by Howard Richards
4. Kaldor's
"circular and cumulative causation"
as an explanatory principle
for the
strategic trade practices
of firms and nations, most notably
Japan
In an essay contributed to the collective volume Trading
Industries, Trading Regions Candace Howes and Ann Markusen remark that of
the 84 billion dollar United States manufacturing trade deficit in 1990, $53
billion can be explained by the globalization of production due to the
comparative advantages of low wage areas. "...$53 billion of the trade deficit,
$40 billion with Asia, and $13 billion with Latin America, can be explained by
neoclassical trade theory, or its modern expression in the New International
Division of Labor theory. The United States was importing low-wage consumer
goods and labor-intensive electronics assemblies from Southeast Asia. Much of
the trade between the United States and Mexico is in automotive products and
electronics that are exported to Mexico for assembly or fabrication and
reimported into the United States. Consumer goods imports from Southeast Asia
were the consequence of indigenous development efforts. The electronics and auto
parts imports followed the search for low-wage havens for labor-intensive
assembly by multinational corporations."
To say that the phenomena observed are "explained by" low
wages is, to recall a point made above, to use the concept of "explanation" (or
of "cause") in a weak sense. Low wages abroad are clearly not the sufficient
explanation (the sufficient cause) of the United States trade deficit. It might
be the case, for example, that the United States would refuse entirely to trade
with low wage areas; in that case there would be no trade deficit with them
because there would be no trade. Hence a complete list of the conditions that
must be met before the observed phenomenon, $53 billion of an $84 billion trade
deficit, will be produced would include all the institutions, decisions, and
physical ("brute") facts, that led to, or allowed, there being such trade in the
first place. A complete causal explanation would also have to explain why,
thirty years previously, in 1960, the $53 billion deficit did not exist, even
though the United States was trading with those regions at that time, and even
though at that time too wages in those regions were low.
The conclusion Howe and Markusen mainly want to draw in the
passage quoted is, I believe, that a theory of globalization like that of
Bluestone and Harrison sketches some main features of a plausible causal
explanation of $53 billion of the 1990 U.S. manufacturing trade deficit. But, as
Howe and Markusen make clear in the sequel, with regard to the remaining $29
billion such a theory is a non-starter. It cannot possibly explain the remaining
$29 billion of the deficit, because that part of the deficit was in trade with
high wage areas. The implication is that some other causes must be at work
besides low wages. The suggestion is that theories of a different type may be
needed to understand international trade.
The late Nicholas Kaldor was a prominent economist who
distanced himself from neo-classical economics, who endorsed and proposed
explanatory principles different from the neo-classical ones, and who prescribed
a series of neo-Keynesian remedies for the ills of international
trade.
4a. Kaldor's
Explanations
At least two types of causal explanation are characteristic
of Kaldor's work, and it turns out that the two are intimately intertwined. One
is the principle of "circular and cumulative causation," which Kaldor adopted
from Gunnar Myrdal, which emphasizes that in international competition success
tends to lead to more success, while failure tends to lead to more failure. The
second is of a type I think it may be useful to call "accounting causality." It
is central to the work of John Maynard Keynes. Unlike the neoclassical
economists, who tend to do economics as social physics, economists like Kaldor
who are in the Keynesian tradition tend to do economics as social
accounting.
(Kaldor does not deny that technology itself has played a
causal role in history; he holds rather that technology and economics are in
constant interaction, so that it is impossible to know how much historical
change is due to one and how much is due to the other.)
Kaldor notes that Ricardo's theory of comparative advantage,
as it has been refined and improved by John Stuart Mill, Ely Hecksher, Bertil
Ohlin, and Paul Samuelson, is mainstream international trade theory today. It
implies that every nation gains from free trade, and that due to trade the
poorer countries will gain most, while the richer countries gain least; as trade
increases real income per person will tend to be the same in all
countries.
"The observed trends in income per head for the past 200
years, during which international trade has increased very substantially in
relation to total world income, have been the very opposite. Differences between
wealthy countries and poor countries have grown enormously -- the very opposite
of what the theory predicts."
Kaldor's explanation of the growth of the difference between
wealthy countries and poor countries is that business in the more backward
countries is less efficient in almost every way. Thus integration into the
global economy means that farmers are driven out of business by cheap imported
wheat. The spinners lose out to cheap imported textiles. (This was the motive of
Gandhi's nonviolent resistance against free trade.) The native craftsmen are
unable to compete with less expensive goods from foreign factories. "Backward
countries are less efficient in production, which means that they require
greater inputs per unit of output, not just in terms of one particular factor,
but of all factors."
Shorn of their local producers, the poorer countries are
condemned by free trade to "specialize" in the production of raw materials and
minerals, but these particular specialties are capable of employing only a small
fraction of their labor force. "...the countries depending on the exports of
primary products remained comparatively poor --the poverty was a consequence,
not of low productivity of labor in their export sectors, but of the limited
employment capacity of their `profitable' industries."
The reverse side of the coin is that the success of the
successful is cumulative. Some 90% of the funds invested to expand manufacturing
capacity historically has come from retained earnings. Thus there is a
polarization process, both internationally and nationally. Those who have
earnings to reinvest in technical improvements and greater economies of scale,
reap even greater earnings, which they are able to reinvest to become even more
efficient.
An example (not mentioned by Kaldor) of cumulative success
in the global market is the American pharmaceutical industry. Companies like
Merck and Lilly have over the years attained commanding leads in an industry
that requires enormous capital investment, great scientific expertise, and long
lead times to develop a product. So far at least, the low wage countries have
been unable to challenge the American (and, to some extent, European)
technological lead in pharmaceuticals.
The process of "circular and cumulative causation" has as a
consequence the polarization of wealth and poverty, within nations as well as
between nations. "The economic unification of Italy probably provides the
best-known example of the polarization effect. Since the unification occurred at
a time when the industries of the North of Italy were rather more developed than
those of the South (though the difference was not very large; industrial
productivity was supposed to have been some 20 percent higher in the North than
in the South), it was quite sufficient for free and guaranteed access of the
Northern industries to the Southern markets to inhibit the development of the
latter at the same time as it accelerated the industrial development of the
North."
Together with the polarization produced by the tendency
toward free trade prescribed by neoclassical economics, the world has seen a
countervailing tendency --the spread of industrialization from one country to
another. After Britain, the first country to industrialize, every other country
that has industrialized, starting with France, Germany, and the United States,
has done so by violating the prescriptions of neoclassical economics. "...all
the countries which became industrialized (other than Britain, which started off
the process) did so with the aid of protective tariffs which were high enough to
induce a substitution of home- produced goods for imports."
An effect of causal processes at work in the world economy
is that a high wage country that wants to remain a high wage country must
concentrate on successful leadership in product development for export markets.
"...the proper division of international trade in manufactures is not so much
the traditional division between `capital intensive' and `labour intensive'
trade, but between `low wage' and `technological lead' trade. The developed
industrial countries with high wages must be able to export goods in which they
have a technological lead over others, either on account of the design and
marketing of new products (such as computers, silicon chips, etc.) or because of
advanced manufacturing processes which yield comparatively high
productivity."
Japan is history's most notable example of a nation that
adopted a deliberate trade strategy designed to create technological leads for
itself. The strategy succeeded in field after field. Admirers of Japan have
called for an "industrial policy" in the United States, which would similarly
make product development and the conquest of export markets a concerted national
effort. As was the case with most of the nations that achieved industrialization
deliberately under a protective umbrella of import restrictions, in Japan
industrialization was a military issue. Without modern industry, Japan would be
too weak to resist foreign domination. "Export or die!," the slogan coined by
Kaldor's friends in Post World War II Britain, could have been the motto of
Japan.
The investments in growth industries counseled by attention
to the explanatory principle of circular and cumulative causation, are also
counseled, for different but related reasons, by attention to social
accounting.
An accounting identity important for John Maynard Keynes is
that as money circulates as a medium of exchange, the total of revenues must
equal the total of expenditures. What from one person's point of view is a
purchase is from another person's point of view a sale; one person's outlay is
somebody else's income. Every time money changes hands, there is a debit to the
account of the spender of the money, and a credit to the account of its
receiver. Debits equal credits. Disregarding subtleties, the overall result for
society from adding up all domestic transactions is that society has exactly as
much money as it had before; money just changed hands.
Hopefully the exchange process through which in money terms
society neither gains nor loses, is a process by which in real terms society
gains, as goods and services get produced and distributed, making people happier
and healthier. Presumably if money would just keep circulating, playing its role
as medium and facilitator of exchanges, there would be an unimpeded real flow of
goods and services, and people would keep getting happier and happier, and
healthier and healthier. But, unfortunately, from an individual point of view,
people often keep accounts where success is defined as ending up with more money
than they started with; for this and other reasons people are often inclined to
treat money as a store of value, by saving it instead of spending it. Keynes
writes, "The psychology of the community is such that when aggregate real income
is increased aggregate consumption is increased, but not by so much as income.
Hence employers would make a loss if the whole of the increased employment were
to be devoted to satisfying the increased demand for immediate consumption.
Thus, to justify any given amount of employment there must be an amount of
current investment sufficient to absorb the excess of total output over what the
community chooses to consume when employment is at the given level." For society
as a whole total revenue for time period x is greater than the total available
for expenditures in time period x + 1, because some part of the revenue is saved
instead of spent. Sales lag, for lack of "effective demand," i.e. for lack of
"purchasing power" (i.e. money) coupled with the desire to spend. When sales
lag, everything else lags, since as a general rule goods and services are
produced for the purpose of selling them. All would be well if every cent saved
were invested, because investments are, from the investor's point of view,
purchases of raw materials and labor and so on, and therefore they are from
somebody's point of view sales, i.e. income.
Some Keynesian story, such as the one just told, is, I
believe, the justification for saying that government policy can "cause," in
Kaldor's terms, growth or stagnation. If the government takes those measures
which result in purchasing power being in the hands of those who desire to spend
it or to invest it, then the government will "cause" growth. It will make
society's books balance by compensating for the individual's propensity to save
without investing.
Kaldor writes, "...in the years 1980-82, Britain's policies
were the cause of a deepening recession in Europe...." "For this recession I
hold Britain largely responsible on account of the unfortunate coincidence of
North Sea oil and Mrs. Thatcher coming on stream more or less at the same time.
On account of the North Sea oil, the balance of payments on current account had
a turn- around of nearly 9 billion dollars (from minus 1.4 to plus 7.5 billion)
between 1979 and 1980, rising by a further 5.5. billion to 13.2 billion in 1981.
The deflationary policies of the `monetarist' government of Mrs. Thatcher caused
a turn-around of total real domestic demand by 6 per cent of the gross domestic
product (from +3 per cent in 1979 to -3 per cent in 1981, causing a rise in
registered unemployment of nearly two million."
Thus the North Sea oil bonanza was an opportunity Britain
missed. The new source of income from oil should have been "combined with a bold
policy of expansion of both public and private investment .... Instead,
Britain's gain from oil was wholly offset by the 15 per cent fall in her
manufacturing output...."
The "deflationary" policies caused the lack of growth
through a series of measures that restricted access to money, including higher
interest rates. It was for lack of money that demand declined, and for lack of
demand that employment declined. The policies Kaldor recommended, on the other
hand, would have made money available to finance public and private investment.
I call this an "accounting causality" because it operates by keeping track of
the national accounts, and then through government or concerted private action
adjusting them. The accounts are adjusted on a macro-level in several ways; the
intended result of policies advocated by people like Kaldor is usually to make
it easier for people to get money in their accounts (their bank accounts) to pay
for consumer purchases and for investments. Having money in the bank is a kind
of power; it empowers the owner of the money to perform certain sorts of
actions; thus a favorable adjustment of one's account --when coupled with a
desire to spend or invest-- will generate (i.e. cause) actions to be done,
namely and especially the kinds of action called purchases (i.e., from the
seller's point of view, sales). Which is just what is needed to produce (i.e.
cause) employment and growth. Conversely, Prime Minister Thatcher caused
unemployment and stagnation.
On Kaldor's account, Mrs. Thatcher's deflation reverberated
throughout Europe, since a deflated Britain was not a good customer for the
goods her continental trading partners would have otherwise exported to her;
consequently their sales slowed down, and, since sales slowed down, everything
else slowed down.
In a Kaldorian world, accounting causality tends to be
aligned with the need to attain and keep technological leads. A nation's policy
should be to stimulate investments just to balance the national books, i.e. to
keep money flowing. Given that investments in general ought to be stimulated,
what better choice of investment could there be than those particular
investments which will develop new products for export, exploiting and expanding
those technological leads the nation already has, and perhaps even conquering
new export markets with superior technologies?
4b. Kaldor's
prescriptions
The ethical premises built into the propositions of
neo-Keynesian economics, differ little from those built into neo- classical
economics. The two school advocate competing means to the same end: maximizing
the satisfaction of the preferences of buyers, while respecting the freedom of
the individual. Keynesians are, however, comparatively free of any bias in favor
of decisions made by the market which would make government intervention in the
market morally suspect. They rarely let Rousseau and Locke's premise "what is
natural is good" filter into economic theory in a way that clothes deliberate
government action to achieve social objectives with overtones of ethical
impurity. They usually reject the notion that the market is a fact of nature;
while the government is "artificial," its actions "distortions" of market prices
resulting in "imperfections" in market mechanisms.
Kaldor is among the unabashed activists. He attacks the neo-
classicals not because they have wrong values, but because they have absurd
theories. Armed with a better theory, Kaldor prescribes a different route to
prosperity and freedom. All his life he was both scholar and activist, and he
made many proposals for reshaping the global economy. Toward the end of his life
he proposed a four point program for restructuring the associated economies of
the western powers, which were similar to his proposals for the entire global
economy, and similar to the Keynesian option of Piore and Sabel. Kaldor's four
point prescription can be summarized as follows.
1. Coordinated full employment budgets. "... lower
taxes and higher expenditure..."
2. Internationally coordinated lower interest
rates.
3. International price supports for basic
commodities (i.e. for the main commodities whose prices are subject to slump
because the markets for them are truly competitive) coordinated through a
system of buffer stocks. An international agency would buy commodities when
their prices were low in order to drive up their prices, using an
international reserve currency especially created for the purpose.
4. Having made his first three points, Kaldor
concedes, "..the above would still leave one important problem unresolved, and
this is the problem that Keynes also left entirely unresolved, the tendency to
chronic inflation under full employment conditions...." He does not think
inflation can be curbed by fiscal and monetary policy alone, but only by
curbing wages. His suggestion in this respect is "... a system of continuous
consultation between the social partners --workers, management, and the
Government-- in order to arrive at a social consensus concerning the
distribution of the national income that is considered fair and which is
consistent with the maintenance of economic growth, reasonably full
employment, and monetary stability." Presumably there would be some sort of
coordination internationally of the national wage consensus to be sought
nationally.
The weight of academic and political opinion has now turned
against Keynesian prescriptions like Kaldor's. One of the reasons for the
advance of neoliberalism and the twilight of the age of the social democratic
mandarins who managed capitalism to make it achieve social goals, is that
expansionist prescriptions have led to ever-deepening debt burdens. Keynes'
original idea of counter- cyclical government budgets, such that the government
would engage in deficit spending when business was down, and then repay the debt
by collecting more taxes when business was up, has proven to be a chimera. The
legacy of Keynesian policies has been continuous deficit spending. Kaldor
himself attributes the long postwar "boom" from 1949 to 1971 to American deficit
spending, more than to any other factor. After World War II America created
purchasing power in the world economy by running up huge public and private
debts. It could afford to do this because until 1971 the dollar was accepted as
the international currency. Foreign governments were content to hold reserves in
the form of dollars. America's credit was golden because it could print whatever
amount of money was needed to pay its debts. When Europeans began demanding gold
and Deutschmarks instead of dollars, the American dollar ceased to be the
world's reserve currency. America's ability to generate purchasing power on a
world scale ended, and so did the postwar boom.
Thus Kaldorian prescriptions are often opposed by neo-
classical economists and others as in the long run unworkable. But to say, like,
for example, Ross Perot, that it is imperative to balance the budget and start
paying off the debt, or that any and all spending decisions are more efficiently
made in the private sector and not in the public sector is not to say either:
(1) that one has a viable alternative to Keynes' proposal to counter the
tendency of capitalism toward stagnation by counter-cyclical spending; thus the
conclusion from the premise "Keynes was wrong" may simply be that capitalism is
unstable and there is no way to stabilize it; or (2) that one disagrees with
Kaldor's objective of "growth," or, more specifically, his objective of
concerted national support of product development for export; thus one might
support Kaldor's analysis of what needs to be done, but propose a different way
to do it.
Thus even if one agrees with a neoliberal critique of
Keynes, and therefore rejects Kaldor's prescriptions for expanding economic
activity, there are still two more dimensions of the analysis to consider: (1)
whether social accounts can be macro-managed in some other way, (2) whether it
is desirable or possible to reject the objective of "economic growth" and to put
into practice a "steady state" economics that does not require
growth.
There is also a third dimension to be considered. Kaldor
believed that the present anti-Keynesian trend has as one of its main motives
strengthening management and weakening labor, by taking the question of fair
wages off the national agenda. Rejecting government macro-management of the
economy is a way of saying let the chips fall where they may, and this is a way
of denying the voters the opportunity to vote themselves a social wage higher
than what they would get through the free play of market forces and property
rights. To get the government out of the economy, is at the same time to get the
poor person's hand out of the rich person's pocket. Conversely, making the same
point from the opposite direction, Jurgen Habermas argues in The Legitimation
Crisis, that Keynesian management of the economy makes it transparent that
the division of revenue between property and wages is a political division,
determined by political power -- not a natural fact.
Similarly, advocates of industrial policy generally combine
advocacy of measures to increase national competitiveness with measures for
increasing social peace. Consensus on social issues among the "social partners"
is held to be good for the export trade. Subsidies can be generously distributed
so that both the rich and the poor get some. Some such consensus-producing
social bargain is a requirement for the smooth and uninterrupted functioning of
the economy, once it is decided that a democratically elected government will
manage it. Thus another ethical dimension of Kaldor's proposals is: (3) whether
an activist "industrial policy" is justified as a way to put social issues on
the government's agenda.
The four-part program for economic recovery outlined above
perhaps does not make it sufficiently clear that Kaldor's prescriptions were in
principle global and in principle permanent. He recognized that in today's world
managing the economy through social accounting, if it is going to work at all,
must be made to work internationally. He was confident that all nations could
simultaneously enjoy export-led growth, by exporting to each other. He found
shortcomings in Harrod's theory that there is a warranted rate of growth that is
indefinitely sustainable, but he amended it to repair the shortcomings; thus he
was able to argue in a critique of Marx delivered in Peking in 1956 "...that
there can be no presumption of crisis based on a falling rate of profit." Kaldor
made major contributions to the theory and practice of taxation, and he was
confident that there was a right way to impose heavy taxes, which could be
practiced indefinitely without impeding growth.
The main features of Kaldor's prescriptions can be
criticized by criticizing the concept of "growth." It is "growth" that permits
the social books to be balanced by making savings equal investment, supply equal
demand. It is "growth" that is supposed to bring about progress and prosperity.
"Growth" is the necessary remedy for its alternative, the fate Kaldor takes
pains to teach the world how to avoid: namely "stagnation." It is the promise of
"growth" that cements a hoped-for social consensus in which governmental action
to achieve social justice is supported, or not vehemently opposed, by bankers,
investors and entrepreneurs. It is also the ideal of "growth" that may survive
as an ideal to be pursued by other means, when Kaldor's prescriptions for
pursuing it are discredited as inflationary, as inefficient, or as leading to
unsustainable debt burdens.
The most obvious objection to the ideal of "growth" is that
it destroys the environment. It is physically impossible to continue
indefinitely the present destruction of its own habitat by homo sapiens, and it
is a crime against posterity to attempt it.
In reply to such objections to the ideal of growth by green
economists, Kaldor's friend Joan Robinson argued that those who complain about
growth should instead redefine it. Instead of complaining that growth pollutes,
exterminates species, warms the atmosphere, exhausts fossil fuels, and leaves
radioactive wastes that will continue to be carcinogenic for more years than the
human species has until now walked the face of the planet, the greens should
define growth so that undesirable outcomes are not growth. "True growth" would
consist only of desirable outcomes; activist governments would only pursue it,
not "false growth."
But redefining "growth" does not solve the problems for
which Kaldor offers "growth" as a solution. Product development is needed to
maintain technological leads. It is not ever easy to maintain a technological
lead. To keep a lead in the market subject to the constraint that only green
products defined as true growth are allowed, would only some of the time
coincide with the sine qua non that product development must achieve: namely, to
sell the product. To solve capitalism's problem, the new product must be sold on
a mass scale and thereby reap the super-profits that counteract what would
otherwise be a falling rate of profit. It is the super-profits from exporting
new technologies that justify the super-investments needed to balance the social
books. Thus Kaldor: "Technical progress is a continuous process and it largely
takes the form of the development and marketing of new products which provide a
new and preferable way of satisfying some existing want. Such new products, if
successful, gradually replace previously existing products which serve the same
needs, and in the course of this process of replacement, the demand for the new
product increases out of all proportion to the general increase in demand
resulting from economic growth itself."
The process of constantly developing new products for which
demand will be "out of all proportion" to ordinary demand will not stop if it is
denied the honor of being called "growth" whenever it transgresses ecological
norms. It will not stop, and it will not cease to be necessary to balance
society's books. It will not cease to be necessary, assuming as given the main
institutional features of the status quo, if islands of high wages are to be
preserved in a global sea of low wages. High effective demand, and therefore
consumers who like to shop and to use their credit cards, will continue to be
necessary to maintain employment at acceptable levels.
The most obvious objection to "growth" is valid. Redefining
growth does not magically create the institutions and the culture that would be
required to guide humanity toward "true growth." If what the greens object to
were no longer called "growth," it would be called something else, and they
would still object to it for the same reasons.
Kaldor's prescriptions, workable or not, display the trap
humanity is in. It can be likened to a treadmill. It is necessary to go forward
faster and faster just to stay in place. The direction of movement is determined
by worldwide potential demand for new products. Standing still means stagnation.
Meanwhile, truth, beauty, justice, compassion, partnership with nature, and all
the traditional ideals of the world's civilizations are placed on hold. Ideals
may be honored, but only subject to the constraints imposed by what must be done
to stave off economic collapse. As Keynes himself wrote, "For at least another
hundred years we must pretend to ourselves and to every one that fair is foul
and foul is fair; for foul is useful and fair is not. Avarice and usury and
precaution must be our goals for a little longer still. For only they can lead
us out of the tunnel of economic necessity into daylight."
Every caring and aware member of the species homo sapiens
sapiens must ask the questions, "Why did we get on this treadmill?" And, "How
can we get off it?"
4c. Kaldor's
Metaphysics
Kaldor was a member of a generation for whom "metaphysical"
was a synonym for "unverifiable." In his polemics against his neo-classical
opponents he delighted in castigating their theories as "at best a branch of
metaphysics."
Nevertheless, Kaldor's world is shaped by the metaphysics of
economic society described in sections 1c, 2c, and 3c above.
Traditionally, the term "metaphysics" has been applied to
attempts to articulate the fundamental categories of a civilization --embracing
its cosmology, ethics, epistemology (or science), and its visions of human
nature. This is what was attempted by Plato and Aristotle, by Thomas Aquinas,
and Kant. Kaldor is an adherent of modern philosophy; he has particularly kind
words for Karl Popper's philosophy of science. Modern philosophy articulates the
metaphysics of economic society. But it is not so much his explicit sympathy for
a falsificationist philosophy of science and for modern ideas generally, as the
implicit premises of his economics that makes Kaldor a participant in a world
shaped and justified by metaphysical ideas.
First, I will draw out some of the metaphysical
presuppositions that are latent in the explanations Kaldor gives of economic
phenomena. Being necessary premises of his explanations, they are also premises
of his prescriptions. Modern practices and discourses, for which philosophers
have composed rationales which serve the traditional functions of metaphysics
(even when they describe their work as anti-metaphysical) are, therefore, at the
core of Kaldor's thought. I do not believe Kaldor would disagree. Thus he says
things like, "the study of economics has ... concerned the problem of how in a
de-centralized, `undirected' market economy, scarce resources are allocated
among different uses in the right proportions --in the proportions in which they
give the highest satisfaction to consumers as a body --in a specific Pareto
sense that no one could be better off with any alternative allocation, without
making someone else worse off." In such passages Kaldor appears to acknowledge
that economics is, so to speak, a local science, a science which pertains to the
last few centuries and to those parts of the world where the institutions it
takes for granted exist.
Second, I will compare and contrast traditional and modern
(economic) metaphysics with the aid of several conceptual distinctions, namely:
Max Weber's distinction between traditional value-rationality
(Wertrationalitat) and modern instrumental rationality
(Zweckrationalitat); Christopher Hill's distinction between the
"Ancients" and the "Moderns" who replaced them in the universities early in the
modern era; and the distinction between final causes and efficient
causes.
In specifying how a technological lead, and with it the
growth of a country's exports, explains phenomena of international trade that
cannot be explained by comparative advantages due to low wages, Kaldor wrote,
"...the most successful exporters are able to achieve increasing penetration,
both in foreign markets and in home markets, because their products go to
replace existing products." They replace them because they "...provide a new and
preferable way of satisfying some existing want." (Causes, p.
69)
This explanation only works if it is assumed that the new
products are put on sale in markets, where markets are conceived, as E. F.
Schumacher put it, as populated by bargain-hunters with money, i.e. people who
will buy a new, cheaper, and better product when they come upon it.
It is not a foregone conclusion that people will act like
bargain-hunters, or that markets will be open. In the 19th century Japan
declined to open its markets to European and American exports, and it took
Admiral Perry's naval artillery to compel Japan to behave in a way consistent
with economic theory. In general, the history of the expansion of markets for
European exports is a history of conquest. A contemporary observer (John Locke,
in a candid moment) described a process of circular and cumulative causation
rather different from that described by Myrdal and Kaldor: with the money gained
from foreign trade, England was able to arm ships and pay soldiers, and thus to
gain the power to gain more money, which in turn, it used to buy still more
power, with which to acquire still more money. The mines of South Africa provide
another case in point: since the Africans had no use for money, they could not
be induced to work in the mines for pay until the government imposed a tax on
them which had to be paid in money; the government, in collaboration with the
mine owners, rounded them up and set them to work in the mines for wages so they
could earn the money to pay the tax. Africans were thus conscripted into the
market.
I do not mean to deny that traditional ways of life during
the past few centuries have sometimes been nonviolently seduced out of existence
by cheap manufactured goods, or by wage labor voluntarily accepted. Cheap goods,
conquest, and a number of other factors have all played roles in modernization.
I simply want to assert that there is nothing natural or inevitable about market
behavior.
There is, however, a logic of market behavior. It is the
logic of the bargain-hunter. And there is a metaphysics of the market. It is
modern western philosophy. (Especially early modern philosophy, i.e. empiricism
and rationalism, culminating in the philosophy of Kant --later, romanticism,
Marxism, and some other philosophical movements rebelled against the metaphysics
of the market.)
A similar point can be made about causal explanations
derived from social accounting. When Keynes writes, "The psychology of the
community is such that when aggregate real income is increased consumption is
increased, but not by so much as income," he assumes that we are talking about a
cultural structure where people meet their basic needs by exchanging money for
products; he assumes that workers work for wages, and that investors invest for
profits. He also accepts, not in what he says but in what he does not say and in
the questions he does not ask, that what people do with their money is their own
business, which it is the business of the social scientist to observe and to
explain scientifically. For Keynes the "just price" theories of Aristotle and
Saint Thomas Aquinas have already been dead for four hundred years and forgotten
for two hundred. The question what ought to happen when incomes rise is not a
question anybody is entitled to ask. Keynes simply reports as a fact that,
"...when aggregate real income is increased consumption is increased, but not by
so much as income," as if he were an astronomer reporting on the gravitational
attraction of a moon for its planet. Similarly, when Kaldor, interpreting
Keynes, writes, "A private enterprise economy requires such an excess [revenue
exceeding costs]: the receipts obtained from the sale of output must exceed the
entrepreneurs outlay on production. .... Hence, ultimately, it is the exogenous
component of demand which will determine what the level of output in the
aggregate will be...," he is telling a story about the need for ever-new
"exogenous" demands (mainly because the wages and profits paid in the aggregate
will not yield enough money to buy the products in the aggregate). The story
includes words like must and determine, which appear in mathematical theorems
and in laws of natural science. The very language thus tends to treat socially
constructed realities as if they were natural realities.
I do not mean to say that treating its socially constructed
reality as if it were natural is unusual. Every culture does it. I do mean that
a comprehensive intellectual system that does it can properly be called a
metaphysics. What is unusual about recent western metaphysics --and what marks
the thought of Kaldor, Keynes, and other economists as participating in a
metaphysics generically distinct from those of all the world's other great
civilizations and from those of most of the smaller entities known as
"cultures"- - is the recognition of a sphere of social activity to which moral
rules prescribing solidarity do not apply.
I do not wish to exaggerate the extent to which the
institutions and norms of recent western civilization (which, by expansion, have
defined the rules of the game of the global economy) are constant from
generation to generation and from group to group. Nevertheless, certain broad
generalizations are plausible. Without exception, each of these broad
generalizations is connected with recent western civilization's characteristic
institution: the disembedded market. One of these broad generalizations is Max
Weber's concept of instrumental rationality
(Zweckrationalitat).
Weber held that social action, by which he meant action
meaningfully related to the behavior of others, could be oriented in four
(admittedly often overlapping) ways: as instrumentally rational, determined by
values (value-rationality), affective (especially emotional), or traditional.
The first of these, Zweckrationalitat, typifies modern society; indeed
without a certain amount of it modern society could not have come into being and
would not be able to function. Weber defines instrumentally rational social
action as, "...determined by expectations as to the behavior of objects in the
environment and of other human beings; these expectations are used as
`conditions' or `means' for the attainment of the actor's own rationally pursued
and calculated ends."
The purest form (although not the only kind) of instrumental
rationality is capital accounting, in which money is used to quantify the
decision-making process. "From a purely technical point of view, money is the
most `perfect' means of economic calculation. That is, it is formally the most
rational means of orienting economic activity."
Other societies, the non-modern ones, are the ones where the
value, affective, and traditional orientations predominate. For example,
"..modern economic life by its very nature has destroyed those other
associations [i.e. other than the coercive power of law] which used to be the
bearers of law and thus of legal guaranties. This has been the result of the
development of the market." There is, thus, such a thing as a characteristically
modern, instrumentally rational, way of thinking and acting, which is part and
parcel of modern society's institutional structure. And thus Weber's concept of
Zweckrationalitat helps to explicate what it means to locate the
discourse of an economic theory like Kaldor's in the broader context of the
metaphysics of economic society.
If we look at the intellectual sea-change wrought in Europe
in the 16th and 17th centuries; documented by Christopher Hill, C. B.
Macpherson, and others; we will find further confirmation of the proposition
that economics presupposes an economic metaphysics; or, as E. F. Schumacher put
it, that economics as a science accepts instructions from meta-economics. The
causal mechanisms cited as explanatory principles by neo-liberal,
globalization-of-production, and neo- or post-Keynesian economists, include
institutional features of modernity: private property guaranteed by a modern
legal system, a general expectation that people will tend to act from rationally
calculated self-interest, certain rights, and certain freedoms. These make it
possible to speak of "market forces," and to give a scientific explanation of
social phenomena in which market forces play the role of cause. All of them are
articulated and included in the modern worldview developed first outside the
universities, which then gradually became accepted within the universities, and
which now has become academic orthodoxy. None of them is endorsed or supported
by the traditional western metaphysics, centered on Aristotle, which was
academic orthodoxy at least until the middle of the 17th century, and in some
places long after that.
Economics did not create economic metaphysics. If we date
modern economics from the publication of Adam Smith's Wealth of Nations
in 1776, then it arrived almost a century and a half later than the philosophies
of Thomas Hobbes and Rene Descartes. They were among the leaders in dismantling
the old metaphysics, and in erecting in its place an alternative which was
supposed to provide a "scientific" account of human action. In Leviathan
(1651), Hobbes consciously took Galileo's physics as a model for social science.
Armed with an ideology borrowed from contemporary technology, mechanics, and
mathematics, Hobbes constructed a new philosophy that included as fundamental
natural rights private property and the market freedoms, while it excluded
traditional (Judeo-Christian and Greek) distributive justice. Hobbes's was one
of the philosophies that reflected the advancing spirit of the age; it was
seminal for, among others, John Locke; who was in turn seminal for, among
others, Adam Smith's confidante David Hume. The professor of moral philosophy at
Glasgow did not need to create either the institutional context or the
metaphysical context of political economy; in 1776 they had already been created
by the evolution of society and by earlier thinkers. Even if we think of modern
economics as beginning before Smith, the sequence is still that the geographical
extension of markets came first, the ethical philosophy justifying market
institutions second, and the scientific explanation of market phenomena
third.
The coming of the modern ideas that economics depends on was
ferociously resisted in academic halls, as well as on battlefields and from
pulpits. There were century-long see-saw battles at Oxford, Cambridge, and other
centers of learning, as Ancients and Moderns fought for control. When rich
merchants endowed new chairs, libraries, and colleges they did so for the
express (although normally diplomatically expressed) purpose of challenging the
reigning metaphysics and replacing it. Christopher Hill write, for example, "Sir
Thomas Bodley ... founded his Library to forward the struggle against popery.
But the Bodleian was a pro-scientific as well as an anti-Catholic influence in
Oxford. The frieze in the Upper Reading Room must have shocked conservatives by
including figures so strange to the university as Copernicus, Tycho Brahe,
Paracelsus, Vesalius, Mercator, and Ortelius .... Thomas James, the first
Librarian of the Bodleian ...used the Roman Index `that we may know what books
and what editions to buy, their prohibition being a good direction to guide us
therein'."
Thus the existence of the economic metaphysics Kaldor
inherited is made visible by history. Historically it attained the status of
being obvious and taken-for-granted, which it enjoys today, by struggling
against neo-Aristotelian scholasticism and defeating it.
The concept of "final cause" marks a metaphysical chasm
separating Ancients from Moderns. The word "final" here designates "end" in the
sense of objective or purpose, as in "to what end?" or as the French and Spanish
fin, French finalité, Spanish finalidad. Aristotle had held
that the cause or principle (arche) of any given thing included its end, its
purpose, that toward which it aims. According to the Ancients, for humanity, the
all-important final cause was humanity's Objective, which was caritas,
participation in God's love, which was to be achieved through the salvation of
the soul and through good works. The Moderns denied that there were final causes
anywhere in nature. They insisted that truly scientific explanation must confine
itself to what in Aristotelian terms are called "efficient causes," in other
words the forces, factors, or independent variables which produce the phenomenon
to be explained. The modern paradigm came to be the terrestrial and celestial
mechanics of Sir Isaac Newton, whose Principia Mathematica (1687) is a
story about vis (force) from beginning to end, vis being the Latin
rendering of the Greek dynamis, which is the term Aristotle used to
designate what in English we call an "efficient cause."
Failure to understand that the global economy conforms to an
ideology that has banished final causes weakens many well- intentioned critiques
of it. Examples of such well-intentioned but inadequate critiques are that the
global economy is wrong because it rests on the premise that humans have a right
to exploit the earth, or that it pursues material accumulation of excess for a
few instead of meeting the basic needs of all, or because it rests on greed as a
value, or because it incarnates masculinist rather than feminist values, or
because it takes technological progress as an end in itself, or because it
worships science in a way that excludes spirituality. These well-intentioned
critiques miss the mark because they fail to understand that the global economy,
regarded as a system of efficient causes studied by economic science, does not
have any Objective. It is inadequate to argue that humanity has been pursuing
the Wrong Objective, and that the species could get back on track by pursuing
the Right Objective. The global economy is legally structured and ideologically
defended in such a way that it has no Objective at all.
The possibility of thinking of economics as a science was
thus created in two steps: (1) Final causes were banished from nature, and
nature came to be conceived as a great machine, moved by forces; and (2) By
analogy with nature, so conceived, the market was conceived as a machine, moved
by market forces.
Modern philosophers synthesized the "experimental method of
reasoning," as Hume put it, i.e. a science of efficient causes; with an ethics
of freedom. Thus they performed the social office of the metaphysician by
unifying in a single discourse the language of the society's techno-structure
and the language of its command structure.
It should at least be mentioned, however briefly, that even
before the philosophers, theologians contributed to the social construction of
the institutions that made economics possible. In the 15th and 16th century, at
a time when public discourse on social issues had to be conducted in religious
terms because there were no other terms, religious reformers contributed to
building the scientific and ethical premises of modern accounting and managerial
rationality.
The reformers appealed to scripture to refute the
established church, and in the process sharply distinguished revelation from
natural reasoning. They could consistently recognize the independence of the
supernatural (the revealed) and the natural (the discovered) from each other.
The natural, having nothing to do with the knowledge required for salvation,
could safely be regarded as a system of efficient causes. Natural science thus
obtained theological legitimacy. By extension, social science could legitimately
seek to discover the natural causes of prices. Thus was opened up a discursive
space which political economy could occupy --in an area which the traditional
synthesis of reason and revelation had monopolized, and which it had conceived
in terms of final causes (and therefore in terms of just price, common good, the
good of the soul, and divine will). Somewhat later, when terrestrial and
celestial mechanics had been discovered, and when the laws of supply and demand
had become recognized as their social homologues, theologians and orators could
add to the authority of political economy by asserting that God had created it.
In 1795, Edmund Burke could write of "...the laws of commerce, which are the
laws of nature, and consequently the laws of God....." Later still, when
Nicholas Kaldor undertook the study of it, economics had become fully
independent of theology. In the disputes that preoccupied Kaldor and his fellow
students at the London School of Economics in the 1920s, an assertion that God
had ordained one law of commerce or another would have detracted from rather
than added to its authority. Nevertheless, historically, the evolution of
religious doctrines played some essential roles in the process of constructing
the metaphysics that became Kaldor's.
5. Theories of the
longue durée,
or historical discontinuity,
as explanations of the genesis
and nature
of the global economy
Suppose that the growth treadmill, and the drive toward
lowering production costs even where doing so conflicts with other values (such
as, to name one, the value of maintaining a high social wage), are problems
intrinsic to the basic cultural structures of the modern world. (I use the word
"cultural" as a broad term which includes "social" as a subset) It follows that
to ask "Why did we get on this treadmill?" is to ask "Why did the modern world
come into existence?" Asking this question does not presuppose that pre-modern
and non-modern cultures were or are, in general, better than modern society. It
does presuppose, in this context, that the improvements modernity brought were
accompanied by what Charles Lindblom (in a presidential address to the American
Political Science Association) called, "the market as prison." (Lindblom
compared the market to a prison in order to highlight modern society's built-in
resistance to efforts to modify it to make it conform to human and environmental
values.)
Anthony Giddens has suggested that the three classic
theoretical traditions of sociology, those initiated by Karl Marx, Emile
Durkheim, and Max Weber, stake out their fundamental differences from each other
in the accounts they give of the origins of sociology's object of study, modern
society. Their founders' differing accounts of why modernity arose shape the way
their respective followers conceive of society as it is today. More recently
than Marx, Durkheim, and Weber, historians have created an enormous literature
devoted to studying in much greater detail exactly how and why the change from
medieval Europe to the modern global economy happened. (Another enormous
literature documents the modernization of non-European peoples.) Much of this
literature has come to be known as "studies in historical discontinuity,"
centered in France among the Annales historians, and identified in the U.S.A.
with the work of Immanuel Wallerstein and his school at the State University of
New York at Binghamton.
Leaving for later (part 6) a more complete discussion of
Marxist explanations of the rise of modernity, and leaving for later (part 7)
post-structuralist deconstructions of "modernity" as a scientific concept,
non-Marxist explanations of why the modern global economy began can, I believe,
for the most part be put in one of five classes:
1. Technological theories, e.g. the concept of the
Industrial Revolution.
2. Philosophical theories, i.e. accounts of the
mathematization of the world, the rise of science, the rise of secular
ethics.
3. Organization of human activity theories, e.g.
theories about specialization and supervision; in factories, in schools, in
bureaucracies, where the transition from traditional to modern stems not so
much from new technology as from what Michel Foucault might call new forms of
the deployment of power.
4. Political theories, e.g. accounts of the rise
and political evolution of the first nation-states, Holland, England, France;
together with accounts of the interaction between internal struggles within
the nation-states, and the economic and military strategies they have followed
internationally.
5. Market theories, i.e. accounts of the
disembedding of the economy from social relations as the geographical scope of
markets was extended.
It may be that all of the explanations of the rise of
modernity so far proposed are wrong, and that some explanation not yet thought
of is right. It may also be that the theories mentioned are incommensurable with
each other, because in each case the definition of the phenomenon to be
explained is different; thus, for example, if it is energy-intensive mass
production industry that is to be explained, then the causal factors identified
and the dates assigned to them may not be comparable to the causal factors and
dates found in, say, an explanation of the decline of empires and the rise of
nation-states --because the explananda are disparate. There may be no
such thing as "modernity" in general, and therefore there may be no general
explanation for its rise.
It seems more likely, however, that the five types of theory
mentioned above have all partially explained a complex reality whose elements
form an interrelated set of cultural structures, and which can usefully be named
"the modern global economy." It seems likely that the best explanation would be
one that accounted for each element and gave it its due weight.
I will outline an argument leading to the conclusion that
the verdict from detailed studies of historical discontinuity comes down, on the
whole, in favor of the fifth of the five kinds of theory I have suggested. The
work of scholars like Fernand Braudel, Immanuel Wallerstein, and Karl Polanyi,
tends to justify seeing the extension of markets as the leading cause of
modernity coming into being. (I am not asserting that these scholars would
accept my argument as valid; my assertion is, rather, that it is valid, and that
the evidence they have amassed supports it.) Modernity's technological,
philosophical, organizational, and political causes can be understood in the
context of explanatory narratives fundamentally shaped by accounts of successive
changes in patterns of trade.
Although Braudel, Wallerstein, Polanyi, and others devote a
great deal of attention to the further question why the European commercial
expansion which extended markets itself came into being, and why it was Europe
and not China or Islam that was the center of commercial expansion, I will not;
I will not consider what caused the enlargement of markets, but will confine
myself to outlining reasons why, given that for whatever reason or reasons it
happened, it, in turn, caused modernity.
5a. Historical
Discontinuity as Explanation
The explanandum (that which is to be explained) is
modernity. The explanans (that which explains) is the enlargement of
markets.
In one respect this explanation is true by definition. One
important feature of modernity is (now) the global economy. Formerly, before it
became truly global, the modern economy was what Wallerstein calls "the European
world-system," incorporating Europe and most of the Americas and parts of Asia
and the East Indies, but not the entire globe. Since one of its essential
characteristics is being a large market area, and since formerly markets were
mainly local; and since, by definition enlarging markets creates an enlarged
market; it follows that modernity (in this respect) was produced by the
enlargement of markets. (Wallerstein would qualify such an analysis as follows:
occasional trade and trade in luxuries, did not produce the historical
discontinuity called the emergence of modernity; the relevant enlargement of the
market consists of regular trade, which includes trade in necessities. I am not
sure I agree with him with respect to luxuries, since luxury trade just like
necessities trade generates profits, moves ships, and creates a livelihood for
those engaged in it; and further, it is hard to draw a line between for example,
pepper from India as a luxury for the rich and pepper from India to make the bad
meat of the poor edible, or between the Santo Domingo sugar trade in its earlier
phases when sugar was a rare luxury and in its later phases when sugar and rum
made from it became mass consumption items.)
Citing the expansion of trade over larger geographical areas
as an explanation is more interesting and more illuminating to the extent that
it explains something other than itself. To the extent that it is plausible to
say that the other important features of modernity were produced by, or at least
facilitated by, trade that extended over vast reaches of the globe, it becomes
more reasonable to identify market enlargement as "the leading cause" rather
than "a contributing factor."
Further, in the case of any given phenomenon which the
proposed explanans is supposed to explain, the plausibility of the
explanation is enhanced by (1) an account of the sequence of events compatible
with the cause producing the effect (Post hoc ergo propter hoc is a
fallacy, but nevertheless effects do not precede their causes, and hence a
proposed explanation has passed a test if it can be shown that the cause
preceded the effect); and (2) an account of the quasi-mechanism by which the
alleged cause produce its alleged effect.
In favor of counting market growth as the cause of an 18th
century Industrial Revolution that took place then because for economic reasons
society was ready for it, is the fact that the steam engine, which powered the
coal mines and the cotton mills, was invented long before the 18th century.
Braudel points out that, "The steam engine, for example, was invented a long
time before it launched the industrial revolution --or should one say before
being launched by it?" The ancient Egyptians had steam engines as toys. As a
further point in favor of seeing market growth as the leading cause factor, a
quasi-mechanism can be cited giving a reason why in the 18th century it became
profitable to use steam engines in mining coal and in manufacturing cloth.
Namely: production on a larger scale for the sake of both exports and an
expanded home market. (Enlargement of markets occurs within as well as between
nations, as local fairs give way to national systems for selling merchandise,
and as barter and the informal economy give way to money.) The point about steam
power could be generalized, although it should not be generalized in a way that
denies the facts adduced by writers like Piore and Sabel to demonstrate that
technology choices are sometimes market-leading and not always
market-led.
The sequence of events also favors counting the growth of
the market economy as the cause, rather than the effect, of its ideological
justification. The seminal ideas of Descartes, Hobbes, Locke, and Newton were
articulated in the 17th century, several centuries after the time when great
trade expansion began. When Hobbes, for example, made fun of Aristotle's concept
of a just price determined by what the buyer and seller respectively deserved,
on the grounds that people would not complain if they got more than they
deserved from a sale, and people should not be heard to complain that they got
less than they deserved if they had freely consented to the sale, there was a
functioning market economy based on arms-length transactions already in
existence in England. When a number of writers hit on generalizing the
achievements of technology in a science of mechanics, and then articulating the
theory of the market as a social analogue of mechanics, there was already a
modern market society in existence to write a theory about.
One can cite mechanisms by which larger markets react back
upon and reshape local everyday life, and thus explain the world which writers
found before them to write about --which, admittedly, the writers reshaped and
partly determined the future direction of, by the very act of writing (provided
that they wrote ideas whose time had come, which, consequently, were read). Such
a quasi-mechanism is the relationship of the continental wool trade to the
enclosure movement. Property rights and every aspect of daily life in English
villages were altered because it became profitable to devote land to sheep
raising for the export trade; it became profitable to usurp the common land
formerly used to produce food and fiber for local consumption. Daily life in the
villages of Guinea was irrevocably altered when the slave traders arrived in
search of human labor to work the sugar plantations of Brazil and the Caribbean;
the plantations, in turn, exported the sugar to Europe, and required from Europe
the means of subsistence to support them, which in turn, meant that agriculture
somewhere had to be reorganized to export food to the sugar plantations.
Examples of such mechanisms at work could be multiplied indefinitely.
The early factories were organized to support production on
a larger scale, which was in turn a function of markets. Parallel considerations
apply to the evolution of hospitals, schools, barracks, and prisons. When Michel
Foucault explains the normalizing of human behavior through the new and more
subtle means of exercising power that is more and more characteristic of
modernity, he frequently cites economic necessity. For example, he cites
thievery on the London docks in the late 18th century as threatening to reach
intolerable proportions ruining commerce, thus making necessary modern police
and the modern prison. In the case of the development of many organizational
features of modernity, the sequence was such that the enlargement of the market
came first; and the mechanism producing institutional change was the need to
establish the institutions that the smooth functioning of a market economy
required.
On the other hand, it seems to be the case, as Foucault
suggests, sometimes implicitly sometimes explicitly, that there is a creepy
vengeful side of human nature that delights in participating in the exercise of
power (and in resistance) even when it serves no useful purpose; and it seems to
be the case that bureaucratic and psychological inertia, and the self-interest
of functionaries, produce results, and elaborate rationalizations for those
results, which are not required by any market imperative; and it seems to be the
case that power has a life of its own that transcends both individual psychology
and collective wisdom. Similar caveats against exaggerating the importance of
the direct and indirect effects of the growth of markets could be made about the
technological theories and philosophical theories discussed above. I don't want
my outline of an argument in favor of a theory of historical discontinuity that
treats the enlargement of markets as the leading cause of modernity to be taken
as an excuse to ignore features of modernity, or constants of human nature, that
market enlargement cannot easily account for.
If one dates political modernity from the rise of
nation-states, it is common to take the Peace of Westphalia of 1648 as a
watershed date. This was the treaty that guaranteed the independence of the
Netherlands from the Spanish Empire, and which laid to rest the juridical
principle that Christendom was in principle a single temporal and spiritual
realm. The Netherlands can be thought of as the first nation-state, and it can
be regarded as showing in a nascent and unusually transparent form some
characteristics all the many nation-states that have since come into existence
have had in common.
Immanuel Wallerstein's thoroughly documented account of the
position of the Netherlands in international trade explains why this
nation-state came into existence, and why the nation-state as an institution
emerged there and then and in the form it took. Admittedly, the word "explains"
here is not used in a sense so strong as to imply that an ineluctable necessity
compelled the nation-state to evolve as it did. But this key fact of political
history is explained in the sense that when we understand the position of the
Netherlands in international trade we can see why it would have been reasonable
to expect in advance, before it actually happened, that the Netherlands would
want independence from Spain's empire, that it would be powerful enough (with
the help of alliances) to win it, and that when independence came the
Netherlands would become a constitutional monarchy dominated by
burghers.
Admittedly, too, the emergence of the first nation-state is
not the only event to be explained in a political account of the origins of
modernity. But it is one important event, and the considerations this event
illustrates can serve to outline this part of an argument for seeing market
enlargement as the leading cause of modernity's rise.
In the 17th century, Dutch merchants became major middlemen
in Europe. Although Spain and Portugal had vast empires rich in silver and gold,
they were short of food. In the preceding centuries the Dutch had gradually
improved their fishing and merchant fleets; they were major purchasers of grains
from the countries on the shores of the Baltic Sea. The Dutch Oost Indische
Companie brought spices and fabrics from far Asia, which were traded, in part,
for Baltic grain. The Netherlands was in a position to supply provisions to the
Iberian peninsula, and in a position to use the precious metals thus acquired to
finance commercial adventures elsewhere.
Given Holland's wealth, and given the source of it, it was
to be expected that the Netherlands would desire to be rid of Spanish taxation
and regulation; it was to be expected that (with alliances) it would have the
power to free itself from the Empire; it was to be expected that the resulting
independent state would recognize, in the words used by Lord Mansfield of the
second nation-state (Britain), that "commerce is become the pillar of the
kingdom." It was to be expected that the first nation-state would be (as
subsequent nation-states have been) a participant in an international trading
system. It was to be expected that its governors would support its merchants by
pursuing policies designed to enable them, and therefore the nation, to prosper.
In the Netherlands as elsewhere, reliance on trading in enlarged markets to
supply the daily bread of the people, led to the establishment of political
institutions that were conducive to trading successfully.
Thus with respect to the origin of the nation-state, the
proposition that commercial expansion is the explanans and political modernity
the explanandum can be shown to be in a significant sense true. It cannot be
shown to be true in the strongest sense of the concept of cause and effect, but
neither is the causal connection so weak as to empty the word "cause" of
meaning. The sequence of events was that commercial expansion came first,
political modernity second. An account of how one could be expected to produce
the other provides a quasi-mechanism showing how the alleged cause operates to
produce the alleged effect.
It is not necessary or desirable to be a reductionist or a
determinist. We need not and should not say that politics is nothing but
economics. We need not and should not say that once 17th century trading
patterns are known it can be rigorously deduced that The Netherlands had to
become an independent constitutional monarchy. The weaker but still significant
claim that commerce is the leading causal factor, and a background condition
operating on the other factors, is sufficient.
To complete the argument it is necessary to show that the
need to find political forms conducive to success in the modern economic world,
which was operative in the case of The Netherlands was similarly present in the
emergence of other modern nations; and it is necessary to show that what is true
of the nation-state is also true of the other main features of modern politics.
I believe that the weight of the evidence amassed by students of historical
discontinuity does show these things --even though, admittedly, the weight of
the evidence also shows that social history is infinitely complex, that there is
no current without a counter-current, and that there is no generalization that
does not require qualifications. As a second set of examples, supporting the
view for which I have an outlined an argument using 17th century Netherlands as
a first example, I would cite and analyze Immanuel Wallerstein's account of the
French Revolution and of the shape modern institutions took in the first years
of the 19th century in his The Modern World-System III: the second era of great
expansion of the capitalist world-economy 1730-1840s.
5b. Historical
Discontinuity as Prescription
The enlargement of markets changed the moral status of the
stranger. From being mainly unknown, presumed on contact to be an enemy, at best
a lost soul whom a saint might convert to the true faith, the stranger came to
be an essential partner in the business of life, the customer, the source of
wealth, even the source of necessities. As local daily life came to be organized
around production for sale in distant markets, the status of the neighbor
changed also; the neighbor became more like a stranger.
Ethics had to change.
The ethics of medieval Europe was, like ethics everywhere,
an element of ideal culture which, although it provided a discourse for
criticizing and for guiding practice, did not describe or govern practice. It
was --like the ethics of many other civilizations and cultures-- an ethics that
prescribed self- discipline both for the improvement of one's own character and
for the good of others and the community. It was an ethics suitable for
communities where survival was always an issue, where individuals and families
relied for survival on the protection and food provided by neighbors (be they
superiors or inferiors) who owed allegiance to the same lord and prayed to the
same God. We pay special attention to medieval Europe not because it was
intrinsically more important than any other pre-modern or non- modern culture,
but because Europe turned out to be the part of the world where, at the end of
the medieval period, the modern system that became today's global economy was
born.
Life was precarious. Population increased slowly, and in
some decades declined. Plagues and poor harvests, the latter often leading to an
outbreak of the former, undid the effects of fecundity. The medieval settlements
in Greenland died out completely, leaving no survivors. Warfare was endemic
--with moors from the south, tatars from the east, Vikings from the north, as
well as with feudal lords of Christendom fighting each other. Whole villages
were exterminated by war, their farms pillaged and destroyed "to the
root."
The population was overwhelmingly rural. Braudel estimates
that even in 1500 only 10% of the English and 2.5% of the Russians lived in
towns with more than 400 inhabitants. The main form of production was manorial,
producing for use more than for exchange; for barter more than for sale; for
local fairs more than for long trade routes to exotic destinations. The peasants
who produced food for the knight of the manor were the knight's servants in
peace, his infantry in war. The knight was the protector of his
people.
Medieval Europe produced a systematic ethics of conventional
solidarity of a type typical of traditional civilizations. It was elaborated
--in a way also typical of traditional civilizations-- in the form of
commentaries on sacred texts. One of the biblical names for God was agape
(love). In Saint Thomas summaries of medieval thought, caritas, the Latin
translation of the Greek agape was the centerpiece. (This is my
interpretation of Thomas, and I think it is a straightforward reading; many
commentators, reflecting today's scholarly concerns, find the centerpiece of
Thomas' thought to be his epistemology, his theory of meaning, or his
onto-theological hierarchy.) Caritas was the basis of moral obligation;
it was also the source of joy (gaudium) and of peace (concordia).
It was the basis of the duty of the sovereign to care for the people; it was the
basis of everyone's duty to perform the seven corporal works of mercy, the first
of which was "feed the hungry." (The seventh was "bury the dead.") Law was
defined as an ordinance for the common good made by the one whose duty is to
care for the community.
This is the context of the just price. The police of
medieval Paris were instructed to supervise the markets, and in so doing to
assure that food would be plentiful and cheap. In the medieval ethical system it
was the duty of the peasantry to produce food and to make it available at low
(just) prices; they could legitimately be compelled to do so. Merchants who
interfered with just prices by committing such crimes as "forestalling" (meeting
the peasants on their way to town, buying their produce, and then taking it to
town themselves to sell it for a profit) were believed to deserve
punishment.
As the medieval period drew to an end, in the commercial
expansion of the 15th and 16th centuries, a modern economy was born. When,
later, there were technological, philosophical, organizational, and political
changes; and when modernity expanded further to become a global economy; these
further changes were conditioned by, and to a not inconsiderable extent and in a
not insignificant sense they were caused by, the commercial expansion that had
already taken place. The historical discontinuity wrought by commerce required
discontinuity in ethics.
It had to become possible to buy and sell with any people
anywhere, allowing them to have their own religion and way of life, but imposing
on them universal norms requiring compliance with bargains struck in business.
As the centers of commerce, the towns, grew, the expectation that people would
share their goods with indigent neighbors had to cease to be a moral and legal
requirement, although it might be allowed to continue as voluntary generosity or
as a duty self-imposed for private religious motives. Particular moral rules
needed to be repealed: the rule against charging interest on loans, the rule
forbidding a person to sell an item for more than was paid for it, the rule
allowing the poor to steal when compelled to do so by need.
What expanding markets needed was a revival of the Roman jus
gentium, the law of all nations, the common law of commerce used in Roman times
when peoples of many cultures came together to buy and sell in markets. And that
is what first Europe, and then the world, got. Revived Roman law became (even in
England, whose difference from the continent in this respect is often
exaggerated) the basis of the civil law which gradually replaced the
confessional, the canon law, and scripture as the source of public moral and
legal authority. Backward areas that still did not have civil codes in 1800 had
codes imposed on them by Napoleon's armies; when the Napoleonic tide receded the
codes remained. Outside Europe civil codes came with colonization, or else with
modernizing elites, such as the Young Turks or the liberals who led the
revolutions of the Latin American republics against Spain. Europe moved away
from what Ferdinand Tonnies called a Gemeinschaft (from the German
gemein, common) a community, whose principle is unity; and toward what
Tonnies called a Gesellschaft (from the German Gesell, companion,
partner, fellow, brother member), a society, whose principle is mutual respect
for the rights of independent persons.
But the historical discontinuity of ethics needed something
more. It needed a worldview in which the normative principles that governed
secular life in the factory and in the marketplace could continue to enjoy
legitimacy because they could make sense --if only because so long as all the
cosmologies were religious, human behavior could only make sense in religious
terms. There had to be, and there was, an historical discontinuity in
metaphysics.
5c. Historical
Discontinuity as Metaphysics
That international trade theory is derived from economic
theory, and that the latter in its principal versions presupposes the existence
of certain institutions and ideas (markets, property, contracts ...) that I have
characterized as modern, is not difficult to establish. What is perhaps more
difficult is to show how the main concepts underlying international trade theory
were, specifically, part of a metaphysical sea-change. What I think I need to
show is that in the birth of the global economy there were conceptual
discontinuities, and not simply cumulative advances from what Adam Smith called
"early and rude state of society" toward higher and higher levels of what he
called the progress of "improvement."
I shall make my case for saying that a discontinuity in
metaphysics made international trade theory possible by tracing the evolution of
the concept of "rent."
As a limbering-up exercise for the mind, before considering
rent it may be helpful to broaden the context by citing some facts from
prehistory and from child development, even though they are not, strictly
speaking, relevant. In Before Philosophy, H. and H. A. Frankfort wrote,
"...there is justification for the aphorism of Crawley: `Primitive man has only
one mode of thought, one mode of expression, one part of speech --the personal.'
This does not mean (as is so often thought) that primitive man, in order to
explain natural phenomena, imparts human characteristics to an inanimate world.
For this very reason he does not `personify' inanimate phenomena..." Somewhat
similarly, Jean Piaget writes, concerning the judgment and reasoning of young
children, "...originally the child puts the whole content of consciousness on
the same plane and draws no distinction between the `I' and the external world.
Above all we mean that the constitution of the idea of reality presupposes a
progressive splitting-up of this protoplasmic consciousness into two
complementary universes --the objective universe and the subjective."
These brief allusions to early peoples and to early
childhood may, by marking beginnings, serve to suggest that the evolution of the
mental frameworks within which human symbolic functioning takes place has a
direction. The suggested direction of this evolution is away from
undifferentiated thought suffused with personal qualities. It is toward thought
that is progressively more articulate and more objective. The little piece of
metaphysical history that is about to be outlined, the history of the idea of
rent from the 13th to the beginning of the 19th century, can be regarded as a
fragment in a much larger process of mental evolution.
The practical utility of this brief reminder that the
history of thinking about rent, or, for that matter, the history of thinking
about anything, is a part of the history of thinking, is that it may enlarge our
ability to think of rent as a malleable concept. The evolution of mental
frameworks may not be over yet. (When comprehensive mental frameworks are
deliberately made into intellectual systems they are traditionally called
"metaphysics.") Our present stage of mental evolution may be only a step toward
a more intelligent future in which the concept of rent, along with other
concepts, will be more articulate and more objective than it is now. And, on the
other hand, it may be the case, as scholars who have devoted themselves to the
study of ancient myths incessantly tell their readers and audiences, that
valuable ancient wisdom, which somehow went along with conceiving of reality in
an undifferentiated manner suffused with personal qualities, has been lost
somewhere along the way. If so, it may be easier to recover the lost wisdom if
we remember that economics and the global economy, which are, respectively,
today's dominant discourse and dominant practice, grew out of earlier forms,
which, in turn, grew out of still earlier forms.
According to the Oxford English Dictionary the word
"rent" comes from the Old French rente, which comes from the popular
Latin rendita, which comes from the classical Latin reddita, a
form of the verb redare, which is formed from dare, "to give" and
the prefix re, and which meant "to give back." The O. E. D.
suggests a cross-reference from "rent" to "render," which has the same Latin
source, and which, of course, is sometimes a synonym for "surrender."
In the early common law of England, the words "rent" and
"render" were sometimes used interchangeably. "With a render of rent, which in
those days was of Corn or other Victual." "It is frequent in domesday-book,
after specifying the rent due to the crown, to add likewise the quantity of gold
or other renders reserved to the queen." "They swore ... that they would ...
make such renders from the land, as had been done before to any other
King."
From these brief etymological remarks it can be surmised,
correctly I believe, that at first the word "rent" was used along with "render"
and other terms to refer to the tribute paid by the feudal inferior to the
feudal superior. Land was most frequently held by the feudal inferior under
socage tenure, by which the inferior became the liege man of a feudal baron.
Each had duties to the other in the relationship. The most important of the
liege man's duties was to deliver food to his lord. The most important of the
lord's duties was the military protection of his vassals. Rent was at first paid
mainly in kind; it was only with the passage of time and the increasing use of
money that it became customary to pay a certain sum of money in lieu of
surrendering a certain portion of the harvest.
By the time when economists came to write about it, rent had
already become the price paid for the use of land. There was a lingering
awareness that this price had its origin in the subjugation of some people by
others. Thus Adam Smith writes, "As soon as the land of any country has become
private property, the landlords, like all other men, love to reap where they
never sowed, and demand a rent even for its natural produce. The wood of the
forest, the grass of the field, and all the natural fruits of the earth, which,
when land was common, cost the laborer only the trouble of gathering them, come,
even to him, to have an additional price fixed upon them. He must then pay for
the license to gather them, and must give up to the landlord a portion of what
his labor either collects or produces. This portion, or, what comes to the same
thing, the price of this portion, constitutes the rent of land...."
True to the mechanistic psychology employed by many of the
advanced thinkers of his time, Smith declared human nature to be such that
landlords would raise rents as high as they could. It thus became a fact of
nature, and a premise to be regarded as a cause when studying its effects, that
in order to obtain the use of land it was necessary to pay as much as the tenant
could afford to pay, for that was the sum without which permission to use the
land could not be obtained. "Rent, considered as the price paid for the use of
land, is naturally the highest which the tenant can afford to pay in the actual
circumstances of the land. In adjusting the terms of the lease, the landlord
endeavors to leave no greater share of the produce than what is sufficient to
keep up the stock from which he furnishes the seed, pays the labor, and
purchases and maintains cattle and other instruments of husbandry, together with
the ordinary profits of farming stock in the neighborhood."
It was thus easy to conclude that rent was a quality of a
physical object, most notably the land. Since the moral factors were held
constant, they dropped out of the equation; they became invisible. Two of the
invisible moral factors were: (1) The institution of land ownership; and (2) The
moral compass guiding the landlord. Rent attained the metaphysical status of a
natural quality of a physical object. Together with its new metaphysical status,
rent attained, from a normative (legal and moral) point of view, the status of a
given in a constellation of rent-related institutions. These rent-related
institutions, which presuppose the land yields rent, included, or soon came to
include, the duties of trustees holding land in trust, the duties of managers
holding land as agents for the owners, the holding of land in endowments for
educational and eleemosynary foundations, landholding by corporations whose
directors have fiduciary duties to shareholders, land burdened with debt on
which payments must be made to banks, the payment of property taxes by the
owners of the land, land owned by pension funds, and so on ... It became, and it
now is, impossible to modify rent, as a concept and as an institution, without
also changing the courses of the other stars in the normative constellation of
which rent is now a part.
The objective nature of rent as a quality of the land itself
was classically articulated in 1817 by David Ricardo in his theory of rent.
Ricardo distinguished between "rent" as a word in ordinary language and "rent"
as a technical term employed in the science of political economy. The latter he
defined as payment for "the original and indestructible powers of the soil."
When a country is first settled, there is no rent. The time of first settlement
is, "...when land is most abundant, when most productive, and most fertile..."
Then nothing is paid for the powers of the soil because the cost of farmland
consists entirely of the labor and capital required to improve it. "...it is
only when its powers decay, and less is yielded in return for labor, that a
share of the produce of the more fertile portions is set apart for rent." The
rent of a particular piece of land, the "quality of the land," which makes labor
on it more productive by pairing it with natural fertility, is measured by the
difference in value between the crops this particular piece of land will
produce, and what can be produced on the worst land then pressed into use (with
equal labor).
(The worst land then pressed into use has at any given time
become cultivated because of the growing demand for food. The worst land does
not produce any rent. It is marginal. When there is a slight drop in demand,
this worst land will not be used at all, and when the worst land is cultivated
it yields just enough to pay the cost of working it.)
Ricardo's theory of rent has often been cited as a paradigm
showing what it means to be a law of economic science. It is non-obvious,
quantitative, and empirically testable. Once rent becomes a quality of objects,
economics as a science is off and running. Thenceforth, in analyzing the prices
of commodities, the rent that must be paid to produce them can be studied as one
of the causes of the effects observed. Income streams consisting wholly or
partly of rent can thenceforth be treated as objective, natural phenomena; rent
streams of income, and by extension of the metaphor other streams of income too,
can be measured and studied in a manner analogous to the hydraulic study of
streams of water.
The transformation of the concept of rent was a part of a
metaphysical discontinuity, and a metaphysical discontinuity was its context.
Rent evolved hand in hand with a world-change toward a world where personal
relationships counted for less, and objective facts counted for more. As the
world changed, worldviews changed. In terms of human welfare, much was gained
--the change indeed represented what Smith called the progress of "improvement"
-- but there was loss too. In Martin Fierro, a classic of Argentine literature,
the hero laments the fate of the gaucho in words that mock modernity:
Pues todos son sus senores Sin que ninguno lo
ampare
Everybody wants you to call them "Sir" (senor), but
nobody protects you.
6. Marxist
Theories and the Feminist Theory of Maria Miles
The unsettling of traditional ways of life caused by the
coming of modernity was first felt and discussed as a religious crisis. It took
several centuries in the West to get to the point where social issues could be
framed in terms of debates between competing secular ideologies. Even then, even
now, ghosts of ancient religious ideals hover about the subtexts and the
silences of the social sciences, as ghosts of Enlightenment humanism hover about
the subtexts and silences of the genealogies of Michel Foucault. When modernity
arrived pre-modern traditions did not depart. The West itself--like the rest of
the world--is an alloy, a split-level culture, in which the ancient ideals
typically expressed in religious discourse have remained alive as dialogue
partners of modernity, and as elements in a series of cultural
syntheses.
The theories that I am counting as Marxist are theories that
explain international trade and the global economy through the idea of
"accumulation" developed by Karl Marx. "Accumulation" is intrinsically connected
with other key Marxist ideas, such as surplus value, commodity, the labor theory
of value, and the private appropriation of the social product. I am including in
the same discussion Maria Mies's book Patriarchy and Accumulation on a World
Scale because she refers to Marxist ideas frequently, either to disagree
with them or, as in the case of "accumulation," to employ them. Marxist
theories, and also Mies's theory, provide powerful scientific arguments in favor
of an egalitarian and communitarian organization of society. Their socialism,
or, in Mies's case, feminism, projects a future cultural synthesis of modern
ideals of liberty and equality with a holistic sense of society as a great
mutually interdependent family. In this latter respect their visions of a better
future are like the visions of brotherhood and sisterhood found in ancient
sacred texts.
6a. Marxist
Explanation
Marx and Marxists explain international trade, and, more
generally, the global economy, as a search for profit, or, more precisely, as
accumulation. (In making this generalization I exclude, in addition to the many
Marxists I have not read and do not know about, Louis Althusser, who, although
he was a Marxist advanced ideas on causal explanations more conveniently
discussed together with the post-structuralists, below in Section 7.) In order
to discuss the global role that Marxists assign to "accumulation," it is first
necessary to consider "profit."
Much of Volume One of Marx's Capital is devoted to
discovering "the secret of profit-making." Before Marx, Adam Smith had given
what can properly be called a moral explanation of profit, even though in
Smith's work the moral element is in the process of disappearing. Smith's
explanation is that the entrepreneur would not be willing to invest capital
unless he expected to make a profit. If there were not profit to be made, the
entrepreneur would, instead of undertaking a business venture, lend out his
money at interest. He would, indeed, prefer to lend out his money at interest
even if he could expect a profit from running a business, if the expected profit
from the business were smaller than the interest he would get from lending.
Similarly, the moneylender would not be willing to part with his money unless
the borrower paid interest --and, indeed, interest in excess of, or at least
equal to, what could be gained from lending to someone else (with appropriate
adjustments made for terms of repayment and degree of risk).
What makes Smith's explanation of profit irreducibly moral
is its reference to the will of the entrepreneur. The human will is the very
same entity which, often but not always under the name of "spirit," was, and
still is, construed by religion to be in need of salvation. Actions performed
after deliberation and choice were, and still are, regarded by ethics, including
secular ethics, as acts for which the person is responsible. Willful actions can
be praised as good and right, or condemned as bad and wrong, just because they
are acts of the will.
Smith uses as the explanatory principle, which explains
profit, the will of a stylized human person; i.e. the will of homo economics, an
ideal type. Since it is the will that explains, it is necessary to examine
Smith's account of profit in the light of appropriate categories for the
analysis of deliberate human action, such as those proposed in ancient times by
Aristotle, and those proposed by the twentieth century philosophies of human
action of Stuart Hampshire, Stephen Toulmin, Rom Harre, and others. In
Aristotelian terms, the conduct of the entrepreneur needs to be analyzed with
the categories of deliberation, choice, habit, character, rule, and convention
(that is to say, ethics).
Smith's account of profit leaves room for realism and
accuracy because the reference to the will of the entrepreneur allows for the
possibility that he or she, functioning as an acting human person, might
deliberate differently and might decide otherwise. It leaves open the
possibility that the practices and conventions of the milieu, which guide normal
action, might prescribe conduct somewhat different from that of the homo
economics Smith supposes. The person might decide to loan money without charging
interest -- indeed, according to canon law, and according to the guidebooks used
by confessors even long after the middle ages, making zero interest loans is not
merely a logical possibility; it is sometimes the course of conduct required by
a moral imperative. It is one of the many types of action that grace empowers
the human person to perform. Upon baptism caritas (the Latin term for
agape) enters the human heart, and --so the mainstream traditional
doctrine goes --caritas becomes thenceforth the ruling principle of all the
person's actions.
Smith's reference to the will also leaves open the
possibility that if interest is to be charged, or if goods are to be sold at a
profit, the rate of interest or profit will be a conventional rate, i.e. a
customary rate, i.e. an ethical rate (according to the root meaning of the word
"ethics," and in the sense of the German Sittliche). Allowing for this
possibility is a step toward realism and accuracy, as has been shown by Cyert
and March in A Behavioral Theory of the Firm, and by many others who have
documented the roles played by custom, by ethics, and, moreover, by friendship,
in the real world of business.
Smith, by explaining profit by reference to what the
entrepreneur will or will not do, leaves open the door to a social psychology or
an anthropology of business which would study the real life of human beings --
which is a moral life, embedded in the normative conventions of language and
daily practice. Having left the door open, he declines to enter it, and prefers
to build political economy on the basis of his own few and scattered
observations, which serve to confirm his belief that homo economicus, is
an ideal type which can be relied on to explain what humans have done and to
predict what they will do next. Early in the 20th century, Vilfredo Pareto, the
Austrian economists, and the others who are generally considered the victors in
the Methodenstreit (the battle over the methodology of economic science in which
those who took economics to be a branch of history, which studied the economic
norms prevailing at any given time and place, are generally thought to have
lost) made the validity of Smith's hypotheses about the behavior of his ideal
type a matter placed beyond the reach of empirical inquiry, because of the way
they defined economic science. Real economics, pure economics, according to
Pareto, takes as its field of study the behavior of profit maximizers. Pareto's
defense of Smith has the consequence that economics may well be --as Nicholas
Kaldor and others have indeed said that mainstream economics was-- an arcane
academic subject which does not apply to most of the phenomena in fact observed
in the world.
Milton Friedman, a 20th century self-styled "positive
economist," justifies Smith and himself by giving a reason why entrepreneurs who
do not seek to maximize profit can be disregarded by economic science. Friedman
wrote that a businessman who does not seek in some way to maximize profits "will
not be in business for long." The existence of such people, according to what
Friedman wrote in this particular unguarded moment, may safely be ignored by
social science because their own irrational behavior will soon cause data about
them to disappear from all equations. Friedman thus overlooked the findings of
behavioral economics and economic anthropology; he overlooked the histories of
civilizations where homo economicus was unknown which survived for centuries; he
overlooked the existence of the nonprofit sectors of the economy.
Nevertheless, one-sided as the claim that non-profit-
maximizers "will not be in business for long" is, it is a claim about the proper
methodology for economic research that is the bearer of some important truths
about social structure. It is quite true that the competitive institutional
structure of modern economic life is such that people are often compelled, or at
least pushed, to act like homo economicus whether they want to or not,
and whether their moral compass points them in that direction or not. Friedman's
point does not imply that Aristotle was wrong to say that voluntary human action
is the product of deliberation and choice. Friedman's point does underline the
fact that what Marxists call "the competition of capitals" does impose severe
constraints. These constraints can be described as limitations on the moves that
players who wish to remain in the game can make in the complex language game
called "capitalism." Certain moves lead to forfeit of capital, to what Smith
called "ruin," and the player is thenceforth demoted to the working class; or,
even worse, the player is demoted to the ranks of those who have no money at
all, in a world where all the necessities and conveniences of life must be
purchased with money. In capitalist society, in terms cited by Braudel, he or
she who has no money "wanders dead among the living."
Marx did not aim to broaden Smith's vision. Instead, Marx
aimed to exploit the internal contradictions of classical economics. Like a
guerrilla army that acquires its weapons by capturing them from government
troops, Marx wrote a critique of bourgeois political economy that created out of
the framework of concepts that Smith and others had constructed, a powerful
ideology for the working class. Marx mocked economists like Smith for failing to
notice that according to their own premises, exchanging commodities at their
values does not yield any surplus of value (Mehrwert). Therefore, if the
classical theory of the market were correct, making a profit would be, as a
general rule, impossible.
Although Smith's homo economicus may desire a profit,
and may be unwilling to invest if no profit can be expected, it follows from
Smith's postulates that profits happen only in unusual circumstances, where the
capitalist succeeds in cheating, or happens to have the good luck to buy at less
than market value and/or to sell at more than market value. The exchange process
produces no surplus. "Turn and twist then as we may, the fact remains unaltered.
If equivalents are exchanged, no surplus value results, and if non-equivalents
are exchanged, still no surplus value. Circulation, or the exchange of
commodities, begets no value." (Capital, pp. 181-82) Much of the first
volume of Marx's Capital is devoted to analyzing this contradiction, and
to solving the riddle of profit. Thus profit-making becomes the
explanandum, that which is to be explained. The labor theory of value
(more specifically, the use value of labor-power) turns out to be the
explanans, that which does the explaining. By explaining what classical
bourgeois economics could not explain, Marx established the scientific
superiority of Marxism.
This scientific superiority is achieved by moving the
analysis to a deeper level --moving downward in metaphysical space from the
superficial level of the surface of society, the level of circulation, in order
to encounter Reality more intimately and more truly in the underlying depths of
society, at the level of production. The movement of the argument from surface
to depth is dramatized in these famous lines:
"This sphere that we are deserting, within whose boundaries
the sale and purchase of labor-power goes on, is in fact a very Eden of the
innate rights of man. There alone rule Freedom, Equality, Property, and Bentham.
Freedom, because both buyer and seller of a commodity, say of labor-power, are
constrained only by their own free will. ... Equality, because each enters into
relation with the other, as with a simple owner of commodities, and they
exchange equivalent for equivalent. Property, because each disposes only of what
is his own. And Bentham, because each looks only to himself. The only force that
brings them together and puts them in relation to each other, is the
selfishness, the gain and the private interests of each ....
"On leaving this sphere of simple circulation or of exchange
of commodities, which furnishes the 'Free Trader Vulgaris' with his views and
ideas, and with the standard by which he judges a society based on capital and
wages, we think we can perceive a change in the physiognomy of our dramatis
personae. He, who before was the money-owner, now strides, in front as
capitalist; the possessor of labor-power follows as his laborer. The one with an
air of importance, smirking, intent on business; the other timid, holding back,
like one who is bringing his own hide to market, and has nothing to expect but
--a hiding." (Capital, Volume I, pp. l95-96)
Between the lines of Marx's explanation of profit, in its
silent subtext the ancient ideals of love and justice chant inaudible
enthymemes, as a mute, invisible chorus. It turns out that the secret of
profit-making is the exploitation of labor. (The chorus: "...inasmuch as ye have
done it unto the least of these, so ye have done it unto me.") The capitalist
buys labor- power at its exchange value, which tends to fall toward --here as
elsewhere Marx follows Smith and Ricardo-- the cost of buying the means of
subsistence necessary to keep the laborer alive. Labor- power's exchange value,
like the exchange value of everything else, naturally tends toward its cost of
production. The capitalist, having purchased labor-power at its fair value, then
uses the commodity that he has bought and therefore owns. He puts the laborer to
work. At the conclusion of the labor process, the capitalist owns the products.
The products are then sold at their exchange value, and it turns out that they
have value-added, a surplus value; labor-power is not only a source of value,
but a source of more value than it has itself; its use produces an exchange
value in excess of what it cost. Thus it is by privately appropriating the
product of the social effort that the capitalist makes a profit.
But this is just the beginning of the story. Money ("value
in money-form") having been metamorphosed into more money, the resulting surplus
of money can now be thrown back into the acquisition of more elements of the
production process --and the cycle begins over again. Surplus value is thrown
afresh into the production of more surplus value, over and over. It accumulates.
It must accumulate, and continue accumulating, for only the continuous
repetition of its self-aggrandizement produces profit (and, as by-products,
employment, goods, and services.) The concept of necessary self-expansion of
capital leads Marx and Marxists to think of the global expansion of capitalism
as a necessary historical process, an "accumulation on a world scale." Whatever
the Chorus may think, from a scientific perspective, even the capitalist
himself, viewed in historical perspective, is but the agent of forces that
neither he nor anyone else controls "From a concrete point of view, accumulation
resolves itself into the reproduction of capital on a progressively increasing
scale." "...the social wealth becomes in an ever increasing degree the property
of those, who are in a position to appropriate to themselves again and again the
unpaid labor of others." "Moreover, the development of capitalist production
makes it constantly necessary to keep increasing the amount of capital laid out
in a given industrial undertaking, and competition makes the immanent laws of
capitalist production to be felt be each individual capitalist, as external
coercive laws. It compels him to keep constantly extending his capital, but
extend it he cannot, except by means of progressive accumulation." "Accumulate,
accumulate! That is Moses and the prophets."
David Harvey synthesizes the scientific explanations of the
global economy offered by several contemporary Marxists. Harvey takes it for
granted that where there is capitalism, there is accumulation. He adopts the
concept of "regimes of accumulation," which implies that while as long as there
is capitalism there is always accumulation, nevertheless the form and method,
the "regime," of accumulation varies from time to time and from place to place.
"A particular system of accumulation can exist because 'its schema of
reproduction is coherent.' The problem, however, is to bring the behavior of all
kinds of individuals --capitalists, workers, state employees, financiers, and
all manner of other political-economic agents-- into some kind of configuration
that will keep the regime of accumulation functioning."
Harvey characterizes the present state of the global
economy, since more or less l973, in partial contrast to previous phases through
which global capitalism has passed, as a period of "flexible accumulation."
Among its characteristics are rapid change, flux, uncertainty, more flexible
labor processes including more temporary workers and less job security, more
open markets, greater geographical mobility of capital, rapid shifts in
consumption practices, a revived entrepreneurialism, neo- conservative ideas
(known as "neo-liberalism" in most of the world), postmodern culture, the
breakup of United States economic hegemony, new and sometimes exotic financial
services, a decline in manufacturing and a rise in the service sector, new
industrial ensembles in hitherto underdeveloped regions, high levels of
structural unemployment, and the rollback of labor union power. The new trends
which characterize this new, flexible, regime of accumulation, were themselves
produced by the crisis of the previous regime of accumulation, which Harvey
broadly characterizes as Fordist-Keynesian, which for a variety of reasons) was
unstable. The pre-1973 Fordist-Keynesian regime of accumulation was unable to
keep the accumulation process going, and therefore it had to be
replaced.
Harvey finds, faithful to Marx's original vision that
capitalism would eventually produce the conditions of its own revolutionary
overthrow, that today's global economic regime, flexible accumulation, is itself
also unstable, more a "temporary fix" than a permanent solution. Flexible
accumulation,"...has to be seen as a particular and perhaps new combination of
mainly old elements within the overall logic of capital
accumulation.")
Maria Mies in Patriarchy and Accumulation on a World
Scale discusses the place of women in the international division of
labor,"...the relationship between women's exploitation and oppression and the
paradigm of never-ending accumulation and 'growth'"...) Mies believes
that,"...the confusion in the feminist movement worldwide will continue unless
we understand the `woman question' in the context of a global division of labor
under the dictates of capitalist accumulation."
Mies's scientific explanations of the global economy can be
expressed in terms of three phases or stages. In the first and earliest stage,
the stage where the main part of her analysis begins (but not without some
attention to still earlier times), the explanandum, that which is to be
explained, is the oppression of women, and, generally, the oppression of
everybody except the dominant males. Patriarchal control over women, as she
conceives it, historically has been intrinsically interwoven with the
establishment of class societies. The explanans, that which explains, is
violence and coercion.
The second stage is what Mies, Marx and others call
"primitive accumulation." It is the period before the capitalist global economy,
properly speaking, gets underway, when the initial capital stock of the wealthy
classes of the European core countries was accumulated. It is a phase
characterized, according to Mies and other authors (she relies, among others, on
Marx, Immanuel Wallerstein, Carolyn Merchant, and Barbara Ehrenreich) by, among
other things, commercial expansion and the discovery of the new world. There
were a series of opportunities for capital accumulation (one was piracy, another
was feeding the working classes potatoes instead of grains, which made it
possible to lower their wages...). There were strong incentives to amass capital
for commercial ventures; large funds were also needed, then as now, to pay for
wars, for governments, and for upper class luxuries. The explanans, that which
explains how primitive accumulation was accomplished, is, once again, violence
and coercion, but usually under the mask of some moralistic pretext. Mies
especially emphasizes the witch hunts, in which millions of women, and a smaller
number of men, were accused of heresy, tortured, and burnt. Their property was
confiscated. "The persecution of the witches was a manifestation of the rising
modern society and not, as is usually believed, a remnant of the irrational
`dark' middle ages." Witch hunts were a mechanism used to subordinate women, to
quell heterodox sects, and, at the same time accumulate capital."
In the third phase the explanandum is the modern
global economy. The explanans is the logic of accumulation. Mies gives
parallel accounts of the fate of women in the third world under colonization,
and the fate of women in the first world under what she calls "housewifization."
She shows that family structures and gender relations regularly followed the
pattern that was dictated by profit calculations. For example, in the Caribbean
islands, when it was more profitable to buy new slaves from Africa than to breed
them on the islands, the slave women were prevented from marrying and not
allowed to have children. When it became more profitable to treat the African
territories as colonies with their own labor forces to be used in Africa, and to
breed slaves on-site in America, then the slave women were evangelized with
pro-family ideologies. For another example, until the middle of the 19th century
the lower classes in Germany and other countries were not expected to marry and
to have families. An ideology which discouraged the formation of lower class
families, and reserved the concept of "family" for the upper classes, helped to
keep wages low. In a later phase of capitalism, however, family formation became
an important source of consumers; the logic of accumulation led to a different
ideology, and to a different role for women. But the evolution of women's roles
in Germany was not independent of industrial Germany's relationship to the third
world; it was part of the same global logic of capital accumulation. "It is my
thesis that these two processes of colonization and housewifization are closely
and causally interlinked. Without the ongoing exploitation of `external'
colonies --formerly as direct colonies, today within the new international
division of labor-- the establishment of the `internal colony,' that is , a
nuclear family and a woman maintained by a male `breadwinner,' would not have
been possible."
Mies brings her analysis down to the present day. "Asian
women in the electronics industry are placed on a global assembly line that
reaches from Silicon Valley in the USA to South-East Asia. On this assembly line
the Asian women do the most monotonous, time-consuming, stress-producing,
unhealthy jobs. They have to weld together under a microscope the hair thin
wires which hold the tiny chips together to make them an integrated circuit.
These electronic components are the actual `brains' by which the new computers
and automata are directed. The American and Japanese firms have worked out a
subtle system of labor control which combines methods of direct compulsion with
methods of psychological manipulation. It goes without saying that trade union
activity is prohibited in these factories. In Malaysia, if women are found to
belong to some trade union, they are fired. The firms employ only young women
between 14 and 25. When they marry, they usually lose their jobs. Hence, the
firms save maternity benefits and always have young, inexperienced women who get
some quick on-the-job training. The women have to complete a certain number of
chips per day. A woman from a semi-conductor plant in Penang, Malaysia, said
that every woman worker had to complete 700 chips per day, that they were not
allowed to speak during work, that they were not allowed to move away from the
workplace, that there were no breaks..."
Mies's use of "patriarchy and accumulation on a global
scale" as an explanans provides an effective answer to those who say, "Slavery
and exploitation happened in the past. Today advanced societies have put all
that behind us, and what happened in the past is not the fault of anybody now
living. So let's get on with the task of bringing the backward areas up to the
standards of the advanced areas, and forget about the bitterness caused by
memories of the past." What Mies shows is that the same explanatory principles,
patriarchy and accumulation, explain both capitalism's past and its present.
Whether as an exploited factory worker making microchips in the third world, or
as a doll running up credit card debt in the first world, a woman now is part of
a single global economy. It has the same logic now as it had when some women
were slaves in the sugar plantations of Santo Domingo while other women were
pampered favorites in Paris. Hence it is not true that the past is behind us;
the same causes are still producing similar effects.
Mies's theory is, nevertheless, a delicate balance, perhaps
a synthesis, between, on the one hand, her great and pervasive explanatory
principles, coercion, self-interest, and the logic of accumulation, and whatever
additional factors seem important to explain a particular phenomenon. Included
in the latter are the voluntary acts of persons. Mies is somewhat troubled by
the position taken by Clara Zetkin, a leading 19th-century German socialist
feminist, who spoke in favor of, not against, women staying home and being
dependent on their husband's income. Although Mies does not say so explicitly,
it seems clear that she implies that Zetkin could have taken a different
position, and that if she had taken a different position it would have made a
difference.
Nor did Marx himself deny that the individual person is more
than the helpless agent of economic laws. "I paint the capitalist and the
landlord in no sense couleur de rose. But here individuals are dealt with only
in so far as they are the personifications of economic categories, embodiments
of particular class-relations and class-interests." Marx is usually careful to
say whenever he speaks of what "the capitalist" will do, that he is speaking of
a particular human person only insofar as he or she is regarded as "capital
personified," i.e. assumed to act on the basis of economic
calculations.
In conclusion, where accumulation is the explanatory
principle, human action that is deliberate (and therefore subject to moral
evaluation) is twice buried. It was buried once by classical economics, when
writers like Adam Smith replaced concrete human action with a stylized ideal
type. It was buried still deeper when Marx replaced Smith and Ricardo's account
of the profit motive with the concept of surplus value ceaselessly augmenting
itself through the historical process of capital accumulation.
But it is not irretrievably buried. As Marx implicitly
acknowledges, and as Maria Mies implicitly illustrates, even where the logic of
accumulation is operating, deliberate human decisions can make a difference.
And, further, the fact that accumulation operates at all necessarily reflects
the existence of certain institutions and the performance of certain acts of
will.
6b. Maria Mies's
Prescription, and Marx's
That deliberate human action can make a difference is a
proposition that Maria Mies manifestly believes. She proposes a positive future
for humanity, a "feminist perspective on a new society." The new society is to
be achieved, at least in part, by embracing better concepts (she suggests some),
and by taking deliberate steps to put better concepts into practice.
Conversely, in her historical account of the evolution of
the global economy --this is the other side of the same coin-- negative effects
were often caused by people who had wrong moral philosophies. Mies cites, for
example, A People at School, a book by a Mr. Fielding Hall, who was the
Political Officer in the British administration in Burma in 1897-91. Mr. Hall
reports that when the British conquered Burma they found a people who practiced
the equality of the sexes, and recognized the independence of women; the Burmese
lived at peace under the guidance of the precepts of the Buddhist religion.
"But, instead of trying to preserve such a happy society,..." Mr. Hall believed
so firmly in militarism and in sexism that he thought it was the duty of the
British to impose them on the Burmese. "I can imagine nothing that could do the
Burmese so much as good as to have a regiment |