they were used in debates on topics from metaphysics to celestial motion and to justice. We have already noted Oresme’s use of them. Another instance was a fierce thirteenth-century debate between Henry of Ghent and Godfrey of Fontaines. 286 In Maifreda we can find another interesting example: “A horse is really worth 100 scudi; one person values it at 1000 scudi, another at 10 scudi: the question is, which of them made the best evaluation and which was the least extravagant?” This “mathematical point” was posed as late as 1627, and yet answers varied. To many, the obvious answer was that 10 scudi was closer to the real price because, after all, it is only 90 scudi from it. The problem interested Galileo, who argued that the exaggeration cannot be measured “by its absolute distance from the just price […] [which would be] founded on a certain political decree that wants commutative justice to proceed in adjusting inequalities, with arithmetical proportions,” but must be measured using “geometric proportions.” Only then, he argued, can one arrive at a proper conclusion that both estimates are equally of the point, one inflated the price ten times, while the other understated it by the same proportion. 287 Economics and Its Discontents 97 A significant factor in the development of new commercial mentalities was the proliferation of a new approach to numbers. In 1202, Leonardo Fibonacci introduced to the Latin West the numeration and calculation methods he had learnt from his teachers in Algier, where his merchant father took Leonardo precisely in order to acquaint him with superior Arabic mathematics. 288 The Indo-Arabic numeration coexisted for a long time with Roman numerals. It can be argued that it was only with the invention and spread of double-entry bookkeeping that it supplanted the Latin numeric system. The first Italian book on the new accounting methods was published in Venice in 1494, but it was probably in use for over a century prior to that. 289 Not much is known about the origins of double-entry bookkeeping, but its subsequent great career is unquestioned: The double-entry system was a great deal more than a simple collection of information concerning income and expenses, details of transactions and debt, which might have been easily gathered into a single-entry volume as well. It represented a successful attempt to offer a complete and systematic analysis of transactions in a single document, making it possible to produce simultaneous, synchronized calculations of profit and loss, capital investment and the details of the business's financial situation. For these reasons, economic historians, from Weber, Sombart and Schumpeter, have seen the basis and stimulus for the birth of the capitalistic rationale in “scientific” accounting. 290 Accounting was slowly becoming a lingua franca of the emerging capitalist world economy. And if it may be an exaggeration to say, like Sombart did, that “capitalism without double-entry bookkeeping is simply unconceivable,” and it is certainly incorrect to claim that “with this way of thinking the concept of capital is first created,” 291 accounting undoubtedly very soon started to symbolize, for better or worse, a new calculating rationality. Already Petrarch longed to “abandon the cities to merchants, the lawyers, the money-lenders […] let them be: they are not our race. Let the rich count their coins, helping themselves with 98 Economics and Its Discontents arithmetic: we shall count our riches without the need for study or science.” 292 On the other hand, Bacon and Newton modelled their notebooks after merchant’s waste books, attracted by their elegance and specificity. 293 The distinctness of capitalist bookkeeping came to light quite recently. After 1989, when socialist enterprises were being privatized by foreign investors, even though they all had books of account, the investors soon noticed that they were unauditable. In socialist countries, accounting served another purpose – it was not a language in which changes in actual resources were recorded, but a language through which state planners and local directors negotiated their plan. 294 Chapter 18: In which historical, static patterns of consumption are explained, and then their breakdown, as well as legal attempts to defend them are presented. Increase of appetite had grown By what it fed on Shakespeare, Hamlet “No one ever yet possessed so much silver as to want no more,” wrote Xenophon. 295 “The avarice of mankind is insatiable, men always want more and more without end,” added Aristotle. 296 “Avidity alone, of acquiring goods and possessions for ourselves and our nearest friends, is insatiable, perpetual, universal,” confirmed Hume. 297 Kant added that “it is not in man’s nature to be contented with what he already possesses and uses and settle for it.” 298 This cliché has been repeated over and over again, and if it is relatively easy to find arguments that say that man should limit their wants, few will say that they are naturally limited. Rather, the common sense is that “in the human nature lies, that the more it has, the more it wants.” 299 I find this discussion entirely irrelevant. The philosophical debates over human nature have a long tradition, and I don’t think it is worthwhile to add to it another voice. Let us thus leave aside human nature and look at the real historical consumption patterns. Interestingly, when we do that, the historical data provides us with an entirely different picture of human appetites than the one derived from philosophical and economic treaties. Even if we don’t fully accept Campbell’s bold argument that “the idea that human beings somehow have a ‘natural’ tendency to display 100 Economics and Its Discontents insatiable wanting does not derive any support from history or anthropology,” 300 there seems to be vast historical evidence suggesting that in societies that weren’t WEIRD (Western, Educated, Industrialized, Rich, and Democratic), consumption patterns maintained a customary, finite and static rather than endless or dynamic notion of wants. 301 European consumers didn’t automatically use surplus income to satisfy new wants and change consumption patterns. Hoyt and Nair have shown that when the introduction of cash crops provided peasants with extra wealth, at first they were most likely to pay others to do their own work, translating the new wealth into leisure and not increased consumption of goods or services. 302 Several times in the course of history the same consumption patterns and the same tastes have been perpetuated unchanged. When one inspects the history of fashion – the symbol of the instability of modern consumption, one can find that in ancient Egypt, the same type of tunicdress was maintained for nearly fifteen centuries with almost absolute consistency. Greek peplos, a women’s garment, hadn’t really evolved from the origins of Greek society to the sixth century B.C.E. A similar stability can be found in Rome as well as in China, India, and other premodern Asian civilizations, where alterations in clothing were rather an exception than the rule. 303 It seems that it was only in the mid-fourteenth century that throughout Western Europe a new attitude towards fashion appeared. Its protean character was quickly noticed by a number of authors. Its most notable critic was Montaigne, who denounced it as artificial and theatrical, warned that “we change so suddenly and promptly that the inventiveness of all the tailors in the world could never furnish us with enough novelties,” 304 and called upon his readers to “return to their own natures.” 305 In this way, the fickleness of fashion came to be presented in Economics and Its Discontents 101 opposition to internal true identities. Stavrakakis argues that to this day, this is the dominant type of critique of consumerism: to see the culture of consumption in terms of a false consciousness that is produced by advertising to stimulate false and artificial needs. 306 On the other hand, there was also praise of the new consumerism. Particularly, the Italian humanists “extolled fashion and in general ‘the needs of the mind’, that is, the desire for things beyond the necessary. These needs were infinite and so had a civilizing influence on man.” 307 An English pamphlet from this time portrays the streets of London in this way: And now from the Tower to Westminster along, every street is full of [luxuries], and their shops glisten and shine of glasses, painted cruses, gay daggers, etc., that is able to make any temperate man to gaze on them and to buy some-what, though it serve no purpose necessary. 308 The necessary somehow had to be recognized from the purposeless, so a new notion of “taste” appeared and in the first decades of the sixteenth century, new books on the issues of manners and etiquette were published. 309 “Man are not born, but fashioned,” wrote Erasmus in one of them. The temporal and geographical correlation between these new patterns of consumption and new types of social structures is of course not accidental. An important part of the transformation from medieval to early modern society was a change of the nature of social stratification. Slowly, step by step, social differentiation was gaining a dynamic character, ceasing to be ruled by the principle of hereditary nobility. Consumption filled this void, becoming a new factor in the process of class structuring, a factor that – many would argue 310 – is today an integral, if not fundamental, part of this process. Modern consumption became both a matrix for class cohesion and a vehicle for individual 102 Economics and Its Discontents differentiation. 311 On the one hand, displaying certain consumption patterns became a part of establishing one’s class affiliation, while on the other, vague and transient lines of demarcation between social classes encouraged emulative consumption. 312 In this way consumption became the means through which social status and reputability can be achieved. The “frivolity of fashion” scorned by moralists is absolutely essential to its functioning. If its purpose is to evaluate not the past, but the present position in the society, prevailing tastes have to change as often as possible. As Debord writes: The fashions of the upper stratum of society are never identical with those of the lower; in fact they are abandoned by the former as soon as the latter prepares to appropriate them […] There must be novelty, but it must be novelty that is recognized as a mark of fashion and that is at least potentially capable of being imitated and purchased. 313 The feudal elites didn’t passively yield to this new paradigm of social stratification. On the contrary, they tried to make use of their legislative powers to limit the social significance of consumption. Hence, the existence of sumptuary laws. Sumptuary law was regulation of consumption, either in the form of legal limits on expenditures or reserving particular types of cloth for designated social classes. Historians, although aware of the existence of these regulations, for many decades regarded them usually as “an immature or unsophisticated stage of legal development.” 314 This disrespect can be arguably pinpointed to the fact that the sumptuary laws were simply misunderstood. It is easy to belittle social institutions as “immature” or “delusional” 315 when one does not understand their function. The history of sumptuary legislation is long. The regulation of acceptable style of dress can be found in Locrian code, the first written Greek law code, and in Solon’s laws. Romans had their own sumptuary legislation as well. The Roman laws included both regulation of clothing Economics and Its Discontents 103 (which were understandably the first type of goods to be regulated, because one’s clothes are always on display, they are the most palpable intermediate between private resources and social recognition) and detailed rules on acceptable alimentary expenditures. 316 The regulations were often gendered, and an association was constructed between female desire, desire for luxuries, and “effeminacy” – and the triad functioned as a feature of many narratives of political and moral decline. 317 For instance, the 1433 preamble to Florentine statute reads: The barbarous and irrepressible bestiality of women, who, not considering the fragility of their nature, but rather with that reprobate and diabolical nature, they force their men, with their honeyed poison, to submit to them. But it is not in accordance with nature for women to be burdened by so many expensive ornaments. 318 Sometimes this stereotype of women’s desire for extravagance, although stripped from its “bestial” features, was cast in the positive role of a civilizing factor which “incited [in men] a general passion to work, invention and industry.” 319 At other times, women’s dress was left entirely out of the scope of sumptuary laws, which focused solely on men. 320 In Medieval Europe from the early ninth century, dress was at times linked with rank; from the eleventh century often only certain colors were permitted to the peasantry, and by the end of the twelfth century quite detailed sumptuary regulations appear in more commercially developed cities: 1157 Genoa, 1234 Aragon, 1249 Siena, 1250 Florence, 1256 Castille, 1267 Bologna, 1277 Padua, 1297 Venice, 1304 Zurich. The laws were coming both from church and secular authorities. By the end of the fourteenth century, they were present in a large number of Western European cities and in England. By the middle of the fifteenth century, they spread to Scotland and Germany. 321 Hunt thus argues that: 104 Economics and Its Discontents It is only with the decline of feudalism that the emergence of the “bastard feudalism” that succeeds the monetization of land rents, and the long rise of merchant capitalism, gives rise to what may be regarded as the high period of sumptuary law. 322 Sumptuary laws were not part of the naïve medieval attempt to regulate social reality by decrees, but a reasonable attempt to protect the social standing of the traditional elites in a rapidly changing environment: An obvious and striking feature of the great bulk of sumptuary law was that it was directed at conceptions and images of the social order. It was concerned with attempts to protect hierarchical conceptions of social relations, to resist some of the most directly visible manifestations of rising social groups challenging the incumbents of advantaged social positions. 323 Hunt’s argument can be backed with Wood’s description of 1363 sumptuary legislation in England: The legislation regulated the food and above all the dress appropriate to each order, so that someone’s social status was instantly recognizable. It drew attention to the “outrageous and excessive apparel of divers people against their estate and degree, to the great destruction and impoverishment of all the land.” 324 Therefore, imposition of sumptuary laws can be understood as a conscious tactic designed at preserving immobile social order. On the other hand, regulation of consumption patterns was sometimes a part of radical egalitarian projects, for example in the case of the Florentine humanist Anton Doni’s 1552 project of the ideal city, in which everybody would dress in the same way and use the same things. 325 After the sixteenth-century peak in sumptuary legislation, the eighteenth century has seen its decline, and today, if sumptuary laws haven’t disappeared completely, than certainly they have changed in character and lost much of their importance. 326 Although struggles over dress and consumption patterns continue, at least in the Global North, legislative regulations play in them only a supplementary role. Economics and Its Discontents 105 The point here is to appreciate the sphere of consumption as a legitimate field of power that needs to be studied in its own terms. It is not innocent of practices of domination (like some sociologists who study consumptionism claim), nor are these practices epiphenomenal to supposedly more concrete economic realms, such as production (like Marxist economists argue). Structures of consumption must be studied at once in relation to other economic institutions but without forgoing their autonomy, and certainly as a field that is not innocent of relations of power (Chapter 48). Chapter 19: In which we study an economic school that has never existed. Their argument frequently supposes that all wealth consists in gold and silver, and that to multiply those metals is the great object of national industry and commerce. Adam Smith, The Wealth of Nations Reinert argues that the common understanding of political economy is skewed by “precursorist bias,” i.e., a tendency towards “charting the genealogy of current ideas and ideologies rather than studying ideas in their own contexts.” 327 Probably the most unequivocal example of such a retrospective and “precursorist” approach to economics is the case of socalled “mercantilism.” The term “mercantile system” was invented by Adam Smith as a polemical term. 328 Nearly two centuries after the fact, Smith managed to create this phantom economic school, which then served as a sort of whipping boy, an allegedly unscientific background for his supposedly scientific political economy. Although as Harris shows, the greatest “mercantilist” authors such as Malynes, Milles, Misselden, and Mun “never belonged to any coherent, let alone nameable, school of thought,” 329 and rather perceived each other as ideological adversaries than as supporters of the same paradigm or policy, Smith made them one. The quarrels between the “mercantilists” were simply erased from history. Mercantilism was said to be based on the “[self-]interested sophistry of merchants and manufacturers,” 330 who confused wealth with money, fetishized balance of trade, and neglected the advantages that laissez-faire policies could bring. 331 As the concept of mercantilism from its very beginning was politically loaded, to this day discussions on mercantilism are often spoiled by ideological quarrels on the merits and weaknesses of state 108 Economics and Its Discontents intervention in economy. 332 Nevertheless, it is worthwhile to go beyond polemical appropriations of “mercantilist” ideas and to try to understand them in their own terms and in their own historical contexts. So, first we have to abandon the ridiculous, if enormously popular, idea that economists of the sixteenth and seventeenth centuries mistook wealth for gold. Even Foucault ascribed to them the opinion that gold presents a natural economic value as it is a perfect product of a cosmic system. 333 This seems to be a terrible case of mythologization of the past. It may have been seen as perfect in abstract alchemical terms, but was useful only insofar as the people agreed to use it. Economists of the era didn’t fetishize gold or money. They were merely occupied with coming up with ways to strengthen domestic production and they closely linked surplus in balance of trade with increase of production. The anonymous authors of Advice and authors such as Cary, Child, Davenant, Evelyn, Huet, Mandeville, Mun, and others were explicit about the fact that money should not be confused with wealth. 334 As Perrotta writes: A spectre haunted Europe in the mercantilist period: the fear of ending up like Spain, rich in gold, poor in production and with a frighteningly unfavourable balance of trade. These three factors constituted in all Europe the negative example of Spain, which the mercantilists unanimously indicated as a model not to follow. According to Eisenhart, it was in fact the example set by Spain that made the seventeenth century economists shift their gaze from the earning of money to the strengthening of manufacturing. This statement is an exaggeration, since the English mercantile policies had been designed and introduced before the Spanish crisis became evident. However, the affirmation of mercantilism in Europe can be said to have been favoured by the negative example of Spain. 335 For “mercantilists,” wealth clearly didn’t come from hoarding money or gold but from employing it productively. 336 Expansion of manufacturing was usually seen as the best way to make a country rich, and trade enabled this expansion. The two were inseparable. In 1767, James Steuart still argued that “to ask whether trade owes its beginning to Economics and Its Discontents 109 industry, or industry to trade is like asking whether the motion of heart is owing the blood, or the motion of the blood to the heart.” 337 Money itself was likened to the blood in the body, and its quantity had to stay in proportion to the amount of commodities in the country to nourish its trade. 338 Money was the “soule that did infuse life to Traffique” (Malynes), or “the vital spirit of trade” (Misselden). 339 It was not the end in itself. “Mercantilists” weren’t obsessed with bullion itself, but merely concerned with its flows (see Chapter 21). And if the writers of the era sometimes stressed the need to have a steady supply of precious materials, it was not because of some naïve adoration of gold and silver, but because it was crucial to the supply of sound coinage. 340 And as that supply time after time was found to be inadequate, European economy suffered chronic coin shortage. 341 As we have seen in Chapters 4 and 5, most people did without coins at all in day-to-day life. People used tallies and promissory notes instead, and in smaller communities they simply kept track of who owes what to whom and more generally disciplined every and each member of community to contribute to the wellbeing of his or her peers within customary boundaries. 342 In the fifteenth century, there was the famous “Great Bullion Famine,” caused in part by unfavorable balance of trade with the Levant. 343 In the sixteenth century, the expansion of European economy caused the demand for money to grow by approximately 500 percent, while the supply grew by only 63 percent. 344 In the eighteenth century, even the British government was often a year behind in paying to wages to its own employees. 345 In the United States, the account books from the mid-nineteenth century show that only one-fourth to one-third of business was carried out in cash (and that included barter transactions). 346 Thus, as late as 1940, sociologists spoke about various effects of the “recent plunge” into the cash-economy system. 347 We can see that as a sort of 110 Economics and Its Discontents liquidity crisis was almost permanent, the preoccupation with bullion was entirely rational. The first “bullionist” legislation forbidding export of silver from England in 1278 was no more a crude money fetishism than the £50 travel limit for British tourists going overseas, which was abolished only in 1979. There has never been a mercantilist era. As always, a number of different economic discourses flourished in different economic environments. Early Modern Spain is of special interest. As the sixteenth and seventeenth centuries were turbulent for the Spanish economy, they provided a fascinating ground for economic debates. The fact that they remained barely mentioned in accounts of economic thought until very recently can be perhaps understood only because they couldn’t be easily reconciled with Whig historiography that disregards economics prior to Smith as naïve gibberish. Although the so-called price revolution, caused by the expansion of world economy, the rise of international financial markets, and the inflow of American gold and silver, meant in reality inflation of only 1-1,5% yearly 348 – a very modest rate for modern capitalist economies, its significance was big. After hundreds of years of relatively stable prices, it was not the rate of inflation that was surprising, but its constancy. In other words, what was revolutionary was not the actual changes in price, but the change in the perception of price. Observing this development of early capitalist forms of economy, the scholars of Salamanca proposed that debasement cannot be treated as the main cause of inflation. Instead, they singled out the market forces of supply and demand and the quantity of money as the determinants of prices. 349 Francisco de Vitoria (14831546) developed the subjective theory of value, 350 and with de Soto (1494-1560) and Saravia de la Calle (fl. 1544) proposed that the volume Economics and Its Discontents 111 of money is the prime determinant of its value. 351 Tomás de Mercado (1525-1575), who besides being a moral theologian worked in the Exchange House of Seville, offered a clear formulation of quantity theory of money and an analysis of international purchasing power parity that preceded works on the same subject of Fisher and Cassel by three centuries. 352 The Salamantitos perceived economy in the same terms as the moneyed classes. They praised the social value of instrumentum persistens lucre, or productive capital, and they praised the merchants themselves, these hombres universals, cosmopolitan citizens of the world. 353 Sometimes they are credited with founding the monetarist tradition of thought that has resurfaced so many times up to this day. Certainly, if we were to describe the history of economic constellations in terms of a linear development of a number of traditions, one could make this claim. But as we are not interested in such narratives, we should simply note that this is yet another (not the first, if we recall Levant economic theories [Chapter 12], and certainly not the last) instance in which a commercially developing society becomes a breeding ground for a set of ideas that is aligned with the short-term interests of the moneyed classes. This is not to say that this was the only economic discourse in the Iberian Penisula of the time. Besides the scholars of Salamanca, another group, the Arbitristas, proposed a different economic discourse. If the Salamantitos are today called monetarists, the “Projectors” can be compared to structuralist or development economists. 354 They pressed for the development of industry and national productivity. Luis Ortiz (fl. 1558) proposed detailed policy of state-led industrialization consisting of, among other things, new investments in infrastructure, a fiscal reform that would provide impulse for private investments, and promotion of new machinery organized by the local authorities. 355 Another proponent of 112 Economics and Its Discontents industrial development was Sancho de Moncada (fl. 1619), who argued that industrialization cannot succeed without simultaneous reform of administration and higher education, as well as the introduction of vocational training. Moncada was perhaps the first advocate of the increased interaction between the business community and higher education, proposing reforming the latter to satisfy the needs of the former. 356 Francisco Martines de Mata (fl. 1626) added a theoretical formulation of the consumption multiplier, somewhat prefiguring Keynesian ideas on the subject. 357 However, all these ideas had little impact on Spanish policy: During the second half of the seventeenth century the Spanish Empire went down-hill. The writings of the arbitristas and their associates failed to make any headway against the established interests of the Sevillian banking world, or against those sectors profiteering from the inflation and deindustrialization, or against the Spanish kings and nobles. Seldom in history has such loudly proclaimed advice been disregarded by the responsible policy executives with such damaging consequences. 358 In England, the immediate political implications of economic debates were as clear as in Spain. Misselden and Malynes were merchants; the latter was also an English commissioner in the Spanish Netherlands; Mun was a member of the East India Company; Child was its governor. Their disputes may have been expressed in a theoretical idiom, but they were not abstract from political realities of the time. On the contrary, they often explicitly intended to influence the policies of the Parliament. Theories of international trade arouse around the very practical issues of administrating the East India Company. The last bullionist theses of the era (i.e., theses favoring qualities of metallic currencies over bank money) were formulated in the eve of the currency reform of 1696 in an attempt to fence off the emerging alliance of the government and Bank of England (more on the birth of modern banking in Chapter 33). Two Economics and Its Discontents 113 hundred years after the discovery of America and encountering peoples who lacking in iron would happily buy it for its weight in gold, the purely social character of money was already acknowledged. 359 But of course anthropological knowledge, however accessible in the era, mattered little in establishing dominant economic narratives. I would argue that the new trope of using the language of romance to describe commercial ventures was more influential for the British economic imagination. At the beginning of seventeenth century, Milles characterized England’s foreign trade as “our sweet Mistresse” who, “distempered and distrest,” waits for “remedy” from her male saviors. As Harris writes, “adventure” came to signify both romantic quests and commercial enterprises by the end of the sixteenth century. 360 If the appearances of economic debates have changed over the centuries, their most basic premises have not. The topics of the debate are still mostly set by the clashes of the most immediate political interests, all sides of the argument pay little attention to actual anthropological, sociological, psychological, or historical findings and instead rely on whatever can attract some eristical value. But let’s not get ahead of ourselves. Chapter 20: In which the emergence of population as an economic subject is considered. The only wealth is men. Jean Bodin In 1615, the French dramatist Antoine de Monchrétien published what is by many considered the founding text of political economy, namely, A Treatise on Political Economy. His analysis almost completely dispensed with quantitative methods, relying on metaphorical and philosophical arguments instead. The alleged novelty lay in his focus on a new object of governance – the population, and his perception of national economy as subject to a series of natural, cyclical processes. Monchrétien argued that it is not the gentry and clergy that should be identified with the state, but the lowly “people” who could be “the most negligible in appearance,” but in fact constituted the essence of the nation. 361 This was by no means a radical project of emancipation of the third order, but rather a call for redefinition of politics as a procedure of governing the population. To that great and most honourable design your pacific majesties can apply yourselves; in what may the persons whom you chose to admit to the administration of your affairs be more worthily and usefully employed, if not to vigil over and work for order, employment and reconciliation of your people? 362 Of course, this wasn’t Monchrétien’s original idea. At least since Jean Bodin (1530–1596) the enrichment and well-being of the population were commonly seen as the proper object of sovereign’s policy. 363 And even before that, a large population was traditionally considered to be a signifier of a sovereign’s power, both as a supply of his troops and as proof that he is capable of enforcing his rule. 364 The novelty of Monchrétien’s approach was that he analyzed it mainly in economic 116 Economics and Its Discontents terms: “the more hands, the higher the production and the stronger the State.” 365 Fifty years later, in 1680, William Petyt (1641–1707) described population in terms of human capital in quite explicit terms: The most precious resource, from which everything derives; it is a form of capital, which is in itself a raw material and which needs governing to be improved. If there were a policy and if labour were under public control, instead of being at the mercy of greedy antisocial interests, England would grow great. 366 In Petyt’s argument, it was therefore not simply a numerous population but a numerous and skilled population. Later on, Botero and Petty complicated the picture by adding that there is a possibility of overpopulation, which can be caused by an unbalanced growth of the people in relation to the resources that are at hand. 367 Cantillon similarly wondered if a small but well-fed population isn’t better than a large but destitute one, and inverted the causation between population and production, arguing that the rise of the former depends on the growth of the latter. The economic relationship between the two was for centuries one of the main issues for political economy. The argument that “the world is already full and the population is too large for the soil” was not new, 368 but now it was taken up as an economic question. We will be coming back to questions surrounding the population (Chapter 29), but before we proceed, let us note the three tangent points between population, biopolitics, techniques of statistical quantification, and discourse of medical care. First, as we have already mentioned, not only did Monchrétien point to the population as the proper subject-object of political economy, but he also argued that economy is to be understood in terms of an inalterable natural process. His political economy saw men as part of the natural Economics and Its Discontents 117 world, and proposed that its population is subject to the same laws as that of any other mammal. The concept of biopolitics made a career so brilliant that it is today reasonable to be somewhat suspicious of its value. But however it ended, it began here: at the turn of the sixteenth and seventeenth centuries, in debates over population and productivity. Only later “mankind” would turn into the “human species” (as in the French Encyclopaedia), 369 and schemes for control of people’s fertility would be presented as solutions to the problem of economic development (e.g., by Benjamin Franklin, James Steuart, Arthur Young). 370 Second, this new approach to population went hand in hand with the development of new techniques and knowledge, namely, statistics, “political arithmetic,” and demography. Of course, the instrument of census was used before, at times for purely economic reasons, as in the case of Diocletian’s census in the third century CE or the British 10851086 Doomsday census. But after John Graunt’s 1662 Natural and Political Observations Made upon the Bills of Mortality and with the establishment of “political arithmetic,” the biological life of the population begins to be quantified on a daily basis. Political arithmetic is defined by Davenant in 1698 as “the art of reasoning by figures, upon things relating to the government.” 371 After all, (this is still Davenant) “the wealth of all nations arises from the labour and industry of the people; a right knowledge therefore of their numbers, is necessary to those who will judge of a country’s power and strength.” 372 In 1751, Arithmétique politique will be put into Diderot’s Encyclopaedia as art “essential” to modern administration of the state. 373 And, in fact, from the eighteenth century, the practice of governing will be closely intertwined with the that of accounting, at times shifting entirely from governance, through administration, to pure management. 118 Economics and Its Discontents Third, the emergence of the concept of population should be analyzed along with changing attitudes towards the poor. We have already noted in the Chapter 10 that new economic inequalities provoked a transformation of the discourse and practice of almsgiving. Polanyi argues that the new political and social phenomenon of the poor masses was one of the main causes of the development of modern political economy, both liberal and Marxist, and of expansion of the state administrative machine. 374 This is an argument that should not to be dismissed lightly. The relationship between the enclosures of the commons, the establishment poor relief system, and the discourse of taking care of the population certainly should be studied in detail. Already today it is a well-documented claim that first creating the poor by enclosing the commons and then turning them into a productive resource by forcing them into workhouses was indispensible for British economic development. 375 And all this was done not simply in the name of economic development, but was also legitimized as providing immediate well-fare for the population: The promotion of compulsory work within the ateliers nationaux in France and the workhouses in England from the beginning of the seventeenth century was an answer to a dual goal of national enrichment and improvement of the population’s health. Mercantilist thought supported by physicians managed to transform the danger of having a population of idle and starving people into a cheap and disciplined source of labour, which, through the policy of imprisonment, contributed to national wealth. 376 Chapter 21: In which the synthesizing effects of bodily and organic metaphors are explained. Primum non nocere. First, do no harm. As the influence of explicitly religious frames of reference declined, the need for new metaphors and a new symbolic framework for legitimizing economic arguments arose. At first, in the seventeenth century, the most successful model for economic knowledge was medicine or, to be precise, anatomy and physiology. A number of economists, including Locke, Petty, Barbon, Mandeville, and most notably, Quesnay, studied anatomy and practiced medicine. 377 Quesnay actually spent most of his life working as a surgeon and physician and writing works on medicine and physiology, and in 1749 he was even appointed an “ordinary surgeon” to the king. 378 Christensen seems to be spot on, when he argues that: Physiology played a crucially important role in shaping the early development of the classical model. From Hobbes to Quesnay, the dominant set of metaphors shaping the conceptual structure of the economic theory of production and exchange were drawn from physiology and the comparison of the economy to the living body. 379 In the seventeenth and eighteenth century arguments, the primary rhetorical devices were analogies, metaphors, and identities, and one of the main anologies established by political and economic writers was that between animal/human body and the political body of the State. 380 Clément has collected a number of telling examples. For example, Monchrétien wrote in 1615 about a strong relation between the wellmanaged State and the animal body: Animals have three faculties, the vegetative that nourishes the body as labourers work and nourish the state, the sensitive that is a source of heat, 120 Economics and Its Discontents under which one may class skilled workers, and finally the mental, which makes the body move and to which merchants correspond in our society. 381 Mun spoke in 1644 about the sovereign who is like “the stomach in the body.” Davenant substituted the sovereign for the population (see the previous chapter) and in 1698 made the people “the stomach of the State’s Body.” Boisguilbert argued in 1707 that “the body of the State is like the human body, all parts of which and all limbs must also contribute to the common sustenance.” The notion of the complementarity of body parts was extended to the economy, in which different sectors and actors were seen as integral parts of a single organic entity. 382 Another bodily category used by seventeenth century economists was a physiological-circulatory “flow.” Maifreda notes that when Mun proposed his concept of the balance of trade, he didn’t portray it as a system weights balancing the scales of international exchange but rather as a persistent flow of fluid streams of goods and money. 383 Harvey’s discovery of the circulation of blood (1628) was quickly followed by Petty’s (who began his career as Harvey’s personal assistant) concept of the velocity of circulation of money, and afterwards the circulation of blood in a body became a go-to analogy for the circulation of money in the economy. We have already noted prevalence of this figure in “mercantilist” discourses (see Chapter 19). It was also absolutely instrumental to Hobbes – who had witnessed autopsies conducted by Harvey and was a great admirer of his work, which he thought to be equaled only by that of Galileo and Copernicus. 384 What is important to understand here is that the penetration of medical metaphors into economic discourse had nothing to do with recently popular interdisciplinary inquiries. Economists didn’t draw from physiological knowledge to enrich their understanding of the biological aspects of economical processes. “While medicine provided new imagery Economics and Its Discontents 121 for economic discourse, it would be hard to argue that it yielded new economic knowledge.” 385 Economists were more interested in the inspirational value and objective aura of medical framework than in the actual findings of contemporary medicine. When Montchrétien spoke of the faculty of the brain that enabled movement, he was not borrowing from medical knowledge of the time – Vesalius (the leader in this field) had been unable to elucidate the problem of the brain – but was referring to common and everyday assumptions about the human body. 386 However, the fact that medical metaphors didn’t provide any positive knowledge for the economic genre doesn’t mean that they didn’t leave any imprint on it. As the disorders of national economy were described in medical metaphors, and the sovereign was cast in the role of a physician, the general legitimization of economic liberalization became Hippocratic: “first, do no harm.” 387 A good physician will rather abstain from any action than risk doing more harm than good. In this narrative, national economy was envisioned as a series of natural processes that could not be easily controlled but could be understood as an organic whole. It didn’t have to be controlled because as a living organism it naturally took care of itself. Digestive metaphors and the theory of humors were used to justify eighteenth-century French reform of grain trade: “to rid the economy of its excess grain, Boisguilbert suggested setting up a free trade policy. The opening of borders was the remedy for economic decline, just as bloodletting was the remedy for humoral congestion.” 388 Bodily metaphors eventually gave way to the mechanical model, but this medical episode in the history of economics can be noticed even on 122 Economics and Its Discontents the superficial level of modern economic language. For an instance, inflation was first a medical term for swelling, and consumption signified tuberculosis. 389 This identity between consumer spending and consumptive disease was part of the Victorian ethic of thrift and prudence. Reinventing “consumptive” credit as “consumer” credit and shedding its pathological sense occurred only in the late 1920s, 390 and was part of the reconfiguring of the modern debt regime (see Chapter 48). And even today, economic crises are often portrayed in medical terms, e.g.. the “Asian Flu” of 1997, or the “Russian Flu” of 1998, or the “Mexican Flu” of 2008. Harris puts forward a good argument that: By troping economic illness as a communicable condition that transmigrates across oceans, the metaphor attributes the cause of plunging stocks and evaporating capital around the world to specific foreign bodies rather than to global commerce itself, which is figured simply as the disease's indifferent medium. [...] the "Asian flu" is not simply a metaphor; it is a character. 391 In short, organic economic metaphors erase conflicts and instabilities from economy by externalizing them: the capitalist world economy is naturally prosperous and growing, unless it is attacked by some foreign bodies. One can see, that this was also basically the dominant economic discoursive tactic in Nazi Germany, which heavily relied on organic imagery of economic relations (see Chapter 43). Interestingly, the body seems to have become fragmented and dispersed in the most recent mainstream economic discourse. For Classical economists like Adam Smith, political economy was to a large extent an anthropological science, both in a sense that it described the “whole human,” with all their natural sentiments, desires, and capabilities, and in a sense that it was a proposal for a certain logic of administration of individual bodies. In neo-classical theory of the Economics and Its Discontents 123 twentieth century, human bodies exist only as supposition, perhaps a logical correlate of the existence of bodily functions such as consumption or production. 392 Amariglio and Ruccio argue that after Debreu’s Theory of Value (1958) and Arrow and Hahn’s 1971 General Competitive Analysis, as economic discourse becomes formalized, [h]uman bodies are no longer recognizable as the site at which the various economic “capacities” and “functions” do their work. The full discussion of sensation and sentiment, passions and interests which informed so much of the theoretical legacy handed down to today’s economists is not so much reduced in importance with the onset of axiomatization as it is completely ignored or even renounced as extraneous to the methods and procedures of contemporary economics. 393 Chapter 22: In which the relationship between Protestantism and the rise of capitalism is discussed. Their distance from God could only be precariously bridged, by unstinting, purposeful labor. Max Weber In his famous Protestant Ethic, Max Weber argued that Protestantism (and especially Calvinism) was a key force behind the development of modern capitalism. By encouraging interest in earthly business and influencing new work ethics, it not only accidentally led to the success of capitalism in Northern Europe, but also contributed greatly to establishment of a new rational world-view. This argument has been debated for many decades now and has been both attacked and defended in numerous ways. It is not the purpose of this chapter to fully engage in this debate, let alone to resolve it. A study of the history of economic reason that would omit one of the most commonplace reasonings on the birth of modern economy, however, would be at fault. Hence, let us note a number of objections that were raised to Weber’s thesis. First, there is the methodological problem. A wider reading of Protestant writers of the sixteenth and seventeenth century (including even those whom Weber himself cites) shows that their attitude towards worldly prosperity was far more nuanced, and at times unreceptive, than Weber has argued. 394 Moreover, he mistakenly attributed the seventeenth century additions to Protestant treaties to the sixteenth century, thus inverting the alleged time sequence between radical Protestant ethics and the birth of Modern Capitalism. 395 126 Economics and Its Discontents Second, there is the problem of Weber’s dualist and periodical view of history. It has been argued that he was interested in feudalism only insomuch as he treated it as the reverse of capitalism. 396 He saw the two as distinct space-time continua that could be linked only through intervention of an external, spiritual, factor. 397 Therefore, he ignored the fact that the Renaissance capitalism of northern Italy and Flanders flourished long before the Reformation, 398 he overlooked the significance of (Christian) Cisterians in economic development that marked the transition from the High to Late Middle Ages, 399 and all in all he simply failed to see that, in Schumpeter’s words: The society of the feudal ages contained all the germs of the society of the capitalist age. These germs developed by slow degrees, each step by step teaching its lessons and producing another increment of capitalist methods and of capitalist “spirit”. 400 Third, Weber’s account of the development of capitalism has been attacked from materialistic positions, mainly, but not exclusively, by Marxist scholars. The arguments stating that Protestantism couldn’t have had an impact on the rise of capitalism because superstructure is derivative of structure, and not the other way around, can be put aside as tautological. But departing from the point that the simplest answer is usually the correct one, one may present, as for instance Wallerstein does, a down-to-earth account of the rise of capitalism that dispenses with the need for a discussion of the role of Protestantism altogether. Hence, the identification of Protestantism with the forces favoring the expansion of capitalism would be seen as largely accidental. 401 Protestantism and the Protestant ethic seem to explain less of economic phenomena than they seemed at one time to do, [because] it also appears there is, in the Reformation era, less to be explained […] Leadership in economic matters passed slowly from the Mediterranean to the north, and as the Italian cities declined, those of the Netherlands rose; but there was little in the way of business or industrial technique in use in northern economies that would have been unfamiliar to a Venetian merchant or a Florentine clothier of the fifteenth century. 402 Economics and Its Discontents 127 All these three objections are serious, but not lethal. First, there are very few methodologically spotless arguments in social sciences, and although Weber’s mistakes are rightly criticized, these criticisms should not be treated as an excuse not to engage with his theorizing. Second, when one makes an argument, generalizations are bound to happen, and although Weber’s treatment of feudalism and capitalism is scandalous, maybe it can be forgiven as a regrettable manner of speaking that can be separated from the main line of argument. Third, Weber explicitly distanced himself from mono-causal explanations and ended his essay by saying that he does not seek to “to substitute for a one-sided materialistic an equally one-sided spiritualistic causal interpretation of culture and history […] each, if it does not serve as the preparation, but as the conclusion of an investigation, accomplish equally little in the interest of historical truth.” 403 Perhaps a promising way out of this conundrum is proposed by economic historians with an institutionalist outlook. Theology and faith don’t influence economic performance on their own, but they certainly can have an impact insomuch as they are intertwined with churches, bureaucratic apparatuses, and legal systems. Thus, the Reformation’s impact would be analyzed not so much in terms of individual, spiritual, or psychological imperatives, but more as a social phenomenon that disrupted existing power structures. 404 As is the case with the topics of all the other chapters, this issue deserves to be studied in far greater detail than has been done here. However, as we have already noted in the preliminary methodological remarks, the point of this thesis lies precisely in forgoing a thorough but limited in scope dissection of details for the sake of a more systemic and general analysis. 128 Economics and Its Discontents So for now, let us just note that perhaps the immense popularity of Weber’s thesis (and the fact that in commonplace reception it often does signify a mono-causal, spiritual, explanation of the birth of capitalism) may come from the fact that it sits well with the discourse on homo economicus (Chapter 42) and its inclination for locating the origins of economic performance within individuals and not in their objective (for instance, geographical or class) contingents. The proposition that the key to economic success lies in individual work ethics is profoundly political in nature and today is often employed in liberal narratives. Chapter 23: In which it is explained that the supposedly secular liberal political economy is more sacral than the economics of Aquinas ever were. And there are those questions that deserve punishment, as to ask proofs of the existence of Providence. Clement of Alexandria Distancing ourselves from Weber’s argument doesn’t mean that we should abandon altogether the notion that religious discourses influenced economic reasoning. Perhaps the most important was the economic appropriation of the figure of providence. Already in the second century oikonomia becomes closely linked with pronoia, and economy was perceived as a manifestation of divine providence. 405 Of course, not all economists called upon an explicitly providential frame of reference, and it is often claimed that those who did, did it for purely ornamental purposes. 406 However, while the overt and superficial use of religious metaphors is one thing, using divine providence as a model and premise for the structure of economic arguments is completely another, and it is the latter that is the subject of this chapter. The classical Thomistic justification of the existence of evil in the world is that: It is not the function of divine providence totally to exclude evil from things. […] The good of the whole takes precedence over the good of a part. It is proper for a governor with foresight to neglect some lack of goodness in a part, so that there may be an increase of goodness in the whole. […] If evil were removed from some parts of the universe, much perfection would perish from the universe […] For this reason, it is said: “I make peace and create evil” (Is. 45:7); and again: “There is no evil in a city which God will not do” (Amos 3:6). 407 One way to look at the liberal political economy is to see it on the whole as a variation on this theme of theodicy, an exercise in secular 130 Economics and Its Discontents theodicy. Some of the medieval scholars already recognized that individual sins may be at times socially advantageous or necessary (recall chapters 11 and 16), but generally it was a concept marginal to the punitive moralistic discourse that secured the Church’s economic interests. But from the seventeenth century, the question “how can individual vices be translated into public virtues?” became central to the political and economic discourses of emerging capitalist Europe. Dudley North, in his 1691 Discourses upon Trade, explicitly linked sinfulness and material prosperity: The main spur to Trade, or rather to Industry and Ingenuity, is the exorbitant Appetites of Men. […] The Glutton works hard to purchase Delicacies, wherewith to gorge himself; the Gamester, for Money to venture at Play; the Miser, to hoard; and so others. Now in their pursuit of those Appetites, other Men less exorbitant are benefitted 408 A bad man can be a good citizen. In the seventeenth century this argument is made repeatedly by Bayle, Barbon, and Harris, among others. In 1714, Mandeville wrote his famous The Fable of The Bees: or, Private Vices, Public Benefits, in which he argued simply that without private vices, public prosperity cannot exist. Although Mandeville’s poem was seen as scandalous and was even prosecuted a number of times, 409 its general thesis, if not its bold style, became accepted by many liberal political thinkers over the course of the eighteenth century. The key to legitimatizing the transformation of private vices into public benefits was mediating it through the figure of providence. Consider Vico (1668 –1744), who wrote: Out of ferocity, avarice, and ambition, the three vices which lead all mankind astray, [society] makes national defense, commerce, and politics, and thereby causes the strength, the wealth, and the wisdom of the republics; out of these three great vices which would certainly destroy man on earth, society thus causes the civil happiness to emerge. This principle proves the existence of divine providence: through its intelligent laws the passions of men who are entirely occupied by the pursuit of their private utility are transformed into a civil order which permits men to live in human society. 410 Economics and Its Discontents 131 The mainstream historiography sees early modernity as the era of the emancipation of economic thought from the religious discourses of the Middle Ages. However, it can be argued that what is perceived as the laicization of economics was in fact its radical sacralization. In scholarly discourses, the realm of economy was portrayed as a distinctive order that was essentially illegitimate and hostile to God’s plan of creation. Hence, various ways were devised to restrain profit motives and limit social effects of the cash nexus. New economics reconciled Jehovah with Mammon, proposing that economy is not an impious sphere that needs to be laboriously brought with the sacral universe, but a sort of sacral universe on its own and from the start. The universal law that governed “trafficke and commerce” was an “invention and gift of God,” argued Malynes, 411 and Adam Smith added that “as all the events in this world were conducted by the providence of a wise, powerful, and good God, we might be assured that whatever happened tended to the prosperity and perfection of the whole.” 412 As “the ultimate ground of economic reality is the design of God,” 413 we can rely on some sort of invisible hand or a set of divine/natural laws that ensures that individual efforts, uncoordinated and often conflicting, are somehow translated into a higher purpose. Adam Smith was in this respect not at all an original thinker: besides the authors already mentioned in this chapter, figures as diverse as Locke, Hegel, or Montesquieu proposed a very similar world-view. 132 Economics and Its Discontents A novel element in this new conceptualization of market economy was a futility thesis, which stated that the economic process is structured in such a way that “anything one might wish to accomplish will be offset – usually in some unexpected or unanticipated manner – returning you to the original situation.” 414 According to this view, economy is ruled by overpowering natural laws that can be studied and understood, but cannot be changed. Francis Bacon theorized the productive processes in his “history of trades” project in this very way, 415 but in the eighteenth century it became an orthodoxy that from then on may have been challenged a number of times, but has never been overturned. In this regard, Marx didn’t differ from Locke, Smith, or Malthus at all. What Žižek says is true – that today “the rise of global capitalism is presented to us as such a Fate, against which one cannot fight – one either adapts oneself to it, or one falls out of step with history and is crushed.” 416 But the Marxist rhetoric on the inevitability of the communist revolution was nothing other than a variant of the same argument. Interestingly, in a pre-growth economy, this futility thesis may have had some validity. As long as the economy was caught in the “Malthusian Trap” (recall Chapter 8), the economic prosperity of the majority of the working poor tended to go time after time to low subsistence levels. It may seem ironic that at the moment the European economy was entering the Industrial Revolution which finally rendered the Malthusian pessimism obsolete, the futility thesis put down its roots in economic thought. Chapter 24: In which two main outlooks on international commerce are outlined. The division of labor among nations is that some specialize in winning and others in losing. Eduardo Galeano. The providential ordering of economy was recognized not only in analyses of national economies, but also in international trade. Although trade in the eighteenth century was still perceived in purely economic terms as a zero-sum game, with the gain of one country being an equivalent loss suffered by another, trade was believed to have a great range of political, social, and moral benefits. 417 The idea that international trade is a part of the divine plan was voiced already in the fourth century by John Chrysostom, who argued that “God decided that certain countries should produce different goods from others, so that they need to exchange them, thus creating a bond of mutual support between them.” 418 In the seventeenth and eighteenth centuries, this view became commonplace. Consider this fragment of Le parfait négotiant, the seventeenth-century textbook for businessman: [Divine Providence] has not willed for everything that is needed for life to be found in the same spot. It has dispersed its gifts so that men would trade together and so that the mutual need which they have to help one another would establish ties of friendship among them. This continuous exchange of all the comforts of life constitutes commerce and this commerce makes for all the gentleness of life. 419 This was the “doux commerce thesis,” an idea that “the pursuit of commerce reconciles nations, calms wars, strengthens peace, and commutes the private goods of individuals into the common benefit of all.” 420 International commerce was praised for its stabilizing and civilizing effects, and financial globalization was seen as a positive force 134 Economics and Its Discontents that limited a sovereign’s ability to debase coinage. Montesquieu was explicit on the disciplinary effects of international finance on national monetary policy: These violent operations could not take place in our time; a prince would fool himself, and would not fool anybody. Foreign exchange operations have taught bankers to compare coins from all over the world and to assess them at their correct value. […] These operations have done away with the great and sudden arbitrary actions of the sovereign or at least with their success. 421 Commerce was supposed to bring out what is best in people, to make them “smooth” and “gentle.” This theme was repeatedly reproduced by Italian, French, and British elites over the course of seventeenth and eighteenth centuries. Often it was presented through dialogic figures, for instance, when Turogt said that commerce is a “debate between every buyer and every seller,” 422 or when Smith explained that “the offering of a shilling, which to us appears to have so plain and simple a meaning, is in reality offering an argument to persuade one to do so and so as it is for his interest.” 423 Economic exchange was like small talk – a gentlemen’s pastime. However, if we go beyond this elitist horizon, doux commerce immediately starts to look suspicious. First, as Reddy argues, although “in the comfort of a European salon, it was easy to evoke the image of two wealthy London merchants, one Puritan, the other Quaker, dickering over the price of their wares, and to treat this image as a paradigm of what commerce did to social relationships,” 424 it cannot be seen as a general model for dealings in the European, let alone the colonial, economic regimes of the time. Thus, the thesis that commerce was gentle should be put in the perspective of slavery in the Caribbean or serfdom in Eastern Europe, which although Economics and Its Discontents 135 geographically peripheral to the emerging world-market, were absolutely instrumental to its development. Second, doux commerce was only one way of conceptualizing international trade, and by no means the dominant one, if we take into consideration a wider selection of sources than a handful of liberals from economically dominant nation-states. Its more popular counterpart was the “jealousy of trade” thesis, which perceived the competition over resources, goods, and markets in terms of “perpetual combat” (Colbert) and “a kind of warfare” (Josiah Child). 425 Arguments were made that the “jealousy of trade is nothing but jealousy of power,” 426 and that “commerce had come to decide the superiority of one Nation over another.” 427 And many saw this new “war of industry” and “bloodless war” as always on the verge of being resolved by violent military means. 428 The period we are talking about was that of the emergence of a relatively integrated European capitalist market. Between 1500 and 1800, previously distinct economic zones became to a large extent co-dependent parts of the same economy. 429 As international commerce intensified, its political role rose as well. In the feudal pre-growth economy, the longdistance trade in exotic luxuries was of marginal importance to economics of power. Access to it was a prize for the feudal elites, but their standing was secured by other means. Now, the international trade became the very vehicle through which power was distributed across states and societies. As Reinert argued: A state could no longer safeguard its liberty by closing itself off from international trade, for no closed commercial state – at least in Europe – could long resist the aggressive power of the great trading nations. As even Davenant admitted in 1699, amid fears of virtue’s decline in the modern world, though “trade” was “in its nature a pernicious thing,” it was “a necessary evil” given the “posture and condition of other countries.” 136 Economics and Its Discontents Commerce might have been a negative influence on human existence, but it was also a necessity for the survival of an independent polis in the face of hostile foreign powers. 430 Pietro Verri, an Italian philosopher and economist, wrote in 1765 that: In the last century, the enlightenment spread across Europe has given birth to a new science of finance. The nations have shaken off their lethargy; the nations feel that the tacit war of commerce always progresses and always acts, even in peacetime, and that the balance of commerce in Europe becomes that of power. 431 This tacit war was no different from a military conflict in at least one respect: the winning side saw it in terms of bringing peace and concord, while the losing one decried it as a violent subjugation. The former spoke about doux commerce, the latter about the jealousy of trade. For instance, in the Kingdom of Naples, which time after time found itself subdued to foreign powers, a sophisticated economic theory was formulated that focused on asymmetries in trade patterns and underlined the political effects of an economy that exports raw materials and imports manufactured goods from abroad. Genovesi (1712-1769) warned about the meaninglessness of titular independence in a situation when a nation hasn’t got enough military and industrial power to guard its position in the regime of international trade. 432 De Jorio (1769-1851) echoed these concerns when he wrote about English “dominion” and “Universal Monarchy” established through “industry” and free trade. 433 De Jorio argued that this is a new kind of Empire, but nevertheless an Empire capable of giving laws to subjugated states. Filangieri (1752-1788) added that: Commerce [had become] essential to the organization and to the existence of political bodies […] In the midst of opulence your name will be feared, your alliance will be desired, your rights respected, your pretensions supported well, [and] you will give the law to your neighbors, but they will give it to you if you are poorer than they are. 434 Economics and Its Discontents 137 Agamben writes about “an implicit assimilation between war and economics.” 435 In the eighteenth century this assimilation was very explicit. One could hear that “finance is the sinew of war,” 436 but commerce was militarized not only discoursively but also in practice. In the words of Jan Coen (1587-1629), an officer of the Dutch East India Company and the governor general of the East Indies, “one cannot do commerce without war, nor war without commerce.” 437 McCloskey criticizes contemporary popular economic discourse for using the metaphor “of leadership in a race of industrial might” as “it assumes silently that first place among the many nations is vastly to be preferred to second, or twelfth.” 438 It is easy to sympathize with such critiques, however, one can see that as soon as there emerged something that can be called world economy, it started to operate as if it was a race. An economic race, in which war becomes a mere continuation of economy by military means, while economy becomes a continuation of war by monetary means. As List (Chapter 43) observed in 1841, “anyone [who] strives only to retain without acquiring must come to grief, for every nation which makes no forward progress sinks lower and lower, and must ultimately fall.” 439 At the same time, various arrangements for international balance of power between core countries were devised to ensure that no single state could get too far ahead of others for too long. 440 138 Economics and Its Discontents It must be remembered that up to the eighteenth century, Europe was neither the most developed nor the richest nor the best-supplied region of the world. See these tables: 441 From the standpoint of the world market, events such as the Thirty Years’ War or the French Revolution were little more than peripheral turmoils. Even in 1850, India and China still generated 65 percent of the global GNP. The institutional framework of private property regime was in place, the rates of growth in literacy and productivity were similar to European ones, and even poor, working class families in China were better nourished than those in the United Kingdom. 442 Hence, many historians argue that the Industrial Revolution was around the corner for China and India. 443 Although the debate on this subject is heated and its speculative character makes any definite conclusions impossible to achieve, the general consensus is that if Asian countries had any chance at Economics and Its Discontents 139 industrializing themselves, it was destroyed by European engagement in the region. 444 As Davis argues: The looms of India and China were defeated not so much by market competition as they were forcibly dismantled by war, invasion, opium and a Lancashire-imposed system of one-way tariffs. […] Whatever the internal brakes on rapid economic growth in Asia, Latin America or Africa, it is indisputable that from about 1780 or 1800 onward, every serious attempt by a non-Western society to move over into a fast lane of development or to regulate its terms of trade was met by a military as well as an economic response from London or a competing imperial capital. 445 Dozens of “unequal treaties” were enforced by gunboat diplomacy, of which the most notable examples were the Opium Wars, the Yangtze Patrol, or a number of interventions in Japan. Wallerstein shows that European powers deliberately pursued the policy of the forceful deindustrialization of its competitors. 446 In 1830 an ex-employee of the East India Company and a Member of Parliament, Charles Marjoribanks, testified before House of Commons: We have excluded the manufactures of India from England by high prohibitive duties and given every encouragement to the introduction of our own manufactures into India. By our selfish (I use the word invidiously) policy we have beat down the native manufactures of Dacca and other places and inundated their country with our goods. 447 When the power struggle between nation-states wasn’t decided with gunships, it depended on “a perpetual and peaceful war of mind and industry among all nations” 448 (Colbert), in which the main vehicle was emulation. As Marquês de Pombal of Portugal (1699-1782) said, “all European nations have improved themselves through reciprocal imitation; each one carefully keeps watch over the actions taken by the others.” 449 Knowledge about good economic practices was perceived as a “mystery” jealously protected by some countries and desperately sought by others. First, the Dutch were “hiding” it, then the English managed to “divine it,” and then other European countries had to steal it from the Brits. 450 140 Economics and Its Discontents Progress was thus to be achieved by emulation, and emulation was to be achieved through translation. Translations of economic texts were very rare in the sixteenth and seventeenth centuries, but they increased moderately towards the end of the seventeenth century and boomed in the mid-eighteenth century. See the figure below: 451 And the decisive majority of these translations were from English. In the entire period 1550-1849, 615 texts were exported from England, while only 144 were imported. 452 It is worth pointing out that the economists on which modern economic historiography focuses were almost completely uninfluential in terms of translations and international emulation. While in retrospective reading, special importance is attributed to the British free trade proponents such as Barbon or North, their contemporaries hardly ever referred to them, being far more interested in texts that proposed much more protectionist policies. 453 A good example of such a work is largely 141 Economics and Its Discontents ignored today: “Essay on the State of England’s Trade,” written in 1695 by John Cary, a Bristol merchant. Cary proposed that real wealth is based on accumulated labor and technological developments, to which international trade can be instrumental if it is the right kind of trade – which should be the object of a state’s policy. 454 Not the trade itself but what was traded was important, and when England’s position was endangered by cheaper manufacturing in Ireland, the latter should be simply “reduced to the state of a colony” if there are no other ways to “discourage the working up this Wooll there.” 455 Cary’s essay enjoyed a big career throughout Europe, and after being translated to French, Italian, and German, it became a textbook of modern realpolitik. And in each country, the translation meant a transformation of Cary’s essay. Genovesi translated it and used it as textbook of political economy at the University of Naples, but first he edited Cary’s work to align it more closely with the Italian perspective. In the 1755 French translation, the same happened. 456 Translation of an economic text meant its adaptation for the needs of the new addressee. In this regard, these eighteenth century translations were no different from earlier appropriations of Aristotle by Ibn Rushdi, or Moerbecke, or Aquinas, who always lost in translation some uncomfortable lines and interpreted others in a way that suited their arguments. 457 Another aspect of emulation by translation was economic propaganda produced by the leading countries aimed at misleading the developing ones: At the height of the French Revolution, Gaetano Sotira, a Neapolitan scholar in Parisian exile, explicitly warned against the “errors,” the propaganda and the disinformation, promulgated by certain “political writers” with regard to the causes of “England’s greatness.” Rather than locating it in centuries of imperial policies and interventions to “encourage manufactures,” said writers explained it simply by recourse to the “form of 142 Economics and Its Discontents its Government,” English “national character,” or even it “being an island.” The “English themselves,” he argued, “have accredited such errors, which serve greatly to render their emulation by other Peoples more difficult.” 458 Whether or not this is a conscious tactic on the part of the hegemonic states, it is still practiced today. Time after time, promoting laissez faire trade by the Global North is condemned by politicians and economists of the developing countries as “kicking away the ladder with which they had climbed to the top” and a “don’t do what we did, do what we say” approach (Chapter 43). In many peripheral countries, especially in Eastern Europe, these processes of emulation coexisted with conservative movements that pushed in the opposite direction. They idealized the past, praised locality, and equated capitalist progress with moral decay. Thus, it has been said that Narodniks in Russia or messianic movements in Poland sought refuge from the economic machine in romantic nationalism, agrarian ideologies, and moralistic discourses. However, it is important to see that these movements were neither a really external force, hostile to modernity, nor that they can be properly understood as its effect. Both approaches are guilty of presenting modernity in idealistic terms as a sort of abstract yet homogenous force of nature that progresses through history, helped by some and restrained by others. Hence, the triad of modernity-modernizers-anti-modernizers should be abandoned. It is invested with ideological presumptions and it is analytically barren. Conversely, these issues could be understood in terms of main sets of discourses and practices, all equally “modern” (which by now becomes really an empty, analytically useless, category), that voiced interests of different groups and proposed alternative structures of power Economics and Its Discontents 143 distribution. And in eighteenth-century Europe, as the world market became increasingly integrated, it became evident to more and more groups that no power strategy can ignore the emerging global economy. Liberal trade doctrines, protectionist policies, or isolationist proposals were simply different ways of establishing one’s position in the slowly bolstering and stiffening system of international division of labor. Chapter 25: Which shows how perilous passions were turned into legitimate interests. To set affection against affection, and to master one by another. Francis Bacon We have noticed in Chapter 10 that although the medieval Christian discourse found a way to legitimize earthly possessions, it simultaneously established a punitive discourse on the seven deadly sins. It praised temperance and treated passions as dangerous forces that need to be controlled at all times. Hirschman argues that during the age of Enlightenment a new approach to affections was established, one that proposed that they should not be repressed, but balanced by playing them off one against the other. 459 If for Dante pride, envy, and greed fed off each other and could be kept in check only by the rule of reason, 460 for Spinoza, Hume, or d’Holbach they could balance each other in such a way that not only was no harm done, but rather they became a driving force for social and individual progress. Consider d’Holbach: The passions are the true counterweights of the passions; we must not at all attempt to destroy them, but rather try to direct them: let us offset those that are harmful by those that are useful to society. Reason [...] is nothing but the act of choosing those passions which we must follow for the sake of our happiness. 461 And such successful balancing of the passions could be recognized when someone acted in accordance with their interest. This concept of interest was relatively new, and can be summarized in the shortest form as a legitimized profit motive. Hume compared avarice with other passions and found that “the desire of gain, is a universal passion which operates at all times, in all places, and upon all persons” and is preferable to other passions which “operate only by intervals, and are directed 146 Economics and Its Discontents against particular persons.” 462 Montesquieu equalled the love of gain with interest and argued that “it is fortunate for men to be in a situation where, though their passions may prompt them to be wicked, they have nevertheless an interest in not being so.” 463 Francis Hutcheson, Adam Smith’s tutor, praised the “calm desire of wealth” as the civilizing force that encourages rational calculation and calms other passions. 464 If thinking had progressed in a linear fashion, we could mark a path from Bacon’s idea that passions can be set against each other, through the Enlightenment concept of pitting one’s interest against other passions, to Adam Smith’s final solution: collapsing all passions into the drive for the “augmentation of fortune.” 465 Of course this would be a clumsy generalization, as a dissolution of passions into self-interest was proposed by Hobbes in England or La Rochefoucauld in France long before Smith. 466 Nevertheless, it seems undeniable that a gradual shift in attitudes, or a reconfiguration of acceptable attitudes toward passions occurred over the course of the seventeenth and eighteenth centuries. Interest differed from avarice mainly in appearances. As Hirschman writes, “in the pursuit of their interests men were expected or assumed to be steadfast, single-minded, and methodical, in total contrast to the stereotyped behavior of men who are buffeted and blinded by their passions.” 467 This novel concept of predictable rationality will later become a basis for the figure of homo economicus (see Chapter 42) and abstract economic theorizing (Chapter 44), somewhat prefigured by 1758 Helvétius claims that “just as the physical world is ruled by the laws of movement, no less is the moral universe ruled by laws of interest.” 468 The notion of individual interest can be apposed with the postMachiavellian concept of interesse, reason of state, which in the second Economics and Its Discontents 147 half of the sixteenth century came into use in Italian, French, and English political thought. “On the one hand [it was] obviously a declaration of independence from the moralising precepts and rules that had been the mainstay of pre-Machiavellian political philosophy; but, at the same time, [it] aimed at identifying a ‘sophisticated, rational will, untroubled by passions and momentary impulses,’ that would give clear and sound guidance to the prince.” 469 The Duke of Rohan opened his 1638 essay On the Interest of Princes and States of Christendom with a statement that “princes order their people around and interest orders princes around.” 470 Also, earlier Italian writers called interest the “tyrant of tyrants” and the “prince of the princes.” 471 Interestingly, both state and individual interest, much like the neoclassical notion of utility (see Chapter 42), remained largely undefined. Although for centuries the dichotomy between passions and reason was absolutely fundamental to European moral discourses, the new paradigm that united both in one notion of interest was now seen as a self-evident frame of reference for both moral and amoral judgements. 472 If the literature on interest in statecraft explicitly cleared itself from moral pretences, in terms of individual morality it has been immediately valued as a virtue. “There are few ways in which a man can be more innocently employed than in getting money,” claimed Hume. 473 And Montesquieu argued that “it is almost a general rule that wherever the ways of man are gentle there is commerce; and wherever there is commerce, there the ways of men are gentle. […] [It] polishes and softens barbarian ways as we can see every day.” 474 But by now we have arrived at the doux commerce thesis, which has already been discussed in the previous chapter. Chapter 26: In which iconoclasm as a mode of critique is critiqued. Ye shall not make with me gods of silver Neither shall ye make unto you gods of gold. Exodus 20:23 The shift from feudal dues in kind to rents paid in cash and the growing importance of cash transactions in general didn’t go unnoticed for contemporaries. As we noted in Chapter 18, many commented on the social changes brought about by the new commercial economy. Wallerstein dates these developments in England between 1540 and 1640. 475 And in fact, an the turn of century even merchants voiced concerns about excessive commercialization of life, as can be seen in this fragment of A Treatise on Commerce, written in 1601 by a British merchant John Wheeler: All the world choppeth and changeth, runneth and raveth after Marts, Markets and Merchandising, so that all things come into Commerce, and pass into traffic [...] this man maketh merchandise of the works of his own hands, this man of another man’s labor, one selleth words, another maketh traffic of the skins and blood of other men, yea there are some found so subtle and cunning merchants, that they persuade and induce men to suffer themselves to be bought and sold, and we have seene in our time enowe, and too manie, which have made merchandise of mens soules. 476 The most heavily exploited theme in critiques of the emerging capitalist society was that of idolatry. The prohibition of idolatry had its roots in the Old Testament commandment against worshipping idols – the products of human labor which one invests with supernatural powers. 477 It is Yahweh’s first concern in the Decalogue and the single most often regulated issue in the Old Testament (the second being usury). In second century, Tertullian picked up the Aristotelian notion of a final cause and argued that all things can be used accordingly to their proper, natural purpose, or they can be abused, which would be idolatrous. 478 Hence, 150 Economics and Its Discontents idolatry meant worshiping gold and silver, worshipping the products of labor and confusing the natural with Satanic uses of things. It is perhaps not surprising that the figure of idolatry served easily as a mode of critique of the embryonic commercial society. Hawkes argues, that the Protestant Reformation could be understood precisely as an iconoclastic movement: Luther was shocked and outraged to discover that the indulgence system was no temporary aberration of papal policy, but merely an especially egregious abuse of an ecclesiastical system that was, as he saw it, openly run on market principles. This commodification of religion is the crux of Luther’s case against Rome. In his Appeal to the Ruling Class of the German Nationality (1520) he informs his audience of: a state of affairs in Rome that beggars description. You can find there a buying and selling, a bartering and a bargaining, a lying and trickery, robbery and stealing, pomp, procuration, knavery, and all sorts of stratagems bringing God into contempt, till it would be impossible for the Antichrist to govern more wickedly. There is nothing in Venice, Antwerp, or Cairo to compare with the fair which traffics in Rome. […] the pope has built a market-house for the convenience of all this refined traffic, viz.: the house of the datarius in Rome. This is where all those resort who deal in this way in benefices and livings […] if you bring money to this ecclesiastical market, you can buy any of the goods. […] Indeed, here the devil becomes a saint and a god: what can-not be done anywhere else in heaven or earth, can be done. 479 As the geometrical (see Chapter 15) ordering of economic life progressed, the once certain axioms crumbled. In their place arose new concerns about confusion of means and ends and about the dangerous supremacy of representation over essence. Let us not forget that this was the very definition of magic: the manipulation of symbols, appearances, and representations for the sake of altering reality. And although this is not a place for a detailed study of this issue, we can note that there historically has been at least a recurring correlation between the periods of commercialization of life and social concerns with witchcraft. This was the case in Early Modern Europe and it is still the case in places that have been integrated with the world market more recently, for instance, in certain areas of contemporary South America 480 or Africa. 481 Economics and Its Discontents 151 Although iconoclasm as an explicitly religious mode of critique of commercialization declined towards the end of the seventeenth century, we can see that its secularized form has remained one of the main modes of critique of capitalism. After all, doesn’t the Marxist critique of commodity fetishism repeat the basic formula of arguments raised against idolatry? An identification of appearance as false reality, an attribution of social ills to confusion of appearances with reality, and a call to restoring natural order and proper relationship between means and ends? This figure is so handy that even the latest poststructuralist thinkers often fall into its traps, and the fact that they turned it upside down to denounce the substance in the name of surface changes little. It is not that there are no instances in which such critique can be legitimate. But iconoclastic arguments are very much like dialectic ones. There are particular situations in which they can provide valuable insights, but to believe that an argument is valid simply because it is presented in this or that style is ludicrous. Not all iconoclastic arguments are valid as iconoclasm as a mode of critique is not sufficient to make them valid. It is just like with dialectics. There are some matters which can be enlightened by three-lined dialectic stanzas, but generally poems are not necessarily true just because they rhyme. Historically there may have been moments when these iconoclastic surges could be successful in terms of political mobilization, but if we are to understand anything about historical and contemporary constellations of power we must abandon this Old Testament hunt for false idols. Chapter 27: In which an example of iconoclastic argument from seventeenth-century England is presented. In all its specific manifestations the spectacle epitomizes the prevailing model of social life. Guy Debord Another stage on which concerns about the social effects of the development of monetary economy was voiced was the stage of Elizabethan theater. It is common knowledge that sixteenth and seventeenth-century England saw an “antitheatrical controversy” in which theater was attacked by numerous groups as it was considered in many ways demoralizing and generally was held in contempt. The argument usually stated that all spectacles are immoral because “the theater relies on a visual, sensual, medium of signification, which is intrinsically corrupting […] This results in a fetishized or ‘idolatrous’ sensibility, and the adoration of human figures upon the stage leads to a correspondingly objectified view of human beings in general.” 482 In Agnew’s words, the theater provided an “intelligible, formal analogue of the increasingly fugitive and abstract social relations of a burgeoning market economy.” 483 However, when this issue is explored in more detail, one can see that the antitheatricalists were often opposed not to the theater as such, but to its “abuse.” As antitheatrical clergyman John Northbrook (fl. 1567-89) wrote: As farre as good excercises and honest pastimes & plays doe benefit the health of manne, and recreate his wittes, so farre I speake not against it, but the excessive and unmeasurable use thereof, taketh away the right institution thereof, and bringeth abuse and misuse […] and therefore they are rather chaunged into faults and transgressions, than honest exercises for mans recreation. 484 154 Economics and Its Discontents It seems that the demarcation between the “use” and “abuse” of theater was drawn along the lines of the taboo against commercialism. Northbrook supported plays which were not performed “publicly for profit and gain of money.” Munday criticized he “who writeth for reward, neither regardeth virtue, nor truth; but runs unto falsehood, because he flattereth for commoditie.” And the 1574 London City Council exempted from its ban plays that were performed without “collection of money of the Auditorie.” 485 Hawkes sums it up: The main objection, it seems, is not to the theater per se but to the startlingly new form taken by the theater in Elizabethan London. The most conspicuous novelty to scandalize puritan opinion was the fact that the playing companies had become commercial enterprises, selling a product for a fee. Again and again, the tracts deplore the fact that the public playhouses charge admission, and they decry the aesthetic effect of the consequent need to pander to popular taste. The “abuse” of the theater, in short, involved its commodification, and to “abuse” poetry was to transform it into a commodity to be traded on the market. 486 These “antitheatrical” and more generally, anti-commercialist, arguments were regularly expressed in the theater itself. Ben Jonson’s “Bathelomew Fair” denounced “this wicked Fair […] the abuses of it […] this idolatrous grove of images, this flasket of idols.” 487 In Milton, Middleton, Shakespeare, Bunyan, or Adams we can find sharp critiques of the novel commercial realities. Idolatry, usury, and their social and cultural effects were common themes in the English Renaissance theater. Arthur Stonex counted 71 plays that included the role of a usurer in the period, and in 45 of them the usurer played a dramatically central role. 488 Often the sphere of monetary exchange was linked or related with the erotic sphere. Prostitution, pimping, and homosexuality were linked with usurious practices, “they were essentially the same and differed only in form.” 489 Commodified sexuality and all non-reproductive sex acts were regarded as violations of sexuality’s natural telos and thus, an appropriate Economics and Its Discontents 155 metaphor for usury. 490 Meres explained it clearly in 1598: “As Paederestie is unlawful, because it is against kinde: so usury and encrease by gold and silver is unlawful, because against nature; nature hath made them sterill and barren, and usurie makes them procreative.” 491 And Howards argues that the sudden obsession with “whores” reflects a new anxiety that due to the commodification of labor, everybody was becoming a prostitute. 492 Probably the most overtly political play in this controversy over the commercialization of theater and social relations was John Marston’s “Histrio-Mastix,” in which he supports arguments of the antitheatricalists and treats the theater as a metonym for the market society: 493 The mercantile classes rise, the lower classes become wage-laborers instead of feudal retainers, the nobility feels threatened. It is noble Mavortius who first initiates the conflict into which Histrio-Mastix’s society degenerates, when he refuses to pay the players the price they demand, preferring to get drunk and pass out. On waking, he begins to decry the decline of the aristocracy, deploring the new state of affairs […][Finally] civil war breaks out between the nobles and the merchants. Chaos soon ensues, and the stage is held by a crowd of name-less “Russetings and Mechanicalls,” who vow to kill all the nobles and middle classes alike: Slid, we are men as well as they are. And we came all of our Father Adam. Goe to then, why should we be their slaves? Liberty, liberty, liberty 494. All this is usually ignored in the analysis of economic history and declared null and void for any contemporary political reflection. I would argue that this is a big mistake. When we forget about these past debates, we end up wasting time by repeating them time after time. And by overlooking this particular controversy, we may end up even worse. We may end up getting excited about Debord’s Society of Spectacle – another analytically useless offshoot of iconoclastic exorcism. Chapter 28: In which we see that economic freedom was instrumental for the market equalizing machine. Laissez faire, morbleu! Laissez faire! Marquis d'Argenson For many mainstream historians of economics, the French physiocrats were the first real economists. The Économistes praised private property, individual self-interest, and the agricultural sector. They considered the latter as the only productive sector of economy, hence the only possible source of surplus was cultivated land or, in other words, nature and human labor. Therefore, they are often considered inventors (wrongly) or proponents (rightly) of a sort of labor theory of value. While they are also known for their influence on Smith or Ricardo, they are probably best known as enthusiastic supporters of laissez-faire economic policies in general and liberalization of trade in particular. The liberalization of commerce was presented above all as a way of dealing with periodical scarcities of grain (for more on scarcity see Chapter 29) and high prices. They argued that market regulations do not prevent scarcities or limit prices in times of dearth but are their very causes. “Dearth, that is to say the actual insufficiency of the quantity of grain necessary for a nation's subsistence, is obviously a chimera. The harvest would have had to be nil, in the strict sense of that term,” 495 argued Abeille in 1763, and added, “As soon as people know that commerce is free – free within the country and free also between one country and another – they know full well that at the end of six months imports will relieve the country's lack.” 496 “Freedom is the only possible preservative against scarcity,” wrote Turgot in his Lettres sur le commerce des grains. 497 Condorcet argued likewise, when defending 158 Economics and Its Discontents “unlimited freedom for the grain commerce” at all times, withstanding extreme situations such as military blockade. 498 When the Scottish physician Arbuthnot urged in 1773, “Let the corn flow like water, and it will find its level,” 499 he encapsulated both the ends and means of the physiocratic argument. Freedom of trade must lead to the best possible results because market is both the providential and natural place of equalization. First, Divine Providence (Chapter 23) guarantees the proper functioning of the markets, and therefore all imbalance must be caused by human wrongdoings. 500 Second, the market mechanism is conceived in biological and hydraulic terms. Already Boisguilbert (Chapter 21) theorized market equilibrium in these terms, 501 arguing that: by immediately removing an “unnatural element” like a fallen boulder, the deviation of the natural course of a river ceases, with the ensuing reestablishment of the good conditions of nature. Consequently “the remedy of an ill is nothing more than the cessation of its cause.” No “disorder” has ever been found in nature without its “remedy”, as “there cannot be a mountain without a valley.” 502 And the physiocrats picked up these themes. As Christensen argues, Quesnay’s “language resonates with the meanings it takes from his own physiological writings and from the biological work of his contemporaries. This meaning is not confined to physiology but involves the larger economy of nature: the circulation and regeneration of vital materials within the womb of nature. Nature reproduces itself.” 503 Quesnay, a physician who took an interest in economy only at the age of 60, based his economic models on the cardiovascular system of blood circulation. 504 As blood must flow freely through the body to “irrigate all the parts,” money has to flow through economy. “The body provides the map of the structure and operation of the socioeconomic system.” 505 The scientific objectivity of this approach seemed for Economics and Its Discontents 159 Quesnay undeniable. After all, he tested it empirically, when he experimented with homemade machines made of water pumps and tubes of tin. 506 Another important influence for the physiocrats was China, which is not surprising given that at that time it was the richest and in many respects the most developed state on the planet. Fascination with China was thus not uncommon in Europe, and figures such as Leibniz, Voltaire, or Diderot are often described as sinophiles. 507 In Despotisme de la Chine (1767), Quesnay presents a “systematic digest of the Chinese doctrine, worthy to be used as a model for all states.” 508 China was idealized and reshaped to fit the needs of French liberals. The meritocratic mandarinate was praised as a truly rational and enlightened system of government, 509 hard-working and entrepreneurial Chinese were contrasted with idle and poor European vagrants, 510 and the legitimacy of various policy proposals was established through claims that they had already been implemented in the Middle Kingdom. On the other hand, Chinese policies that didn’t sit well with physiocratic doctrine, such as government aid for the poor in times of scarcity, were harshly criticized or simply omitted and ignored. 511 Chinese culture provided European writers also with more intangible sources of inspiration. For instance, it was noted already in the 1760s that Quesnay’s Tableau economique (one of the first European graphic macroeconomic models ever, see figure) was modelled after the ancient Chinese Book of Changes, the Yijing (yes, the very same Yijing that plays the central role in Philip K. Dick’s The Man in the High Castle). 512 It would certainly constitute an intellectual abuse to say that the whole edifice of European economics was built on one ancient divination text because the Tableau didn’t have that much of an influence on the 160 Economics and Its Discontents economic genre. But one can see that this enthusiasm for neat, albeit abstract, models is a shared trait of economics and religion alike up to this day (Chapter 44). Economics and Its Discontents 161 Using the figure of China as a way of establishing legitimacy was criticized by many contemporaries of the physiocrats, including Montesquieu. This is not the place for a prolonged discussion on this issue, but it can be seen as an interesting case of an economic emulation (Chapter 24) at a moment in history, when the country most worthy of emulation seemed to be not in the West, but in the Far East. But physiocracy was criticized for much more than its naïve sinophilia. Tocqueville criticized the Économistes for the fact that they construced abstract “models” of “essential order” and then wanted to reconstruct the individuals to fit this “imaginary society.” “It does not simply reform men, it transforms them,” “[the role of the State for physiocrats] is not only to command the nation, but to shape it in certain way.” 513 This sort of government leads to a form of despotism that is “dazzling men instead of enlightening them.” 514 The physiocrats, in fact, did propose a seemingly paradoxical, although well-known for anyone who has ever met a neoconservative, mix of anti-statist ideology and advocacy of strong government. On the one hand, economic activity was to be freed from governmental interference, on the other, this freedom was to be guaranteed by an all-powerful ruler. Representative of this approach was Lemercier de La Rivière’s 1767 proposal for establishing a regime of co-property, in which the sovereign would own a set proportion of all productive resources in the country. This would remove the potential conflict of interest between the government and private industry and ensured that as long as the sovereign acts in his best self-interest, he acts also in best interest of his subjects. This was an interesting usage of the recently established paradigm of self-interest (Chapter 25), but what’s perhaps more important is that this was one of the first comprehensive attempts to construct the identity of 162 Economics and Its Discontents economic interests within a nation-state. The attempt to establish a synthesis of many contradictory elements. To erase conflicts, to reconcile different forces, to smooth out surfaces. This will for synthesis will corrupt the character of economic reasoning from then on. The market is a synthesizing machine as such (Chapter 15), and social and economic ills are result of imperfect functioning of this machine. Recently, it has been argued that this is the neoliberal paradigm, 515 but in fact this is the basic logic of all main economic doctrines, all economistic doctrines, Marxism notwithstanding (Chapter 39). Economy is seen as a natural sphere of equalization. It may be (and in practice, always is) distorted by cultural backwardness, governmental interference, or capitalist exploitation (delete as appropriate), but is potentially capable of becoming a matrix for a just society. Provided a couple of more or less radical changes in economic policy, the goal will be achieved, the perfect equilibrium will be established, and peace will finally be achieved (Chapter 11). To take part in the process of equalization, one simply has to produce. Hence, so common in classical economics, liberal and radical alike, the contempt for “nonproductive work,” such as the domestic labor of women 516 or for landlords’ profits, achieved without any labor at all. 517 Without expounding on this issue, and certainly without resolving it, let us only note the ambiguity of arguments for introducing pay for domestic work. On the one hand, they express the understandable need for recognition of domestic work’s worth and the domestic laborer’s dignity. On the other, their successful introduction would lead to subsumption of yet another aspect of life under the cash nexus. Maybe today, it really is the only attainable way to improve the domestic laborer’s position in the current constellation of power, but if so, it is very telling of this constellation. Economics and Its Discontents 163 But for now let us go back to the physiocratic treatment of freedom. What is of outstanding importance here is to understand that when we talk about “freedom” we do not speak of some abstract idea or value and not about the political ideal of liberté, but about a very concrete way of arranging economic life. Analyses of economic freedom as a discourse, practice, and institution must not succumb to its praise as an ideal. By doing that, it becomes nothing more than a blind apology of liberalism, without bringing us any closer to understanding how it works. Foucault proposes a quite good approach to freedom: Ideology of freedom really was one of the conditions of development of modern or, if you like, capitalist forms of the economy. This is undeniable. […] More precisely and particularly, freedom is nothing else but the correlative of the deployment of apparatuses [of power which ][…] cannot operate well except on condition that it is given freedom [...] the possibility of movement, change of place, and processes of circulation of both people and things. 518 And then he describes the physiocratic discourse as a pure affirmation of these new techniques of liberal governance, which were: Connected to what the physiocrats called physical processes, which could be called natural processes, and which we could also call elements of reality. These mechanisms do not tend to a nullification of phenomena in the form of the prohibition, “you will not do this,” nor even, “this will not happen,” but in the form of a progressive self-cancellation of phenomena by the phenomena themselves. In a way, they involve the delimitation of phenomena within acceptable limits, rather than the imposition of a law that says no to them. 519 It seems that the capitalist economy as we know it cannot function (at least in its core countries) without some degree of economic laxity, for instance, without license to sell and buy labor. Although today it is a liberal cliché to portray economic freedom as a foundation and a necessary prerequisite for universal political freedom, for the early liberals that was clearly not the case. The two were quite distinct, and while legitimacy of the former was based on “scientific policy” and “rational government,” the latter was rather seen as a threat to the edifice 164 Economics and Its Discontents of Enlightened policy that needed to be muted and kept in check. We will come back to this confusion of two “freedoms” in Chapter 31. Foucault argues that with the physiocrats, the conceptualization of the marketplace changed so it became a site that reveals “something like a truth”: This does not mean that prices are, in the strict sense, true, and that there are true prices and false prices. But what is discovered at this moment, at once in governmental practice and in reflection on this governmental practice, is that inasmuch as prices are determined in accordance with the natural mechanisms of the market they constitute a standard of truth which enables us to discern which governmental practices are correct and which are erroneous. In other words, it is the natural mechanism of the market and the formation of a natural price that enables us to falsify and verify governmental practice when, on the basis of these elements, we examine what government does, the measures it takes, and the rules it imposes In this sense; in as much as it enables production, need, supply, demand, value, and price, etcetera, to be linked together through exchange, the market constitutes a site of verification, I mean a site of verificationfalsification for governmental practice. 520 Thus, government becomes economic government. As Terranova writes: “the natural laws of the market constitute the primary referent for a government that, from now on, will present itself always as an ‘economic government.’” 521 It can be said that when Foucault presents these developments as qualitatively new, when he contrasts historical periods when market was a “site of jurisdiction” and a “site of verification” (or, in fact, almost always when he uses the past as a contrasting background for the phenomenon at issue), he seems to be indulging in completely unnecessary and analytically harmful periodization. Nevertheless, to some extent these intuitions reflect the developments in eighteenth-century political and economic discourse. When Quesnay spoke about a good government being “economic government,” 522 it seems that this was what he had in mind – that the economic realm maps out the field of state politics (Chapter 32). Chapter 29: In which we see the roots and fruits of the scarcity figure. Lack is created, planned, and organised, it is never primary. Gilles Deleuze and Felix Guatarri The key to understanding modern economics is the notion of scarcity. Assumption of the “main fact of scarcity” 523 constituted the basis for the most part of twentieth-century economics and in 1935 economic sciences were simply defined by Robbins as “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” 524 Today the general understanding of this issue is one exemplified by Sartre’s claim that “the whole of human development has been a bitter struggle against scarcity.” 525 Even such an acute mind as Foucault seemed to reaffirm this ahistoricity of scarcity, arguing in 1966 that the situation of scarcity is “perpetual and fundamental” 526 to men’s life. This approach fits well with the tendency to consider lack as the true fundament of all reality (Chapter 11), but however scarce is the research on scarcity, I would argue that it is sufficient to constitute a base for an argument against this threadbare view on lack. Scarcity, in the current sense of the term, is a quite recent invention. The etymology of the English “scarcity” reveals to some extent the historical development of the notion. Of medieval origin, derived from the Old French escarceté, it was at first used to denote an insufficiency of supply and in the fifteenth century acquired a more specific sense of a dearth. 527 It wasn’t until the nineteenth century that the word took on its modern meaning of a general condition. As late as in 1763, Abeille wrote that scarcity means a “present insufficiency of the amount of grain necessary for a nation’s subsistence.” 528 At that time it was always “a scarcity of” or “a time of scarcity,” never simply “scarcity.” 529 Hence, a 166 Economics and Its Discontents juridical system of price controls, regulations of the right to store and the prohibition of hoarding was put in place to prevent events of scarcity altogether or limit the social impact when the dearth did occur. In the eighteenth century, a different take on scarcity was taking roots in European economics. The physiocratic school (Chapter 28) argued that instead of maintaining a legal apparatus preventing scarcity from occurring, an economic system should find a point of support in the very processes of scarcity. The quantitative fluctuations of production resulting sometimes in abundance and sometimes in scarcity were to be studied, so the other elements of reality could be fine-tuned in relation to them in such a way that scarcity is cancelled out. 530 Parendo vincere: in order to conquer nature, man has to obey its laws. That is the literal as well as real meaning of the physiocratic movement: physio cratos, “the government of nature.” Curbing scarcity by a sort of “laisser-faire,” […] a sort of “[laisser]-aller,” in the sense of “letting things take their course.” It means allowing prices to rise where their tendency is to rise. We allow the phenomenon of dearness-scarcity to be produced and developed on such and such a market, on a whole series of markets, and this phenomenon, this reality which we have allowed to develop, will itself entail precisely its own selfcurbing and self-regulation. So there will no longer be any scarcity in general, on condition that for a whole series of people, in a whole series of markets, there was some scarcity, some dearness, some difficulty in buying wheat, and consequently some hunger, and it may well be that some people die of hunger after all. But by letting these people die of hunger one will be able to make scarcity a chimera. 531 In other words, the physiocrats naturalized the phenomena of abundance/scarcity, and tried to arrive at a mechanism that would work within this new reality of scarcity and not against it. 532 It was argued that due to such developments, scarcity must in the long run become a chimera, 533 as the phenomenon will be “gradually compensated for, checked, finally limited, and, in the final degree, cancelled out, without it being prevented or losing any of its reality.” 534 Exactly this was the Economics and Its Discontents 167 moment “the long-run perspective” started to play a significant role in economics. The change in the treatment of scarcity was, as it must have been, accompanied by a shift in the discourse on economic subject. Around the middle of the eighteenth century, the concept of the individual husbandman being charged with God-given tasks died out, and farming started to be conceived in terms of a series of natural processes. 535 Profit ceased to be perceived as a result of the individual “diligence” of the husbandman, but rather as the outcome of managerial procedures applied to nature. 536 This divorce from an individualistic perspective on agricultural production meant also the end of the idea that economic production can be understood in terms of particularized and isolated actions of husbandmen. This new global perspective was the perspective of the population (Chapter 20). Thus, in the second half of the eighteenth century, population becomes the “collective subject-object” 537 of economic and political management. As Quesnay wrote in 1756, “the condition of the population and the employment of men are […] the main objects of economic government of states; for the fertility of the land, the monetary value of products, and the good use of financial wealth are the results of the work and industry of men.” 538 That’s why D’avenant notes in 1771 that “people are the real strength and riches of country.” 539 As we have noted (Chapter 20), the notion of population is associated with a changing attitudes towards the poor. The pauper was no longer an issue of morality but rather of productivity. Thus, in the eighteenth century, many ceased to see temporary scarcity or even permanent poverty as undesirable. Ontes wrote in 1774 that “misery [of the nation] 168 Economics and Its Discontents corresponds with its wealth,” 540 M’Farlane claimed in 1782 that “the greatest number of poor is not to be found in barren countries or amidst barbarous, but in those which are the most fertile and the most civilized,” 541 and Burke argued that “once the masses were fated by the laws of political economy to toil in misery, what else was the idea of [material] equality but a cruel bait to goad mankind into selfdestruction?” 542 Hume’s economic theory explicitly justified the existence of scarcity, inscribing it into the theory of the dynamic of social needs and integrating it into a broader theory of progress (Chapter 23). 543 A conventional warning should be issued here – this change in the treatment of scarcity, its generalization and internalization into economic processes, didn’t happen at any single point in history. Late eighteenthcentury France wasn’t the place where this change occurred, it is merely the point where it can be seen. And in any case, it was still a long way from Robbins’ “main fact of scarcity.” For instance, for Adam Smith scarcity was still specific and local, contrasted with the usual abundance of low-priced goods after a good harvest, 544 and Brown persuasively argues that attribution of the neoclassical notion of generalized scarcity to Smith is a bad case of retrospective reading. 545 But it can also be argued that without the inclusion of scarcity as an integral element of economics, the later neoclassical generalization of it would not be possible. Economics and Its Discontents 169 For the purposes of a crude generalization, the attitudes to scarcity can be arranged in order: x x from moral-religious discourses aimed at providing alms to the poor; through paternalist systems of legal regulations of markets that tried to prevent occasional scarcities, treating them as external to market x mechanism; through laissez-faire markets which tried to limit the harm done by occasional scarcities by treating them as internal to market x mechanism; to the neoclassical generalization of scarcity, which treated it as an essential condition of every action and simply a natural economic environment. This gradual shift to the acceptance of scarcity was accompanied by the emergence of a post-scarcity utopia. The idea of a final stage of economic development is built into the great majority of economic doctrines. Marx envisioned a society which was able to provide “the common satisfaction of needs.” 546 As Arendt writes, this “hope for an eventual liberation from labor and necessity” was the “Utopian element of Marxism and at the same time the actual motor of all Marx-inspired revolutionary labor movements. It is the ‘opium of the people’ which Marx had believed religion to be.” 547 On the other end of the political spectrum, classical liberal economists founded their post-scarcity utopias on Ricardo’s hypothesis of a falling rate of profit and the stationary state. J.S. Mill argued that economic development must eventually lead to when the rate of profits falls to zero, it will bring about a state of social equilibrium in which people will be free from impulses towards competitive accumulation. 548 Then, human concerns would shift from 170 Economics and Its Discontents problems of quantity to a matter of quality, 549 focusing on “all kinds of mental culture, and moral and social progress [on] the Art of Living.” 550 More recently, the idea of post-scarcity utopia was employed by Keynes. In “Economic Possibilities for our Grandchildren,” he envisaged that economic progress would eventually “lead us out of the tunnel of economic necessity into daylight” 551 of abundance, when the moral codes will be transformed 552 and man will concentrate on “his real, his permanent problem – how to use his freedom from pressing economic cares, how to use his leisure, which science and compound interest have won for him, to live wisely and well”: 553 We shall once more value ends above means and prefer the good to the useful. We shall honour those who can teach us how to pluck the hour and the day virtuously and well, the delightful people who are capable of taking direct enjoyment in things, the lilies of the field who toil not, neither do they spin. But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. 554 All these post-scarcity visions were obviously built on the essentialist, ahistorical, understanding of scarcity, needs, and consumption and therefore, on the old dichotomy between natural and artificial needs. While the conservative Greeks told a story about a lost Golden Age when people were content with their natural needs (Chapter 7), economists told a story about a coming Golden Age when economic progress will allow for their satisfaction. But as Xenos argues: The promise is in each case based on the presumption that the distasteful present is a necessary precursor to the attractive future. And in each case, the present and past are explained in terms of a necessary struggle with scarcity that will yield a future of abundance. In a curious way, then, this tradition, which sets out to criticise the status quo winds up offering a legitimisation for it. 555 Economics and Its Discontents 171 That was certainly the case with Hume, Smith, Mill, Marx, and Keynes. They all integrated economic dynamics into a larger theodicean narrative of progress, whether under the name of refinement or dialectical history. 556 Chapter 30: In which it is shown how liberal political economy was used to legitimize nineteenth-century economic genocide. A brilliant way of organizing famine. Bertold Brecht As we have seen, the new subject-object of modern political economy was population, and its new mode of management, biopolitics – politics concerned with the biological life of a population. But “since the population is nothing more than what the state takes care for its own sake […] the state is entitled to slaughter it, if necessary. So the reverse of biopolitcs is thanatopolitics.” 557 Thus, events such as the infamous Great Irish Potato Famine, with a death toll of one million, 558 should not be perceived as a fatal mistakes of the new system of the management of population and scarcity, but the very vehicles through which this system operates. Let us consider the less-known, but recently flawlessly portrayed by Davis, 559 Great Famine of 1876-1878 in India, which killed around 5.5 million people, caused ten times more distress, and brought terrible horrors upon the people. It is estimated that during the week-long celebration of Queen Victoria’s Diamond Jubilee, around 100,000 of her subjects starved to death. 560 British village officers reported to their supervisors cases of cannibalism; “one madman dug up and devoured part of a cholera victim, while another killed his son and ate part of the boy.” 561 The only well-fed part of the village population were the pariah dogs that feasted on the bodies. 562 This is how one British journalist described the situation in the country: 174 Economics and Its Discontents The dying and the dead were strewn along the cross-country roads. Scores of corpses were tumbled into old wells, because the deaths were too numerous for the miserable relatives to perform the usual funeral rites. Mothers sold their children for a single scanty meal. Husbands flung their wives into ponds, to escape the torment of seeing them perish by the lingering agonies of hunger. Amid these scenes of death the Government of India kept its serenity and cheerfulness unimpaired. 563 Victims of Madras Famine, 1876 In the same article another important statement catches attention: One civilian, a Mr. MacMinn, unable to endure the misery around him, opened a relief work at his own expense. He was severely reprimanded, threatened with degradation, and ordered to close the work immediately. 564 This was because the main principle of colonial famine policy was “the sufficiency of private trade” and the “necessity of non-interference with private trade.” 565 “Humanitarian hysterics” were denounced and strict orders that “there is to be no interference of any kind on the part of the Government with the object of reducing the price of food” were issued. 566 An amalgam of Smithian and Malthusian ideas was brought up to justify 175 Economics and Its Discontents this. After all, The Wealth of Nations, a textbook in the East India Company college at Haileybury, asserted that “famine has never arisen from any cause but the violence of government attempting by improper means, to remedy the inconvenience of dearth.” 567 And Malthusian demographics allowed the authorities to claim that “[e]very benevolent attempt made to mitigate the effects of famine and defective sanitation serves but to enhance the evils resulting from overpopulation.” 568 (See, how the providential “futility thesis” [Chapter 23] is at work here). A good example of this attitude was Queen Victoria’s economist Nassau Senior’s expression of fear that the “the famine of 1848 in Ireland would not kill more than a million people and that would scarcely be enough to do much good.” 569 All in all, the main preoccupation of colonial officials was that the scarcity might “disturb the intricate system of the multilateral settlement of [Britain’s] balance of payments.” 570 According to Temple, the Famine Commissioner for the Government of India, elevating public health above public finance was “irresponsible.” Although a couple of years earlier he had managed to deal very efficiently with a drought that severely damaged the harvests in Bengal, and thanks to measures such as food imports and providing relief works, the official death toll was only twenty-three starvation deaths, after he came under harsh criticism from London, he changed his policies completely. 571 The relief proposals were denounced as Communism.” 573 “Fourierism” 572 and a “species of International When a “welfare safety net” was provided, it was in the form of forced labor camps in which the daily diet provided less calories than were provided in the Nazi Buchenwald labor camp. One district official suggested that “it would be better to shoot down the wretches than to prolong their misery in the way proposed.” 574 176 Economics and Its Discontents In a fashion resembling today’s liberal attacks on the unemployed and the poor, the high mortality was blamed on the victims as well. After all, “nor will many be inclined to grieve much for the fate which they brought upon themselves, and which terminated lives of idleness and too often of crime.” 575 The economics of famine, its structural underpinnings, were completely ignored. Meanwhile, three such features can be pointed out: first, change in the local debt regime; second, new local market infrastructure; and third, integration with the world market. As elsewhere in the world, pre-capitalist economy in India depended largely on the commons. “Dry grass for fodder, shrub grass for rope, wood and dung for fuel, dung, leaves and forest debris for fertilizer, clay for plastering houses, and, above all, clean water. All classes utilized these common property resources.” 576 With the imposition of colonial rule, all that had changed. Enclosing lands and forest, and above all, privatizing the water sources demolished the traditional modes of subsistence. Moreover, after the Mutiny of 1857, the traditional system of communal grain reserves regulated by the social debt regime (Chapter 4) was replaced by the money economy and its cash nexus. 577 In practice this meant pauperization of the masses and establishment of a debt peonage as the main mode of production – “nothing is cultivated in India without advances, sugar, indigo, and everything which is cultivated to be exported from that country,” testified Prideaux before the House of Commons in 1848. 578 “The creditor debtor relationship was easily transformed into one in which the debtor delivered whatever surplus produce he had to the creditor. The creditor became his landlord, and de facto the master of the whole family,” as described by Bagchi, 579 while Wallerstein adds some details: “once a weaver accepted advances from the East India Company, he was required to deliver cloth to the Company, and it became illegal to sell this cloth to anyone else. The Economics and Its Discontents 177 Company was given the right to impose guards over the weavers to see that they fulfilled their contracts,” and in the case of indigo cultivation he goes on to argue that it “would not be wrong to describe [it] as indigo slavery.” 580 Perhaps the 1848 testimony of J. A. Turner of the Manchester Commercial Association that “India, with its cheap labor, will at all times be able to compete with the slave labour of America,” 581 is the most telling. Second, there were the railroads. Lauded as safeguards against the famine (after all, they did facilitate easy circulation of goods), they were in fact used to ship grain out of drought-stricken districts. 582 Tens of thousands of miles of new tracks were supposed to “make famine impossible,” 583 but in fact the population decreased more in the regions with railways than in regions without them, 584 and as Washbrook has shown, the death-toll was heaviest in the most commercially advanced districts. 585 Commercial development and the most basic security of life didn’t go hand in hand. Between the years 1875 and 1900, from 10 to 20 million people died from successive famines (according to different estimates), annual grain exports increased from three million to 10 million tons, and “by the turn of the century India was supplying nearly a fifth of Britain's wheat consumption.” 586 This is the third feature of famine economics – integration of the Indian economy with the world-market. The great European demand for wheat and a rapidly developing futures market on which standing crops were bought in advance elevated prices of wheat, making it unattainable to the local population. The profits from exports were pocketed by the small Indian moneyed elite, moneylenders, and grain merchants, while the incomes of direct producers were halved 587 and their life expectancy in the years from 1872 to 1921 dropped by 20 percent. 588 178 Economics and Its Discontents Of course India wasn’t alone. This was happening all over world, wherever the colonial enterprise put its roots. As Davis says: We not are dealing, in other words, with “lands of famine” becalmed in stagnant backwaters of world history, but with the fate of tropical humanity at the precise moment (1870-1914) when its labor and products were being dynamically conscripted into a London-centered world economy. Millions died, not outside the “modern world system,” but in the very process of being forcibly incorporated into its economic and political structures. They died in the golden age of Liberal Capitalism; 589 Europe’s la belle époque was the Global South’s colonial war, debt peonage, genocide, labor camps, and famine. All done for the sake of the “White Man’s Burden” and under the aegis of Adam Smith. When the Soviet famines of 1928-1934 which took the lives of around 5.5-6.5 million people are discussed as a case of economic terror, they are rightly so. But so, too, should be discussed the famines orchestrated by the capitalist countries. In both cases, it is wrong to say that the economic discourse was secondary to a pure struggle for power, because economics is a struggle for power. Economic discourses and practices are (one of) the very vehicles through which domination and discipline is ensured. The differences between Queen Victoria thanking the Irish for their “patience in resignation” in the face of the Potato Famine and Stalin executing by a firing squad demographers who found out that the due to famine the USSR lacks millions of citizens are pretty obvious. But at the same time, there are more similarities between the two than it may at first seem (Chapter 46). Chapter 31: In which a time is shown when everyone understood that economic and political freedoms aren’t the same. No injury is done to the willing. a common law doctrine Today political and economic freedoms function usually as one, being presented either as fundamental to each other or simply two expressions of the same abstract Freedom. It is worth noting that not always has this been the case. At the turn of the eighteenth century, it was often suggested that the spheres of commerce and politics were essentially distinct, and although they may have some tangent points, they should be generally conceived separately. Economic freedom was about freeing economic flows, as in “freedom of trade and industry,” “free circulation of labour and of stock,” and “free competition” – all vital instruments of “national wealth,” 590 while political freedom was, well, to put it simply, just dangerous. Coleridge tells the story of a shipowner in 1798: “An acquaintance of mine (least of all men a political zealot) had christened a vessel which he had just built – the Liberty; and was seriously admonished by his aristocratic friends to change it for some other name. What? replied the owner very innocently – should I call it the Freedom? That (it was replied) would be far better, as people might then think only of Freedom of Trade; whereas liberty has a jacobinical sound with it!” 591 Historically, the development of liberal economic institutions was usually carried out by not so liberal governments. The physiocratic argument that to break old economic structures and ensure certain levels of laissez-faire an (enlightened) despot needs to be in power (Chapter 28) proved to be one of their few correct observations. This was because scrapping of the old institution didn’t mean setting free the natural free spirit of capitalist entrepreneurship. Such a spirit has never existed. The new capitalist institutions had to be built and upheld. As Reddy argues: 180 Economics and Its Discontents Extensive recourse to coercion was necessary to impose liberal social orders in Europe not just because old habits held the multitude in thrall, nor just because the machinations of benighted reactionaries threatened to undo the victories of virtue. Coercion was necessary because liberal reform did not produce dramatically new and free social relationships. Liberal reform did not liberate most people; it provided some with momentary windfalls (as in the abolition of the tithe or of seigneurial dues); it gave to all new opportunities to fight their way out of (and new chances to fall back into) the subjection of propertylessness. 592 Anyone who has studied history of economy and economic institutions and not just history of economics and economic ideas can confirm that laissez-faire consisted not so much in “leaving things alone” but was developed through very proactive governmental policies. The regime of economic freedom was planned, organized, and executed with full force. 593 As Foucault notes, liberalism “has developed extremely coercive techniques that in a certain sense have become a counterbalance to a determinate economic and social ‘freedom.’ Individuals certainly could not be ‘liberated’ without educating them in a certain way.” 594 And they had to be “liberated,” that is, their social relations had to be mediated by the labor market and the money nexus (Chapter 34) if capitalist economy was to function. One could say that the freedom gained in the process was the freedom of poultry released from battery cages into the free range. The fact that it could be called free at all comes in part from a longstanding tradition in European legal philosophy which asserted that compulsion by any means other than open violence isn’t really a coercion. Therefore all choice is by definition free. As Aristotle put it, “none is voluntarily treated unjustly” or in other words, “one who was ever willing cannot be seen to suffer an injury.” 595 Physical force eliminates will, but compulsion does not. This is why Hobbes wrote that Economics and Its Discontents 181 “Covenants entered into by fear, in the condition of mere nature, are obligatory. […] if I be forced to redeem myself from a thief by promising him money, I am bound to pay it, till the civil law discharge me.” 596 In this light, all economic exchange is free as long as parties do not steal from each other or use physical force (but not a threat thereof). A galley slave shackled to his seat wasn’t free, but if it was a monetary debt that kept him in place, he was as free as the galley captain. This was also made possible by the concept that money can act as a neutral universal equivalent, a subject upon which we have already touched (Chapter 15) and to which we will return in more detail later (Chapter 34). (Perhaps we can also note here that the central figure of liberal political mythology, namely the [historically ludicrous] myth of the social contract is an interesting vehicle for establishing the legitimacy of politics by means of economic metaphors.) 597 This sort of thinking is still evident in more recent economic doctrines, perhaps most vividly in the writings of Hayek and Mises who claimed in unison that economic coercion simply cannot and does not exist. 598 Economic coercion is defined out of existence. As Langholm says, “Where the old institutionalists speak of coercion […], authors in the Austrian branch of the new institutionalism therefore call for freedom or liberty in order for the invisible hand thus to guide economic evolution.” 599 This is truly a long way from Roman Emperor Julian the Unfaithful’s idea to punish slave converts to Christianity by freeing them and throwing them into the world of paid work. 600 From economic freedom as a punishment for heretic slaves to economic freedom as the foundation of all political liberties – this is the distance we have travelled. Chapter 32: In which we see that classic liberals were rebellious pro-statists. The coldest of all cold monsters. Friedrich Nietzsche The European transition from feudal to capitalist economy was accompanied by the emergence of a new kind of state regime: an international system of balance between absolute monarchies. Wallerstein argues that the history of modern statehood can be seen as “one long quest to create structures sufficiently strong to defend the interests of one set of owner-producers in the world-economy against other sets of ownerproducers as well as, of course, against workers.” 601 The state, if it is able to organize an effective bureaucratic machine, can perform the following functions for them: x directly help compete in the world market (mercantilism); x affect the ability of other states to compete (military power); x mobilize their resources to perform these competitive and military tasks (public finance) 602 Such a modern state “becomes less the central economic enterprise than the means of assuring certain terms of trade in other economic transactions.” 603 In other words, interstate system and the state itself become an environment for economic struggles, and not so much the main agent in them. On the other hand: Incorporation into the world-economy means necessarily the insertion of the political structures into the interstate system. This means that the “states” which already exist in these areas must either transform themselves into “states within the interstate system” or be replaced by new political structures which take this form or be absorbed by other states already within the interstate system. The smooth operation of an integrated division of labor cannot operate without certain guarantees about the possibility of regular flows of commodities, money, and persons across 184 Economics and Its Discontents frontiers. It is not that these flows must be “free.” Indeed, they are hardly ever free. But it is that the states which put limitations on these flows act within the constraint of certain rules which are enforced in some sense by the collectivity of member states in the interstate system (but in practice by just a few stronger states). 604 It can be said that this was the rationale behind the post-Westphalian regime of the interstate balance of power that Foucault describes in the Birth of Biopolitics, and which is still in place today. The economic debates on the role of the state from the seventeenth to the eighteenth century seem to reflect that gradual change very well. First, with “mercantilism” they introduced the national economy as a unit of analysis 605 and then they meticulously redefined the role of the state. The retrospective reading of these old debates that treats them as voices in a modern dispute between state-advocates and market-proponents misses the point. They were written in an environment in which these two institutions were not at all opposed to each other, but on the contrary, competed as a pair with the older arrangement of feudal economies, guild systems, social debt regimes, and the paternalist relationship between the sovereign and his subjects. Within the mainstream economic discourse, a strictly anti-statist position simply didn’t exist at the time. The physiocrats favored active engagement of the state in economy. So did “mercantilist” writers earlier, and so did English “classic” liberals afterwards. The debate was over not the engagement itself, but about its specific character. The novelty of Turgot or Smith lay in their faith that markets can work as universal equalization machines, provided that the state creates the proper legal environment. If for Steuart (1712-1780) the modern economy was a delicate watch that is “continually going wrong; […] and Economics and Its Discontents 185 the workman’s hand becomes necessary to set it right,” 606 for liberal economists the watch generally showed the right time. Smith’s The Wealth of Nations envisions a system of “natural liberty,” a sort of providential ordering of economy that synthesizes individual interests into common opulence: All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions which it can never be for the interest of any individual, or small number of individuals, to erect and maintain. 607 As one can see, the system of liberty is natural because it was said to “establish itself” whenever artificial impediments are taken away, but in practice it establishes itself through deliberate state policy. In Lectures on Jurisprudence, he argues that “whatever regulations are made with respect to the trade, commerce, agriculture, manufactures of the country are considered as belonging to the police,” whose proper “object” should be “promoting opulence.” 608 Smith challenged not the state as such, but the outdated concept that the state should engage as an actor in the day to day commercial dealings. This is the praise of Foucault’s “moderate governance,” which puts limits on the arbitrariness of a sovereign’s 186 Economics and Its Discontents decisions and makes the economic environment more reliable, more predictable. 609 As Goethe described it, it meant “introducing a regular and efficient system of political economy, of dispensing with all the arbitrary power, and of ruling alone by law and justice.” 610 If The Wealth of Nations depicted an enemy of the system of natural liberty, it certainly wasn’t the state but big business. As Brown notes: Hardly a reference to these groups passes without a barrage of negative terms: “the clamour and sophistry of merchants and manufacturers” (Wealth of Nations I.x.c.25); “the sophistry of merchants and manufacturers” (WN IV.ii.38); “the impertinent jealousy of merchants and manufacturers…the mean rapacity, the monopolizing spirit of merchants and manufacturers” (IV.iii.c.9); “the interested sophistry of merchants and manufacturers” (IV.iii.c.10); “with all the passionate confidence of interested falsehood” (WN IV.iii.c.13). Smith’s vision of economy, like that of the physiocrats, was sectoral, meaning that he analyzed it not in terms of a series of co-dependent markets, but of distinct sectors of economy: agriculture, manufacturing, home trade, and foreign trade were seen as qualitatively different from each other. 611 The economic relation between the individual and society was, thus, not a simple one of aggregation or disaggregation, but was mediated through a sectoral view of the composition of revenues. Within the system of natural liberty, therefore, competition secures the greatest annual revenue, not by promoting market equilibrium, but by means of facilitating the proper course of sectoral development which underlies the natural progress of opulence. 612 And Smith claimed that the actual historical development of European economy is an inversion of its proper and natural, development: Instead of agriculture being developed first, followed by the manufactures of the towns, and finally by foreign trade, the actual order of development in Europe had been based on the prior development of the towns and foreign trade with agricultural development lagging behind. Again here, the terms used by WN in describing this development are entirely negative. Such development is characterised as an “unnatural and retrograde order” (WN III.i.9) and “contrary to the order of nature and of reason” (WN I.x.c.26). In obstructing the free circulation of labour, the Economics and Its Discontents 187 corporation laws have produced “disorder, the greatest perhaps of any in the police of England” (WN I.x.c.45). 613 Thus, for Smith, the state was the enemy, insomuch as it was hijacked by the interests of merchants. In his own words, The Wealth of Nations was a “very violent attack […] upon the whole commercial system of Great Britain.” 614 As Rothschild argues, his attacks on corporations and guilds – the silk weavers of London, the cutlers of Shieffield, the master smiths, the bakers – have attracted little attention in the modern debates because they couldn’t be mechanically transposed to current political debates. 615 Nevertheless, when Smith’s argument is studied in his own contemporary context, it is clear that the guild system was one of his primary targets. This is why Smith was denounced as “a friend of the poor” 616 who is “out of touch with the needs of a commercial society.” 617 In fact he attacked the contemporary “laws and government [which] may be considered […] in every case as a combination of the rich to oppress the poor.” 618 His argument for high wages was used in 1795 to justify a parliamentary proposal to fix a minimum wages: No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed and lodged. When the regulation […] is in favour of the workmen, it is always just and equitable 619 No wonder a few weeks before The Wealth of Nations was published in March 1776, the manuscript was seized by the London police and almost destroyed. 620 Smith had been seen as seditious and rebellious. In 1793, Lord Lansdowne, the former prime minister, even argued in the House of Lords that it was Smith’s ideas that inspired the French Revolution. 621 “This is the foreign effect of Adam Smith – French Revolution and Socialism,” repeated Lord Acton in 1881. 622 Austrian 188 Economics and Its Discontents economist Carl Menger, in turn, added: “Smith placed himself in all cases of conflict of interest between the poor and the rich, between the strong and the weak, without exception on the side of the latter.” 623 A French economist and Louis’s XVI minister of finance, Anne Robert Turgot, should be of special interest. Perhaps his practical policies point to the character of the new liberal discourse even better than Smith’s theoretical writings. A good hallmark of Turgot’s economics is his treatment of the 1770-1771 crisis in Limoges, when a famine tested his devotion to the freedom of grain trade. On the face of it, he remained committed to liberal doctrine. “No! No! I will never be a cowardly deserter!” 624 he exclaimed when pressured to bring back market regulations, and insisted that the freedom to transport and store corn should be untouched. On the other hand, he criticized the physiocrats as a “sect” of “the most arrogant men that now exist” who, unlike him, preferred “the laws of order” over “the rights of humanity.” 625 He then implemented a number of welfare policies to limit famine’s social effects. Most importantly, he started a program of public employment, supported food imports, and readjusted taxation. He opposed charity and almsgiving, advocating in their place “public works” that would “spread money among the people.” 626 It can be argued that, not for the first and not the last time in history, a crisis was thus used to augment the social importance of the cash nexus, but Turgot’s policies were, by modern standards, rather ones of a moderate social democrat than a laissez-faire champion. Nevertheless, the policies were considered a triumph – in Condorcet’s summary, this “successful experiment had confirmed M. Turgot in the truth of his principles.” 627 If Turgot had opposition, it was not really from the paupers demanding more paternalist protection nor was it from liberal economists Economics and Its Discontents 189 demanding more laissez faire. The strongest enemy was still the establishment that owed its position to the medieval guild system. The craft guilds, thanks to their semi-monopolistic position, were able to affect both the market prices and wages. Also, they controlled “standards of work, working hours and conditions, entry to the craft, the number of apprentices each master might have” 628 to protect the standard of living of their members. For physiocrats and other liberals, this sort of regulation was no smaller a distortion of market mechanism than paternalist control of the grain trade. The conservatives, on the other hand, mounted a defense of the guild system, warning against “abandoning the certainty of the present for an uncertain future” and envisioned a dark prospect of universal alienation in which “every manufacturer, every artisan, every worker will regard himself as an isolated being, dependent on himself alone, and free to wander in all the discrepancies of an often disordered imagination; all subordination will be destroyed.” 629 Turgot, in his 1776 edict for the suppression of the guilds, described them as “bizarre, tyrannical, and contrary to humanity and morality,” 630 but just few weeks after registering the reforms he was removed from the office. As Rothschild says, “the reforms proved too radical for Paris.” 631 All in all, Smith and Turgot can certainly be seen as an advocates of liberalization of trade, but this should be put in the appropriate historical context. They promoted liberalization of commerce at a time when it was still regulated by feudal institutions, laws, and customs. Their praise of free trade was an attack on the state involvement in the charity-like welfare provisions and on the power of the guilds. And not on, let us say, socialist control over economy or etatist involvement in it, which would have been at that time simply incomprehensible. One can see that both of the main modern reactions to these proto-liberal discourses are therefore 190 Economics and Its Discontents at fault. Lefties, who see in them the first symptoms of the deadly disease of “neoliberalism,” and righties, who see in them the first state-bashers and apostles of laissez-faire, are equally guilty of crude appropriation of the past for their immediate political use in the present (Chapter 36). Chapter 33: In which impact of banking on the regime of debt is inspected. The trouble with being educated is that it takes a long time; it uses up the better part of your life and when you are finished what you know is that you would have benefited more by going into banking. P.K. Dick For a very long time a strict definition of banking didn’t exist. In the UK, until the 1979 Banking Act, it was common practice to define it simply as a business carried out by a banker, and a banker was defined as someone carrying on the business of banking. 632 Such problems with definitions are common when it comes to old institutions and practices, and banking is certainly one of the oldest. Already in the Code of Hammurabi one can find regulations of banking procedures of temples and great landowners. 633 The oldest Babylonian private bank known by its name was the seventh-century BCE “Grandsons of Egbi” which gave loans, accepted deposits, issued checks, and had its own merchant fleet. 634 The first giro system of payment was developed in fourth-century BCE Ptolemaic Egypt, in which a system of government granaries were turned into a network of banks under the control of the central bank in Alexandria and its head, called the Oeconomus. 635 In the second century BCE, the Bank of Delos rose to significance, becoming a financial center for Hellenistic and Roman merchants for at least four centuries. 636 In medieval Europe, the first prominent bankers were probably the Knights Templar. Certainly, Le Goff’s claim that “the only fruit of the Crusades kept by the Christians was the apricot” was an exaggeration. 637 They brought about a rare concentration of capital and opportunity to carry out international trade on an unprecedented scale: 192 Economics and Its Discontents Ships which carried armies to the eastern Mediterranean could and did offer cheap facilities for return cargoes, and thus increased two-way trade across the Mediterranean. […] [The Knights Templar] had their own ships, kept their own private armies, depots and storehouses, and occupied strong-points and castles at a number of strategically placed ports and inland towns, from Spain to Syria and from England to Egypt. They could therefore easily arrange the safe custody and delivery of valuable goods, specie and coins, and often save the necessity of moving such specie and coins by bilateral and sometimes trilateral offsetting transfers. They also themselves owned considerable financial resources which they increased as a result of accepting vast deposits from kings and merchants, which they were then able to lend out to creditworthy borrowers, the interest element in such dealings normally being hidden by the nature of the transactions either in foreign exchange or as bills of exchange or, frequently, as both. […] They were even granted powers to mint their own coins […] They therefore were able to carry out the whole range of merchant banking activities relevant to the increasing demands of commerce and politics in the thirteenth and fourteenth centuries. 638 Only when in 1307 King Phillip IV of France, who was heavily indebted to the order, turned on the Templars and accused them of numerous crimes (among others, spitting on the cross, homosexual acts, and of course, idolatry) was their power crushed and wealth expropriated, 639 leaving only legends about hidden treasures and sacred artefacts. Although bills of exchange had already been in circulation in the Levant in the eight century, and proper paper money was in use in seventh-century China, the development of modern banking and paper money as we know them probably should be traced to twelfth-century Venice. Needing money for military purposes, compulsory loans were collected from its citizens, promising a five percent annual interest and allowing the bonds to be transferable. 640 The practice slowly spread to other more commercially developed states and was accompanied by the establishment of a number of private and public banks. The Bank of Barcelona was founded in 1401; the public Bank of Genoa in 1585, the Banco di Rialto in Venice in 1587, the bank of Amsterdam in 1609, Economics and Its Discontents 193 Hamburg in 1619, Rotterdam in 1635. Sometimes banks were founded by agricultural cooperatives to insure against bad harvests, the Monte dei Paschi di Siena, which is today one of the biggest banks in Italy, was established in 1473 precisely to serve as an intermediary for such arrangements. 641 However, the question of the birth of modern banking is not really a question of the first modern banks per se, but rather of the establishment of a new relationship between the state and the banking community. The Bank of England, the first successful central bank, was founded in 1694 when a group of English bankers made a loan of £1,200,000 to the king in return for the right to issue paper banknotes in that value which could be loaned to the general public. The loan was perpetual, which meant that the government wasn’t obliged to pay it back, but only to pay 8 percent annual interest. 642 In the following decades, the Bank of England gained more and more privileges and governmental protection, and a century later it had a guaranteed monopoly over the issue of banknotes, which were now recognized as the legal tender and whose forging was punishable by death. 643 Interestingly, the crucial connection between the introduction of metallic money and war (Chapter 5) was repeated in the case of paper money as well. The money provided by the Bank of England was needed for no other purpose than the English war with France. It was “born out of a marriage of convenience between the business community of the City, ambitiously confident that it could run such a bank profitably, and the government of the day, desperately short of the very large amount of cash urgently needed to carry on the long war against Louis XIV.” 644 The new monetary arrangement changed the nature of state debt. It was no longer a private affair between the sovereign and a number of 194 Economics and Its Discontents moneylenders, but a public credit. The state debt, first in the form of transferable government bonds, and then in the form of regular banknotes, was increasingly impersonal. Lending money to the monarch no longer locked creditors in a long-term relationship with the state, as the debt could be easily unloaded at all times. As Wennerlind observes: Public credit thus came to depend on how public opinion perceived the state’s current capacity to service the interest payments and its imaginary ability to repay the debt in some distant, theoretical future. In this new culture of credit, public opinion became the arbiter of public credit, dictating everything from England’s imperial campaigns, fiscal administration, and legislative decisions to the choice of ministers. 645 This was the context of Napoleon’s famous remark that “When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” If the state’s military strength, its ability to use force, started to depend on the international financial markets, can one legitimately speak about the state monopoly on force? 646 Public credit was no longer an exclusive affair between the Crown and a small number of wealthy financiers. It was now subject to the fickle judgment of the public. Since public debt instruments were now actively traded, the status of the national debt was dictated by an amorphous public’s decentralized judgment of the prospects of a disembodied and depersonalized state administration. The recognition that an intractable public opinion now dictated public credit was deeply unsettling to traditional elites. 647 Creditworthiness, or “credit rating,” became the underlying background of all politics from this point on. “The issues pertaining to public credit were deeply intertwined with other major issues of the day – party politics, foreign policy, the succession, and religious controversy – the opinion of the investing public was formed within a much broader public sphere.” 648 This new reality was quickly realized by the British Economics and Its Discontents 195 Lord Treasurer who assembled a propaganda team that included Daniel Defoe, Jonathan Swift, and Simon Clement, dedicated to securing public trust in the government through press articles and pamphlets. 649 At the same time, an argument should be made that the rate of interest that governments have to pay for their debt is not necessarily an innocent product of international foreign exchange markets dominated by rumors and mob mentality. At times, interest rates are set arbitrarily and unilaterally, through political decisions and used to put disciplining pressures on governments that try to break away from economic submission by pursuing heterodox economic policies. This political significance of the global regime of debt can be seen time after time, most recently in the 2015 conflict between the Greek government and the Troika. As state credit became increasingly public, individual debt became more and more privatized. Social regimes of debt were gradually becoming monetized, and the monies themselves changed from various tokens produced independently by local goldsmiths to state produced coins. 650 Already in the sixteenth century, cases of civil litigation concerning indebtedness (i.e., conflicts over debt that were resolved within the state-legal framework and not the customary one) increased manyfold. 651 When the law allowed debt to be transferred in the beginning of the eighteenth century, 652 the traditional network of personal debt truly gained a full-scale alternative of impersonal debt regime. This shift from “personal” to “system” trust was ensured by an energetic campaign on the part of the state’s apparatuses of violence. After the passing of the 1695-1697 Acts to prevent counterfeiting, which considered all kinds of monetary frauds a high treason punishable by death, 653 an important role in the imposition of the new order was 196 Economics and Its Discontents played by Isaac Newton. Appointed as the warden of the Royal Mint (and afterwards Master), in 1696 he managed a network of secret agents and informers who infiltrated the counterfeiting rings. On numerous occasions he personally, often in full disguise, travelled to prisons and taverns to investigate cases and interrogate witnesses. 654 As both Hobbes and Locke pointed out, it was essential that the government was willing and capable of prosecuting those engaged in activities that undermined trust, such as corruption, overissuance, forgery, counterfeiting, or other fraudulent practices. The idea of using the death penalty to deter people from manipulating credit was an integral part of nearly all of the period’s credit money proposals. Hence, as much as seventeenth-century political economists believed that it was possible to generate trust in credit money by designing a transparent mechanism with impeccable security, managed by men of the highest reputation, the gallows nevertheless constituted an important ingredient in the formation of trust. 655 Perhaps this is the right moment to note a significant shift in the constellation of powers. Not because the change of monetary and debt regime was decisive in it, but because with it we have enough elements to outline a basic sketch of the situation. So, a gradual change was taking effect. In the place of customary debt regimes; of a pre-growth, local, feudal, and largely non-monetary economy; of a static, arithmetic worldview, and of moralistic condemnation of interest-charging; of hereditary social classes and of sumptuary regulations; of the state machinery as a private affair of a monarch whose power differed from his vassals’ quantitatively rather than qualitatively; a new arrangement was taking shape, one of a monetary debt regime, of a slowly integrating capitalist world economy, of a geometric, dynamic worldview, of capitale, of the modern nation-state machinery defended by new warfare technologies and financed by bankers and international financial markets. The change was not absolute, nor was it unconditional. Nevertheless, Economics and Its Discontents 197 there had been a change in the technologies of power. Their center of gravity has moved; their multiple centers of gravity have shifted. Chapter 34: A short but important chapter which shows how economics is blind to the political nature of money and its disciplining effects. Also, a chapter in which the worthlessness of the radical notion of value is outlined. This planet has a problem: most of the people living on it are unhappy for pretty much of the time. Many solutions were suggested for this problem, but most of these were largely concerned with the movement of small green pieces of paper, which was odd because on the whole it wasn't the small green pieces of paper that were unhappy. Douglas Adams The progressing monetization of societies was accompanied by a strengthening of the conviction that money can serve as a universal equivalent, oiling the wheels of the equalizing market processes. Suspicion towards exchange value and monetary transactions in general was slowly giving way to a confidence that money is a natural and neutral medium of exchange. Moreover, often it was not even seen as value-free, but an essentially emancipatory thing. This trope can be found already in Aristotle, and in the medieval praise for geometrical systems (Chapter 15): in economic transactions no account was to be taken of the social positions of the participants. 656 Market not only was said to ignore them, but even actively encroached upon the petrified social relations. “All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned.” 657 It is questionable whether the market really challenges practices and discourses of domination, or whether it merely challenges traditional forms of domination only to re-implement them in a slightly changed 200 Economics and Its Discontents form (Chapter 49). And arguably, even this is achieved at the cost of exporting the heaviest economic burdens to the peripheries of the world market (Chapters 24, 30). In any case, it seems to be out of discussion that the new monetary exchange relations brought their own forms of discipline and subordination. And it is one to which the economic discourse is entirely blind. We have already touched upon this issue in Chapter 31. The basic premise of the new money ideology was simple: “Only if the poor are subjected to nonmonetary, juridicial forms of direct or personal domination is there any disadvantage. If, however, power over the poor arises solely out of the lesser stake that the rich have in any transaction, it is liberty.” 658 On the one hand, individual monetary exchanges start to be perceived as politically and morally neutral or even positive (Chapters 24, 25). On the other, the systemic, political significance of money becomes legitimized (Chapter 16) and institutionalized (Chapter 33). Reddy, in his terrific Money and liberty in modern Europe calls it the “liberal illusion”: Its ingredients were (1) the unlimited and easy substitutability of money for any other object of desire, and therefore (2) the universality of the underlying desire for “advantage” or gain; (3) the political neutrality of money exchanges, and therefore (4) the compatibility of free trade with personal liberty. Each of these ideas so neatly entailed the others, all so plausibly turned on the apparent truth of the first principle, that the theory seemed to sum up what the essence of money is, especially in the experience of well-to-do landlords and merchants who had little contact with either production or deprivation. 659 The Smithian system of “natural liberty” was coherent and workable insofar as within it money answered all things. Through a series of geometrical equalizations, the market was presented as capable of synthesizing all conflicting interests, provided that money was left to Economics and Its Discontents 201 perform its natural function as a medium of exchange. In Smith’s words, as long as people are allowed to pursue their interests: The whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighbourhood, be either perfectly equal or continually tending to equality. If, in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of the other employments. This at least would be the case in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to choose what occupation he thought proper, and to change it as often as he thought proper. Every man's interest would prompt him to seek the advantageous, and to shun the disadvantageous employment. 660 Thus, the purpose of the economist is to identify and remove the artificial obstacles to natural liberty. The scourge of economy is a guild, a monopoly, or a protectionist policy that doesn’t allow free circulation of goods and labor. In more general terms, it is a use of political power to disrupt and corrupt the natural economic process of equalization that would result in perfect competition. It is amusing that so many economists who praise this fantasy of perfect competition and who propose policies based on it fail to see that in a perfectly competitive market no action could ever be performed at a profit. The obvious blind spot of this approach is that it fails to grasp that economic wealth is already a form of political power. They are not two distinct realms that can be opposed to each other. Property laws are nothing other than regulations of access to the apparatus of state violence. 661 Debt, property, money, they are all institutions, thus wealth is a form of power – this is true by definition, it’s a tautology. There can be no natural economic exchange free from power asymmetry because economic exchange is the very articulation of power asymmetry. Reddy calls upon the history of ending serfdom in Prussia to illustrate this point: 202 Economics and Its Discontents The outcome in Prussia was utterly different from what the reformers had envisioned. […] [It had been] promised in 1811 that “the state would thus acquire a new, estimable class of motivated property owners” and that “through the desire to enter this class, the cultivation of the soil would profit from more hands, and through their greater effort, because freely given, more work as well.” Up to 1848, in fact, roughly 350,000 peasants did gain ownership of some land in Prussia, although compensation payments and indebtedness made their position precarious and many now had to depend on wage labor to supplement the yield of their own meager acres. Even worse, the number of rural landless laborers in Prussia in the meantime tripled, reaching well over a million. Hope of gaining access to land ownership was for this group nil; their insecurity was extreme in the best of times. […] Prussian reformers thought they were liberating serfs; in fact they were merely altering the disciplinary potentials within which serfs could be made to continue obeying their betters. 662 What is fascinating and of utmost importance is that Marx’s economics followed a very similar route. In his Capital, money “radical leveller that it is, does away with all distinctions” 663 and works as a neutral medium of exchange. 664 The Marxist critique attacks the specific crimes of the capitalist mode of production but treats the market mechanism as such as an equalization machine that is almost never mistaken. 665 The whole edifice of Marxist economics can be treated as a quest for an identification of the mechanism that corrupts this objective process of equalization. Capitalist exploitation is said to be precisely this: an unequal exchange, theft of worker’s labor, of “a definite quantity of human muscle, nerve, brain etc.” that is unlawfuly taken from laborers. 666 This critique is made possible by the labor theory of value – a concept that economic value is produced by labor. Historically, in preChristian European societies where economy wasn’t sustained either by slavery or serfdom, the connection between labor and the right to its produce was often seen as self-evident. 667 In feudal Europe it came to be considered a radical and subversive idea, at odds with the feudal regime of property (Chapter 10), 668 and when it was voiced again in the Economics and Its Discontents 203 seventeenth century by Locke, it still had that character. Only then, it didn’t just challenge the feudal social structure but it simultaneously legitimized a new commercial economy. 669 For a whole generation of classical economists the labor theory of value was a cornerstone of their theory, providing a legitimization for a transition from manorial to market economy. Marx followed this tradition and embarked on a journey in the search of lost value. In Capital he showed how value that is produced by laborers is then appropriated by the capitalists. The laborers have a bigger share in the production than they are remunerated for, and the objective rate of this disproportion, “the rate of exploitation,” can be expressed by a mathematical formula. 670 This approach treats value is an objective, innate quality of the produced good. Individual labor is, of course, put in the context of the whole economy and the “social organization of production,” but ultimately, it can be said to produce a certain measurable value, and whenever his employer appropriates a share of this value, the individual laborer is exploited. This is the “physiological truth.” 671 Robinson wrote: Voltaire remarked that it is possible to kill a flock of sheep by witchcraft if you give them plenty of arsenic at the same time. The sheep, in this figure may well stand for the complacent apologists of capitalism; Marx's penetrating insight and bitter hatred of oppression supply the arsenic, while the labour theory of value provides the incantations. 672 Perhaps an entirely different approach to value would be more frutiful. One that would see it not as an inherent feature of traded goods and services, but in social, relational, inter-subjective terms. Values are neither produced in factories and equalized in the process of exchange, nor are they independently assigned by individuals expressing their autonomous preferences (like the marginalists believe [Chapter 41]). They are established in a series of exchanges, as differences. And these exchanges are by no means natural equalizations of different values. And they don’t have to be peaceful. Usually they aren’t. They are simply brutal (if discreet) executions of power. Chapter 35: In which it is shown how intellectual property was established by business fighting business in British courts. Art is individualism, and individualism is a disturbing and disintegrating force. There lies its immense value. For what it seeks is to disturb monotony of type, slavery of custom, tyranny of habit, and the reduction of man to the level of a machine. Oscar Wilde A valuable insight into the dynamics of new economy can be provided by a study of the eighteenth-century enclosure of cultural production, namely, the development of the modern copyright. Although usually discussions on intellectual property rights portray them as an “eternal idea” and “a natural need of the human mind,” 673 even a sketchy historical look at the sources shows that it is quite a recent institution. Modern copyright was a child of a new technology – the printing press – a child of the development of market society, of the discourse of individual authorship, and of prolonged struggles in British courts. For centuries, authors didn’t own the texts they wrote in the abstract form of intellectual property but rather in the concrete form of a manuscript. Once it was sold to a patron, a bookseller, or a theatrical company, it was no more the author’s property “than the cloak that he might have sold to the actors at the same time.” 674 In the Middle Ages, each owner of a manuscript was considered to possess an alienable right to copy it, and monasteries often charged a fee for permission to copy their manuscripts. 675 The first English system of intellectual property was modelled after the system developed in fifteenth century Venice where it took form of a “patent,” a seven-year privilege to print granted to printer guilds and authors alike. 676 Rose notes that at first the preoccupation of the authorities was not so much focused on securing the economic 206 Economics and Its Discontents interests of authors and publishers, but on enforcing an effective system of governmental surveillance of the press. 677 Interestingly, the printing guild themselves put forward the argument that tying the right to print to a royal grant makes political and religious censorship much easier, 678 hinting at the community of interest that the state and business shared in controlling the circulation of ideas. The first English legislation that gave some consideration to the question of literary “intellectual” property was the 1710 Statute of Anne, which enabled authors to license their works for a 14-year period, after which they entered the public domain. From this point on, the period of copyright and its specific character became the subject of ferocious public debates and legal struggles, resolved finally in the House of Lords. Interestingly, the opposing sides in these debates were neither authors vs. business nor the general public vs. business, but business vs. business. The bookselling trade of the eighteenth century was highly developed and “represented one of the most significant accumulations of capital in the country,” 679 and, to put it schematically, consisted of big London publishing houses that printed copyrighted material and smaller Scottish publishing houses that printed works whose copyright had expired. For some decades, the two industries peacefully coexisted, but in the 50s the English booksellers felt threatened by their Northern competitors and started a legal campaign against them. 680 The richer Londoners argued for imposition of a common-law right that would treat intellectual property as no different from any other property, thus giving the initial buyer a perpetual monopoly over it. The Edinburgh publishers, unsurprisingly, campaigned for keeping the existing copyright as it was. Although both sides of the struggle claimed that they were primarily concerned with the authors’ interest, the contemporaries were well aware Economics and Its Discontents 207 that “the question is of no great importance to authors, yet it is a question in which the booksellers of London, on the one side, and […] all the other booksellers in Britain, on the other side, are deeply concerned.” 681 As Rose argues: At one level, the literary-property question was a legal struggle about the nature of property and how the law might adapt itself to the changed circumstances of an economy based on trade. At another, it was a contest about how far the ideology of possessive individualism should be extended into the realm of cultural production. At still another, it was a commercial encounter, played out in the form of a national contest between England and Scotland, in which a deeply entrenched business establishment was challenged by outsiders. 682 Arendt writes that the notion of artistic “genius” has only recently been commercialized, 683 but in fact, the realm of commercial art as such was established thanks to the figure of genius. Although the notion of creative genius was present in the Classical and Renaissance cultures, only in the commercial societies did it become instrumental in cultural production. 684 Lawyers and pamphleteers hired by London publishing houses developed a discourse of artistic genius that was revealing in its authenticity and originality. London lawyers on the one hand, praised original compositions whish “rise spontaneously from the vital root of Genius” 685 and on the other, asserted that artistic production is no different from any other commodity production. 686 “Characters are but the signs of words, and words are the vehicle of sentiments. The sentiment therefore is the thing of value, from which profit must arise.” 687 Their opponents proposed that the authors’ interest should be secured by a temporary copyright, but “from the moment of publication, [the works] are thrown into a state of universal communion.” 688 and one cannot treat them as private property. Just like industrial inventions 208 Economics and Its Discontents become the common good after the patent protection ends, so should literary works. The conflict was the subject of numerous judicial actions and incoherent court rulings until it was finally resolved in 1774, when the House of Lords ruled that a literary work cannot be treated as a common law property and that copyright can be limited in time. The significance of this dispute was evident for the contemporaries: […] the London newspapers devoted multiple columns to the proceedings, reporting the arguments of the lawyers and judges in great detail, and they printed dozens of letters to the editor from lawyers, booksellers, and others commenting, often very colorfully, on the case. […] Throughout the proceedings in the House of Lords, public interest was intense. On the first day of argument, according to a letter from London in Donaldson's Edinburgh Advertiser, several hundred people had to be turned away for lack of space (8 Feb. 1774), and the Morning Chronicle reported that the “House below the Bar was . . . exceedingly crowded” and that “Mr. Edmund Burke, Dr. Goldsmith, David Garrick, Esq; and other literary characters, were among the hearers” (5 Feb. 1774). 689 This history can elucidate at least three points: First, we can see how the notion of a creative individual or artistic genius was brought to the discourse on cultural production as a way to discount another vision of culture, one that sees it in terms of a continuous appropriation and transformation of a common good. This culminates in a grotesque situation where writers’ names become actual trademarks under which books can be published even after their death, as is the case with Robert Ludlum™, under whose name, since the death of Robert Ludlum in 2001, over a dozen books have been published. It is ironic that this institution of the individual author has been built on the archetypal figure of Shakespeare, whose plays, often written collaboratively, retold old legends and popular tales – at the very time Shakespeare’s Hamlet was staged at the Globe, at least one other Hamlet was staged in London. Economics and Its Discontents 209 Second, we can see how the final outcome of the struggles over the regime of intellectual property resulted from a fight between two business groups. Although both sides developed discourses in which they presented themselves as the protectors of authors and readers, ultimately it wasn’t a fight between the authors and publishers or the producers and consumers, but between two business models. Analogies are tricky, but wasn’t this also the case with the 2012 protests against SOPA and ACTA, when the popular protests began only after the new internet business, which lives off free circulation of content, campaigned against them? This should not be taken as evidence that commercial interests are inherently or inevitably privileged in the modern constellations of power, but rather that it usually takes institutional power to influence them. And a corporation is one form of institutionalized power that is always keen to strengthen itself. Third, it shows very well that private property is only one of many possible arrangements for managing the exchange of goods and services. It was not discovered as a “natural” or “self-evident” fundament of personal liberty, but rather it was constructed through discoursive and legal struggles, and even then it not always succeeded. But as the enclosure of the commons is always one of the most profitable investments there is, attempts to enclose more and more spheres of life in the regime of private property are constantly made, and only some of them are fought off. Chapter 36: Which argues that Adam Smith was not the father of economics. Mother’s baby, father’s maybe. The purpose of this chapter is not the reconstruction of Adam Smith’s political economy (or worse, its interpretation), but merely cracking down on a few of the myths surrounding this figure and the alleged “Adam Smith Problem.” The said “problem” is an assumed incoherency between the two Smiths: the moral philosopher and the economist, the stoic moralist and amoral individualist, the author of the Theory of Moral Sentiments and the author of The Wealth of Nations. Following Brown’s arguments, 690 I would argue that the “problem” is at least overstated or simply illusory, and the perceived inconsistency between the two Smiths comes from investing his work with new meanings and situating it within the context of modern capitalism. Surely, if Smith had praised the utilitarian individualism of late capitalism in The Wealth of Nations, it would be inconsistent with his other works. The simple resolution is that he hadn’t. Hence, his critique of Mandeville’s “sophistry” that allows him to claim that “that private vices are public benefits” 691 and his reproaches against individualism 692 are perfectly consistent with his economic theories. It is perhaps best to quote Smith in length to show how he understood the subject of his economic analysis: Power and riches appear then to be, what they are, enormous and operose machines contrived to produce a few trifling conveniencies to the body, consisting of springs the most nice and delicate, which must be kept in order with the most anxious attention, and which in spite of all our care are ready every moment to burst into pieces, and to crush in their ruins their unfortunate possessor. They are immense fabrics, which it requires the labour of a life to raise, which threaten every moment to overwhelm the person that dwells in them, and which while they stand, though they may save him from some smaller inconveniencies, can protect him from none of the severer inclemencies of the season. They keep off the summer shower, not the winter storm, but leave him always as much, and sometimes more exposed than before, to anxiety, to fear, and to sorrow; to diseases, to danger, and to death. 693 212 Economics and Its Discontents As we have outlined before, Smith was a liberal economist, a believer in market equalization and an advocate of a modernization of the relationship between the state and the economy (Chapter 32). But he has never been a crude libertarian. Even though he believed that the market mechanism can synthesize conflicting interests, he nevertheless recognized that there will always remain some conflict between the interest of the individual and the interest of the community that needs to be resolved by legislation and not the market. For instance, he argues for regulation of the banking business on the grounds that: Such regulations may, no doubt, be considered as in some respects a violation of natural liberty. But those exertions of the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments, of the most free as well as of the most despotical. The obligation of building party walls, in order to prevent the communication of fire, is a violation of natural liberty exactly of the same kind with the regulations of the banking trade which are here proposed. 694 Moreover, even though he saw the “system of liberty” as natural and intuitive, he recognized that reforms that could bring it can only be gradual and cautious, and must take into consideration the values and beliefs of society. 695 And even such gradual reform would probably never reach the ideal of perfect liberty. As the private interests of moneyed groups would not allow it, Smith recognized the utopian nature of his project: “to expect, indeed, that the freedom of trade should ever be entirely restored in Great Britain is as absurd as to expect that an Oceana or Utopia should ever be established in it.” 696 When modern economists and historians of economic thought are confronted with these nuances, they usually ignore them or treat them as foreign contaminations that should be removed in order to uncover what Smith really intended to say and what he truly had in mind. Smith is a Economics and Its Discontents 213 perfect example of a two-fold “canonization” – at the same time a consecration and a reduction of all the complexity of the past to “a single voice for consumption of the present.” 697 As I hope is already evident, economic discourses evolve slowly and gradually. Kuhn argued that the identification of “famous scientists” may make pedagogical practice easier, 698 but it also obscures the heterogonous character of the production of economic discourse. Making Adam Smith the founding father of economics was a kind of paternity fraud, in which the legitimacy of the new science of political economy was acquired by linking it with the figure of a brilliant scientist who could be put against the background of the misguided non-scientific economic ideas of the past. As we have seen (Chapter 19), this was a tactic used by Smith himself, who brought together various economic ideas under the single term of the “mercantilist system” and rejected others en masse. As has been often (and still is) the case, the final argument for scientific basis of his own theories vis à vis the groundlessness of his predecessors’ was the fact that the latter were “absurd,” examples of “sophistry,” or “vulgar prejudice,” “unnatural” and “contrary to the order of reason,” while the former were “natural,” “obvious,” based on “common sense,” and evident to “plain reason.” 699 The Wealth of Nations came to be considered the foundation of modern economics only many years after its publication and only when it was transformed by the likes of Ricardo, Mill, and McCulloch. 700 And in any case, the man who was canonised was not the historical Adam Smith, a moral philosopher who put economic issues in a broader historical, societal, and cultural perspective 701 but a simplified image of Smith which denotes little more than the concept of some fabulous “invisible hand.” 702 Well, as Nietzsche noticed, “without blind disciples the influence of a man and his work has never yet become great.” 703 214 Economics and Its Discontents Smith can be praised for his persuasive and eclectic style and for elegantly bringing together many different perspectives on economic issues, such as analytic, empirical, historical, philosophical, and purely polemic, 704 but he can hardly be considered truly an original thinker in terms of the content of his work. By the time Wealth of Nations was published, the gradual reform of the market-state relationship had already been underway both in England and in France (Chapter 32), and Smith simply took part in an ongoing debate. 705 Smith is often credited with discovering the advantages of the division of labor and with appreciating the importance and value of individual incentives, but in fact, “the concept of the division of labour is one of those common ideas which are found in all economic writings, starting at least from Xenophon.” 706 The belief in a natural international division of labor was key to the doux commerce thesis (Chapter 24), and the concept of a social division of labor was used before Adam Smith by Boisguilbert, Cesare Beccaria, Defoe, Ferguson, Giambattista Vasco, Harris, Kames, and many more. To claim that Smith’s appreciation for self-interest is original is even more bizarre. Not only was the role of self-interest in economy appreciated long before Smith (Chapter 25), but the famous passage that “it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest” 707 is a paraphrase of Seneca’s well-known, and appreciated by Smith, De Beneficis. 708 Chapter 37: Which shows that socialist and liberal economics are not that different. - What is a Socialist? - That's when all are equal and all have property in common, there are no marriages, and everyone has any religion and laws he likes best. You are not old enough to understand that yet. Fyodor Dostoyevsky Socialist discourses were from the beginning deeply indebted to the Enlightenment ethos. They appealed to the ideals of social equality, progress, and, above all, rationality. As Newman observes From the utopian societies dreamt up by the early socialists like SaintSimon and Fourier, to the revolutionary projects of Marx and Lenin, and even to the later to the sexual rebellions of Marcuse – all of these aspirations had been largely motivated by an Enlightenment way of thinking. This included: a concept of society and social reality as transparent, scientifically observable and determined by historical forces; a faith in rationality to both overcome social antagonisms and to liberate the individual from the obfuscating veils of religion and ideology; a belief in the universal liberation of all humanity from oppressive social and political arrangements; and a notion of the human subject with essential moral and rational characteristics which could flourish given the right social conditions. 709 Many early socialists claimed that there exists “an ultimate and objective social goal to which all rational men would submit if they understood both the nature of man and society and the imperatives of long-term social survival.” 710 Thus, they argued that radical social change could be acquired through a rational public debate. But even those for whom such ideas were “utopian” and who argued that change can be seized only through struggle shared a belief in the power of reason to devise a social organization that would erase conflicts and bring harmony. Perhaps only the anarchist Proudhon argued with his model of “negative dialectic” that a perfect synthesis of all conflicts was unattainable. Saint- 216 Economics and Its Discontents Simon, Fourier, and Owen all advocated a thorough and radical reform of social structures that would ensure rational co-operation and resolve all conflicts. The utopia would follow from “organic” social development or would be achieved by methodical control (“rationalization”) of social life, but all in all was achievable. These projects of rationalization where attractive not only for social activists, but also for the industrialists. Owen himself was a factory-owner, and many other entrepreneurs, such as the developer of the Suez Canal, Ferdinand Lesseps, subscribed to these early socialist doctrines. This may seem paradoxical now, but in the early nineteenth century it was something completely ordinary. For many decades, liberalism and socialism were seen as constituting one ideology. In the period from the French Revolution to the revolutions of 1848, the “only clear cleavage” for contemporaries was between those who accepted progress as inevitable and desirable, and thus “were globally favorable” to the French Revolution, and those who favored the Counter-Revolution, which took its stand against this disruption of values, considering it as profoundly wrong. Thus the political struggle was between liberals and conservatives; those who called themselves radicals or Jacobins or republicans or socialists were regarded as simply a more militant variety of liberals. 711 Even the concept of class conflict, long before being appropriated by Marxists, formed the basis of policy during the July Monarchy. 712 Three decades before the Communist Manifesto declared that “the history of all hitherto existing society is the history of class struggles,” 713 the rightwing liberal and French Prime Minister, François Guizot, proposed that “the struggle of the Orders suffuses or rather creates all this history.” 714 And class analysis was also central to classical economists such as Adam Smith or David Ricardo. Economics and Its Discontents 217 It is often argued that it was only after the revolutions of 1848 that the division between liberals and socialists became evident. “Moderates” delineated themselves from “radicals” and politically became more and more often aligned with conservative movements. Both socialists and liberals still voiced a belief in the inevitability of social reform and progress, but the former demanded it now, while the latter were content with various Parties of Moderate Progress Within the Bounds of the Law. Still, it was rather a difference of degree than substance. Hence, the undisputed champion of liberalism and “the most influential Englishspeaking philosopher of the nineteenth century,” 715 John Stuart Mill, could consider himself a socialist. Mill argued that a decentralized socialist (or “communist,” as he used these terms interchangeably) society based on cooperative forms of property can be perfectly consistent with ideals of individual liberty. 716 In his autobiography we read: Our ideal of ultimate improvement went far Beyond Democracy, and would class us decidedly under the general designation of Socialists. While we repudiated with the greatest energy that tyranny of society over the individual which most Socialistic systems are supposed to involve, we yet looked forward to a time when society will no longer be divided into the idle and the industrious; when the rule that they who do not work shall not eat, will be applied not to paupers only, but impartially to all; when the division of the produce of labour, instead of depending, as in so great a degree it now does, on the accident of birth, will be made by concert on an acknowledged principle of justice; and when it will no longer either be, or be thought to be, impossible for human beings to exert themselves strenuously in procuring benefits which are not to be exclusively their own, but to be shared with the society they belong to. 717 Much like Smith, who argued that “civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all,” Mill recognized the historical and institutional character of property laws: 218 Economics and Its Discontents The idea of property is not some one thing identical throughout history and incapable of alteration, but is variable like all other creations of the human mind; at any given time it is a brief expression denoting the rights over things conferred by the law or custom of some given society at that time; […] society is fully entitled to abrogate or alter any particular right of property which on sufficient consideration it judges to stand in the way of the public good. 718 The relationship between socialist and liberal economics is not simply that of a shared ancestry or a few accidental tangent points. They both share a significant number of premises, goals, and methods. The recognition of this correspondence has been historically providing a solid base for many conservative discourses. Of course, when ultraconservative or simply anti-Semitic discourses have personified both liberalism and communism in the all-encompassing figure of Jewry, they abandoned analytical reasoning for chauvinist scapegoating. Wasn’t Heidegger’s involvement with the Nazi regime motivated exactly by a belief that the only force that can stand to the challenge of the nihilistic forces of modern technology (communism, liberalism, Americanism) is a conservative counter-revolution that will bring back the possibility of an authentic life? 719 Obviously, the Nazi counter-revolution was nothing more than yet another facet of modernity, and Heidegger’s nostalgic dreams about “the inner greatness of National Socialism” 720 quickly turned into the nightmare of the Holocaust. Nevertheless, in this spoiled bunch one apple remains fresh: the argument that liberalism and socialism are two faces of the same modernizing project cannot be rejected as easily as the anti-Semitic language in which it has been usually expressed. Economics and Its Discontents 219 The correspondence between socialist and liberal economic projects was also reflected in their debates. The divide between twentieth-century socialist economists was between those who adapted neoclassical economic models to non-market environment and those who did it with Keynesian (or Kaleckian, but let’s not get lost in the details now) economic models. Since Oskar Lange proved in 1938 that the Walrasian model of equilibrium of supply and demand is perfectly consistent with socialist economy, mainstream liberal economists accepted that, in Schumpeter’s words, “there is nothing wrong with the pure theory of socialism.” 721 As Hodgson notes: It was admitted implicitly there was nothing in neoclassical core theory that encapsulated prominent institutional features – such as private property and genuine markets – that were vital to capitalism but absent within socialism. As far as neoclassical core theory is concerned, neither the form of ownership nor the existence of real markets, actually matters. […] Bergson also gave Lange a clear victory in the controversy over the possibility of socialist calculation. He remarked that “there can hardly be any room for debate; of course socialism can work. On this, Lange certainly was convincing.” A similar assessment of the outcome of the debate was widely popularised in Paul Samuelson’s seminal and bestselling neoclassical textbook. 722 Just as the classical labor theory of value could accommodate both Smith and Marx, the neoclassical figure of equilibrium was equally feasible for Samuelson and Lange. Arguably, it was the appropriation of these pro-market models by socialist economists that each time provoked the introduction of a new paradigm – certainly that was the case with the marginalist (Chapter 41) and Austrian revolutions 723 (Chapter 47) – but the fact remains that the completely abstract character (Chapter 44) of these models allowed them to be easily turned around by any willing theoretician. Chapter 38:, Which inspects a few important tropes of labor struggles. - Did you work in a factory? - No, we were there with our notebooks. A conversation between Sylvère Lotringer and Antonio Negri. The history of all hitherto existing societies is the history of struggles. This is tautological bacause historical events appear as events at all only insomuch as they are expressive of some conflict. An inclusion of an event into the body of history, pulling it out of the silent background, means appreciating its dynamic and conflictual character as well as its political significance. But history is also a history of struggles in the very basic sense that the past has always been packed with clashes between social actors. What seems to me of crucial importance is to acknowledge the enormous variety of their origins, dynamics, goals, and ends, without necessarily bringing them all to the common denominator of this or that theory of struggle. Probably the classical Marxist historiography of class struggles and class emancipation isn’t as absurd as the liberal narrative on the liberation of the individual. Nevertheless, it too often approaches history not to learn from it but to confirm its preliminary assumptions. Obviously, particular struggles need to be analyzed in context, and their structural underpinnings and systemic effects need to be studied. But attempts at producing an all-encompassing theory of resistance must be crippling for the practices of resistance themselves. Theorizing that tries to be avant-garde, that attempts to be one step ahead of its times makes for a poignant sight when due to its hubris, it ends up blocking the way for any practice that could surpass it. Theory should rather endeavor to serve as the arier-garde, the rearguard. 222 Economics and Its Discontents It should occupy itself with perhaps the more modest but also more fruitful task of rethinking a given structure or episode in such a way that it can be closed and left behind, so space for a new praxis could be opened. As Keynes said, “the difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.” 724 The modern popular culture makes room for slave rebellions, so we all know about the Roman Servile Wars and brave Spartacus who fought for freedom “in the last century before the birth of the new faith called Christianity, which was destined to overthrow the pagan tyranny of Rome and bring about a new society.” 725 However, much less attention has been given to a long series of popular revolts and labor struggles in the Middle Ages. As we have already noted (Chapter 14), the prevailing picture of a motionless and static medieval society completely ignores the actual reality of the constant struggle between the laboring serfs and the nobility. The list of major revolts is long. To name just a few examples one can point to peasant revolts, such as 1323-1328 Revolt in Flanders, 1358 Jacquerie, or the Great Rising of 1381, or to first “worker’s democracies” established by bourgeoisie revolutions in Ghent in 1335 and 1378-1382, Liege in 1378, and Florence in 1379. 726 But these were only violent outbursts of a conflict that underpinned day-to-day life at all times. In this everyday conflict the nobility had at its disposal manorial courts and institutionalized violence, and the serfs made use of collective bargaining and refusal to work. Evidence from the manorial courts of the mid-thirteenth century shows that tenants repeatedly resorted to “massive withdrawal” of labor 727 and the threat of the “secession of plebs” 728 was, if not a constant, then a recurring feature of medieval economics of power. In the more commercially advanced parts of Europe, evidence of Economics and Its Discontents 223 very modern-like collective action on the part of laborers can be found as early as in the 1229 strike of tailors in Douai, when representatives of “all the chief officers of the craft, all the guardians of the goods of the trade, all the merchant clothiers and all the tailors” negotiated wages. 729 In the eighteenth century, the installation of the new economic regime of property met not only with the resistance of old establishment (Chapter 32), but also of the poor. The energetic development of commercial economy in England was accompanied with numerous “risings of the poor” in 1709, 1740, 1756-1757, 1766-1767, 1773, 1782, 1795, and 1800-1801. 730 These were often disregarded by the mainstream historiography as “riots” of hungry and angry mobs that are selfexplanatory and don’t need to be studied. But as Thompson acutely observes: This simple four-letter word [“riot”] can conceal what may be described as a spasmodic view of popular history. According to this view the common people can scarcely be taken as historical agents before the French Revolution. Before this period they intrude occasionally and spasmodically upon the historical canvas, in periods of sudden social disturbance. These intrusions are compulsive, rather than self-conscious or self-activating: they are simple responses to economic stimuli. […] [It is] the schizoid intellectual climate which permits this quantitative historiography to co-exist (in the same places and sometimes in the same minds) with a social anthropology which derives from Durkheim, Weber, or Malinowski. We know all about the delicate tissue of social norms and reciprocities which regulates the life of Trobriand islanders, and the psychic energies involved in the cargo cults of Melanesia; but at some point this infinitely complex social creature, Melanesian man, becomes (in our histories) the eighteenth-century English collier who claps his hand spasmodically upon his stomach, and responds to elementary economic stimuli. 731 The eighteenth-century marketplace was often a site of openly fierce struggles. These were not chaotic outbursts of social anger, but organized and self-disciplined direct actions legitimized by the old paternalist moral 224 Economics and Its Discontents economy. “If the market was the point at which working people most often felt their exposure to exploitation, it was also the point – especially in rural or dispersed manufacturing districts – at which they could most easily become organised.” 732 Direct actions often took the form of “popular taxation,” in which the rioters would seize corn by force, take it to market, sell it at the customary price, and then return the money to the farmers. 733 In reports from these events, one can find out that these direct actions were often initiated and carried out by women, “perfect furies,” “with knives stuck in their girdles.” 734 A 1807 press article explained that “women are more disposed to be mutinous; they stand less in fear of law […] because they presume upon the privilege of their sex, and therefore in all public tumults they are foremost in violence and ferocity.” 735 There is some evidence that this was truly a consciously adopted tactic on the part of dissenting women who assumed that “[the soldiers] would do them no hurt.” 736 This perhaps banal (but often overlooked by male-centric historiography) fact should be always remembered – that just as there would be no French Revolution without The Women’s March on Versailles, the eighteenth-century popular taxation would have never be of the same import without the “perfect furies.” Labor struggles have always been fought by all genders. And sentencing women’s labor struggles to oblivion or treating them as an appendix to the male dominated political history plays a big role in reproducing current gender economic inequalities. Economics and Its Discontents 225 737 The legal regulations of trade in grain were repealed by the Parliament in 1772, but for many decades they were repeatedly reinstated at the grassroots level. The dissenting gangs often styled themselves as “the Regulators,” 738 and the validity of their actions had been acknowledged by Tory paternalists for many decades. As late as 1795, Lord Chief Justice Kenyon declared that in his view, forestalling and engrossing remained offenses in common law. 739 One of the most famous cases of resistance to economic transformation is the early nineteenth-century frame-braking. Although the history of machine-breaking is much older than the history of the Luddite movement, 740 it is in the latter that the phenomenon found its most illustrious instance. The movement was seen as quasi-revolutionary, and characterized by an unusual degree of organization, secrecy, and discipline. 741 “Frame-breaking was no longer the work of ‘rioters’ but of smaller, disciplined bands, who moved rapidly from village to village at night […] Every attack revealed planning and method.” 742 This is how the Luddites’ attacks were described in a 1812 press article: 226 Economics and Its Discontents They broke only the frames of such as have reduced the price of the men's wages; those who have not lowered the price, have their frames untouched; in one house, last night, they broke four frames out of six; the other two which belonged to masters who had not lowered their wages, they did not meddle with. […] The rioters appear suddenly, in armed parties, under regular commanders; the chief of whom, be he whomsoever he may, is styled General Ludd, and his orders are as implicitly obeyed as if he had received his authority from the hands of a Monarch. 743 The Luddites were crushed only after a coordinated military and legal offensive. Frame-breaking had been made a capital offence, and in the summer of 1812, over 12,000 soldiers were deployed in the disturbed regions – a force greater than the one sent to fight Napoleon on the Iberian Penisula. 744 Usually these conflicts were not so much provoked by the straightforward issues of wages and cost-of-living. E.P. Thompson points to the fact that the “issues which provoked the most intensity of feeling were very often ones in which such values as traditional customs, ‘justice,’ ‘independence,’ security, or family-economy were at stake, rather than straightforward ‘bread-and-butter’ issues.” 745 The reductionist Marxist approach often disregarded such struggles, seeing them as futile revolts that waste political energy on issues of secondary importance, while leaving the basic structure of exploitation intact. This is an unnecessary harmful dichotomy. One way to say it is that purely economic issues are always mixed with other concerns, but in fact this is an artificial division altogether that creates a fictitious realm of “purely economic concerns.” This notion may have constituted economistic ideologies of socialism or capitalism, it may even describe the actual approach to reality of a hedge-fund broker, but it has never been the basis of labor struggles. I would argue that this should not be perceived as a Economics and Its Discontents 227 problem that needs to be fixed by improving labor’s class consciousness, but in terms of a value that needs to be protected from economistic designs upon it. The recurring embarrassment and complaints of modern leftist politicians and publicists that people repeatedly and unexplainably chose liberal conservatism over egalitarian progressivism, that “they vote against their class interests,” 746 are based on an assumption that people are “homines oeconomici” (Chapter 42) who personify little more than the eternal drive to augment their economic interests (Chapter 25). And if they are not, they should be educated or forced to become them. Of course, only for their own good. Or, to be more precise, for the sake of their own interests. This does not mean that we should idealize “the people” and their traditional practices, discourses, and institutions. They were not and are not idyllic or harmless. On the contrary, many of them were built on violent domination and sustained by brutal discipline. One certainly must not succumb to the temptation of romanticizing the past. Conservative nostalgia and soulless modernism are no more alternatives to each other than the two sides of the same coin are. And the discussion between them is no more illuminating than playing a game of “heads or tails.” Chapter 39: In which essential shortcomings of Marx’s economics are outlined. A minor post-Ricardian. Paul Samuelson In recent decades, the mainstream left has made a habit of including a new disclaimer in their arguments. Just as conservative arguments often start with the waiver “not that I’m a racist/misogynist/homophobe but…,” the post-Marxist variants habitually distance themselves from the horrors of the Gulag and Stalinist persecutions. Two main tactics of such dissociations can be outlined. The first treats Stalinism as a betrayal of the inner greatness of Communism – a “tragic misunderstanding” of Marx. The second has been best represented by Foucault when he argued that a critical approach to real socialism must mean “questioning all these theoretical texts, however old, from the standpoint of the Gulag. Rather than searching in those texts for a condemnation in advance of the Gulag, it is a matter of asking what in those texts could have made the Gulag possible.” 747 Although the second tactic is obviously much more fruitful than the first one, it too can easily degenerate into a meaningless ritual. The point lies not in exposing past practices and denouncing the theoretical mistakes that allowed them. These spectacles of self-criticism are no more productive now than they were in Moscow of the 1930s. Conversely, Marxism has to be analyzed as an inherently synthesizing and totalizing machine that has no inner greatness worth defending, and whose perhaps well-minded intention can be saved precisely by a betrayal of the doctrine and not by its purification. The communist revolution will bring social conflicts to an end, render politics useless, and bring about a liberal utopia of individuals set 230 Economics and Its Discontents free to pursue their hobbies of choice. This is how the communist future is portrayed in the Manifesto: When, in the course of development, class distinctions have disappeared, and all production has been concentrated in the hands of a vast association of the whole nation, the public power will lose its political character. Political power, properly so called, is merely the organised power of one class for oppressing another. If the proletariat during its contest with the bourgeoisie is compelled, by the force of circumstances, to organise itself as a class, if, by means of a revolution, it makes itself the ruling class, and, as such, sweeps away by force the old conditions of production, then it will, along with these conditions, have swept away the conditions for the existence of class antagonisms and of classes generally, and will thereby have abolished its own supremacy as a class. In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association, in which the free development of each is the condition for the free development of all. 748 The revolution will bring the final conquest of the world by the power of reason. Chaos of natural and social realms will be brought under the command of rational management. Class in itself will become the class for itself, 749 mankind will finally rise above the status of human species (Chapter 20) and become a demiurge of its environment: The life-process of society, which is based on the process of material production, does not strip off its mystical veil until it is treated as production by freely associated men, and is consciously regulated by them in accordance with a settled plan. 750 All conflicts are inherently irrational and transitional and thus ultimately will be resolved. A fact that Marx overlooked (or at least didn’t treat as a problem) was that, on the grounds of his own theory, a centralized economic “basis” must “superstructure,” lead 751 to a monolithic and all-powerful political and a proposal to “centralise all means of production in the hands of the state” 752 could be possible only due to his Enlightenment faith in the power of reason. 753 Hodgson argues that: Economics and Its Discontents 231 It would be a particularly blinkered Marxist who would read the words of Marx and Engels on their proposed socialist future, and see no threat to a plurality of forms of common ownership and see no antagonism to the market nor any type of mixed economy. There is no evidence in any of their works that they saw any value in institutional and structural diversity, under capitalism or socialism. In their stated proposal “to centralize all instruments of production in the hands of the state” they favoured a single, all-encompassing arrangement, subject to rational principles of accounting and control. 754 This is consistent with the Marxist premise that economy is an equalizing machine that needs to be cleansed from all extra-economic contaminations (Chapter 34). Had Marx seen exchange as a function of power, instead of power as an effect of exchange, he would see that “centralisation of all instruments of production in the hands of the state” must lead to a shift in the structures of domination and discipline that are hardly preferable to the proletariat. Reddy acutely argues that the bargaining position of such state vis-à-vis the workers is incomparably greater than that of private employers, “unless there were very rigorous and very extensive safeguards created expressly to prevent such discipline. [But] on the shape of such future safeguards Marx and Engels had virtually nothing to say.” 755 This is by no means an original criticism of Marxist economics. The identification of state control over economy with political despotism was a common theme of liberal discourse of modernization. For example, see this classic passage from Smith: The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. 756 And from the more radical end of the political spectrum, Bakunin identified Marx as a “state worshipper” and in Statehood and Anarchy pointed to the danger that “the so-called people’s state will be nothing 232 Economics and Its Discontents other than the quite despotic administration of the masses of the people by a new and very nonnumerous aristocracy of real and supposed learned ones […] to liberate the masses of the people they first have to be enslaved.” 757 This was a critique read by Marx and answered in his best polemic style. Bakunin was an “ass” and his argument was nothing other than “schoolboy drivel,” windbaggery.” “democratic nonsense,” and “political 758 This rationalistic economism isn’t an accidental mistake of Marx. It isn’t a contingent element of his project that could be rejected in order to save it. It is the very foundation on which the edifice of Marxism is built. As Foucualt wrote: At the deepest level of Western knowledge, Marxism introduced no real discontinuity; it found its place without difficulty, as a full, quiet, comfortable and, goodness knows, satisfying form for a time (its own), within an epistemological arrangement that welcomed it gladly (since it was this arrangement that was in fact making room for it) and that it, in return, had no intention of disturbing and, above all, no power to modify, even one jot, since it rested entirely upon it. Marxism exists in nineteenthcentury thought like a fish in water. 759 When Samuelson called Marx “a minor post-Ricardian,” it was primarily a political declaration, however, it does not mean the he wasn’t to a large extent right. Today no one really disputes that Marx’s economics is anything other than a variation on classical economics, built on the same premises, categories, and logic. 760 And as C. Wright Mills notes, “both Marxism and Liberalism make the same rationalist assumption that men, given the opportunity, will naturally come to political consciousness of interests, of self, or of class.” 761 Even Harvey, after all a big fan of Marx, cannot help but to wonder: Economics and Its Discontents 233 Why does he stick with the bourgeois structure of knowledge so rigidly […] I really do not have a good answer to this question. All I know for sure is that this is clearly what he does (the textual evidence, as we shall see, is overwhelming). 762 He sticks as closely as he can to the bourgeois conception of a law-like level of generality – of production – and excludes the accidental and social particularities of distribution and exchange and even more so the chaotic singularities of consumption from his politicaleconomic enquiries. 763 These two economic discourses have been obviously mobilized by different states in the course of different political projects, but they share more in common than it may seem at first sight. But even at first sight, there is one thing for which they both share great enthusiasm: namely, capitalism. The history of mankind is a history of linear progress and moves through subsequent “stages” of which capitalism is so far the most progressive. Thus, as Marxists argue, capitalism should be seen at once as “the worst and best thing that happened to the mankind.” In A Contribution to the Critique of Political Economy, Marx wrote: Asiatic, ancient, feudal, and modern bourgeois modes of production can be designated as progressive epochs in the economic formation of society. The bourgeois relations of production are the last antagonistic form of the social process of production – antagonistic not in the sense of individual antagonisms, but of one arising from the social conditions of life of the individuals; at the same time the productive forces developing in the womb of bourgeois society create the material conditions for the solution of that antagonism. This social formation brings, therefore, the prehistory of society to a close. 764 Hence, the ostensibly paradoxical movement of “Legal Marxists,” who used Marx’s analysis to legitimize capitalist development in nineteenth-century Russia, is not by any means paradoxical. 765 All in all, Marxist and liberal discourses shared the same enthusiasm for the “modernization” of society 766 based on the Enlightenment overconfidence that progress of scientific methodology, accounting mentality, and 234 Economics and Its Discontents instrumental rationality is necessarily bound to the growth of universal freedom. 767 The final argument for Communism was simply that it beats Capitalism at its own game. As Keynes noticed: Communism merely claimed to be in the long run a superior technical instrument for obtaining the same materialistic economic benefits as capitalism offers, that in time it will cause the fields to yield more and the forces of Nature to be more straitly harnessed. In this case there is no religion after all, nothing but a bluff to facilitate a change to what may or may not be a better economic technique. 768 But it can be argued that even without the perspective of a communist future “developing in the womb of bourgeois society,” Marx would still be an advocate of capitalist progress as the next best thing mankind can get. In The British Rule in India, Marx legitimizes the British exploitation of India (Chapter 30) by arguing that progress has its costs: “whatever may have been the crimes of England she was the unconscious tool of history in bringing about that revolution.” 769 Similarly, Engels praises the French rule in North Africa, which after all dealt with the “barbarious state” of the African population. 770 This is the progress of Hegelian “philosophy of history”: “so mighty a figure must trample down many an innocent flower, crush to pieces many things in its path.” 771 Certainly one cannot deny that Marxism was successful in establishing itself as a temporarily viable political alternative to liberalism. Interestingly, in terms of discoursive devices employed towards this end, it differed little from the rhetoric of its rivals. It positioned itself between the old authorities such as Aquinas 772 and Aristotle. 773 It appealed to the age-old figures of use and abuse of money and criticized false (“idolatrous” [Chapter 26]) consciousness. Sometimes it presented itself as a purely scientific study of the laws of nature 774 or Economics and Its Discontents 235 the laws of history, 775 at other times it heavily utilized the imaginary of gothic horror novels, 776 especially the vampire metaphor. 777 And in the final instance, it simply used “the power of abstraction” which, simply because Marx declared so, was not like Smith’s or Ricardo’s “incomplete” and “formal” abstraction but “real,” “concrete,” and “rational.” 778 However, they must have been “concrete” and “real” in a very peculiar way, because if a political opportunity arose, Marx easily changed his views. For instance, he insisted for years that an industrial revolution is an indispensible prerequisite for a communist one, and portayed the Russian Empire as a hopelessly backward state. Conversely, when the Russian translation of Capital met with a largely positive reaction on the part of the Russian intelligentsia, he changed his mind and suddenly declared that communism can be based on semi-feudal communal ownership of the land. 779 Either because Marx was more a skilful politician than a theoretician or because he believed that the revolution is around the corner, he often made his analysis subordinate to his partisanship. Arguably, this should be treated not as a betrayal of Marxist principles but rather as their confirmation, which points to the inseparable knot between politics and economics. After all, the point was to change the world, not to interpret it. 780 For all these reasons, Marxism certainly did succeed in terms of gaining a following. However, it is worth noting that Marxists were often, especially in the Anglo-Saxon countries, better in spreading their good news to various elites, to intellectuals and academics, than in attracting a mass blue-collar following. At times, one has to wonder whether this was not a deliberate strategy. It is striking that before the Communist Manifesto in its final phrase calls “proletarians of all countries” to “unite,” 781 its addressee is rather the bourgeoisie, who are addressed as “you,” rather than the proletariat, who are referred to as “they.” 782 Hayek 236 Economics and Its Discontents argued that socialism has never been a worker’s movement, but rather an ideology forced upon the working class by intellectuals, those “professional secondhand dealers in ideas” 783 who may have been wellintentioned, but in fact, by promoting socialism did little more than secure their own privilege. Perhaps this argument has been too easily rejected simply because of Hayek’s bad reputation for being an economic libertarian and co-founder of the infamous Mont Pelerin Society and should be inspected with more scrutiny. In an 1882 letter to Bernstein, Engels reported that Marx, unhappy with political appropriations of his ideas, declared once that “If anything is certain, it is that I myself am not a Marxist.” 784 Although Marx intended to taunt his alleged followers with this, in fact he jibed at himself. Notwithstanding all Marx’s faults, for many decades various neo-Marxist and post-Marxist theories offered the most attractive analytical approaches available for those who wanted to critically rethink the status quo. Much of the most interesting and vigorous current intellectual life has sprout from the grounds of Marxist analysis. Nonetheless, as we have seen in this and previous chapters (Chapters 23, 26, 29, 34, 37), the Marxist project cannot be seriously treated as an alternative to capitalism not because of historical crimes of Stalinism or the economic breakdown of Soviet Union, but because from the very beginning it was one flesh with liberal economics. It was a totalizing search for a perfect synthesis, based on a faith in the equalizing character of economic exchange and confidence that Enlightenment rationalism is a force of universal progress. It did allow some place for conflict (albeit dialectic and ephemeral), thus at times it may have helped to mobilize political potential of the oppressed groups, but these had organized themselves long before Marx (Chapter 38), and all-in-all today’s Economics and Its Discontents 237 “proletarians of all countries” are still exploited just as they were in 1848. Perhaps, the only major change is that the most brutal practices have been exported to the periphery of the world market, so today the most ruthless industrial production is no longer carried out in Manchester, but in China, Pakistan, or Nigeria. At the end of the day, one has to ask – If Marx was so smart, how come Marxism is dead? The answer is: he wasn’t that smart. He is ballast that needs to be left behind to open possibilities for new conceptualizations of powers struggles. Chapter 40: Which explains why the “working class” can never win the “class struggle”. if there is hope, it lies in the proles George Orwell Let us make three observations on the notions of class and class analysis. Firstly, Marx argued that since capitalism is based on the theft of the proletarians’ labor (Chapter 34), it is the historic mission of the proletariat to rebel against this injustice and overthrow the exploitative regime of production. However, the fact is that almost all revolutionary and tradeunion movements of the long nineteenth century were dominated not by the proletarians, but by artisans who had higher incomes and workplace autonomy than the workers and at times even owned small-scale capital and employed labor themselves. 785 “Study after study reveals […] [that] neither leaders nor supporters of such factions were recruited exclusively or even predominantly from the classes whose interests these factions were said to represent.” 786 For example, in the great Ruhr mining strikes of 1889 and 1905: Activists, it has been shown, continued to come predominantly from the high-skill, high-pay end of the spectrum, and in particular from trades like construction and metal working where apprenticeships still had meaning and traditions of organization and political action stretched back at least to the 1830s. Among such well-organized laborers moments of high militancy resulted not from misery but from technological challenges to the current organization of work. True proletarians were still in the minority within the working class and, even where numerous, often quiescent. 787 Similarly, Thompson shows that the British “Friendly Societies,” probably the most important hubs of nineteenth century labor organization in England with membership just under one million in 1815 788 (when the total population was around 10 million), were 240 Economics and Its Discontents dominated by artisans. 789 Wallerstein explains that the artisans were more likely to engage in strike and direct actions, because being better organized and possessing more resources and monetary reserves, they had a better bargaining position. 790 It seems to be a reasonable explanation, as it points to the fact that it takes power to fight power. The Marxist confidence that it will be the revolt of the poor that will usher in the communist utopia resembles, in its disregard for reality, a somewhat religious faith in the salvation that will be found by the last who shall be first. When empirical data contradicted Marx’s propositions, he simply ignored it. Wolfe showed that in the second (1873) and third (1883) editions of Capital all statistics were updated except the ones on workers’ wages, which were already outdated in the first edition (1867). 791 The rise in real wages in the second part of the nineteenth century contradicted prognoses of pauperization and polarization of the proletarians and the prophesies about the coming time when “they will have nothing to lose but their shackles,” 792 so they had to be disregarded. Reddy calls it fetishism of the proletariat: Failure to deal fully with the disciplinary potentials of wage and other exchange relationships has handicapped the Marxist tradition's treatment of class formation. The fetishism of wages has given rise to a fetishism of the proletariat. Almost inevitably wage laborers are believed to hold a privileged position in the hierarchy of suffering and to have a special propensity to rebel because of low wage levels and because the surplus value they create becomes someone else's private property. In reality quite the reverse is true. That is, earning levels are, if anything, symptoms, not causes, of oppression. 793 Secondly, numerous cases have been made in recent decades against using the concept of class as a valid analytical concept. 794 Several historical studies show that class seems to be a largely elusive thing, a mirage that evaporates when one gets close to it. Economics and Its Discontents 241 Thompson’s momentous Making of the English Working Class unveils the great diversity of “economic standing, social prestige, relations to the means of production, political participation, and selfconsciousness among the labouring poor at the very time the factory system was supposed to have been homogenizing into a single working class.” 795 Classes as real, concrete entities, as social actors that pursue a single set of political and economic goals, cannot be identified. Even when it comes to political antagonisms, whose class character is assumed to be self-evident, a careful examination of the social composition of the struggling parties shows that no clear lines can be drawn. Speaking of the English Civil War, Tawney remarked “Bourgeois revolution? Of course it was a bourgeois revolution. The trouble is the bourgeoisie was on both sides.” 796 And Wallerstein adds that “this was as true of the Glorious Revolution of 1688-1689 as it was of the revolution of 1640; and it was true of the Fronde as well, and even of the French Revolution in 1789.” 797 Class narratives seem to overemphasize the significance of agency in historical processes. Series of short-term tactics are seen in retrospect as long term strategies, and accidental effects are mistaken for intentional objectives. “Roman peasants plowing and sowing their fields in a twofield rotation generation after generation did not intend to exhaust the soil. The inventor of gunpowder did not intend to make medieval chivalry obsolete. Columbus did not intend to find a new continent.” 798 Historically, political actions rarely brought about intended systemic effects. As Lachmann notes: Actors almost always intended to be conservative, to merely preserve or perhaps to augment their existing positions. Action usually had little effect. Plans went unfulfilled. Rivals were able to blunt most challenges to their positions. Elites and nonelites only rarely achieved the specific and shortterm gains they intended. More rarely, actors set in motion the long chains of contingent elite and class conflict that transformed social structure and produced new and unanticipated forms of production. 799 242 Economics and Its Discontents Of course some political battles are unequivocally won, and some of these victories even produce local sets of intended effects. But to see general systemic developments as outcomes of deliberate strategies makes as much sense when the agent of said change is said to be bourgeoisie or proletariat as it does when it is said to be the Illuminati, the Elders of Zion, or Reptilians. It can be said that the notions of class and class struggles were a solution of an analytical problem by means of a political postulate. Redefining the dynamic networks of overlapping hierarchies in which social agents try to combine various means of securing their interests so that it appears as a conflict between two relatively homogenous classes had been instrumental to mobilizing political support for socialist projects. It may be argued that many historical achievements of the working poor have been won thanks to such discoursive tactics. It may be also argued that today we need to express more issues in terms of class conflicts, because in this way social struggles can be framed in terms of negotiable interests and not around nonnegotiable identities. 800 Notwithstanding these arguments and their partial validity, it seems doubtful that our general understanding of social processes and power struggles should be based on propagandists’ categories, however wellintentioned. Thus, thirdly, class fetishism has to be eschewed and replaced with a study of the discoursive and institutional environments in which various individual and collective agents pursue their goals. By no means should it be perceived as a move against political agency as such, a fatalistic celebration of structuralism, but rather as an attempt to appreciate the fact that the matrix for power struggles is more complex than the “class struggle” over “the control of the means of production.” Economics and Its Discontents 243 Marx deliberately ignored all other dimensions of socio-economic conflicts and focused on the control of the means of production (and let us note that both “control” and “means of production” are highly abstract and ahistorical concepts). 801 Reform of the credit regime, redistribution of wealth, progressive taxation, anti-monopoly regulations, progressive monetary policies were all “bourgeouis devations.” 802 The only possible subject for properly scientific economic analysis was the realm of production, and the division between capital and labor inherent in it. 803 Social relations could be brought to the simple difference between those who own the machinery and those who constitute a mere addition to it in the form of laboring power. Hence, the central question becomes: who owns the factories? The alternative approach would work from the premise that not only the social context but the deeply social character of all production has to be emphasized, and the institutional nature of ownership has to be appreciated. The class narratives are politically loaded constructs that obscure the heterogeneous character of power struggles and envision a mythical future when the working class will finally transform itself into an agent of change, a sovereign that will shape its political and natural environment at will. The political need of constructing discoursive vehicles through which collective agency could be expressed is understandable, but employing such devices towards analytical ends cannot end well. And it can be argued that immediate political purposes would also be better served by concepts more grounded in reality than the notion of a class struggle with a messianist role prescribed for one of the classes. Chapter 41: In which we take look at the so-called “marginalist revolution.” I say that things are useful whenever they can be put to any use at all. Léon Walras “It is evident that a spirit of very active criticism is spreading, which can hardly fail to overcome in the end the prestige of the false old doctrines,” wrote William Jevons in 1879. 804 By that time classical political economy had been appropriated by Marxists and challenged by the historical school (Chapter 43). The former derived a radical critique of the existing social order from the labor theory of value, while the latter challenged the very method of abstract theorizing. Then, according to the mainstream history of economics, in the 1870s a so-called “marginalist revolution” happened. As Schumpeter wrote in his classical History of Economic Analysis: “this revolution centered in the rise of the marginal utility theory of value that is associated with the names of three leaders: Jevons, Menger, and Walras. We pause to salute them.” 805 Milonakis and Fine argue that with marginalism, economics is “pushed away from its traditional definition as the science of wealth or the science of the economy, towards its definition as the science of choice.” 806 As Unger describes it: Faced with socialist attacks on political economy and escalating socialtheoretical debates about how society worked, the new marginalist market theory simply withdraw from the contested terrain. It relocated on what it believed to be a higher or, at least, a more general ground. 807 The marginalists proposed that economy should not be concerned with absolute values produced by the whole economy, but only with the relative utilities of particular goods as they appear before an individual buyer or seller at a specific time. The value of this shift is often explained 246 Economics and Its Discontents by a claim that thanks to this approach, finally the ancient paradox of value (why is water, which is indispensible for human survival, cheaper than diamonds, which have hardly any practical use at all) could be resolved. 808 But as we have seen (Chapter 15), medieval scholars were already aware that prices are dependent on changing supply and demand. Thus, the originality of the marginalists lay not so much in discovered relativity of values, as in dissolving the politically charged tension between relative and absolute values by excluding the latter from the body of economic analysis. The marginalist school was an attempt to make economics an objective science that could discover the underlying principles of economic conduct by deductive, abstract reasoning. Milonakis and Fine show that Menger Consider[ed] all phenomena as having some essential properties that underlie their nature, and search[ed] for causal relations among the individual elements of these phenomena through the method of abstraction and isolation: Menger sought the “simplest elements” of everything real, the essences, the nature (das Wesen) of the real. In his exact approach, he used the process of abstraction from the individual phenomena of the empirical world to discover their essences, to isolate them, and then to utilise the “simplest elements” so obtained to deduce “how more complicated phenomena develop from the simplest, in part even unempirical elements of the real world.” 809 Walras’s general equilibrium theory in which all agents are not allowed to make binding contracts with each other until all markets reach the state of equlibirum 810 is so unrealistic, it is hardly conceivable even as a pure thought experiment. As Hodgson observes, it is so abstract that it “does not satisfactorily encompass money, markets or firms.” 811 But the more abstract the theory, the more universal its application 812 (Chapter 44). Hence, general equilibrium could be (and in the twentieth century was) easily adapted as a model of a centrally planned economy. This is Economics and Its Discontents 247 another instance that shows the structural closeness of socialist and capitalist economics, and would be probably welcomed by Walras himself who before taking up professorship at Lausanne, worked in a cooperative movement. Personally, Walras explicitly stated that no recourse to empirical verification of economic theories is necessary. According to him, economics as a “physico-mathematical science” “abstracts ideal-type concepts which [it] defines, and then on the basis of these definitions [it] constructs a priori the whole framework of their theorems and proofs. After that they go back to experience not to confirm, but to apply [its] conclusions.” 813 “Pure economics does not expect any confirmation from reality.” 814 When in 1881 he was asked about practical recommendations for tariffs policy, he refused to give them. “I am a man of pure theory,” he explained. 815 It is perhaps a banal point, but nevertheless one worth making, that one has to wonder about the practical applicability of economic knowledge, when economists themselves are not that good at making money. And with some exceptions (most notably, Keynes, who repeatedly lost and made fortunes on the stock market), they know better than to wager their own money on their theories. A bit symbolic in this regard is Jevon’s attempt to practically use his economic reasoning. In his forties, this “revolutionary,” in anticipation of a coming spike in the price of paper that would bar him from work, bought a great stock of paper. But the rise in prices never came, and Jevons died, surrounded by stockpiles of unused paper so high, his children hadn’t used them even fifty years later. 248 Economics and Its Discontents We will come back to the issue of abstract economics (Chapter 44), but before we proceed, it should be noted that since the 1970s the very notion of the marginalist revolution has been brought under sceptical scrutiny. Although it is true that the three musketeers of marginalism spoke of their own work as revolutionary, 816 historians who look past these self-congratulatory declarations for evidence of the marginalists’ originality struggle to find any. The leading ideas of the “revolutionaries” were by no means novel. 817 To mention only names already brought up in this book, “marginalist” concepts and formulas could be find in works of Ibn Rushdi, Olivi, Genovesi, Verri, Beccaria, and Turgot. Moreover, Blaug points out that: To try to explain the origins of the Marginal Revolution in the 1870s is doomed to failure: it was not a marginal utility revolution; it was not an abrupt change but only a gradual transformation of old ideas; and it did not happen in the 1870s 818 And Amadae argues that “the marginal revolution was reconstructed in the twentieth century when the neoclassical orthodox position matured and sought to celebrate its antecedent roots in the early marginalist principles.” 819 To borrow Alfred Marshall’s favorite aphorism: fabula non facit saltus – discourse does not make jumps. Chapter 42: In which psychological premises and logical tautologies behind the figure of homo economicus are inspected. the object of economics is to maximize happiness by purchasing pleasure Stanley Jevons. Yossarian was moved very deeply by the absolute simplicity of this clause of Catch22 and let out a respectful whistle. Joseph Heller. Criticizing the figure of “homo economicus” is probably as common as blaming “neoliberalism” for all the predicaments of the modern world. It is described as an essentialist and ahistorical abstraction that has no grounding in reality. It is criticized as a basis for real life policies that have absolutely no grounding in reality. As Madison observes “homo economicus, a mere economizing, calculating entity […] can be thought and has his uses, [but] he does not… exist.” 820 On the one hand, it is said to be a purely theoretical concept that deliberately removes itself from reality. On the other, mainstream economists like to claim that precisely thanks to its abstract character, it is in a way more objective and real than the reality itself. The concept found its first definite expression in Mill’s 1844 Essays on Political Economy: What is now commonly understood by the term “Political Economy” is not the science of speculative politics, but a branch of that science. It does not treat of the whole of man’s nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging of the comparative efficacy of means for obtaining that end. It predicts only such of the phenomena of the social state as take place in consequence of the pursuit of wealth. It makes entire abstraction of every other human passion or motive. 821 But already three decades later, the drive to profit was treated by marginalists as “the inevitable tendency of human nature.” 822 Thus, the 250 Economics and Its Discontents Enlightenment appreciation for self-interest (Chapter 25) is transformed into a conviction that the gain motive not only should be treated as a legitimate one, but simply is the only real one. It should be noted that although mainstream economics disregards modern psychological studies, it is not devoid of psychological assumptions. 823 Arguably, they were based on theories of mechanistic psychology developed by Richard Jennings, whom Jevons named along with Jeremy Bentham and Nassau Senior (Chapter 30) as the most important influence on his Theory of Political Economy. 824 Jennings, in his Natural Elements of Political Economy (1855), presented “natural laws” of economic behavior thanks to which “the mystery of action is solved.” 825 “The laws […] of human action are, in the same sense in which other laws of Nature are so, fixed and invariable,” 826 and could be explained in terms of automatic reflexes, predetermined by the “materialist automatism” of human neurophysiological organization. 827 Although Jennings referred in a number of places to economic actions that were governed by the will he noted that these occurred “much less frequently than is commonly supposed.” Instead, a good deal of activity was regulated behavior, consisting of actions that were “simply automatic or instinctive,” performed “without the attention, or the intention, or even the excitement of consciousness in the mind of the agent.” 828 Despite Jevons’s conviction that “economics, if it is to be a science at all, must be a mathematical science,” 829 he spent some time doing empirical experiments designed “to throw some light upon the chemical and physiological conditions of muscular force,” 830 in which he sought to confirm Jennings’ “laws of the physical basis of political economy” by measuring time for which he could hold weights in the hand with an outstretched arm. And as Alborn says: “perhaps not surprisingly, a diagram of Jevons’s results looks like the labor disutility curve in the TPE [Theory of Political Economy].” 831 Economics and Its Discontents 251 Although such crude mechanistic psychology was heavily criticized in the 1860s and was widely considered outdated already by the time Jevons adapted it for his purposes, 832 it didn’t hinder its success in the economic discourse. Homo economicus fit too well with the liberal critique of an economically over-active state (Chapters 24, 32) which was based on the premise that the sum of local, dispersed, rationalities will always be more efficient than “the statesman who should attempt to direct private people in what manner they ought to employ their capitals.” 833 Individual preferences are always right, they cannot be wrong, because they are the very standard against which everything else is measured, they are the purest expressions of truth. As Foucault put it: “homo ɶconomicus is the one island of rationality possible within an economic process.” 834 Consider Smith: “every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him,” 835 or Turgot: “each individual is the only judge of the most advantageous use of his land and his labor. He alone has the local knowledge without which the most enlightened man reasons only blindly.” 836 The only possible point of rationality was the individual, and the logic of this rationality was “utility maximization.” A brief outline of establishing utility maximization as the main principle of homo economicus can be sketched as if it proceeded in three phases. First was Bentham, who brought all action under the common hedonistic utilitarian denominator: Nature has placed mankind under the governance of two sovereign masters, pain and pleasure. It is for them alone to point out what we ought to do, as well as to determine what we shall do. […] They govern us in all we do, in all we say, in all we think: every effort we can make to throw off 252 Economics and Its Discontents our subjection, will serve but to demonstrate and confirm it. In words a man may pretend to abjure their empire: but in reality he will remain subject to it all the while. The principle of utility recognizes this subjection, and assumes it for the foundation of that system, the object of which is to rear the fabric of felicity by the hands of reason and of law. Systems which attempt to question it, deal in sounds instead of sense, in caprice instead of reason, in darkness instead of light. 837 Second, Mill redefined pain and pleasure to account for cultural and social motives that exceed the hedonistic calculation of pain and gain. People do calculate, but they take into account things such as the hope of favour and the fear of displeasure from our fellow creatures or from the Ruler of the Universe, along with whatever we may have of sympathy or affection for them or of love and awe of Him, inclining us to do His will independently of selfish consequences. 838 It has been noted, that “the push by Mill to complement an objective theory of value with subjective elements, in order to account for the historically and socially situated individual, in part had the perverse effect of paving the way for ahistorical and asocial subjectivity (marginal utility) to prevail.” 839 This is the third phase: homo economicus becomes a subject who at once evaluates relative utilities of everything around him and seeks to maximize its individual utility. Self-interest is the “prince of the princes” (Chapter 25), and “every effort we can make to throw off our subjection, will serve but to demonstrate and confirm it.” It is a tautological argument that goes in circles. Utility is relative, and whatever one does, one seeks to maximize it. If somebody’s action seems to you to be a disadvantageous one, it must be because you don’t grasp the true utility that one derives from it. If it wasn’t the most advantageous action possible, one wouldn’t perform it. It is Catch-22. As Reddy argues: Such a procedure is immune from all possible disproof. For this reason, the notion of advantage that rests at the core of classical political economy can Economics and Its Discontents 253 lay no more claim to validity (and no less) than Freud's notion of the oedipal stage or Luther's notion of the futility of works for achieving salvation. All are equally profound and instructive statements about the underlying nature of human motivation; all are equally metaphorical, nonscientific, essentially poetic. Money is numerical, however, whereas salvation or making love to one's father or mother are not. One can make calculations and projections with money. To do so looks like science. 840 In Sedlacek’s words, the utlity maximalisation thesis can be summed up in short as the discovery that “human beings do what they do.” 841 In the mainstream economic discourse, the figure of homo economicus was seriously challenged three times. First, it had to fight off the eighteenth-century conservative discourse mounted in support of the guild system and apprenticeship, which proposed that people are not naturally entrepreneurial and that without the guide of the guild masters, they won’t be able to pursue their own interests. 842 Interestingly, these arguments were also voiced in the British debate on the abolition of slavery, and decisively shaped its outcome. The Abolition Act of 1833 established a six-year transition period of “The Apprenticeship,” during which the ex-slaves were expected to gradually learn how to be free while working without pay for their former owners for four and a half days a week. 843 Second, it was challenged by Keynes, who stressed the economic importance of factors such as chance, psychology, mob mentality, and of course “the animal spirits”: Business men play a mixed game of skill and chance, the average results of which to the players are not known by those who take a hand. If human nature felt no temptation to take a chance, no satisfaction (profit apart) in constructing a factory, a railway, a mine or a farm, there might not be much investment merely as a result of cold calculation. […] Even apart from the instability due to speculation, there is the instability due to the characteristic of human nature that a large proportion of our positive activities depend on spontaneous optimism rather than on a mathematical expectation, whether moral or hedonistic or economic. Most, 254 Economics and Its Discontents probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as a result of animal spirits – of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities. Enterprise only pretends to itself to be mainly actuated by the statements in its own prospectus, however candid and sincere. Only a little more than an expedition to the South Pole, is it based on an exact calculation of benefits to come. 844 And finally, it was criticized by Mises, who stressed the significance of uncertainty and argued that economics should not deal with “imaginary homo economicus,” but rather with man “as he really is, often weak, stupid, inconsiderate, and badly instructed.” 845 The figure of rational and calculating homines oeconomici has been criticized by mainstream economists and it has been criticized by countless anthropologists, sociologists, and psychologists. However, its arguably most devastating assessment was delivered not by academics, but by the industry, namely, the advertising industry. As early as the 1920s, America’s advertising and public relation companies explicitly advocated public relations based not on “factual argument and rational persuasion” but on “emotion and sentiment.” 846 Despite all these theoretical and practical shortcomings of homo economicus, it is still the predominant paradigm of mainstream economics. Thus, the 1992 Nobel Prize laureate Gary Becker claims that: the economic approach is a comprehensive one that is applicable to all human behavior, be it behavior involving money prices or imputed shadow prices, repeated or infrequent decisions, large or minor decisions, emotional or mechanical ends, rich or poor persons, men or women, adults or children, brilliant or stupid persons, patients or therapists, businessmen or politicians, teachers or students. 847 It certainly sits well with the culture of individualism, which praises self-improvement, self-reliance, and self-blame. Possesive individualism is a topic for another time, but let us note now that homo economicus as a Economics and Its Discontents 255 primary subject of economic analysis (as opposed to classes or institutions) constitutes an important part of it, as it places the sole responsibility for one’s economic performance and social position on the individual. The most immediate consequence of this is that both economic successes and hardships are experienced individually. Thus, when employees are made redundant, they are more likely to blame themselves and feel shame than to feel anger towards institutional agents such as companies or governments. 848 The famous 1933 “diaries of the unemployed” study, which sought to analyze the every-day life of the poor during the Great Depression, was repeated in 2001 and it shows that the tendency to treat economic problems as individual failures has been on the rise in recent decades. 849 The diaries, written 70 years after the first study, described in many regards a parallel experience to the one of 1933, used similar narratives and spoke of similar problems. The subjective experience of unemployment, despite all the economic, social, and cultural changes of the past century, is analogous. However, one difference stood out. It was precisely this newly developed shame stemming from the conviction that it is the unemployed man who bears sole responsibility for his unemployment. Let us make one footnote at this point. It is ironic that for the most part, the liberal praise of capitalism fails to see that the basic institution of capitalist economy, the unit which is indispensible (or so liberals claim) for economic innovations and progress, namely, the capitalist company, is an institution whose internal environment is essentially non-capitalist. Once an individual becomes a full-time employee, he or she enters a microcosm that is not regulated by deals struck on a market but by a corporate culture. Employees and departments within a single company do not trade with each other nor do they simply compete with each other. 256 Economics and Its Discontents The efficient functioning of a company surely depends on disciplining employees to perform their tasks, and a company’s survival depends on its performance on a market, but the internal organizational logic of companies is not a market one. And its efficiency depends not on employees acting as homines oeconomici, but on them acting as social beings who are ready to cooperate and learn from each other, and whose motivations are at least in part affected by non-monetary incentives and techniques of discipline. Chapter 43: In which the historical role of historical schools of economics is outlined. the register of crimes and misfortunes Voltaire As we have seen in the chapter on the doux-commerce and jealousy of trade theses (Chapter 24), the standpoint on economic liberalism has been ordinarily dependent on relative position in the regime of world economy, that is, in the international division of labor. Ha-Joon Chang extensively and convincingly describes the historical protectionist, industrial, and trade policies taken by such countries as Britain, the USA, Germany, France, Sweden, Belgium, the Netherlands, Switzerland, Japan, Korea, and Taiwan in order to develop national economies strong enough to compete on the “free” market. 850 This is well documented, so in this chapter I will focus on only one, relatively recent, economic discourse that legitimized such policies – a discourse that before the Second World War could be considered mainstream in many European countries 851 and influenced American Institutionalists, 852 namely, the German Historical School of economics. In the eighteenth and early nineteenth century, Germany was still primarily an exporter of raw materials, with industry in the state of infancy. The classical dogma of laissez-faire was indisputably recognized as inadequate to the needs of a weak economy. 853 See, for instance, this passage from Fredrich List’s 1841 The National System of Political Economy: 258 Economics and Its Discontents It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, in order to deprive others of the means of climbing up after him. In this lies the secret of the cosmopolitical doctrine of Adam Smith, and of the cosmopolitical tendencies of his great contemporary William Pitt, and of all his successors in the British Government administrations. Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her, can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth. 854 Also, a number of nineteenth-century US presidents explicitly expressed this position. Consider the 18th US president, Ulysses S. Grant: For centuries England has relied on protection, has carried it to extremes and has obtained satisfactory results from it. There is no doubt that it is to this system that it owes its present strength. After two centuries, England has found it convenient to adopt free trade because it thinks that protection can no longer offer it anything. […] Within 200 years, when America has gotten out of protection all that it can offer, it too will adopt free trade. 855 Or the 25TH US president, William McKinley: “under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man.” 856 The difference between historical and classical economics was grasped in 1875 by Leslie: Two different conceptions of Political Economy now divide economists throughout Europe, of which, looking to their origin, one may be called English, the other German, though neither meets with universal acceptance in either England or Germany. English writers in general have treated Political Economy as a body of universal truths or natural laws; or at least as a science whose fundamental principles are as fully ascertained and indisputable, and which has nearly reached perfection. The view, on the other hand, now almost unanimously received at the universities, and gaining ground among practical politicians, in Germany, is that it is a branch of philosophy which has received various forms in different times and places from antecedent and surrounding conditions of thought, and is at a stage of very imperfect development. Each of these Economics and Its Discontents 259 conceptions has its appropriate method; the first proceeding by deduction from certain postulates or assumptions, the second by investigation of the actual course of history, or the historical method. 857 Of course Marxists claimed to pursue the historical method as well. Marxist political economy was supposed to be “essentially a historical science” (Engels), 858 but Hodgson acutely notes that its “aim is not to analyse any specific variety of capitalism but capitalism in general. Rather than any specific form of capitalism, capitalism per se is chosen as an ideal type because the dynamism of that system is attributed to its general relations and structures rather than national or cultural specificities.” 859 The Historical School has been criticized by neoclassical economists primarily for its alleged lack of theoretical sophistication, which leads to failure in discovering any general economic laws. “Not one single ‘law’ deserving of the name, not one quantitative generalisation of permanent validity has emerged from their efforts,” 860 argued Robbins. Therefore, they really do not belong to the body of economic knowledge. But since “many institutionalists would be reluctant to admit that many ‘generalisations of permanent validity’ exist […] they should not be condemned outright for failing to discover them.” 861 In any case, it is not true that the Historical School was theoryless or anti-theory. They objected to abstract and deductive theorizing that tried to establish atemporal scientific certainty. 862 As leading historical economist Schmoller argued, “by cloaking propositions as ‘laws,’ one gives them the appearance of necessity which they do not possess […] It is more justifiable to doubt whether today we can and ought to speak of historical laws.” 863 Economic history has to be theorized, but all generalizations will be historically and geographically specific. Thus, for Knies, another historical economist, “to be historical meant to be context-bound. 260 Economics and Its Discontents Economic facts and theories must be interpreted in the context of the place and the time period of the society or people in question, not in the light of a larger developmental scheme or timeless causal law.” 864 This is how Schmoller, who devoted a quarter of a century to collecting historical and statistical data on economic development, envisaged the future of economics and a proper relationship between history and theory: In the future there will come a new epoch for national economy. It will come, however, only through giving full value to the whole body of historico-descriptive and statistical material that is now being assembled, not through further distillation of the already hundred times distilled abstract theories of the old dogmatism […] It is by no means a neglect of theory, but a necessary substructure for it. 865 An important element of German historical economics was its unit of analysis. It was neither the individual nor the class, but society or the national economy as a whole. 866 They stressed the interdependency of people living in one country: The common element which relates each economic individual or nation is not only the state, but is something deeper: the common language, history, memories, morals, and ideas […] It is a common “ethos” what the Greeks called the spiritual-moral sense of community, that is crystallized in the morality and law and that influences all human actions, as well as economic actions. 867 The primary metaphors to which such narratives appealed were, once again (Chapter 21), ones of anatomy, the body, and organism. As Roscher declared explicitly in 1882: “our task is to speak, the anatomy and physiology of social or national economy!” 868 Just as the very term “organism” was a neologism introduced by Stahl in an overt attempt to oppose the Cartesian paradigm of “mechanism,” 869 organic metaphors were considered a viable alternative to a mechanistic understanding of economic phenomena. 870 However, it could be argued that both frames were pursuing the same goal of turning the plurality of economic conflicts into a flawless synthesis. As Murphy writes: “Organism and mechanism Economics and Its Discontents 261 are but two variations on the same theme of stipulated order: The attempt to explain structure as if it were deliberately designed for its function.” 871 Therefore, it is worthwhile to consider the argument put forward by Hutter, namely, that such organic economics contributed to the rise of National Socialism. 872 Conceptualizing national economy as a single organism made it easy to consider every and each economic misfortune as a symptom of an infection by foreign bodies (Chapter 21) and invited questions about the purpose of this organism. 873 This argument is undoubtedly strengthened by the fact that organic language has been often closely intertwined with that of Romantic nationalism. However, this does not seem sufficient to confirm the simple causal relation between organic metaphors in economics and “the emergence of an ideology in whose spirit tens of millions of people were killed.” 874 Certainly, the deadly potential of homogenizing narratives should be remembered. But the claim that the organic paradigm must lead to the gas chambers of Auschwitz seems to be a way of securing the legitimacy of the rival individualist and mechanical model, rather than a sound evaluation of historical evidence. In 1930s and 1940s the Historical School was not so much defeated in open debate, as it was defined out of it. Between Robbins’s aforementioned 1932 essay and the publication in 1947 of Samuelson’s bestselling textbook on economics, the mainstream simply excluded historical considerations as unscientific. 875 Economics became, by definition, “the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses.” 876 Nothing more, nothing less. Meanwhile, historical economists found themselves described as sociologists or simply historians. 877 Ever since, historical approaches to economics have been treated as heterodox, sometimes 262 Economics and Its Discontents appreciated in leftist academia and welcomed by developing countries, but ignored by mainstream economics. One way to understand it is that the German Historical School disappeared from mainstream economic European discourse when it had served its role. It didn’t lose the debate, but on the contrary, it won it so successfully, that it helped to develop Western economies to a point when they didn’t need development economics anymore. As soon as the ladder could be kicked away, it was. Unfortunately, the current conditions of the production of mainstream economic discourse do not look promising with regard to bringing back historical or institutionalist perspectives. As Colander says, “the internal dynamics of the profession: who is allowed to become a member, who gets promoted, who gets paid what, who gets the laurels” 878 promote abstract, scholastic, theorizing for its own sake. By developing these models, graduate students and professors demonstrated that they could jump through hoops; the more hoops they could jump through the higher their income, chances for promotion, and standing in the profession. For many economists economic research has become the art of devising clever models and in doing so demonstrating one’s technical virtuosity. Rational expectations is only one example. There are many others. Econometric work often is done to demonstrate mastery of new techniques, rather than to answer questions. 879 As Hewings and Helburn show, in the course of economic education the “relativeness of knowledge, and the legitimacy of different and conflicting viewpoints” are ignored, as textbooks “provide a consensual lens and an officially defined interpretation of reality […] They do not introduce students to economics as science, into the process of inquiry and knowledge creation […] to the diversity of opinion and ferment in economics today.” 880 If I may be excused for citing personal experience, the characteristic statement, expressed over and over again during both Economics and Its Discontents 263 Neo-Keynesian and Orthodox economic courses I attended, was the annoyed remark: “Don’t ask whether it is true or false! It is true by definition, it is true by mathematical identity.” If the history of economics is present at all in economic departments, it is a sketchy Whig history of progress and the gradual separation of biased ideology and superstition from pure science. 881 Robbins’s description of the course on the history of economics he taught in the 1930s could describe a great majority of courses on the subject even today: The course will deal mainly with the economic theories of earlier generations, but it will attempt to exhibit these theories, not as so much antiquarian data but as the raw material out of which by a process of refinement and elimination the economic theories of today have been evolved. That is to say, its ultimate purpose will be to provide a negative preparation for modern analysis. 882 The fact that economic discourse is closely coupled with political partisanship doesn’t help either. The direction in which mainstream economics flows is obviously intertwined with prevailing political interests. Historically, time after time, economists compromised their analytical reasoning to maintain their political significance. Marx is one obvious and already mentioned example (Chapter 39), but the same can be said about Galbraith or Samuelson, who labored tirelessly to prove that the Keynesian element in their analysis doesn’t make them sleeper-agents of the Comintern. 883 The direct transmission between the economic discourse and political struggles makes unconstrained economic analysis especially hard. As economic ideas became shibboleths of political factions, any attempts to rethink them are denied without reflection. Asking questions about the workings of the Invisible Hand is thus often treated as an explicit expression of support for the Gulag and Khmer Rouge, while to raise doubts about the usefulness of class analysis is 264 Economics and Its Discontents equalled with betrayal of the working people and surely a clear sign of one’s lack of intellectual courage. 884 Surely, part of the problem lies in the dynamics of intellectual discourse production as such. As Jedlicki, Janowski, DQG 0LFLĔVND show, 885 ever since the eighteenth century, it had strictly societal character in the very basic sense that it was organized around informal networks of people, often sustained more by personal relationships than strictly professional ones. It is perhaps inevitable, although regrettable, that in this situation solidarity with one’s social circle and one’s colleagues often becomes an important motivation for engaging in public polemics. Hence, substantive debates are frequently intertwined with personal arguments, and the discourse on the whole has a tendency to isolate itself from any tangible links with reality, becoming merely a simulation of thinking. Pamphleteers refute polemicists, who claim to have falsified theories of a philosopher who was brave enough to expose another philosopher’s conceptual reliance on a misunderstanding of yet another theoretician. Such tendencies are additionally reinforced by the academic regime of knowledge production, within which too often the safest way to make a career in the field of the humanities is to stick to armchair theory. Chapter 44: In which mathematicization of economics and its use of abstract theorizing is criticized. If you wish to create a cult, mumble. Thorstein Veblen Judged by modern standards, Condorcet’s complaint about the deluded use of “the language of geometry” in “the economic sciences,” 886 may appear unfounded. Condorcet voiced it in 1771, when Jean-Baptiste Say was only five years old and David Ricardo wasn’t yet born. At that time, and for many more decades, pure deductive theory wasn’t dominant in political economy. As we have already mentioned, classical writers appealed to a variety of frames of reference, such as historical, philosophical and empirical (Chapter 36). Among British classics, it was first Ricardo, a broker who had made a fortune on financial speculations but had no university education nor any training in philosophy, who developed a comprehensive economic theory using purely deductive methodology and abstract reasoning. As Coleman says, Ricardo “hardly ever appealed to history to make a point, to support an analytical proposition, even to illustrate an argument.” 887 Sowell confirms that, arguing that “with Ricardo economics took a major step toward abstract models, rigid and artificial definitions, syllogistic reasoning – and the direct application of the results to policy. The historical, the institutional, and the empirical faded into the background, and explicit social philosophy shrank into a few passing remarks.” 888 Ricardo sought to establish universal “laws” and general “principles” of economic phenomena by means of abstract speculation. Leaving aside a few matters of arguments, in terms of the content of his propositions, he mainly rephrased or advanced theses already voiced by Smith and 266 Economics and Its Discontents Malthus. What was revolutionary was not the medium, but the message. “If the changes brought about by Ricardo’s work, and the influence which it exercised, may validly be regarded as ‘revolutionary,’ this must surely be primarily, or largely, because of the novelty, and subsequent importance for the subject, of its methodological contribution,” says Hutchison. 889 As we have already mentioned, abstract theorizing was also a prime methodology for the “minor post-Ricardian,” Karl Marx. As Harvey comments on the Capital: This was partly due to the incompleteness of the work, but there is no hint in the text of any intention of enriching the study with investigations of historical forms of appearance. Indeed, if anything, the hints point towards a desire to construct the purest possible theory of a capitalist mode of production, uncontaminated by any attempt at grounding it anywhere. 890 Abstract economics appealed to two frames of reference: physics and mathematics. It has been sometimes suggested that the appeal of physicalist metaphors can be traced to Spinoza, who proposed to “consider human actions and appetites just as if [one] were considering lines, planes, or bodies.” 891 Notwithstanding the impact Spinoza may have had on the thinking of a few European philosophers, a more immediate influence on the economic genre was exerted by Newton. A number of classical economists invoked Newton by name to establish the legitimacy of their claims. The most colorful case was Fourier, who not only claimed that his “calculus of attraction” unveils “the laws of motion missed by Newton,” 892 but also maintained that just as Newton was led to his discoveries by an apple falling from a tree, he was led to his, by an apple that he ate at one Parisian restaurant. 893 Others followed the suit, if only in a less extravagant way. Saint-Simon spoke of forces of gravitiational morality, and Smith, in a clear analogue of 267 Economics and Its Discontents Newton, declared that the natural price was “the central price to which the prices of all commodities are continually gravitating.” 894 The relationship between the economic genre and physics was similar to its previous relationship with medical language (Chapter 21).These metaphors didn’t provide any insight into economic phenomena, but simply furnished economists with rhetorical figures that made their arguments look like legitimate scientific proofs. As mainstream economics became more and more abstract, the relationship between it and the physicalist frame of reference became stronger and stronger. Therefore, Mirowski argues that “neoclassical economic theory is bowdlerized nineteenth-century physics.” 895 Nineteenth-century 896 in fact did their best to economists, often themselves trained engineers, mimic the style of physics. This meant mainly cribbing famous equations and simply replacing physical values with economic terms. And thus, for Walras, “the price of things is in inverse ratio to quantity offered and in direct ratio to the quantity demanded.” 897 Jevons laid claims to the scientific status of his price theory, exactly because its maths bore resemblance to mathematical forms of physics. 898 Carey, in turn, tried to explain urbanization by establishing a law due to which “the greater the number [of humans] collected in a given space [e.g., in populous cities], the greater is the attractive force there exerted.” 899 Edgeworth claimed that: “Mecanique Sociale” may one day take her place along with “Mecanique Celeste,” throned each upon the double-sided height of one maximum principle, the supreme pinnacle of moral and physical science. As the movements of each particle, constrained or loose, in a material cosmos are continually subordinated to one maximum of sub-total of accumulated energy, so the movements of each soul whether selfishly isolated or linked sympathetically, may continually be realising the maximum of pleasure. 900 268 Economics and Its Discontents The fact that hardly any economists really understood physics 901 and that often the equations in the process of translation into economic idiom were shattered or at least distorted 902 didn’t really matter. The selfproclaimed success of economics in “acquir[ing] the rigor of rational mechanics” 903 seemed to be enough to hijack the scientific authority of physics. And when economists were confronted by genuine physicists, who pointed to theoretical problems arising from such a treatment of physics, they simply retreated into even more crude mechanistic metaphors. 904 In the twentieth century, Newtonian physics finally lost ground to Einstein and his General Theory of Relativity. But of course that didn’t change anything in the dynamics of the production of economic discourse. Still, mainstream economics operated through an atomistic lens and resorted to a language of frictions, the figure of equilibrium, and other mechanistic metaphors. And when Keynes sought to revolutionize these dogmas, he did it through an appeal to physics, albeit a new physics, calling his work the General Theory of Unemployment, Interest and Money suggesting that readers should see his efforts as following in the footsteps of Albert Einstein. 905 As we mentioned, the second vehicle of abstract economics was mathematics. The first incursion of mathematical methods into economic discourse was Petty’s project of political arithmetic (Chapter 20) in which he attempted to quantify all aspects of social behavior and formulate “an Equation between drudging Labour, and Favour, Acquaintance, Interest, Eloquence, Reputation, Power, Authority, etc.” 906 Customarily, economic historiography treats Cournot’s 1838 Recherches sur les Principes Mathematiques de la Theorie des Richesses as “the first serious work of mathematical economics.” 907 Economics and Its Discontents 269 Cournot didn’t receive good press for his theories, but he did influence Walras, who claimed to to have followed Cournot’s route to a point and then superseded him, thanks to the methodological superiority of his “rigorous axioms and pure theory.” 908 Walras’s mathematics was deemed not good enough when he tried to enroll in the engineering course at the Paris School of Mines. 909 Jevons’s main area of speciality was metallurgy. Nevertheless, they managed to mathematicize economics to the point that it became subjected to Kelvin’s Dictum that states that “when you cannot express it in numbers, your knowledge is of meagre and unsatisfactory kind.” 910 Confirmation of the primacy of mathematical methodology in economics came with Marshall’s classic Principles of Economics (1890). Ironically, Marshall himself was very sceptical of the usefulness of mathematics in economics. He insisted that organic metaphors are better suited for economic subjects than physicalist ones 911 and in a 1906 letter to Bowley he wrote: [I had] a growing feeling in the later years of my work at the subject that a good mathematical theorem dealing with economic hypotheses was very unlikely to be good economics: and I went more and more on the rules: (1) Use mathematics as a shorthand language, rather than an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life. (5) Burn the mathematics. (6) If you can't succeed in (4), burn (3). This last I did often. 912 In the first edition of the Principles, he also included chapters on economic history, believing that marginalist theory must be combined with historical analysis and the social sciences. However, these were dropped from later editions. For the sake of gathering support for marginalist theory, he made a compromise and simplified his message. 270 Economics and Its Discontents As Milonakis and Fine say, “his was one of the last attempts within mainstream economics to keep the link between theory and history alive, compromised though it was by the wish to establish marginalist theory. […] The corresponding tensions within Marshall were largely and increasingly resolved by his successors, in the token way of setting them aside as inconveniences to be ignored.” 913 Although at the beginning of the twentieth century, the (so far) final episode in the expansion of abstract methods in economics was still to come (Chapter 47), the paradigm had been already established. Mathematics has become the medium through which economic discourse was expressed, and mathematical sophistication started to be considered a sufficient condition for its validity. Economics for centuries had been feeding off various (sacral, medical, philosophical, mechanistic, organic, etc.) discourses in a quest for its legitimacy. It is fascinating that in the twentieth century it largely settled for mathematics as its main metaphor. After all, mathematics is a purely speculative, self-referencing system that does not relate to anything else but itself. As Porter notes, “mathematics does not describe a world, but posits one. It is a language of symbols that refers to nothing outside itself.” 914 In this context, it is not at all shocking that in a study by Klamer and Colander, approximately ninety percent of American graduate students of economics said that in their profession, knowledge of mathematics and modelling are important. Only three percent said that knowledge of the economy is very important, while sixty-eight percent said that for an economist knowledge of the economy is unimportant. 915 Accordingly, economics is no longer a science of economy but merely its simulation. It becomes self-subsisting and self-legitimizing and to a significant extent emancipates itself from previously used metaphors. Economics and Its Discontents 271 Arguably, it can do that because today economic genre simply does not need to establish its authority by appeals to other kinds of knowledge (see an exemplary case study in Chapter 47). Rather a reverse tendency of “economic imperialism” is well recognized, in which discourses as diverse as anthropology, biology, criminology, history, theology, sociology, etc. turn to economic figures and metaphors in the search for their legitimacy. 916 This shift certainly didn’t happen because Alfred Marshall wanted to write a bestselling textbook of economics. It didn’t originate on a piece of paper, or as an idea, but rather was caused by a very concrete and material transformation of the structures of power and everyday social, economic, and cultural practices. To this we will come back (Chapter 49), but for now let us note that insofar as economic discourses do play a role in power struggles, during the last century they started to cast a shadow not only on economic struggles, but on all kinds of struggles, becoming the abstract and self-sufficing standard against which everything and everyone can be measured. Chapter 45: Which shows why Keynes was no Keynesian. I can only say that I am ready to have my head chopped off if this is false. John Maynard Keynes Long before Keynes developed his general theory of economy, he wrote a primarily philosophical work, A Treatise on Probability, in which he attacked the Enlightenment discourse on knowledge. Keynes argued that Hume, in his attempt to delineate scientific, objective knowledge from subjective value judgements, overstated the difference between the two. For Hume, probabilities fall under the second category, “all probable reasoning is nothing but a species of sensation.” 917 Keynes tried to break this dichotomy by arguing that there exists a middle ground between objective knowledge and subjective opinion, namely, “rational belief.” 918 Just because judgement is not based on quantitative calculation, it does not mean that it is made on a whim. On the other hand, even in the most cold calculations, it is not always possible to abstract from certain subjective judgements. Thus, it has been argued that to a “considerable extent Keynes was proposing to roll back the Enlightenment.” 919 Later on, Keynes often attacked other economistic dogmas. In The End of Laissez-Faire (1926), he observed that: The world is not so governed from above that private and social interest always coincide. It is not so managed here below that in practice they coincide. It is not a correct deduction from the Principles of Economics that enlightened self-interest always operates in the public interest. Nor is it true that self-interest generally is enlightened; more often individuals acting separately to promote their own ends are too ignorant or too weak to attain even these. 920 By no means can he be considered an enemy of capitalism or liberalism. He thought that the economic regime in Soviet Russia was based on an “obsolete economic textbook” that is “scientifically 274 Economics and Its Discontents erroneous [and] without interest or application for the modern world” 921 and can be at best considered “a dusty survival of a plan to meet the problems of fifty years ago, based on a misunderstanding of what someone said a hundred years ago.” 922 At the 1920 Congress Of The Communist Internationale, Lenin found it necessary to single out Keynes as a “well-known bourgeois and implacable enemy of Bolshevism.” 923 And in fact, Keynes explicitly declared that “the Class war will find me on the side of the educated bourgeoisie.” 924 Keynes had a nuanced view on capitalism. He saw it as a morally ambiguous system that could be politically legitimized by the fact that it leads to a post-scarcity utopia (Chapter 29). But he never really criticized capitalism on the whole. His message was nothing else but the old revisionist “Capitalism: yes! Distortions: no!” His critique was both philosophical and political in character. As Fitzgibbons argues, on the one hand A new Liberalism that was informed by Keynes’s epistemology was meant to replace Socialism and laissez-faire. Keynes objected to these doctrines, which he traced back to Hume, because they were materialistic and excluded probability and intuition; they reached pseudoscientific conclusions about what should have been matters of moral and factual judgment. 925 But on the other hand, it can be said that in the face of the rise of socialism and fascism, he simply sought to save capitalism from itself. Politically, he could be perhaps lined up with Adam Smith and Thomas Piketty: liberals who believe that capitalism is generally the best possible system of production, who see that it has flaws but treat them as excesses that can be curtailed without a grand revolutionary change of political regime. Economics and Its Discontents 275 Keynes, who worked all his life in civil service and from 1941 sat in the House of Lords, had many occasions to personally influence the political processes. Most famously, he was the leader of the British delegation to the 1944 Bretton Woods conference, at which the foundations of the post-war economic international regime were laid. Although the outcome of the negotiations accorded mostly the American vision, Keynes’s ideas contributed to it as well, so today he is celebrated as the “intellectual founding father” of the International Monetary Fund and the World Bank 926 (perhaps another instance of a discoursive paternity fraud [Chapter 36]). Today, Keynes is either lauded or castigated, but few people doubt his influence on the economic discourse and practice of the twentieth century. After all, how could there be a “Keynesian Revolution” without Keynes? However, even a quick glimpse at the economic policies made during the 1930s in response to the Great Depression shows that discretionary fiscal policy (i.e., using budget deficits to battle the adverse effects of economic depression) were undertaken without any reference to Keynes. The General Theory was published in 1936, the New Deal in the US began in 1933. As Bateman shows, “in the United States, in inter-war Germany, in Japan, in France and in Sweden, governments undertook budget deficits for a variety of reasons, but not because of Keynes or his great work, The General Theory.” 927 In 1938, Lloyd George, himself an advocate of deficit spending and an author of the 1935 British New Deal proposal, commented on Keynes that he was a “much too impulsive counsellor for a great emergency” who wrote “bright but shallow dissertations on finance and political economy.” 928 Moreover, Keynes personally was no proselyte of “Keynesian” policies. In 1937, he warned against a simplified reading of the General Theory that would focus solely on the issue of government spending: 276 Economics and Its Discontents Public loan expenditure is not, of course, the only way, and not necessarily the best way, to increase employment. Nor is it always sufficiently effective to overcome other adverse influences. The state of confidence and of expectation about what will happen next, the conditions of credit, the rate of interest, the growth of population, the state of foreign trade, and the readiness of the public to spend are scarcely less important. 929 During the Second World War when he worked in the British treasury, he insisted that, setting aside military expenses, the “regular” budget should be always kept in balance. An exception could be made for long-term investments that would be eventually paid off from the projects themselves. 930 “The object of our analysis,” argued Keynes, “is not to provide a machine, or a method of blind manipulation, which will furnish an infallible answer, but to provide ourselves with an organised and orderly method of thinking out particular problems […] It is a great fault of symbolic pseudo-mathematical methods of formalising a system of economic analysis.” 931 mathematical methods” 932 He criticized using “high precise and in economic reasoning and warned that “in economics [contrarily to natural sciences] to concert a model into a quantity formula is to destroy its usefulness as an instrument of thought.” 933 Despite this, it seems that Keynesian economics gained its legitimacy only after Hicks turned it into a simple diagram, “a classroom gadget,” as later Hicks himself apologetically would call it, 934 that led to the emergence of a “bastard Keynesianism,” as critics dubbed it. 935 Just as with Adam Smith (Chapter 36), Keynes’s theory became a “Keynesian” practice only after it was reinterpreted and simplified. And in the process, Keynes himself was flattened into a one dimensional figure, representing not a set of ideas or a style of thinking, but merely a emblem of an approach to fiscal policy. Economics and Its Discontents 277 Keynes certainly was a brilliant polemicist who wrote with an elegant style and came up with more bons mots than many writers did. Even his critics were impressed by him. Hayek called him “the one really great man I ever knew,” 936 and Robbins said that “Keynes must be one of the most remarkable men that have ever lived.” 937 But he wasn’t as original an economist as it is commonly claimed today. The appreciation of the role of unstable expectations in economic cycles and relative sympathy for discretionary government spending can be found throughout the nineteenth century economic discourse. 938 It seems that the best thing Keynes did for the establishment of Keynesianism was die. When he died in 1946, he allowed for the immediate and safe canonization of him as the founding father of post-war “Keynesianism,” which points to the fact that from the standpoint of the dynamics of economic discourse, a good economist is a good economist, but the best economist is a dead economist. Chapter 46: In which it is explained why in the twentieth century the enthusiasm for central planning was shared on the both sides of the Iron Curtain. The tricks of growth are not that difficult. Walt Rostow The economic effects of the Great Depression of the 1930s were devastating in nature and world-wide in scope. Unemployment soared, incomes fell, world trade halved. The political consequences of the Great Depression are more nuanced, but it is hardly disputable that the economic turbulences at least contributed to the rise of Fascist and Nazi governments. The trauma of the Great Depression also had a deep impact on the economic discourse. The crisis was generally received as capitalism’s great defeat. In the 1930s and 40s for the whole mainstream political spectrum, from Left to Right, free market amounted to chaos, poverty, and inefficiency. 939 The experiences of the Second World War, on the one hand, suggested that the state can efficiently play a strong directive role in the economy, exerting influence over wages, prices, and investment. The Planning Committee in the United States controlled over two-thirds of the American Economy and in the years 1940-1943 built more factories than were built in the previous two decades. 940 The Germans already had positive experiences with statist control over economic production during the First World War. 941 In the years 1933-1939, after the nationalization of many industries by the Nazi government, unemployment fell twentyfold without adverse effects on wages, while industrial production exceeded pre-depression figures. Soviet economic planning, both in times of war and peace, seemed to be successful. Between 1928 and 1937, annual industrial production rose on average by 11 percent, whilst the rate 280 Economics and Its Discontents of investment went from 12 to 26 percent. 942 All in all, during the first two five-year plans, its GDP doubled. 943 In the 1950s, Soviet leaders had every reason to believe that if the rate of growth was maintained, the USSR was on its way to beat the capitalist United States, both in terms of production and consumption. 944 In fact, numerous liberal economists in the West shared that opinion (Chapter 47). In the three decades following the 1949 Chinese Communist Revolution, the Chinese GDP increased sevenfold, or per capita, fourfold. On both sides of the Iron Curtain the leading theories of economic growth were strikingly similar. The Harrod-Domar model, 945 as well as the so-called Feldman-Mahalanobis model, 946 posited that growth is a simple derivative of industrial investment, and that assets for this investment should be acquired by cutting down on consumption. The PRGHOVZHUHVLPSOLVWLFEXWDV/HV]F]\ĔVNLDUJXHVWKLVZDVWKHLUgreatest value: The political consequences of this simplicity can hardly be overestimated. Politicians – who often had little knowledge about economics – were presented with straightforward policy goals: the rate of investment had to be raised. Like the petit-bourgeois, who in order to invest every penny, save on food and heating costs, the Third World governments were to reduce consumption and invest. Money spent on living today was a lost opportunity for a better tomorrow. 947 Although the growth was legitimized both in the communist and capitalist camps as a way of ushering in emancipation of the poor masses, in practice it was precisely the poor masses who had to pay for it. Curtailing the luxury consumption of the elites was often too costly politically, so by and large the capital was raised by putting a strain on the consumption of the masses. “Everything according to the recipe: one has to tighten his belt today to be able to loosen it tomorrow.” 948 In the 1950s, the whole of mainstream development economics subscribed to these models and expressed strong support for pro-active Economics and Its Discontents 281 and decisive governmental involvement in the economy. As the members of the first World Bank “mission” reported: Only through a generalized attack throughout the whole economy on education, health, housing, food and productivity can the vicious circle of poverty, ignorance, ill health and low productivity be decisively broken. […] One cannot escape the conclusion that reliance on natural forces has not produced the most happy results. Equally inescapable is the conclusion that with knowledge of the underlying facts and economic processes, good planning in setting objectives and allocating resources, and determination in carrying out a program for improvement and reforms, a great deal can be done to improve the economic environment by shaping economic policies to meet scientifically ascertained social requirements. […] In making such an effort, Colombia would not only accomplish its own salvation but would at the same time furnish an inspiring example to all other underdeveloped areas of the world. 949 Escobar rightly points out “the colonial, Christian missionary overtones” of such World Bank “missions” that aim at bringing “salvation” to the “ignorant” of the world. 950 /HV]F]\ĔVNL QRWHV WKDW LW was somewhat paradoxical that development economists, often sworn democrats and leftists, prescribed economic policies that demanded authoritarian governance (although it can be argued that it was no paradox, but simply another example of economic despotism [Chapter 28]). Such large-scale social engineering based on burdening the masses was “simply unattainable in a democratic environment.” 951 As Apter showed in 1959, governments that “seek rapid industrialization” are likely to develop a system of “tight organisational control” 952: Where there is popular sovereignty, government actions tend necessarily to be defined within the institutional limits of social life. This must be so, or the government will lose its power. The pace of government can only be so fast as the electoral groups which provide the recurring majorities will permit. […] The big problem facing government, therefore, is how to remain accountable to the public without letting the public dictate the pace of change. […] The nation which can afford democracy while attempting to produce rapid economic change is rather rare. Most governments try to maintain their own powers and discipline the public in order to achieve more rapid development. 953 282 Economics and Its Discontents Economic development was seen as dependent on the technical knowledge of the political elites and their ability to break fractional interests and popular resistance to change. The change itself was seen as apolitical and based on scientific foundations. As one United Nations report from the early 1960s stated: “The ground has been cleared for a non-doctrinaire consideration of the real problems of development, namely saving, training and planning, and for action on them.” 954 The Friedmanite revolution in Chile and Mao’s in China differed little in terms of the faith vested in economic dogmas and disregard for democratic legitimization of economic policies. The social costs were regarded insofar as they were literally costs. The forty-five million victims of the Chinese Great Leap Forward were a sacrifice that had to be made at the altar of economic progress. The end justified the means, after all, in Mao’s words, it would take only “100 million tons [of steel] in ten years, and then we’ll be in heaven.” 955 Radical economic progress has always been achieved not by the invisible hand of market, but by the bloody hands of government officials, assisted in varying degrees by individual entrepreneurship. The death and suffering caused by this was either exported to the peripheries of the world market (Chapter 30) or, when the developing country was itself a peripheral one, it was burdened on the local poor. The economic theorems that legitimized these purges varied from the Victorian laissezfaire, through United Nations developmentalism, to the neo-marxist economics of Feldman and Preobrazhensky. What was constant was the certainty that the prescribed policies are scientifically accurate and politically neutral. Chapter 47: Which shows that economic game theory is a war game. Objective analysis. Effective solutions. RAND’s tagline In the previous chapters, the recurring connection between the military and the economic realms has already been pointed out. In the case of twentieth-century economics, this link is as clear is it can be. With only a bit of oversimplification, it can be said that the modern rational choice theory from its beginning was a military technology, developed by the United States army. Canonical theoretical works of rational choice theory and game theory, such as Social Choice and Individual Values, An Economic Theory of Democracy, The Calculus of Consent, or The Logic of Collective Action were developed by scholars employed by or associated with the RAND Corporation, 956 a think tank founded in 1948 by General Arnold, commander of the US Army Air Forces, to furnish better teamwork between military decision-makers and the academic community. 957 By the end of 1950s, economists outnumbered physicists and mathematicians, becoming the dominant professional group at RAND. 958 Kenneth Arrow, James Buchanan, Paul Samuelson, Robert Solow, Thomas Schelling, Howard Raiffa, Duncan Luce, William Niskanen, Henry Rowen, Alain Enthoven, Herbert Simon, Mancur Olson, in short, almost all theoreticians of the new paradigm of rationality, were associated with RAND and researched military applications of game theory. 959 Contrary to marginalist theories, the new rationality was not simply about maximizing utility for every dollar spent, but about strategically interacting with other actors in a way that secures the actor’s interests. Amadae shows that it was specifically the rationality of a 284 Economics and Its Discontents “nation-state locked in the icy and treacherous grip of the Cold War.” 960 Game theory was devised at the theoretical back room for Cold War wargames, in which the American policymakers wanted to procure a situation in which it would not be in the Soviet interest to launch a nuclear strike on the NATO camp. In general, this can hardly be considered a new approach to war. The classic example is Thucydides’ Melian dialogue, in which during the Peloponnesian War the Athenians threatened the neutral polis of Melos with annihilation if they don’t surrender and pay tribute. During the negotiations, the Athenians argued in a matter-of-fact fashion that putting aside all “specious pretences,” it was simply in the best interest of Athens to demand submission and in the best interest of the Melonians to submit: Since you know as well as we do that right, as the world goes, is only in question between equals in power, while the strong do what they can and the weak suffer what they must […] Of the gods we believe, and of men we know, that by a necessary law of their nature they rule wherever they can. […] all we do is to make use of it, knowing that you and everybody else, having the same power as we have, would do the same as we do. […] we make you join our Empire, is for your benefits, but also for our own benefits. We are trying to save you. 961 The novelty of RAND modelling was that it laid claims to universal validity. It could be used for devising tactics for nuclear war as well as welfare policies, all with mathematical precision and certainty. It truly theorized every social situation as the war of all against all, in which individual workers, consumers, employers, etc. acted as if they were the Cold War generals trying to outwit their enemies. In a moment we will come to the criticisms of this paradigm by politicians and academics, but interestingly enough, it met with strong opposition of the military elites. The modelling was criticized for methodological issues, such as the guesswork required in quantification of non-quantitative data or “the criteria problem,” that is, that the Economics and Its Discontents 285 outcome of analysis is determined by the criteria used to study the problem and the relative value of various factors depends on arbitrary decisions of analysts. For example, the Air Force command insisted that solutions should be ranked by considering the predicted military personnel loss, whereas the RAND “rationalists” preferred ranking them by “the ratio of system cost to damage inflicted.” 962 The army command objected to the allegedly objective analysis and repeatedly emphasized the importance of military experience and unquantifiable knowledge in the decision-making process. However, McNamara, the Secretary of Defense under Kennedy and Johnson, managed to break their resistance. A team of eighteen analysts was charged with: The task of rethinking all of the Army's standard operating procedures, even down to the level of two-man well-digging detachments. Just as workers, foremen and engineers had been shut out of decisionmaking at the Ford Motor Company, [of which McNamara was the president before working for the DOD] so frontline military personnel lost autonomy over local decisions in accord with the rationale that analysts with equations could make large- and small-scale decisions better than men in the field. 963 Another argument against the system analysis was that it put the defense planning into the hands of civilians tied more closely to the interests of the military industry than to actual military imperatives. 964 This view was most famously expressed in the farewell address of Eisenhower in 1961, in which he warned about “the danger that public policy could itself become the captive of a scientific-technological elite” and stressed that “we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.” 965 Amadae points to the fact that civilian oversight of the military might not necessarily mean greater democratic control over it: Whereas it is easy as to be distracted with the appearance that McNamara and the defense rationalists were proponents of civilian control over the U.S. armed forces, it is necessary to recall that arguments for such authority are based on the premise that legitimate military authority be 286 Economics and Its Discontents granted to serve the ends of representative government and to uphold the Constitution. The new policy elite were altering the rules such that authority over military procurement, strategy, and operations would be in the hands of “objective” policy analysts, removed from democratic politics. 966 Objection to system analysis was also raised in the Senate and voiced in academia. The usefulness of such abstract methods was doubted, they were dubbed “a technocratic utopia,” 967 and concerns were raised about the “ignoring of, or less generously, contempt for, democratic values and processes” by the technocrats, who regarded “the President and Congress as enemies of rationality” and sought to “eliminate politics from decisionmaking.” 968 When the new “rational policy tools” were presented in U.S. Senate hearings, the RAND specialists admitted that they didn’t know whether they were actually more efficient or produced better results. 969 No one had ever checked, because – the scientists testified – such evaluation would be too costly and the evaluating staff could not be trusted to attain the necessary objectivity. 970 Thus, no appeals to empirical reality were made in the quest for achieving legitimacy for system analysis. It was simply described as “quantitative common sense” 971 and achieved its legitimacy “insofar as [it] claimed to be based on scientific analysis.” 972 To once again quote Amadae: The new methods gained a de facto legitimacy before they had been tried and debated in any public forum. The decision technologies did not filter into mainstream practice from the world of academia, but were designed in a hands-on manner to revolutionize national security decisionmaking and to integrate budgeting with strategic planning in order to centralize control. 973 Despite all this opposition, the new paradigm not only took a strong hold in the military, but proliferated throughout policymaking. President Johnson’s War on Poverty policies were military not only by name, but Economics and Its Discontents 287 were also designed in accordance with RAND-based system analysis. Policy analysis became an indispensible part of the academic curriculum of American government officials as “public administration” courses were replaced with “public policy” programs. 974 McNamara, three months after ending his seven-year service (to date, the longest in American history) as Secretary of Defense, became the head of the World Bank and started introducing system analysis on a global scale. In the following decades, the rational choice model, however abstract, managed to spread around the world and even started to influence other areas of knowledge, such as psychology, sociology, or biology. 975 To conclude this with a criminally linear and simplified account, this is the story of how the liberals have done away with the fear of collectivist encroachment on individual freedom. Politics as a sphere of a singular tension between an alterable general will and individual freedom was replaced by an apolitical sphere in which multiple tensions between individuals take place. In a way, it can be said that liberal theory has come full circle and came to take Hobbes aback by positing that society is yet another facet of the anarchic state of nature, in which individuals compete with each other as if they were military superpowers on the verge of nuclear annihilation. Economic progress is no longer a force that civilizes individuals (remember the old Doux-Commerce thesis [Chapter 24]), but on the contrary, it is merely a by-product of ruthless competition between “jealous” (Chapter 24) individuals. And, obviously, an important aspect of the state of nature is that it is natural. One can only adapt to it, but one can never change it. Like the Melonians submitting to the laws “of the gods we believe,” the job of “policymakers” (as they are no longer “politicians”) is to study the oracular mathematical simulations and finetune the surrounding reality accordingly. 288 Economics and Its Discontents The political turbulences of the first decades of the twentieth century led a group of liberal (or perhaps, already neo-liberal) thinkers to look for a new conceptualization of politics. Faced with the fascist and communist danger of collectivism, unsure whether capitalism is economically more efficient than central planning and convinced that the “third way” taken by the likes of Keynes is already on a slippery slope that leads to totalitarianism, they embarked on the mission to save western (i.e., individualistic, scientific, capitalist) civilization from all its barbaric enemies. Condensed to one paragraph, this is the basic premise of Schumpeter’s Capitalism, Socialism and Democracy (1943), Hayek’s The Road to Serfdom (1944), and Popper’s The Open Society and Its Enemies (1945), and the axiom from which Arrow, Downs, and Buchanan later operated. The focal point for the classical nineteenth century liberals such as Mill or Tocqueville has always been the tension between the individual and the community. The individual had to be protected from the despotic inclinations of the society, yet he could never be completely detached from it. The surest way to rescue “the basic ideas on which European civilisation has been built” 976 was to reinvent one of these ideas. Specifically, the tension between the individual and society had to be erased, which was achieved by defining the latter out of existence. 977 [Arrow] ruled out any means of assaying individual preferences into a legitimately representative social outcome. […] He generalized the definition of “rational action,” distancing himself from the marginalist economists' fixation with “maximization of utility under a budget constraint,” and introducing the more general concept of a well-ordered set of transitive preferences. Arrow's “impossibility theorem,” […] defined the underlying tenets for “capitalist democracy” while simultaneously excluding any philosophical principles derived from Marxism. 978 Economics and Its Discontents 289 The notion of popular sovereignty was perceived as a dangerous myth of religious provenance, 979 and legitimization of the capitalist democracy started to be built by means of “system analysis.” It’s been argued that this can be seen as yet another instance in the history of the “the tension between the ideal of liberal democracy and the tendency of elites to develop means to control societal decisionmaking processes,” as since its inception, “the drama of democratization has in part been about conveying the appearance of inclusion while designing means to retain actual control over decisionmaking in the hands of a social elite.” 980 Mathematical models produced allegedly “objective” and “impartial” knowledge on which policymakers could rely without worrying about the “general will.” Chapter 48: In which modern consumption is studied as a field of power and domination. The production of consumption becomes more important than the consumption of production. György Lukács It is already a cliché to argue that modern capitalism is based on a contradiction between the “producer” values such as hard work, discipline, and readiness to postpone gratification and the opposing “consumer” ethic of “commanded enjoyment,” in which not to have fun is an unforgivable sin. 981 But it is not enough to notice the modern demand that “people be hard workers by day and hedonists by night.” 982 Thus, one of the standard topics of contemporary sociology is the coupling of identity with consumption. However different are the theories developed by Bauman, Baudrillard, Butler, Illouiz, Giddens, or Lasch, they all point out that individual identities in the postmodern age are essentially liquid, dynamic, and fragmentary. Theoreticians most often disagree over the issue of the autonomy of the consumer. Some present the postmodern era as an age of endless possibilities for individuals who, freed from the opression of traditional mass identities of nationality, class, or gender, can finally express their inner individualities through a playful engagement in the spectacle of consumption. Others are less optimistic, and present it as an age of constant manipulation of individuals by the fashion, advertising, and mass media industries, which is producing new hierarchies of power that are not necessarily less oppressive than the traditional ones. But both sides generally agree that consumption is now at the core of contemporary identity and thus, of contemporary politics: “the ‘new you’ is shaped not by work roles but, for those with money to spend, by patterns of consumption,” 983 while “the 292 Economics and Its Discontents politics of class, based on production, everywhere gives way to the politics of cultural identity, built around consumption.” 984 The issue of consumption certainly deserves the attention it gets, and a lot of valuable research has been done in recent decades on this topic. However, the main optics through which consumption seems to be analyzed is the optics of the individual consumer. Hence, the topic of identity. What is less studied is consumption as a societal structure, consumption as a field of power, and consumption as a field of domination. Let us make a few remarks on these issues in this chapter. It is certainly an exaggeration to claim that the role consumption plays in the constitution of identity is a novelty of the post-modernity. On the one hand, as we have already noted (Chapters 7, 18, 27), this was acknowledged long ago. On the other, it is doubtful whether such liquid identity can really be treated as paradigmatic. As for instance Wojciechowski argues, the ability to playfully engage in the spectacle of consumption relies on an individual’s economic standing, and even in the privileged countries in the modern world-economy, many people are barred from it and form their identities through other means than consumption. 985 And in the peripheral countries, the identity matrix of liquid consumption is available to a very narrow elite. As the world economy is integrated, and core countries cannot be analyzed without regard for the peripheral ones, one can hardly not ask whether the affluent culture of conspicuous consumption isn’t sustained by the sweatshops and forced-labor of the subservient economies. (One might have noticed that throughout this work I refrained from using the politically correct categories of the “developed” and “developing” countries. This is precisely because they should not be analyzed independently of each other, but as two products of one process of international struggle for Economics and Its Discontents 293 domination. Today some countries are not “underdeveloped” but subservient, or in other words, they are underdeveloped, because they are subservient.) That being said, even if it is not the only or the most important facet of contemporary power struggles, the regime of consumption is still one of the primary spheres in which social hierarchies are produced, and thus needs to be studied. However, arguably, what is much needed today is not another study that takes the vantage point of the individual vis-à-vis the world of consumption but rather studies of the regime of consumption on its own, its spaces, its dynamics, its permutations. For the celebratory and gloomy accounts of modern consumerism seem to simply describe two sides of the same story. The pleasures of shopping can be disregarded as shallow, blind, or narcissistic, but perhaps it is better to leave this approach where it belongs, that is, on the psychiatrist’s couch, and accept them as the very real pleasures derived from claiming power through successful performance in the regime of consumption. The Lacanian analysis that sees this in terms of the continual search for the unattainable objet petit a that would finally fill the void in the subject 986 is very clever, but useless when we want to analyze these issues in their systemic context. Going back to the beginning of this book, we may once again have a peak into Xenophon’s economic treaty: I teach to those I want to appoint as stewards, and I second them also in the following ways: I make sure that the clothing and the shoes I must supply to the workers are not all alike, but rather some are worse and some better, so that I may be able to honor the stronger one with the better things and give the worse things to the worse. 987 Of course today the function consumption performs in the dynamics of social stratification is no longer a consciously developed technique for 294 Economics and Its Discontents disciplining workers. Nevertheless, it does serve the same purposes as it did in Xenophon’s Greece. Thus, arguably, we need more studies that would focus on the infrastructures of consumption and the ways in which they affect constellations of social and economic power, rather than more studies on the subjective feelings and identities of individual consumers. One example of the change in the infrastructure of consumption is the shift in the regime of debt linked with the emergence of the contemporary consumer culture. As we have seen, qualitatively new social devices are historically very rare. The idea that debts can be paid off with partial payments spread over time is likewise not new at all, but it has acquired its current form only at the end of the nineteenth century and in the first half of the twentieth century, 988 when the practice of buying goods on instalment credit proliferated throughout society. In the United States, during the mid 1920s, after decades of an ineffective legal punitive campaign against the usurious loans, a group of government officials and philanthropists sought to put an end to the loan shark business by setting up an alternative in its place: a licensed smallloan industry that would at once provide workers with loans at reasonable rates and educate them about Victorian values of thrift and saving. 989 “Our immediate task, is not so much the lending of money as the improvement of the financial management of families. […] I think I can confidently predict that within a very brief period of time we will no longer be thought of as ‘moneylenders’ but as financial physicians to the American family,” 990 urged one of the reformers in 1935. As Calder notes, although the founders of the personal finance industry were explicitly against consumption loans (which they still described as “consumptive” [Chapter 21]) and opposed consumerism when they saw it, they in fact provided the important infrastructure of the modern debt- Economics and Its Discontents 295 driven consumer culture. 991 It can be also argued that they helped to legitimize it by bringing in a new category of reasonable and acceptable individual credit in contrast to the excessive, consumptive one. Shortly afterwards, “once despised as a plebeian form of credit, instalment credit ‘trickled up’ the social ladder to become part of the middle-class way of life,” 992 and the discovery of “debt as a mode of life” was often equalled with the discovery of industrial modes of production. 993 “By 1930, installment credit financed the sales of 60-75 percent of automobiles, 8090 percent of furniture, 75 percent of washing machines, 65 percent of vacuum cleaners, 18-25 percent of jewelry, 75 percent of radio sets, and 80 percent of phonographs,” 994 becoming the foundation of economic welfare: By augmenting consumer buying power, installment credit tremendously expanded the manufacturing and retail base of the national economy, to the point that today the sudden removal of credit buying from the economy would cause immediate economic collapse. Such a scenario is hard to imagine, and to keep it from happening the Federal Reserve, through its manipulation of interest rates, uses consumer installment credit as a valve to regulate stable economic growth. 995 Of course, the aforementioned claim that it was only in the twentieth century that “the people have discovered debt as mode of life” is a gross exaggeration. As we have seen (Chapters 3, 4, 5), “debt as a mode of life” was discovered long before cash was. Therefore, the infrastructure of modern consumer credit should be rather seen as yet another shift in the debt regime, one that was more in accordance with the impersonal economic exchanges mediated through bank money (Chapter 33). The advertising industry is the customary whipping boy for anticonsumerist writers. 996 It is claimed that marketing creates modes of consumption that exploit consumers by forcing them to “buy more than 296 Economics and Its Discontents they need, pay more than they have to, and spend more than they should.” 997 Marketing aimed at children is especially despised, as even hardline liberals have a hard time arguing that kids are homines oeconomici, who treat advertisements as sources of neutral, merit-related, information. The educational role of marketing to children is rightly held up under scrutiny, although the moral outrage aimed at the companies targeting kids with their advertizements seems a bit naïve. First, one could say that the parents are annoyed only because the consumer needs of their children have to be paid for from their pockets. If an adult feels a need for a new watch or a new cologne, it is not because he or she was manipulated by an ad they saw, but because they really need it. If their kid needs a lollipop or a doll, it suddenly becomes marketing abuse of children. However, on a more serious note, one can simply say that it has always been indispensible for all modern political systems to pay utmost attention to educating children, whether by means of Lenin’s Pioneers, Hitler Jugend, or Happy Meals. The advertising industry is an easy target, but arguably it can only work so well insofar as it feeds on the mechanisms of social stratification through consumption. This is why the company that sells shiny electronic toys can today be the highest valued company in the world: 998 the pleasure of purchasing an iPhone is the pleasure of being able to pay one’s way into the elite. Moreover, every such purchase and then every public display of the purchased item, reaffirms its status as a socially desirable emblem of high status. The dynamics of this game – fashion – is as complex as they come, but a few general tendencies have already been outlined (Chapter 18). In any case, when it comes to the regime of consumption, we must remember that for all its excitement and pleasure, it produces at least as much humiliation and shame. As long as consumption is a vehicle Economics and Its Discontents 297 through which social standing is acquired, it will be so. And in this matter, the delinquent wearing counterfeited pirate labels of expensive brands is far more subversive than the so-called “conscious consumer” browsing for the most eco-friendly deal on fair-trade soy milk on their iPads. This context of the infrastructure of consumption could slso suit discussions on “internet surveillance.” and more generally, on systems of the collecting, manipulation, and distribution of information. The present discourse that warns about corporate encroachment on individual privacy misses the point. First, no one cares. It seems that the idea of being watched and followed appears more attractive than scary. Arguably, it is the opposite danger of being overlooked and unnoticed that terrifies people. Moreover, the idea of some abstract being (admittedly more divine than algorithmic) who watches over all our doings is hardly new in most cultures. Secondly, and more importantly, the significance of the technologies of surveillance lies primarily not in their proliferation as such, but precisely in their unprecedented capacity to surround each and every person with a personalized set of adverts in a direct and instantaneous manner. Modern surveillance started in the realm of production, as the Panopticon was originally devised not by Jeremy Bentham, the philosopher, but by his brother Samuel, the engineer in charge of the London dockyards. 999 In the following centuries, it has revolutionized the ways people work and the ways they are made to work. Now it encroaches on the field of consumption, and the effects of this encroachment must be closely studied. Chapter 49: In which the sad frutilessness of the postmodern left is discussed. Postmodernism is a sick joke. Terry Eagleton In recent years, for a large portion of the academic Left and in the popular discourse, the term “neoliberalism” has become the moniker for everything that is wrong in the world. “Neoliberal” ideology, the “neoliberal” way of thinking, the “neoliberal” world order in general are all to blame for everything from dissolution of the welfare state to climate change. Of course, that is not without a reason. But if the term is to retain its analytical value, instead of becoming just another dirty word, we should certainly contextualize it. Thus, in this chapter a series of the neoliberal discourse, rival leftist discourses, and late capitalist economic regime will be sketched to see how they complement each other. The claim that the postmodern left is merely “a cultural vector of late capitalism” 1000 is a known argument voiced by Marxists such as Eagleton, Jameson, or Harvey. However, it will be argued that the Marxism itself is, on a deeper level, part of the same equation. But first, let us stay for a moment on neoliberalism as such. Developed in the 1940s and 50s in libertarian, business-financed, thinktanks 1001 in the aftermath of the 1970s oil shock and energy crisis, it took hold and replaced bastard Keynesianism as the new mainstream doctrine. Neoliberalism is an amalgam of very old ideas, themes, and tactics. It brings together presumptions about the naturalness and the neutrality of money (Chapters 5, 13, 34), market exchange as a universal, selfregulating, somewhat providential mechanism of geometrical equalization (Chapters 15, 23), an anthropology of homo economicus and an extremely 300 Economics and Its Discontents individualist outlook on society (Chapter 42), the old liberal, colonialist belief in the civilizing effects of commerce (Chapter 24) mixed with the discourse of pragmatic realpolitik (Chapter 25), the Enlightenment readiness to enforce freedom (Chapters 28, 31), a belief that scarcity is a general human condition (Chapter 29), a distrust of the state (Chapter 32) mixed with the hope that it will be strong enough to break all resistance to liberal regimes of debt and property (Chapters 33, 35), and the the abstract, mathematical, methodology and atomistic, physicalist imaginary (Chapters 44, 47). This in no way means that neoliberalism can be treated as the final step in the linear evolution of economic knowledge, one in which all previous developments would be accumulated. It is only for the matter of composition that the themes of economic discourse were presented in a chronological fashion. Thus, the same categories, albeit in different constellations, could be used to analyze the fourteenth-century discourse of Ibn Khalun (Chapter 12) or the eighteenth-century discourse of Quesnay (Chapter 28). The fact that neoliberal doctrine is built around age-old themes doesn’t mean that it doesn’t arrange them in novel ways, sometimes producing qualitatively new effects. It seems that one such effect is the change in the relationship between the society and the market mechanism. It is Foucault’s argument, that that the neoliberal governance is focused not on the commodification of society, but subsuming it under the logic of competition altogether: “Not a supermarket society, but an enterprise society. The homo economicus sought after is not the man of exchange or man the consumer; he is the man of enterprise and production.” 1002 The market mechanism thus becomes the desired paradigm not only for economic but for social organization as well. Economic analysis extends itself to fields previously structured by other discourses, such as the self or personal relationships. In Chapter 42 301 Economics and Its Discontents we have already seen Becker’s take on that, someone else worth quoting in this regard is the economist Migue: One of the great recent contributions of economic analysis has been to apply fully to the domestic sector the analytical framework traditionally reserved for the firm and the consumer [...]. This involves making the household a unit of-production in the same way as the classical firm. [...] What in actual fact is the household if not the contractual commitment of two parties to supply specific inputs and to share in given proportions, the benefits of the households' output? 1003 As Illouiz shows, the prevalent theme of popular self-help books and, in general, the discourse of the self is the metaphor of business and entrepreneurship. 1004 People are encouraged to invest in their development, periodically evaluate their performance, and look into behavioral techniques to better micro-manage their affective life. In romantic relationships, individuals are said to first freely chose from the pool of possible partners and then negotiate the best possible deal that will bring both parties the maximum amount of satisfaction. 1005 Relationships can be quantitatively evaluated, and if such balance-sheet shows negative outcomes, their terms should be renegotiated. 1006 If that is not possible, a search for a more fruitful relationship should ensue. Such search won’t take long, as one can always rely on internet dating services, which quantify one’s personal tastes, qualities, and characteristics, and for a small charge instantly present a list of algorithmic “best matches.” Another social sphere that has been colonized by geometrical logic and economic reasoning is the law. The classical liberal principle of the presumption of innocence gives ground to the principle of suspicion. The difference between innocence and guilt rubs away, as they become not two separate statuses, but rather the opposite poles of one spectrum. As Edward Snowden has revealed, as data on each and everyone is collected on a daily basis, and everyone is to some extent suspected, everyone is 302 Economics and Its Discontents potentially dangerous, the differences become quantitative and not qualitative, and they are proclaimed by risk managing algorithms and not the democratic justice system. Algorithmically constructed “no fly lists,” the software analyzing real-time CCTV footage in the search for suspicious behaviors, or the “neither guilty nor innocent” “detainees” at the Guantanamo Bay Camp are different facets of this phenomenon. Recalling Foucault’s studies on apparatuses of discipline, one can see how in a way this marks a return of the pre-modern paradigm of universal guilt. 1007 Probably the loudest opposition to the neoliberal paradigm is voiced today by the various groups of the so-called New Left or the poststructuralist left. They celebrate motifs of deconstruction, difference, and diversity, praise themes of instability, flux, and free flow, and find resistance to power in anarchic, nomadic, and heterogeneous localized struggles. The primary structure of oppression for them is discourse, which individualizes bodies in hierarchical ways and which bars them from experiencing innocent pleasures. In their Marcusian and Foucauldian versions, they stress the political capacities of libido and sexuality, with body portrayed as a site of potential emancipation. It is interesting how discourses that allegedly rely on strictly materialist methodology that focuses on studies of socially constructed structures of oppression easily end up promoting apolitical, individualist, and essentially idealist scenarios of emancipation. Foucault’s discourse that speaks in the name of the body, begs to question – “whose body?” That of the privileged intellectuals and upper-class members of the core countries who can free themselves to enjoy the pleasures of BDSM or the sweatshop slaves who spend their days manufacturing the sex toys used by the former? Economics and Its Discontents 303 Many argue that although the students in 1968 marched under Marxist banners, their revolt can hardly be considered anti-capitalist. If anything, it was anti-fordist. Neo-Marxists argue that it was little more than a petit-bourgeois revolt, necessitated by the crisis of overaccumulation and the need to expand capitalism past the limits of the rigid and conservative mass society. (One may say that this is an unfair assessment that belittles the more ambitious projects of the late 1960s and early 1970s. Maybe to some extent it is unfair. However, at any point in history many heterodox political and economic projects were devised and tried out, but only a fraction of them succeeded [Chapter 43]. And in this book we are not concerned with the martyrological history of lost causes. Notwithstanding the need for remembering the lost battles, the objective of this particular study lies not in cultivating memories of the past defeats, but in understanding how the winners have won.) Here is an exemplary account of 1968’s epilogue, as proposed by Harvey: To resolve the crisis of over-accumulation during the 1970s, manifest in stagflation […] the turnover of capital within markets (circulation) accelerated. Mass markets broke into niches and became more competitive. Public goods commodified and went to market. The shelf-life of commodities reduced through product innovation, brand proliferation and “accelerated decrepitude.” An aesthetic of the instantaneous, the disposable and the temporary developed, by which taste could be manipulated. Flexible consumption necessitated flexible production. A reduction in capital’s turnover time in circulation necessitated a reduction in its turnover time in production. This was achieved by making labour processes and labour markets more flexible. The ultimate in flexibility is the virtual organization, with short shelf-times, perfectly responsive to the changing needs of the market. The result was the break-up of the FordistKeynesian regime of accumulation, centred around the interests of industrial capital, and its replacement by a regime of flexible accumulation, centred around the interests of finance capital. 1008 Inspected with this lens, the postmodern left appears as “a kind of theoretical hangover from the failed uprising of ‘68, a way of keeping the revolution warm at the level of language, blending the euphoric 304 Economics and Its Discontents libertarianism of that moment with the stoical melancholia of its aftermath.” 1009 By means of the classical structure/superstructure argument, postmodernism thus is presented as the most recent superstructure of late capitalism, as its “cultural logic”: 1010 Both postmodernism and capitalism share a contempt for stable identities, unity and permanent ground; both valorise difference, flux and heterogeneity. Indeed, the folly of postmodern cultural theory, according to Eagleton, lies in its claims to be radical by transgressing fixed boundaries of and limits – whereas this transgression is exactly what capitalism itself, in its endless pursuit of profit, thrives on. 1011 On the one hand, such Marxist critiques seem to correctly identify important shortfalls of postmodern radicalism and convincingly cast doubts on its emancipatory potential. On the other hand, the valid intuitions about the postmodern condition don’t save Marxist narratives from being, well, Marxist narratives. As was pointed out before, Marxist analysis is inherently flawed and cannot be treated as a serious solution to contemporary problems (Chapters 37, 39). For what is the currently most popular Marxist analysis of power struggles worth? The theorem developed by Hardt and Negri is an impressively erudite but sadly impotent vision of a coming global revolution in which the nebulous “multitude” 1012 will overthrow the Imperial “network of powers and counterpowers” 1013 and usher in global Communism, which, by the way, looks suspiciously similar to a liberal utopia of universal human rights. 1014 Their self-proclaimed anti-elitism and affinity for “the people” would be perhaps one valuable feature of their analyses. But their confident repetition of the old Second International formula that “capitalism digs its own grave” 1015 brings in an apolitical, teleological, perspective, 1016 and arguably ends up as yet another apology for modern global capitalism. And their methodological reliance on theoretical and philosophical sources (as opposed to a materialist study of economic Economics and Its Discontents 305 power structures), as well as their insistence on the importance of “immaterial value,” 1017 and portraying the creative classes as the avantgarde of economic progress instead of an epiphenomenon of a global distribution of labor is so characteristic of the caviar left that it is hard not to concur with Žižek’s acerbic remarks that Hard and Negri are some of those “unfortunate intellectuals” who construct radical theorems simply because they “cannot bear the fact that they lead a life which is basically happy, safe, and comfortable.” 1018 Chapter 50: The moment comes, when a reconceptualization of power struggles becomes a matter of life and death. Global warming is only one, albeit spectacular, facet of the problem. Speculating about the future is the easiest way to make a fool of oneself. But to refuse to do so is to be an idiot in the literal, Greek, sense of the word. The following issues are already affecting the global ecosystem and livelihoods of millions of people and there is every reason to believe that in the coming decades, they will only gain in gravity. Shrinking water supplies, desertification of vast areas caused by overharvesting and deforestation, deforestation as such, destruction of the marine ecosystem through industrial overfishing and ocean acidification, and decreasing biodiversity in other ecosystems are but a handful of examples of the challenges that will have to be faced, let us not forget, in a context of depleting natural resources. 1019 Global biodiversity is falling at a pace (numerous studies show that the planet has lost around half of its species since the 1970s 1020) precedented only by the “Big Five” mass extinctions that marked the ends of geological periods. Meanwhile, the remaining biodiversity is defended only insofar as it can be turned into an economic resource, which is done by privatizing it by means of bioprospecting and gene piracy, that is, a practice of patenting particular genes and whole genotypes of living organisms, explicitly legitimized in 1980 by the U.S. Supreme Court. 1021 It has been argued that the most important discovery of Marx is that freedom has material preconditions; that “we must survive in order to live.” 1022 Today, when the interests of the few, legitimized by modern economics, this “dominant science, and the science of domination,” 1023 drive us towards global ecological catastrophe, it may be necessary to reverse that message: in order to survive, we must devise new ways to live. 308 Economics and Its Discontents It has been rightly pointed out that a sense of crisis has always been part of modern culture. 1024 A conservative take on this phenomenon is that in each generation, there are people who cry wolf, but the wolf never comes, so we don’t have to worry. I would argue that on the contrary, the sense of crisis is so well-grounded in modern reality because flux and change, ephemerality, and fragmentation have always formed its basis. 1025 One has simply to understand that the crisis differs from the apocalypse in that it does not mark the end of modern temporality, but is its constant condition. It is a manifestation of the continuous process of revolutions, transformations, and ruptures in everyday practices that reshape social structures. For the true moral of Aesop’s fable is that eventually the wolf always comes. I have no doubt that reasonable economic discourses can be constructed, discourses that would take into account power struggles that are simultaneously taking place on the level of the world market and international distribution of labor, on the level of debt regimes, on the level of production, and on the level of consumption. Discourses that would acknowledge the specificities of local economies without losing sight of the global and international economic processes. Economics that would draw insights from other sciences, with the aim of enriching its own understanding of the world, and not just to devour them in the process of establishing legitimacy for itself. Insitutionalist discourses that would reject synthesizing, totalizing and universalizing ambitions and which would cultivate awareness of their own theoretical underpinnings and political biases. At the same time, one should always remember that however humble and reasonable a particular economic discourse is, it can never be treated as a final answer to the questions of political economy. The ultimate task of critical economic thinking does not end with devising a more adequate understading of economy and fighting for a universal recognition of this or that theory. Whenever such a fight is even partially won, the dynamics of Economics and Its Discontents 309 political economic processes are such that they hijack even the most revolutionary ideas and use them to reinforce structures of privilege and domination. Hence, the task of critical political economy lies not in replacing the “corrupted mainstream economics” with “new and innocent political economy” (we have had already too many such “revolutions”), but in engaging in a never-ending movement in the search of better ways to conceptualise economic/social processes, without ever becoming too attached to any one such way, figure, or theory. As was made clear before, this book had no intention of providing a definite framework for analyzing economic power struggles. It has merely tried to do the work of the arier-guard, rethinking the dynamics of economic discourse to date in a way that hopefully allows us to broaden the spaces for discussion. Although in the process of this inquiry it was necessary to generalize and theorize historical developments, all analytical categories should be treated as purely provisional and disposable tools. In any case, what is proposed here, is not a discovery of historical logic, but merely a certain logic of historical discovery. What is proposed here is a critique of economism, but not a doctrine of post-economism, neo-economism or any other fancy -ism. We really don’t need another doctrine, already too many spectres have haunted the people… (Chapter 1) Economics and Its Discontents 311 NOTES: 1 Klamer, A. (1990) Towards thenative's point of view, in: ed. Lavoie, D. Economics and Hermeneutics, London: Routledge, p. 22. 2 Foucault, M. (2006) Słowa i rzeczy, *GDĔVNVáRZRREUD]WHU\WRULDS Newman, S. (2007) Unstable Universalities, Manchester: Manchester University Press, p. 2; Nelson, R. 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(2001) “From Unity to Dispersion: The body in modern economic discourse” in: Postmodernism, Economics and Knowledge. London: Routledge, p. 167. 27 Wood, D. (2004) Medieval Economic Thought, Cambridge: Routledge, p. 77. 28 Baeck, L. (1994) The Mediterrean Tradition in Economic Thought, London: Routledge, p. 31. 29 Graeber, D., Op. cit., p. 59. 30 Davies, G., Op. cit., p. 42. 31 Ibid., p. 44. 32 Wood, D., Op. cit., p. 77-78. 33 Schefold, B. (1997) Reflections Of Ancient Economic Thought In Greek Poetry, in: (ed.) Price, B. Ancient Economic Thought, London: Routledge, p. 117. 34 Davies, G., Op. cit., p. 13. 35 Ibid., p. 11. 36 Mirowski, P. (2001) “Refusing the Gift” in: Postmodernism, Economics and Knowledge. London: Routledge, p.432. 37 Baeck, L. (1994) The Mediterrean Tradition in Economic Thought, London: Routledge, p. 25, 30. 38 Graeber, D., Op. cit., p. 283. 39 Davies, G., Op. cit., p. 175. 40 Wennerlind, C. 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(2004) Consumption as an Investment: I, London: Routledge, p. 19. 82 Ibid., p. 50. 83 Ibid., p. 20. 84 Schefold, B. , Op. cit., p. 128. 85 Baeck, L. (1994), Op. cit., p. 68. 86 Schefold, B., Op. cit., p. 99. 87 Baeck, L. (1994), Op. cit., p. 70. 88 Baeck, L. “The Mediterranean trajectory of Aristotle's economic canon” in: Psalidopoulos, M. (ed) The Canon in the History of Economics, London: Routledge, p.2. 89 Davies, G., Op. cit., p. 69. 90 Perrotta, C., Op. cit., pp. 21, 22. 91 Ibid., p. 17. 92 Ibid., p. 40. 93 Baeck, L. (1994), Op. cit., p. 20. 94 Strauss, L. (1998) Xeonophon's Socratic Discourse, South Bend, Indiana: St. Augustine Press, p. 201. 95 Sahlins, M. (1972) The Original Affluent Society, accessed online at: http://www.utopie.it/documenti/documenti_esd/Sahlins.pdf, date of access: 29/10/2014 Clark, G. 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(1996) 'From Political Economy to Consumption' London: Routledge, p. 138. 110 Clark, G., Op. cit., pp. 1-2. 111 Ibid., p. 3, 5. 112 Malthus, T. (1798) An Essay on the Principle of Population, accessed at: https://www.marxists.org/reference/subject/economics/malthus/, date of access: 29/10/2014. 113 Xenophon., Op. cit., p. 73. 114 Rosicka, J. (1991) O wyobraźni ekonomicznej Polaków, Kraków: Universitas, p. 18. 115 Ibid., p. 10-11. 116 Piketty, T. (2014) Capital in the Twenty-First Century, Cambridge, Massachusets: The Belknap Press of Harvard University Press. 117 Aristotle, Politics, 1258a-b, accessed at: http://www.perseus.tufts.edu/hopper/text?doc=Perseus%3Atext%3A1999.01.0058%3Abook %3D1%3Asection%3D1258b, date of access: 29/10/2014. 118 Perrotta, C., Op. cit., p. 55. 119 Schefold, B., Op. cit., p. 133. 120 Quoted In: Perrotta, C., Op. cit., p. 38. 121 Clark, G., Op. cit., p. 66-67. 316 Economics and Its Discontents 122 Stiglitz, J. (2009) GDP Fetishism, The Project Sindicate, http://www.projectsyndicate.org/, Date of Access: 23/10/2009. 123 Stiglitz, J. (2009) Progress, what progress?, accessed at: http://www.oecdobserver.org/news/archivestory.php/aid/2793/Progress,_what_progress_.ht ml, Date of Access: 16/4/2015. 124 Coyle, D. (2014) GDP: A Brief but Affectionate History, Princeton: Princeton University Press, p. 16. 125 Ibid., p. 23. 126 Quoted in: Ibid., p. 21. 127 Foucault, M. (2008) The Birth of Biopolitics: Lectures at the Collège de France,1978– 1979, edited by Sellenart, M. Davidson, A. Fontanaand, A. Ewald, F. Basingstoke: Palgrave Macmillan p. 282. 128 Nelson, R. (2001) Economics as Religion, University Park, Pennsylvania: The Pennsylvania State University Press Benjamin, W. (1921) Capitalism as Religion, accessed at: http://www.rae.com.pt/Caderno_wb_2010/Benjamin%20Capitalism-as-Religion.pdf, date of access: 30/10/2014. 129 Nelson, R., Op. cit., p. 24. 130 Baeck, L. (1994), Op. cit., pp. 35-36, 40. 131 All quotes from the Bible come from the New King James Version. 132 $JDPEHQ*  &]\PMHVWXU]ąG]HQLH"LQ$JDPEHQPrzewodnik Krytyki Politycznej, Warszawa: Wydawnictwo Krytyki Politycznej, p.89. 133 Agamben, G. (2011) The Kingdom and the Glory, Stanford: Stanford University Press, p. 47. 134 Ibid., p. 66. 135 Ibid., p. 227. 136 Maifreda, G. (2012) From Oikonomia to Political Economy, Farnham: Ashgate, p. 193195, 198. 137 Wood, D. (2004) Medieval Economic Thought, Cambridge: Routledge, p.35. 138 Ibid., p.36. 139 Hunt, E. (1986) Property and Prophets, New York City: Harper & Row, p. 4. 140 Perrotta, C., Op. cit., p. 59-60. 141 Baeck, L. (1994), Op. cit., p. 124. 142 Quoted in: Perrotta, C., Op. cit., p. 48. 143 Hunt, E., Op. cit., p.7. 144 Ibid. Economics and Its Discontents 145 317 Quoted In: Perrotta, C., Op. cit., p. 49. 146 Quoted in: Marshall, P. (2008) Demanding the Impossible, A History of Anarchism, London: Harper Perennial, p. 76. 147 Quoted In: Wood, D., Op. cit., p. 64. 148 Wood, D., Op. cit., p. 56. 149 Quoted In: Ibid., p. 56. 150 Perrotta, C., Op. cit., p. 48. 151 Rosicka, J. (1991) O wyobraźni ekonomicznej Polaków, Kraków: Universitas, p. 18-19. 152 Perrotta, C., Op. cit., p. 47. 153 Wood, D., Op. cit., p. 57. 154 Perrotta., Op. cit., p. 48. 155 Baeck, L., Op. cit., p. 24. 156 Ibid., p. 28. 157 Wood, D., Op. cit., pp. 43, 50. 158 Perrotta, C., Op. cit., p. 161. 159 Quoted in Perrotta, C., Op. cit., p. 67. 160 Wood, D., Op. cit., p. 29. 161 Ibid., p. 32. 162 Graeber, D., Op. cit., p. 64. 163 Davies, G., Op. cit., p. 50. 164 Moser. T. 'The idea of usury in Patristic literature' in Psalidopoulos, M. (ed) The Canon in the History of Economics, London: Routledge, p. 24. 165 Quoted in: Ibid., p. 29. 166 Baeck, L. (1994), Op. cit., p. 26. 167 Ibid., p. 132. 168 Ibid., p. 148. 169 Kaye, J. (1998) Economy and Nature in the Fourteenth Century: Money, market exchange, and the emergence of scientific thought, Cambridge: Cambridge University Press, p. 139. 170 Wood, D., Op. cit., p. 113. 171 Ibid., p. 116. 172 Perrotta, C., Op. cit., p. 57. 173 Ibid., p. 55. 318 174 Kaye, J., Op. cit., p. 81. 175 Ibid., p. 85. Economics and Its Discontents 176 Ibid., p. 119. 177 Wood, D., Op. cit., p. 182. 178 Kaye, J., Op. cit., p. 83-84. 179 Ibid., p. 94. 180 Aristotle, quoted in: Ibid., p. 52. 181 Ibid., p. 46. 182 Illustration from 1847 translation Aristotle’s Ethics, obtained at: http://california.anarchoblogs.org/2009/10/page/3/, date of access: 3/11/2014. 183 Aristotle, quoted in: Kaye, J., Op. cit., p. 44. 184 Kaye, J., Op. cit., p. 44. 185 Beattie, A. (2009) False Economy, New York: Riverhead Books, p. 134. 186 Ibid., p. 135. 187 Baeck, L. (1994) Op. cit., pp 97-98. 188 Ibid., p. 101. 189 Ibid., p. 105. 190 Ibid., p. 99-111. 191 Ibid., p. 106. 192 Ibid., p. 112. 193 Ibid., pp 153, 156, 159. 194 Ibid., p. 162. 195 Kaye, J., Op. cit., p. 21; Baeck, L. (1994) Op. cit., p. 112. 196 Wallerstein, I. (2011) The Modern World System I: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century, Berkeley: University of California Press, p. 30. 197 Quoted In: Maifreda, G. (2012) From Oikonomia to Political Economy, Farnham: Ashgate, p. 134. 198 Davies, G., Op. cit., p. 172-173. 199 Baeck, L. (1994) Op. cit., p. 115. 200 Ibid., p. 177. 201 Wood, D., Op. cit., p. 107. Economics and Its Discontents 202 Maifreda, G., Op. cit., p. 132. 203 Kaye, J., Op. cit., pp. 30, 156. 204 Baeck, L. (1994) Op. cit., p. 170. 205 Quoted in: Wood, D., Op. cit., p. 104. 206 Baeck, L. (1994) Op. cit., p. 70. 207 Quoted In: Wood, D., Op. cit., p. 106. 208 Wood, D., Op. cit., pp. 106-107. 209 Davies, G., Op. cit., pp. 30-32. 319 210 Stein, J. (2012) Evaluating Large-Scale Asset Purchases, http://www.federalreserve.gov/newsevents/speech/stein20121011a.htm, accessed at: 20/4/2015. 211 Klyuev, V. de Imus, P. Srinivasan, K. (2009) Unconventional Choices for Unconventional Times: Credit and Quantitative Easing in Advanced Economies, International Monetary Fund Staff Position Note SPN/09/27; 4 November 2009. 212 Ryan-Collins, J. Greenham, T. Bernardo, G. Werner, R. (2013) Strategic quantitative easing, New Economics Foundation report, accessed at: http://www.neweconomics.org/publications/entry/strategic-quantitative-easing, date of access: 20/4/2015. 213 Baeck, L. (1994) Op. cit., p. 128. 214 Ibid., p. 139-143. 215 Perrotta, C., Op. cit., pp. 62, 78. 216 Federici, S. (2009) Caliban and the Witch, New York: Autonomedia, p. 26. 217 Wood, D., Op. cit., p. 150. 218 Ibid., p. 145. 219 Ibid., p. 46. 220 Kaye, J., Op. cit., p. 39. 221 Ibid., p. 26. 222 Ibid., p. 27. 223 Baeck, L. (1994) Op. cit., p. 144. 224 Federici, S., Op. cit., p. 34. 225 Perrotta, C., Op. cit., p. 78. 226 Graeber, D., Op. cit., p. 289. 227 Baeck, L. (1994) Op. cit., pp. 148-149. 320 Economics and Its Discontents 228 Quoted in: Jacoby, R. (2011) Bloodlust: On the Roots of Violence, New York: Simon and Schuster, p. 29. 229 Kaye, J. (1998) Op. cit., p. 88. 230 Ibid., p. 88. 231 Ibid., p. 50. 232 Ibid., p. 164. 233 Ibid., p. 74. 234 Ibid., p. 76. 235 Ibid., p. 147. 236 Quoted in: Kaye, J., Op. cit., p. 70. 237 Wood, D.., Op. cit., p. 53. 238 Baeck, L. (1994) Op. cit., pp. 148-149. 239 Wood, D., Op. cit., p. 95. 240 Kaye, J., Op. cit., p. 93. 241 Ibid., p. 124. 242 Ibid., p. 99. 243 Ibid., p. 176. 244 Ibid., p. 215-216. 245 Ibid., p. 159. 246 Ibid., p. 132. 247 Ibid., pp. 143, 168-169. 248 Ibid., p. 229. 249 Ibid., p. 98. 250 Baeck, L. (1994) Op. cit., p. 160-161; Perrotta, C., Op. cit., p. 80-81. 251 Kaye, J., Op. cit., p. 119. 252 Olivi, quoted In: Perrotta, C. ., Op. cit., p. 81. 253 Kaye, J., Op. cit., p. 121. 254 Perrotta, C., Op. cit., p. 79. 255 Baeck, L. (1994) Op. cit., p. 160-161; Perrotta, C., Op. cit., p. 141. 256 Quoted in: Perrotta, C., Op. cit., p. 72. Economics and Its Discontents 257 Perrotta, C., Op. cit., p. 69. 258 Ibid., p. 88. 259 Ibid., p. 84. 260 Maifreda, G., Op. cit., p. 51. 261 Quoted in: Wood, D., Op. cit., p. 46. 321 262 Calder, L. (1999) Financing the American Dream, Princeton: Princetion University Press, p. 114. 263 Porter, R. (1997) Introduction, in: (ed.) Porter, R. 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Klemm Scratch & Sniff, Peter van de Kamp Shamanism + Cyberspace, Mina Cheon Sonic Soma: Sound, Body and the Origins of the Alphabet, Elise Kermani Sovereignty in Singularity: Aporias in Ethics and Aesthetics, Gregory Bray The Art of the Transpersonal Self: Transformation as Aesthetic and Energetic Practice, Norbert Koppensteiner The Ethics of Uncertainty: Aporetic Openings, Michael Anker The Image That Doesn’t Want to be Seen, Kenneth Feinstein The Ininite City: Politics of Speed, Asli Telli Aydemir The Media Poet, Michelle Cartier The Novel Imagery: Aesthetic Response as Feral Laboratory, Dawan Stanford The Organic Organisation: freedom, creativity and the search for fulilment, Nicholas Ind The Suicide Bomber; and her gift of death, Jeremy Fernando The Transreal Political Aesthetics of Crossing Realities, Micha Cárdenas Theodore, Soia Fasos Trans Desire/Affective Cyborgs, Micha Cárdenas Trans/actions: art, ilm and death, Bruce Barber Transience: A poiesis, of dis/appearance, Julia Hölzl Trauma, Hysteria, Philosophy, Hannes Charen Upward Crashes Fracture’s Topoi: Musil, Kiefer, Darger, Paola Piglia-Veronese Other books available from Atropos Press 5 Milton Stories (For the Witty, Wise and Worldly Child), Soia Fasos Korahais Che Guevara and the Economic Debate in Cuba, Luiz Bernardo Pericás Grey Ecology, Paul Virilio heart, speech, this, Gina Rae Foster Follow Us or Die, Vincent W.J., van Gerven Oei Just Living: Philosophy in Artiicial Life. Collected Works Volume 1, Wolfgang Schirmacher Laughter, Henri Bergson Pessoa, The Meaphysical Courier, Judith Balso Philosophical Essays: from Ancient Creed to Technological Man, Hans Jonas Philosophy of Culture, Schopenhauer and Tradition, Wolfgang Schirmacher Talking Cheddo: Teaching Hard Kushitic Truths Liberating PanAfrikanism, Menkowra Manga Clem Marshall Teletheory, Gregory L. Ulmer The Tupperware Blitzkrieg, Anthony Metivier Vilém Flusser’s Brazilian Vampyroteuthis Infernalis, Vilém Flusser New Releases from Atropos Press America and the Musical Unconscious, Sascha Pöhlmann and Julius Greve Beyond Relection, Anders Kolle The Future Is An Image, John Cavelli HARDSCAPE/ABC, Andrew Spano Hermeneutics of New Modernism, Lisa Paul Streitfeld The Image Is Crisis, Nancy Jones Languages of Resistance, Maya Nitis Nanotexts, Tony Prichard Media, Meaning, & the Legitimation Problem from the Eradication of the Meta Narrative to the Present, Gregory O’Toole Media Psychology, Matthew Tyler Giobbi On Techne of Authority: Political Economy in a Digital Age, G. M. Bell On Leaving: Poetry, Daesthetics, Timelessness, Lori Martindale On Fidelity; Or, Will You Still Love Me Tomorrow…, Jeremy Fernando Surfgeist: Narratives of Epic Mythology in New Media, Peggy Ann Bloomer Tracing Etymology origin and time; monsters and demons, Yanyun Chen Philosophical Ontological Framework, Rossa Ó Muireartaigh The Role of the Artist in Contemporary Art, Chad Dawkins Becoming Cinema: Towards a Mediatized World, Mohammad Reza Sohrabi