This is an essay on the approach to economics suggested by Maurice Glasman’s essay ‘Labour as a Radical Tradition’. Glasman’s essay forms part of the ebook ‘The Labour Tradition and the Politics of Paradox’.
An essay on capitalism from Dr.D.
I’m not particularly keen on the ‘Blue Labour’ moniker, but the ideas behind Maurice Glasman’s approach bear serious examination. Interestingly, his approach bears some comparison with that recently espoused by Amartya Sen in his book ‘The Idea of Justice’. This is that it is difficult to win political arguments with abstract ideas, and that practical and localised amelioration of well-recognised wrongs is the best way forward. Glasman (in Labour as a Radical Tradition) looks back to the early days of Labour when the movement of which it was part was defined by relationships and ‘practices that strengthen an ethical life’. These practices included reciprocity, mutuality and solidarity, and they led to actions such as the formation of mutual societies, co-operatives and trades unions. These may not and need not have had an explicit or even coherent philosophical underpinning.
I have highlighted the book by ‘Sen’ ‘The Idea of Justice’ so that I can briefly summarise the gist of the book. Essentially it would seem to seek to develop an alternative theory of justice based on ‘comparative justice’. This is certainly consistent with Dr.D’s previous positivist leanings within economics. I on the other hand espouse the a priori position of justice based upon ‘property rights’. In the past our disagreements hinged upon the veracity of assumptions taken, or stated to be axioms from which progression via deductive logic could take place. I shall revisit this sticking point.
According to Glasman, however, ‘The founders of the labour movement understood the logic of capitalism…and the threat this posed to their lives, livelihoods and environment.’ Maybe they did, but this is somewhat in contradiction of Glasman’s narrative, since the ‘logic of capitalism’ is itself an abstract idea. And it’s not at all clear that we understand this ‘logic’ today, or if we do, whether we know how to refute its conclusions.
I’m not sure who the ‘founders’ actually are, nor their understanding of the logic of capitalism. Glassman has stated that ‘abstract ideas’ are essentially too complicated for the majority of the people, so as Dr. D states, this is somewhat of a contradiction.
‘Capitalism’ can be a slippery concept, but the relevant definition here is a society in which market exchanges are the default mode for organising the matching of goods and services from producers to users and some form of non-commodity means of payment (money) is the default medium with which these exchanges are carried out. Clearly, pre-requisites for such a system are clear and enforceable property rights and widely trusted forms of money. One of the consequences of this is to automatically bring in the first ‘contradiction’ of capitalism. While market exchange may be the default mode of allocation it cannot be the only mode, since justice, policing and bank regulation are not feasibly provided by the market.
Two related, but separate areas of knowledge are conflated. The first and central problem is how best, or most efficiently, to organise individuals or groups of individuals [society] to promote the production of wealth. This is the study of economics or ‘Political Economy’.
The second question falls outside the realm of the positive sciences. Rather, the question now asked is whether the goals of ‘Political Economy’, can be justified as goals, and whether or not then the means employed are ‘just’, which is ‘Political Theory’ and ‘Ethics’.
Such a capitalist system has great advantages in the abstract and frequently also in practice. Market exchanges depend on the mutual consent of the exchanging parties. Rational participants in a market only exchange when they expect a gain, so all market activity produces gains for all its participants. Preventing or reversing any market transaction must make one or more people worse off. With a trusted medium of exchange, essentially any re-allocation of goods and services desirable to all those involved is feasible. Unless a non-market system can somehow replicate the exact distribution of the market then the market system will be preferable. The usual assumption is that the information-gathering power required would be beyond any single human institution. I’m not going to dispute this assumption here.
No major disagreements here.
So, whatever the practices of the labour movement, the logic of capitalism always appears to have been a strong opponent. And it remains so today, despite many failures of the practice of capitalism. The logic of capitalism has to be tackled on its own abstract level. Like all logic, it stands or falls on its assumptions. Logic needs facts before it can give us any conclusions, and not all the assumptions of capitalist logic are fully-fledged facts.
So we get to it.
No economist would deny that the first three of these issues detract from the success of market systems – the debate centres more around to what extent they can be corrected by collective actions such as taxation, regulation, insurance and information management. The fourth is fairly obviously untrue. The last is somewhat more controversial, since traditional economic theory regards money as having little independent consequences for economic activity and distribution.
Well I dispute them, and certainly economists also dispute them.
The falsity of the first three of these assumptions has some well-recognised results. For example, transactions may not take place because one or both parties aren’t sure of what they are getting or whether they are being taken for a ride.
For example the purchase of a second hand car. Where the seller of the car has far more historical information than the potential purchaser. This is of course the purpose of prices and discounting the future to present values. If I suffer from an ‘asymmetry of information’ the present value I assign will be far lower, not knowing the future. So this objection is incorrect.
This is why some things can’t be insured against.
Information asymmetries do relate to insurance. The rather lacking in detail of the statement rather distorts the accuracy of the statement. Information asymmetries can be important, or, they can be far less so. One form would preclude insurance, the other would not.
Class probability means, that we know nothing about an individual outcome, but we know everything about a whole class of events, and are certain about the future. In a lottery, for example, we know how many tickets are in total and how many will be drawn. But that does not say at all, if a particular ticket or tickets will win, and buying more tickets does not increase the chance of winning. An instance of class probability is called risk. It is possible to insure against risk, because the behavior of a class of events (or a reasonable subset of it) is well known.
Case probability means, that we know some of the factors which determine the outcome of a particular event; but there are other determining factors which we don’t know. The cases are individual, unique, and nonrepeatable, their result is uncertain. If in roulette a ball falls ten times on red in succession, the probability, that in the next turn will be the result black, is not greater than it was before. Football games cannot be predicted on the results of last games, nor can be presidential elections.
Sometimes transactions that have a total negative effect on society take place because the negative is ‘external’ to those doing the transacting in that the cost is largely borne by someone else now or in the future. This is the problem of dealing with climate change.
Negative externalities, or the ‘tragedy of the commons’ is a failure not of ‘capitalism’, rather it is a failure of ‘property rights’. Property rights can only be enforced through the ‘law’ which has been monopolised by the ‘State’. The tragedy of the commons is therefore a failure of ‘government’. The apologists for socialism always promulgate this lie.
Sometimes transactions that have a total positive effect on society do not take place because the positive is largely ‘external’ to those doing the transacting. This is the problem of ‘public goods’; items such as clean air and national defence that cannot be produced for private profit because once produced they can be enjoyed by everybody.
Simply nonsense. First, clean air, assuming pollution, should be included under the ‘tragedy of the commons’ as it is a ‘negative externality’. Public goods deal with ‘positive externalities’ that would not be provided due to the ‘free rider’ problem. National defence is always put forward as the ultimate ‘free rider’ problem. Government as a monopoly can only ‘grow’ larger and more powerful through acquiring more territory and population to exploit through theft of property. Capitalism promotes competition, the very anti-thesis of monopoly. Government is the prime institution that promotes aggression and war, which is clearly highlighted throughout history. The larger ‘governments’ have become, the larger and more destructive the wars or potential wars have become.
Thus government promote this idea that they protect us. Nothing really could be further from the truth. It is not us that they seek to protect, rather it is their area and population monopoly that they seek to protect from other governments that are seeking to eliminate ‘market competition’ in monopoly coercion.
Free markets promote free entry and competition. This limits the size of dominant firms and their market power. Without government, areas would return to much smaller areas that are governed through the free market with regards to law and law enforcement, city states. City states would, even if they required a military, would have a much smaller and less powerful military, which would limit military actions. Even should military actions take place, the involvement and duration must be lesser.
Thus the whole myth of government providing protection is a giant propaganda exercise, reinforced by technocrats and apologists who draw their living from the government depredations upon the producers in society.
Capitalism’s most problematic assumptions include:
1) All individuals affected by the outcome of a transaction have a say in that transaction;
This is the argument of ‘negative externalities’ or ‘tragedy of the commons’ which is as already shown, a fallacy.
2) The transacting individual has the necessary amount of information to make the best decision for him or herself;
No individual will have ‘all’ the necessary information, or even if in possession of the information, necessarily draw the correct conclusions therefrom. This is not a failure of ‘capitalism’ this is a failure of ‘humanity’.
3) The transacting individual knows the future;
Again, hardly a failure of capitalism, more a failure of ‘humanity’.
4) Individuals access to and power in the market depends entirely on the value of the skills and resources they bring to the market and nothing else;
True. As it should be. Government intervention via subsidies, tariffs, taxes, regulations, etc. distort the free market and directly lead to inefficiencies in producing societies optimal wealth, thus violating ‘political economy theory’. Second all the ‘interventions’ violate ‘ethics’ as they are theft and in violation of ‘property rights’, thus violate ‘political theory, theory’. On both measures, government is a failure.
5) The ‘logic’ of money doesn’t interfere with the ‘logic’ of market exchange.
Whatever that means?
Economists earn their money by analysing these ?market failures’ and devising corrective taxes and regulations, so perhaps it is less than surprising that most of them are unwilling to propose more radical reformation of such a flawed system.
Time to differentiate ‘economists’. There are technocrat apologist economists, those that dip their beak in the government trough, or seek to, those who have sold their souls, and there are ‘economists’ who espouse the ‘truth’, who are not, and do not seek government positions for power or pay.
The intellectual justification of this unwillingness is primarily contained within two standard conventions of economics. The first is the use of a so-called ‘representative agent’ that replaces the multitude of interactions between market participants with a single individual who may be both consumer and producer, may be infinitely lived and may well have perfect knowledge and foresight. The second is the so-called ‘neutrality’ of money (and frequently the complete absence of it) in economists’ models.
Both concepts being total nonsense. The rational agent, economic man having been demonstrated to be just so much hogwash by numerous writers on economics. The neutrality of money again has been refuted via the correct Misean ‘Theory of Money’.
The gap between the real world of markets and the economists’ world of the self-contained representative agent should be obvious – the real uncertainties and complexities in the meshing of human behaviours, incentives and use and abuse of natural resources are simply glossed over and ignored.
The gap between a world with and without money, beyond that simply of convenience, is perhaps less obvious. Standard economic theory has little time for analysing how money acquires and keeps value. Money just arrives from outside the world of humans and real goods and is valued.
‘Standard economic theory’ is then fallacious and should be discarded as quickly as possible. The ‘Regression Theorem of Money’ describes how money first acquired value. ‘Time preference’ defines how money values fluctuate and why. This is in relation to a commodity money, that isn’t continually debased via government theft, although it will also explain the ‘value’ of a constantly depreciating money. ‘Standard economic’ theory is no ‘theory’ at all. A theory to be valid must fulfill ‘universality’ which is ‘true for all times and places’.
No source of this money is identifiable. If there is more of it compared to goods available for transactions then prices will rise across the board (including wages); if there is less of it compared to goods available for transactions then prices will fall across the board. No other effects are allowed.
The superficiality of this analysis lends itself to convenience, rather than any penetrating insights.
The real features of money in a modern economy are rather different. It does have identifiable sources; either a government-backed central bank or licensed commercial banks.
Again, only a version and distortion of the truth. Fiat money is a shadow of commodity money, designed to serve the holder of the monopoly, not the free market of exchanges. The very function and purpose of money is distorted and rendered highly inefficient through the use of ‘fiat’ money.
Since money is a claim on real goods and resources these institutions can only give value to money by ‘capturing’ goods and resources on which these claims can be exercised. The processes by which these goods and resources are captured either by the state on behalf of the central bank, or by the commercial banks, are critical to economic outcomes.
Replace the word ‘capture’ with ‘expropriate’ and you move closer to the truth and accuracy. When you have ‘government’ engaging in theft, and legitimising ‘theft’ for the banking system, is it any wonder that problems develop? Again, this is not a failure of ‘capitalism’ this is a failure of ‘government’.
These processes are triangular transactions between the issuers of money, its recipients and the holders of the goods or resources to be ‘captured’. These transactions are prone to similar failures as ordinary goods transactions and so add a further distance between the economists’ economy and the real world economy. Moreover, money transactions often produce total anonymity between the producers and ultimate users of goods, magnifying any information deficits. In addition, because the total ‘quantity of money’ is neither easy to ascertain nor fixed it is difficult to grasp how much any particular quantity of money relates to the total goods upon which its claim can be exercised. This tends to veil issues of market access and power.
The constant ‘money creation’ of government, the theft of property by government through this process of money creation leads to the ‘market failures’, which are of course not market failures at all, they are failure of the legal system, under the monopoly control of government, to prosecute the systemic and systematic theft of ‘property rights’ by government exercised against their populations, who are virtually imprisoned.
While a look at where your taxes went:
The role of markets and money in ‘oiling the wheels of commerce’, and so expanding economic activity and fostering new goods and technologies, is unquestioned.
Which is ‘free market capitalism’. Government, as a parasite, can only feed off of the production of the free market. Every government action is a negative to wealth production. Every government action is coercive.
They simply allow more permutations of resources and skills. The question frequently left unanswered is how the permutations that result are selected. Which technologies are used to mass-produce which goods?
Time preference exercised through a pricing system that allows cardinal accounting in terms of profit and loss.
In a market economy there are two criteria: demand (in terms of monetary sales) and profit (monetary sales revenue exceeding production costs). The ‘logic’ of capitalism equates these to the true expression of choice of consumers.
Also known as ‘demonstrated preference’.
With fully-informed consumers demand represents a true choice from all available possibilities. Demand brings revenue to producers. When revenue exceeds costs, there is a surplus of money for the producer to expand production. The fully-informed consumer chooses the price he is willing to pay to allow this expansion to take place. So all producer activity is driven by consumer choice with all alternatives open to view. No non-market intervention could produce a better outcome.
Correct as far as this analysis goes. There is more, but for the moment this will suffice.
But as we have made clear above, capitalism’s logic is based on many assumptions that simply cannot be true. No individual knows all the possibilities that are open to him or to the producer, or all the effects of their decisions. Not all those possibilities have even been articulated before choices are made. Few consumption or production decisions are completely free of consequences for those not involved in making them. Money and the price mechanism speed up the way choices are made while narrowing the information available to the consumer about the producer, to the producer about the consumer, and to everyone else about either. What is ‘external’ is actually made invisible. Shifts in distribution and economic power are disguised as streams of monetary numbers. Demand may be a result of informational errors, so that excess revenue is not pre-allocated to consumer-demanded production expansion and profits then become free claims for producers.
Not even close. Your ‘objections’ have already been refuted.
As soon as free claims are in the hands of producers (including the producers of money, banks), the logic of capitalism breaks down further, because markets are not free-floating but are embedded in a complex social and political network of information, norms and regulation.
This again conflates the issues between economics, which does not attach ‘value judgments’ to the recommendations, and politics, which have an ‘ethical’ component attached: fairness, justice, egalitarianism, etc, which are all about ‘value judgments’.
Once claims received are no longer pre-committed to consumer-driven uses, the producer is open to find ways of manipulating his market through its contacts with the social network. Advertising, sponsorship, lobbying and more underhand techniques now become available. And this is before considering the possibilities free claims give to producers for market manipulation, such as temporary under-pricing to damage competitors. As Glasman implies – this sort of freedom is opposed to the common-sense understanding of ‘liberty’ for the individual.
Essentially describing the rise of ‘Corporatism’ which is the buying of political power or support. Government being the coercive agent via the legal system can be ‘purchased’ via individual politicians to support corporate subsidies/interventions that benefit the corporation at the expense of the ‘free market’. This found it’s modern day origins in the 1890’s with the Houses of Morgan & Rockefeller, who purchased wholesale Presidents on down.
Today the most egregious violators are the banking system that are de facto partners of government in the monopoly of money creation. The Federal Reserve is the backstop to the fractional reserve system of money creation for the banking system, and through a monetization of government debt on fiscal matters.
‘Corporatism’ it must be said is categorically not capitalism. Capitalism promotes competition on the free market. Corporatism seeks to limit competition and thus pervert the free market. To end ‘corporatism’ you simply end government.
Most of these problems are well known to economists, but there is a tendency to see them as fixable by technical ‘patches’ of taxation and regulation by the state. But this ‘fixability’ is limited by two crucial considerations. Firstly, actual (as usually opposed to theoretical) taxation and regulation are expensive to administer.
Taxation is also theft, highly unpopular, destructive to wealth creation, creative of dependency to the welfare state and wasteful of resources via misallocation.
They require monitoring of the activities of producers. Full monitoring of those whose own interests are aligned with escaping monitoring may require resources equivalent to the value of the escape. Secondly, when the holding of free claims gives additional access to the political and social network, powerful levers become available to limit the application of taxation and regulation. Anything other then a complete fix always allows the producer to continually add to his war-chest in the battle against the ‘fixers’. Thanks to the positive feedback effect of free claims, he’s always winning, just winning more or less slowly. Justice and fairness move even further out of reach however much they may be willed politically.
A whole paragraph that details the amount of effort and resources that must be assigned to the business of ‘coercion’. What a sad pathetic joke.
‘Commodification’ is an ugly enough word, and probably isn’t a great help in winning political arguments these days, but if we translate it as being what happens when we give money prices more weight in decision-making than they can bear, then we are on the right track.
Rather than to ‘government’ who always make the right decision!
The early Labour institutions of co-operatives, mutuals and trade unions arose from this recognition, and sought to bring people together to discuss and plan action in ways that utilise the full panoply of human communication: intellectual, emotional and empathic. These institutions mirror humanity – they can be messy, dysfunctional and inefficient – but they cannot ignore huge swathes of people and their concerns simply because these cannot easily be fitted easily into price vectors to be processed by capitalism’s steely ‘logic’.
Trade Unions and the like, violate property rights. Trade Unions rely largely upon government legislation, thus once again distort the free market. Unions are ‘restrictive’ and actively seek to reduce employment supply, thus securing a higher ‘price’ for labour.
I think it is in this sense that a return to ‘tradition’ is required – a return to real human beings coming face to face with our common problems (even when they desire different outcomes from those problems).
What ‘tradition’ might that be? Feudalism, slavery? Just how far back, and how traditional are we going to get?
Here communication is not mediated through technology of any sort, it just exists at its most basic level. Without this possibility in all spheres of life Glasman is right that pluralism and diversity – while goods in themselves, much like markets and money – can accelerate the undermining of solidarity, when they erode old understandings between people without allowing new ones to develop.
I have no idea what is actually being said here.
Glasman dislikes abstraction, and feels it has led the labour movement astray. In the sense that the abstractions of money and market signals have been exalted against more complex human interaction, he is correct.
‘Abstraction’ is theory. There are any number of competing pseudo-theories in economics, most are simply nonsense. Unfortunately most of these pseudo-theories are the mainstream ‘economic models’ that are currently employed, more as apologist models to hide the truth than to actually achieve anything.
But abstractions in politics are powerful – ‘free markets’, ‘economic growth’, the ‘nanny state’ and ‘fairness’ will not be pushed aside without a fight – so what is our countering abstraction when challenged? I would suggest that it should be a new understanding of equality – neither the dull impossibility of ‘equality of outcome’ nor the impotent posturing of ‘equality of opportunity’ – but ‘equality of voice’, where all who have a stake in the outcome of any decision, whether economic or political, have the right to state their interest and case in some common forum.
This isn’t really economics at all. This is ‘ethical’ in nature. That the questions are ethical moves the abstract theoretical discussion to a different place altogether. Economics isn’t really concerned with ‘value’ as in ‘ethical’ pronouncements at all; economics answers the question, will the means employed achieve the ends aimed at, in the most efficient manner?
The link of this ‘abstract’ concept with the co-op, the mutual and the union should be obvious when these institutions are compared with big business and even ‘modernised’ (read marketised) public services. How exactly this equality of voice is to be put into effect in these latter spheres in a globalised and consumerist world is the great challenge for the labour movement. We must not shirk it if we are to have any right to claim its legacy.
I agree that the question is an important one. I just have serious doubts that politicians have even the vaguest clue. Assuming that they did, would they then do the ‘honorable’ thing and disband government? I seriously doubt it.