David Graeber's Debt: The First 5,000 Years is a densely written, densely documented, conspicuously scholarly (if also highly readable and colorfully written) study, with four hundred pages of densely packed main text followed by sixty, twin-columned pages of even more densely packed footnotes and another forty pages of bibliographical entries after that, befitting its ambitious object--a thorough revision of a very large part of our understanding of the history of human civilization. By contrast, his book The Utopia of Rules, weighing in at less than half the earlier book's length, more sprightly in tone and "think piece" in feel, brings together three previously published essays with new material in what is not a scholarly reconstruction of a big chunk of human economic history and history more generally, but rather a series of meditations tending toward the ideal, the symbolic, the abstract, which merely share certain themes--bureaucracy, and its relations with violence (especially "structural" violence), imagination and rationality.
The introductory piece, "The Iron Law of Liberalism and the Era of Total Bureaucratization," points to the oft-overlooked contribution of the private sector to bureaucratization (it was the U.S. Federal government which was shaped by the corporations, not the other way around); the limitations of the left's critique of bureaucracy (alas, leaving this ground to the growling right-wing populist); and the tendency to underestimate the role of violence, overestimate the role of technology and misrepresent rationality as an end rather than a means in considering the issue of bureaucracy.1 "Dead Zones of the Imagination: An Essay on Structural Stupidity" considers the bureaucracy-violence-"stupidity" nexus, and what he regards as the curious aversion of contemporary social science to the study of bureaucracy; "Of Flying Cars and the Declining Rate of Profit," the failure of "tomorrowland" to arrive as expected, the overhyping of information technology, and the connections of these with the neoliberal project he argues was about preserving the status quo through quashing alternatives, rather than efficiency, technological innovation or growth; and "The Utopia of Rules; or Why We Love Bureaucracy After All," which stresses the human need for regularity and transparency, which bureaucracy promises (even if it rarely delivers them in ideal fashion). Finally the book includes in an appendix "On Batman and the Problem of Constituent Power" which is, actually, about comic book superheroics (particularly Christopher Nolan's 2012 The Dark Knight Returns, which he watched in the wake of the "Occupy" movement with which he had been involved), and their connections with the preceding themes.
By and large, the themes struck me as well worth exploring, and the case he made for his principal ideas for the most part persuasive, and in cases even necessary. (Too often the complex relationship of private to public is simplified into the tidy opposition existing only in libertarian fantasy. Too often the degree of coercion involved in the minutiae of daily life is overlooked. Too many commentators are intimidated by the ridicule that cheerleaders-for-things-as-they-are heap on those who ask why we aren't living more like the Jetsons, and exalt their cell phone as the telos of the universe from the Big Bang forward.) They were also enriched by numerous smaller observations, sufficiently so that the supporting arguments, the offhand observations, the anecdotes (recollections of his field work in Madagascar, for example), provided much of the book's interest--enough so as to make forgivable his tendency to go off on tangents, and his misses as well as hits. (In his frequent resorts to pop culture for explanations, I found him more convincing when writing about Batman than Star Trek, for instance.) That said, much of what he had to say here (regarding the corporatization of finance and financialization of the corporate, the fusion of public and private, the thrust of information technology, etc.) has been further developed in Bullshit Jobs, so that a reader interested in a fuller exposition of his analysis of bureaucracy and its implications would do well to look to that book, but the wealth of material here is more than ample to justify a look from those already familiar with his other works.
1. As Graeber already noted in Debt, just as states called markets into being, they must also sustain them in being, "an army of administrators" required "to keep them going"--and cites Von Mises on this. Where the case of the U.S. specifically is concerned the bureaucratized corporation preceded the expansion of the Federal government, and corporate functionaries played a significant role in building up the New Deal bureaucracy; while the masses of regulation imposed by government are, after all, largely designed by and lobbied for by business.
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Sunday, December 23, 2018
Review: Debt: The First 5,000 Years, by David Graeber
New York: Melville House, 2012, 534 pp.
David Graeber's Debt: The First 5,000 Years does precisely what its title promises, offer a history of its titular subject, and in a broader sense than this reader might expect--not least, because of how much more the word can mean than they might guess, which is in fact Graeber's starting point, as Graeber goes on to show. The first half of the book is a meditation on the idea of debt itself--both how deeply the idea suffuses our moral and religious ideas, our social relationships and language, all around the world; and at the same time, how varied and how (to modern people) strange the thinking about it has been. Indeed, much of it consists of lengthy discussions of comparatively exotic cultural notions about it, and in particular the idea of a "human economy" as manifested in societies ranging from the Irish to the Tiv.
Still, rather than just cataloguing this variety Graeber does advance a number of bold theses. Particularly important among them is that indebtedness, rather than the unfortunate and disreputable position we now think of it as being, may have been regarded as a normal, natural condition, and even a cement holding society together by connecting individuals together, an attitude reflected in the protections traditionally afforded debtors--like the Biblical "Year of Jubilee" which periodically canceled debts. Important, too, is his subversion of the most basic thinking about markets, money, debt. Where conventionally (in Adam Smith, for instance) a "natural" human tendency to exchange for comparative advantage is held to have made markets intuitive, and these are supposed to have led to money, and money to debts, with states generally outside the process, he contends that it was the rise of large, complex institutions--the temple complexes of ancient Mesopotamia identifiable as its state structures--that led to debt. By way of the need for units of account debt led to money, rather than the other way around, while it was states that fostered markets for the sake of mobilizing economies behind military endeavor, and the same rationale led to the transformation of by that point long familiar precious metal-based money into coinage--the standardized little pieces of those metals being handy for paying soldiers on the move.1
The second half of the book, building on many of these ideas, shifts to a systematic history of the development of debt across what might be thought of as the Eurasian "rimlands" over the past three millennia--the Mediterranean region, southern Asia, China, and eventually Western Europe. As noted earlier, Mesopotamia, and southern Asia more generally, were crucial scenes of the development of thinking about debt, and provide early examples of its abuses (like debt slavery) and the revolt against such abuses (in the form of the flight or rebellion of the victims, with profound implications for personal relations, quite observable in such works as the Bible).
That conflict between rapacious creditors and more humane policies, came together strikingly in the "Axial Age" (which he treats as roughly extending from 600 BCE to 600 CE). Conventionally thought of as an era of moral progress, because of its foundational ethical and religious developments (this was the crucial formative era for the Abrahamic and Dharmic faiths, from the Biblical prophets to Buddha, as well as the speculations of Greek and Chinese philosophers), Graeber emphasizes that this was in substantial part a reaction to another dimension of the era, its ruthless materialism, in economic matters above all, where society shifted away from a reliance on credit, toward "hard cash," commodity, typically metallic, money. This was epitomized by the vast empires that prevailed across most of the continent's more densely peopled spaces--the Roman, Mauryan and Han Empires especially--which functioned as expanding military-slavery-coinage complexes (where armies were used to make conquests and capture slaves and mines, the former to work the latter, to pay for more armies and more conquests in an ongoing cycle). Unsurprisingly this period saw creditors obtain substantial legal and political advantages relative to debtors, on whom debt burdens weighed much more heavily; and whose disadvantages were at times moderated by reformers (often, a matter of the spoils of empire relieving the poorer members of a dominant group, like Rome's citizens) but never eliminated.
Such a change awaited the end of the period, and of its empires. As these exhausted the possibilities of their expansion within the limits set by geography and their technological bases, they simply collapsed, eventually resulting in less militarized societies where slavery was of less economic importance, with the same going for metallic money--increasingly, a virtual matter in what were in general less materialistic, more idealistic societies (in the epistemological sense of the term, of course). Emblematic of the shift was the way in which much of Eurasia saw usury banned outright in what he characterized as not merely the Western, but the Eurasian, "Middle Ages."
However, if the Medieval era was not exclusively Western, the West was an outlier in important respects--in the depth of its imperial collapse (this was no Dark Age elsewhere), and the extent of its embrace of the "corporate" type of institution in the aftermath--pioneered a return to the old stress on tangible, metallic money; and on imperial military-slavery-coinage complexes designed to maximize the supply of it. The very rationale underlay the era's mercantilism and associated voyages of discovery and colonization efforts, which once more produced a worldwide system of empire. This was, of course, the Europe-centered colonial system, turbo-charged by the emergence of full-blown, labor time-commodifying, M-C-M-circit-running capitalism that defined Modernity.
This prevailed until what had become the leading Western and world power, the U.S., abandoned the gold standard in 1971, which Graeber identifies as a return to virtual money. Curiously the era has so far seen creditors retain their advantage, and indeed, become central to the system, their trading in debt and their use of debt forcing governments to accept their program at the core of the neoliberal project dominating the last half century (ironically, as the bailing out of insolvent financial institutions testifies to the extraordinary leniency toward the biggest debtors of all), with the contradictions all too apparent in the confusion, unease and dissent of the moment.
As the description just given shows, Graeber sets the nature and implications of debt and indebtedness, the advent of those most basic economic concepts and institutions, the significance of the Axial Age, and our grasp of the ancient-Medieval-modern division of history, all on their heads. Often I was reminded of Karl Polanyi's classic debunking of the "myth of the market" so beloved by free-market theorists, but Graeber's work is grounded in a far greater wealth of data, and its argument is more intricate and wider in scope (while along the way, enriched by numerous, fascinating smaller theses--like the idea that the chivalric knight-errant in seach of fortune and glory was a Medieval sublimation of the merchant's activity into that of the feudal warriors it sung).
In fairness, much of Graeber's reconstruction of the politico-economic history of Eurasia and the world struck me as counterintuitive. However, that our ingrained assumptions about such matters are historically contingent is partly Graeber's point--the reason why he spends so much of the first half of the book lingering on (to contemporary Western readers) obscure and bizarre customs and beliefs, past and present; while on continued reflection I saw nothing to show the basics of his argument were really implausible, or inconsistent with the known facts. In fact, some of his more seemingly radical statements fit quite well with what we know. (For instance, while I reserve judgment on the matter in regard to China and India, whose histories I know less well, the Roman Empire, as described by Joseph Tainter, among others, accords well with his model of a military-slavery-coinage complex.) And the longer I thought about his case, the more, not less, sense it made.
All this is a very great achievement, enough so as to amply justify the work, though as might be expected given the note on which the history ends--that strange and uncertain phase into which we have entered in the past half century--Graeber is not merely explaining the past, but explicitly interested in the implications of this reading of history, this understanding of economic and social life, for the economic and social life of the early twenty-first century. That extends as far as the harsh and punitive conventional wisdom regarding the repayment of debt as one of the most basic moral obligations, in the name of which politicians have in recent decades inflicted enormous misery on populations from Mexico to Malaysia.
Reflecting on all this Graeber makes clear that an older way of understanding and living in the world is, if you will forgive the unintended pun, bankrupt, but a new one yet to emerge. Indeed, he suggests that contrary to the much maligned and yet (in the mainstream) virtually uncontested "end of history" school, we may be looking at the end of not just a particular attitude to debt, but capitalism itself, perhaps within a generation. That a book presenting this thought, so heretical to orthodox opinion that it has not had a real mainstream hearing for generations, is getting the attention it has (even contemptuous attention from the guardians of that orthodoxy) would seem to say a great deal about how the range of ideas that can be spoken in public has widened. By and large, it has been the right that has been more conspicuous, raising the profile of overt racism within the mainstream as talking heads treat the likes of Steve Bannon with deference on their shows. Still, however resistant elites remain to the ideas of the left, it is undeniable that much of the public does not regard the word "socialism" as the anathema it seemed such a short time ago.
That said, one need not accept Graeber's position regarding our contemporary political and economic life to find interest or value in his understanding of the past. However, those willing and able to at least engage with his ideas about them may be interested to know that in discussing our present discontents in this book he introduced an idea he developed at geater length in an article in Thomas Frank's The Baffler, "Flying Cars and the Declining Rate of Profit,". Specifically he holds that neoliberalism has not been about a more efficient, fast-growing capitalism, but mere preservation of that system's social relations--an idea he has since developed even further in his essay collection The Utopia of Rules (reviewed here), and further than that in his more recent Bullshit Jobs (reviewed here).
1. Lest the simple-minded get confused--as one reviewer of this book who (clearly devoted to the old myth of the market) foamed at the mouth with hostility and intent on treating Graeber's argument as a straw man did--money, and its use as a unit of account, is one thing; and physical money handled and transferred by one to another as a matter of course in daily economic transactions still another thing; with the advent of coinage still not necessarily implied in even the latter. Equally, it is one thing to speak of barter or exchange, another to speak of private exchange in markets as a central organizing principle in economic life.
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David Graeber's Debt: The First 5,000 Years does precisely what its title promises, offer a history of its titular subject, and in a broader sense than this reader might expect--not least, because of how much more the word can mean than they might guess, which is in fact Graeber's starting point, as Graeber goes on to show. The first half of the book is a meditation on the idea of debt itself--both how deeply the idea suffuses our moral and religious ideas, our social relationships and language, all around the world; and at the same time, how varied and how (to modern people) strange the thinking about it has been. Indeed, much of it consists of lengthy discussions of comparatively exotic cultural notions about it, and in particular the idea of a "human economy" as manifested in societies ranging from the Irish to the Tiv.
Still, rather than just cataloguing this variety Graeber does advance a number of bold theses. Particularly important among them is that indebtedness, rather than the unfortunate and disreputable position we now think of it as being, may have been regarded as a normal, natural condition, and even a cement holding society together by connecting individuals together, an attitude reflected in the protections traditionally afforded debtors--like the Biblical "Year of Jubilee" which periodically canceled debts. Important, too, is his subversion of the most basic thinking about markets, money, debt. Where conventionally (in Adam Smith, for instance) a "natural" human tendency to exchange for comparative advantage is held to have made markets intuitive, and these are supposed to have led to money, and money to debts, with states generally outside the process, he contends that it was the rise of large, complex institutions--the temple complexes of ancient Mesopotamia identifiable as its state structures--that led to debt. By way of the need for units of account debt led to money, rather than the other way around, while it was states that fostered markets for the sake of mobilizing economies behind military endeavor, and the same rationale led to the transformation of by that point long familiar precious metal-based money into coinage--the standardized little pieces of those metals being handy for paying soldiers on the move.1
The second half of the book, building on many of these ideas, shifts to a systematic history of the development of debt across what might be thought of as the Eurasian "rimlands" over the past three millennia--the Mediterranean region, southern Asia, China, and eventually Western Europe. As noted earlier, Mesopotamia, and southern Asia more generally, were crucial scenes of the development of thinking about debt, and provide early examples of its abuses (like debt slavery) and the revolt against such abuses (in the form of the flight or rebellion of the victims, with profound implications for personal relations, quite observable in such works as the Bible).
That conflict between rapacious creditors and more humane policies, came together strikingly in the "Axial Age" (which he treats as roughly extending from 600 BCE to 600 CE). Conventionally thought of as an era of moral progress, because of its foundational ethical and religious developments (this was the crucial formative era for the Abrahamic and Dharmic faiths, from the Biblical prophets to Buddha, as well as the speculations of Greek and Chinese philosophers), Graeber emphasizes that this was in substantial part a reaction to another dimension of the era, its ruthless materialism, in economic matters above all, where society shifted away from a reliance on credit, toward "hard cash," commodity, typically metallic, money. This was epitomized by the vast empires that prevailed across most of the continent's more densely peopled spaces--the Roman, Mauryan and Han Empires especially--which functioned as expanding military-slavery-coinage complexes (where armies were used to make conquests and capture slaves and mines, the former to work the latter, to pay for more armies and more conquests in an ongoing cycle). Unsurprisingly this period saw creditors obtain substantial legal and political advantages relative to debtors, on whom debt burdens weighed much more heavily; and whose disadvantages were at times moderated by reformers (often, a matter of the spoils of empire relieving the poorer members of a dominant group, like Rome's citizens) but never eliminated.
Such a change awaited the end of the period, and of its empires. As these exhausted the possibilities of their expansion within the limits set by geography and their technological bases, they simply collapsed, eventually resulting in less militarized societies where slavery was of less economic importance, with the same going for metallic money--increasingly, a virtual matter in what were in general less materialistic, more idealistic societies (in the epistemological sense of the term, of course). Emblematic of the shift was the way in which much of Eurasia saw usury banned outright in what he characterized as not merely the Western, but the Eurasian, "Middle Ages."
However, if the Medieval era was not exclusively Western, the West was an outlier in important respects--in the depth of its imperial collapse (this was no Dark Age elsewhere), and the extent of its embrace of the "corporate" type of institution in the aftermath--pioneered a return to the old stress on tangible, metallic money; and on imperial military-slavery-coinage complexes designed to maximize the supply of it. The very rationale underlay the era's mercantilism and associated voyages of discovery and colonization efforts, which once more produced a worldwide system of empire. This was, of course, the Europe-centered colonial system, turbo-charged by the emergence of full-blown, labor time-commodifying, M-C-M-circit-running capitalism that defined Modernity.
This prevailed until what had become the leading Western and world power, the U.S., abandoned the gold standard in 1971, which Graeber identifies as a return to virtual money. Curiously the era has so far seen creditors retain their advantage, and indeed, become central to the system, their trading in debt and their use of debt forcing governments to accept their program at the core of the neoliberal project dominating the last half century (ironically, as the bailing out of insolvent financial institutions testifies to the extraordinary leniency toward the biggest debtors of all), with the contradictions all too apparent in the confusion, unease and dissent of the moment.
As the description just given shows, Graeber sets the nature and implications of debt and indebtedness, the advent of those most basic economic concepts and institutions, the significance of the Axial Age, and our grasp of the ancient-Medieval-modern division of history, all on their heads. Often I was reminded of Karl Polanyi's classic debunking of the "myth of the market" so beloved by free-market theorists, but Graeber's work is grounded in a far greater wealth of data, and its argument is more intricate and wider in scope (while along the way, enriched by numerous, fascinating smaller theses--like the idea that the chivalric knight-errant in seach of fortune and glory was a Medieval sublimation of the merchant's activity into that of the feudal warriors it sung).
In fairness, much of Graeber's reconstruction of the politico-economic history of Eurasia and the world struck me as counterintuitive. However, that our ingrained assumptions about such matters are historically contingent is partly Graeber's point--the reason why he spends so much of the first half of the book lingering on (to contemporary Western readers) obscure and bizarre customs and beliefs, past and present; while on continued reflection I saw nothing to show the basics of his argument were really implausible, or inconsistent with the known facts. In fact, some of his more seemingly radical statements fit quite well with what we know. (For instance, while I reserve judgment on the matter in regard to China and India, whose histories I know less well, the Roman Empire, as described by Joseph Tainter, among others, accords well with his model of a military-slavery-coinage complex.) And the longer I thought about his case, the more, not less, sense it made.
All this is a very great achievement, enough so as to amply justify the work, though as might be expected given the note on which the history ends--that strange and uncertain phase into which we have entered in the past half century--Graeber is not merely explaining the past, but explicitly interested in the implications of this reading of history, this understanding of economic and social life, for the economic and social life of the early twenty-first century. That extends as far as the harsh and punitive conventional wisdom regarding the repayment of debt as one of the most basic moral obligations, in the name of which politicians have in recent decades inflicted enormous misery on populations from Mexico to Malaysia.
Reflecting on all this Graeber makes clear that an older way of understanding and living in the world is, if you will forgive the unintended pun, bankrupt, but a new one yet to emerge. Indeed, he suggests that contrary to the much maligned and yet (in the mainstream) virtually uncontested "end of history" school, we may be looking at the end of not just a particular attitude to debt, but capitalism itself, perhaps within a generation. That a book presenting this thought, so heretical to orthodox opinion that it has not had a real mainstream hearing for generations, is getting the attention it has (even contemptuous attention from the guardians of that orthodoxy) would seem to say a great deal about how the range of ideas that can be spoken in public has widened. By and large, it has been the right that has been more conspicuous, raising the profile of overt racism within the mainstream as talking heads treat the likes of Steve Bannon with deference on their shows. Still, however resistant elites remain to the ideas of the left, it is undeniable that much of the public does not regard the word "socialism" as the anathema it seemed such a short time ago.
That said, one need not accept Graeber's position regarding our contemporary political and economic life to find interest or value in his understanding of the past. However, those willing and able to at least engage with his ideas about them may be interested to know that in discussing our present discontents in this book he introduced an idea he developed at geater length in an article in Thomas Frank's The Baffler, "Flying Cars and the Declining Rate of Profit,". Specifically he holds that neoliberalism has not been about a more efficient, fast-growing capitalism, but mere preservation of that system's social relations--an idea he has since developed even further in his essay collection The Utopia of Rules (reviewed here), and further than that in his more recent Bullshit Jobs (reviewed here).
1. Lest the simple-minded get confused--as one reviewer of this book who (clearly devoted to the old myth of the market) foamed at the mouth with hostility and intent on treating Graeber's argument as a straw man did--money, and its use as a unit of account, is one thing; and physical money handled and transferred by one to another as a matter of course in daily economic transactions still another thing; with the advent of coinage still not necessarily implied in even the latter. Equally, it is one thing to speak of barter or exchange, another to speak of private exchange in markets as a central organizing principle in economic life.
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Neoliberalism and Technological Slowdown
The possibility that the rate of technological change slowed after the mid-twentieth century has interested me for over a decade--as has the correlation of that slowdown with the neoliberal turn, about which I have had occasion to write much. Of course, the neoliberal decades have been decades of weak growth with what came before--perhaps even very weak growth.
Gerard Dumenil and Dominique Levy in Capital Resurgent contend that the technological slowdown led to slower productivity growth and slower growth generally, which helped prompt the neoliberal turn.1 Yet, one could argue that the relationship has been the other way around--that neoliberalism contributed to a technological slowdown. It is not at all difficult to think up reasons why this might be the case--the neoliberal preference for speculative over productive investment, a "short-termism" in management (fixated on quarterly balance sheets, the highest possible share prices and dividend payouts at a given moment, and the excuses they provide for preposterous executive compensation, and to hell with everything else) that wreaks havoc with genuinely productive work and especially R & D, an IP system run amok that has innovators getting in each others' way.1
There is, too, the disincentive of the ample, cheap labor supply opened up by convenient offshoring and the collapse of the Communist bloc for the development of labor-saving technologies, and the encouragement that the concentration of global sectors in a few, oligopolistic hands provides for sustaining rather than breakthrough technologies, and the opportunities corporate colossi have for defending themselves against disruption. (Consider how long and successfully Big Oil has warded off the challenge from renewable energy technologies.) And there is the austerity that has proceeded from all of it, leading to the trimming of research budgets (often, in unintelligent ways), while discouraging not just the speculation-mad but anyone from investing to the degree they otherwise might.
It seems to me that any serious discussion of the rate of progress, whether a case for its having slowed down, sped up or anything else, needs to take account of all that.
1. In Capital Resurgent the fuller reading of the history is that technological advance slowed in the '60s, encouraging finance's efforts to get the upper hand in economic life, the essence of the neoliberal turn; but that technological progress did resurge later in the century, despite which finance remained dominant, and neoliberalism endured. In fairness, the original edition of the book appeared about the turn of the twenty-first century (2000), when the argument for revived progress seemed more plausible. (To go by Robert Gordon's work, the 1996-2004 period did see strong advance, which petered out again.)
Gerard Dumenil and Dominique Levy in Capital Resurgent contend that the technological slowdown led to slower productivity growth and slower growth generally, which helped prompt the neoliberal turn.1 Yet, one could argue that the relationship has been the other way around--that neoliberalism contributed to a technological slowdown. It is not at all difficult to think up reasons why this might be the case--the neoliberal preference for speculative over productive investment, a "short-termism" in management (fixated on quarterly balance sheets, the highest possible share prices and dividend payouts at a given moment, and the excuses they provide for preposterous executive compensation, and to hell with everything else) that wreaks havoc with genuinely productive work and especially R & D, an IP system run amok that has innovators getting in each others' way.1
There is, too, the disincentive of the ample, cheap labor supply opened up by convenient offshoring and the collapse of the Communist bloc for the development of labor-saving technologies, and the encouragement that the concentration of global sectors in a few, oligopolistic hands provides for sustaining rather than breakthrough technologies, and the opportunities corporate colossi have for defending themselves against disruption. (Consider how long and successfully Big Oil has warded off the challenge from renewable energy technologies.) And there is the austerity that has proceeded from all of it, leading to the trimming of research budgets (often, in unintelligent ways), while discouraging not just the speculation-mad but anyone from investing to the degree they otherwise might.
It seems to me that any serious discussion of the rate of progress, whether a case for its having slowed down, sped up or anything else, needs to take account of all that.
1. In Capital Resurgent the fuller reading of the history is that technological advance slowed in the '60s, encouraging finance's efforts to get the upper hand in economic life, the essence of the neoliberal turn; but that technological progress did resurge later in the century, despite which finance remained dominant, and neoliberalism endured. In fairness, the original edition of the book appeared about the turn of the twenty-first century (2000), when the argument for revived progress seemed more plausible. (To go by Robert Gordon's work, the 1996-2004 period did see strong advance, which petered out again.)
Mass Technological Unemployment Has Already Happened
The renewed vibrancy of progress in the areas of artificial intelligence and robotics has revived interest in the possibility of rapid, near-term automation eliminating vast numbers of jobs in the coming years. I will not here concern myself with the plausibility of the prediction. Rather what interests me here is the fact that this has already happened.
The claim is less shocking or original than it might appear. In fact, I first came across such a claim just as I was beginning to take a serious interest in matters of economics, Jeremy Rifkin's The End of Work (1994). The "end" of work he predicted did not prove so imminent as he thought, but his argument regarding mass technological unemployment as already having happened stuck with me.
Basically, the Industrial Revolution in fairly short order exploded productivity, and displaced labor at a very rapid rate. However, all this has been concealed by three factors.
1. The first, most direct, but least noticed is that people are working less. The school-leaving age is later, higher education is bigger than ever, and people expect to retire. In between people work shorter weeks than they used to (the 12, even 10 hour day a thing of the past). There has also been an increasingly minimal definition of what it means to be employed, whether one thinks in terms of the expansion of part-time, temporary and other irregular employment, or the propensity of governments to fudge the figures in an attempt to show that things are better than they really are. (In Britain, one hour worked in the last week counts as employment.) This conceals a great deal of unemployment, and even more underemployment.
2. A massive amount of labor has been soaked up in marginal or even wasteful uses. Bluntly characterized as "bullshit jobs" by David Graeber, this includes such activities as advertising and marketing, the hypertrophy of the finance-insurance-real estate complex (to twenty percent of U.S. GDP), and the blooming of a health care bureaucracy (explicitly defended on the grounds that while it is wasteful, it is a major employer). There is even make-work of this kind in manufacturing, thanks to built-in obsolescence and product differentiation. And many genuinely productive jobs contain an increasing bullshit component, so that more people end up working them than might otherwise be the case. All this has multiplier effects--as an "unnecessary" financial firm will still need office space necessitating construction, utilities and janitorial services.
(Of course, that one can discuss work in this way is enough to make a market fundamentalist seethe. In their view if someone is willing to pay for something, that is sufficient proof of its value according to neoclassical thinkers' use of marginal utility. But these same people also say unemployment doesn't really exist and you can't run out of resources, so we know what their theories are worth, don't we?)
3. Massive state action, which takes two forms. One is the dramatic expansion of the state, paid for with high and progressive taxation, deficit spending or both, with the money going to such things as enlarged military-industrial complexes, and welfare programs. All of these generate further employment quite directly, while by way of transfer payments, welfare systems put purchasing power in the hands of people who would not otherwise have it, yet again contributing to consumption and employment. The other, related form is the expansion of credit in an age of fiat money, especially explosive after the end of the gold standard. Governments, businesses, households borrow money and spend it, again keeping the economy going.
David Graeber, in his recent take on the issue, suggests that if just some of this were taken into account we might find the real unemployment rate is a mind-boggling fifty, even sixty percent.
We might respond in unconstructive ways--with more statistical manipulation, with more bullshit jobs, with dubious credit expansions. (Alas, I think we're already pushing the limit there.) We might respond in constructive ways--for example, with shorter work days and weeks and years, with works schemes addressing real problems (we sure could do with a rebuild of our infrastructures, in the U.S., anyway), a strengthened system for supporting human beings (for instance, a Universal Basic Income scheme). But whatever we do, the fact remains that mass technological unemployment is something with which we already live today.
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The claim is less shocking or original than it might appear. In fact, I first came across such a claim just as I was beginning to take a serious interest in matters of economics, Jeremy Rifkin's The End of Work (1994). The "end" of work he predicted did not prove so imminent as he thought, but his argument regarding mass technological unemployment as already having happened stuck with me.
Basically, the Industrial Revolution in fairly short order exploded productivity, and displaced labor at a very rapid rate. However, all this has been concealed by three factors.
1. The first, most direct, but least noticed is that people are working less. The school-leaving age is later, higher education is bigger than ever, and people expect to retire. In between people work shorter weeks than they used to (the 12, even 10 hour day a thing of the past). There has also been an increasingly minimal definition of what it means to be employed, whether one thinks in terms of the expansion of part-time, temporary and other irregular employment, or the propensity of governments to fudge the figures in an attempt to show that things are better than they really are. (In Britain, one hour worked in the last week counts as employment.) This conceals a great deal of unemployment, and even more underemployment.
2. A massive amount of labor has been soaked up in marginal or even wasteful uses. Bluntly characterized as "bullshit jobs" by David Graeber, this includes such activities as advertising and marketing, the hypertrophy of the finance-insurance-real estate complex (to twenty percent of U.S. GDP), and the blooming of a health care bureaucracy (explicitly defended on the grounds that while it is wasteful, it is a major employer). There is even make-work of this kind in manufacturing, thanks to built-in obsolescence and product differentiation. And many genuinely productive jobs contain an increasing bullshit component, so that more people end up working them than might otherwise be the case. All this has multiplier effects--as an "unnecessary" financial firm will still need office space necessitating construction, utilities and janitorial services.
(Of course, that one can discuss work in this way is enough to make a market fundamentalist seethe. In their view if someone is willing to pay for something, that is sufficient proof of its value according to neoclassical thinkers' use of marginal utility. But these same people also say unemployment doesn't really exist and you can't run out of resources, so we know what their theories are worth, don't we?)
3. Massive state action, which takes two forms. One is the dramatic expansion of the state, paid for with high and progressive taxation, deficit spending or both, with the money going to such things as enlarged military-industrial complexes, and welfare programs. All of these generate further employment quite directly, while by way of transfer payments, welfare systems put purchasing power in the hands of people who would not otherwise have it, yet again contributing to consumption and employment. The other, related form is the expansion of credit in an age of fiat money, especially explosive after the end of the gold standard. Governments, businesses, households borrow money and spend it, again keeping the economy going.
David Graeber, in his recent take on the issue, suggests that if just some of this were taken into account we might find the real unemployment rate is a mind-boggling fifty, even sixty percent.
We might respond in unconstructive ways--with more statistical manipulation, with more bullshit jobs, with dubious credit expansions. (Alas, I think we're already pushing the limit there.) We might respond in constructive ways--for example, with shorter work days and weeks and years, with works schemes addressing real problems (we sure could do with a rebuild of our infrastructures, in the U.S., anyway), a strengthened system for supporting human beings (for instance, a Universal Basic Income scheme). But whatever we do, the fact remains that mass technological unemployment is something with which we already live today.
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Physics Envy: A Victorian Legacy
Reading Stanley Jevons' founding work of neoclassical economics, Theory of Political Economy, I found it redolent of that Victorian faith that not only was precise, certain, final systematization and mathematization of every field possible, but that they were necessary, and near at hand. Jevons, explicitly holding up physics as the standard, declared in his preface that
Time has not been kind to such views. I, for one, think that it has been too unkind, going too far in the other direction, with the flourishing of postmodernist hatred of reason, knowledge, understanding and thoughtful action. The irony is compounded by the fact that, among the social sciences, it is the adherents of Jevons' faith who have been least touched by that trend. While a hundred and fifty years on mathematical economics has fallen far short of proving its validity, relevance and utility in the way mathematical physics has, the proponents of an adapted version of his views remain in control of the economics departments, such that, as they marginalize dissenters from Marxists to institutional economists, they continue to reduce the whole of economic life to microeconomic models presented in the form of formulas.
The obvious reason is that where the systematizers had few champions in the "real world" in most fields, the vision of economics Jevons presented (pointedly economics rather than political economy, with all the disquieting implications of the "political") has been attractive and convenient for those less concerned with whatever intellectual appeal the idea may have than its political implications. After all, if economics is a science, well, then what it says is just how the world works--and the math intimidates a good many people who would otherwise criticize it.
1. Building on Jeremy Bentham's utilitarian philosophy, Stanley Jevons took the position that people act according to their expectations of pleasure and pain, its intensity, duration, likelihood, proximity, looking to maximize the former and minimize the latter, and that this is reducible to discrete units--what one might call "quanta" of pleasure and pain, of utility and disutility. Such anticipations are not measurable in direct fashion, of course, for no one could know the mind of a person, but could be measured indirectly by their readiness to pay.
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The Theory of Economy thus treated presents a close analogy to the science of Statical Mechanics, and the Laws of Exchange are found to resemble the Laws of Equilibrium of a lever as determined by the principle of virtual velocities. The nature of Wealth and Value is explained by the consideration of indefinitely small amounts of pleasure and pain, just as the Theory of Statics is made to rest upon the equality of indefinitely small amounts of energy.And just like mechanics, he concluded that it "must be a mathematical science," and endeavored to treat it as such, lest anyone think that he was being merely poetic.1
Time has not been kind to such views. I, for one, think that it has been too unkind, going too far in the other direction, with the flourishing of postmodernist hatred of reason, knowledge, understanding and thoughtful action. The irony is compounded by the fact that, among the social sciences, it is the adherents of Jevons' faith who have been least touched by that trend. While a hundred and fifty years on mathematical economics has fallen far short of proving its validity, relevance and utility in the way mathematical physics has, the proponents of an adapted version of his views remain in control of the economics departments, such that, as they marginalize dissenters from Marxists to institutional economists, they continue to reduce the whole of economic life to microeconomic models presented in the form of formulas.
The obvious reason is that where the systematizers had few champions in the "real world" in most fields, the vision of economics Jevons presented (pointedly economics rather than political economy, with all the disquieting implications of the "political") has been attractive and convenient for those less concerned with whatever intellectual appeal the idea may have than its political implications. After all, if economics is a science, well, then what it says is just how the world works--and the math intimidates a good many people who would otherwise criticize it.
1. Building on Jeremy Bentham's utilitarian philosophy, Stanley Jevons took the position that people act according to their expectations of pleasure and pain, its intensity, duration, likelihood, proximity, looking to maximize the former and minimize the latter, and that this is reducible to discrete units--what one might call "quanta" of pleasure and pain, of utility and disutility. Such anticipations are not measurable in direct fashion, of course, for no one could know the mind of a person, but could be measured indirectly by their readiness to pay.
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Review: The Hidden Wealth of Nations: The Scourge of Tax Havens, by Gabriel Zucman
In a slim book just a little over a hundred widely spaced pages long, French economist Zucman endeavors to offer a systematic account of the development of the tax haven system, the manner of its functioning, the scale of its activity, and possible remedies for the problem.
As Zucman explains, the post-World War I spike in taxation across war-depleted Europe sent the rich looking for havens for their wealth, and neutral Switzerland stepped forward to fill that role. Since then, the limited, essentially regional service has, along with the increasing volume, speed and convenience of financial flows, and the integration of the world economy at all levels, grown into a global system of tax havens across Europe, Asia and the Caribbean, each with their own specialties (Luxembourg for mutual funds, Ireland for monetary funds, the Cayman Islands for hedge funds), still largely Swiss-centered (via strategically located overseas branches of those Swiss banks at the key locations).
In endeavoring to compute the extent to which household wealth is offshored in that system, Zucman sets aside for the time being banknotes, insurance contracts and nonfinancial assets like paintings (admittedly, comprising a significant share of the world's wealth), and focuses solely on financial assets, which he assesses through a check of the global balance sheets. He totaled up the listed household liabilities as greater than assets ($96 trillion to $89 trillion), to the tune of $7.6 trillion, a guess he substantiates with another, more solid figure: Switzerland's admitted holdings of $2.3 trillion in foreign wealth, a one-third share of the total that he considers reasonable.
Altogether the total offshore wealth comes to some 8 percent of household wealth worldwide, with Zucman figuring that the proportion is higher for some nations than others--high-tax Europe than the United States, and commodity-producing developing nations rather than industrialized powers (in the case of Russia and Middle East oil producers, perhaps as much as fifty percent).
In an age of endless and steadily worsening inequality, deficits and austerity, this tax evasion would seem a significant problem, especially for those developing states most in need of the resources, while the current system adds to it by facilitating subtler forms of evasion. (Where assets do not "disappear," it enables corporations to shift assets and earnings to low-tax zones on paper, adding yet again to the losses.)
Naturally, there have been attempts at redress of the problem, but as he notes, they have been limited and full of holes--alas, like tax policies in general--leading him to propose a comprehensive package of reforms as an alternative. This would begin with the folding of the current system of multiple, regional registers for financial assets into a single, global register easily accessible to the world's tax authorities; a global wealth tax on undeclared wealth "at the source" (before any interest or dividend payouts) that would be reimbursable only when the owner declares themselves; and the taxation of corporations on overall income with taxes apportioned according to territory. Recalcitrant tax havens would be forced to comply through trading and other sanctions.
As Zucman describes it, the plan appears eminently logical in its mechanisms, in the sense that it would work if enacted; but its enactment is very difficult to picture in anything resembling the prevailing political climate. Even at the height of progressive taxation in the mid-twentieth century, it is arguable that such arrangements were tolerated only because the rich had their opportunities for evading the full weight of that taxation. It may well be that, in these times of crisis and backlash, such opportunities for evasion are looking more rather than less important than before (as demonstrated by the spectacle of the wealthier residents of traditionally capital-friendly Britain panicking over the mere prospect of a Labor government, and responding in, among other ways, a transfer of their assets offshore to precisely such locations).
They can be counted on to oppose any such measures. Especially given the need for a fairly high degree of international cooperation, this would seem to make any such move easier to frustrate. Moreover, even if such a program were implemented, the problem of major governments enforcing the program's dictates would remain--with the conduct of regulatory states in regard to the wealthy, again, doing little to inspire confidence in anything like today's political atmosphere. Still, if the evidences of popular protest around the world are anything to go by, things may be changing in that regard--and even if one is not yet to credit Zucman with devising a feasible plan, he can still be credited with providing considerable insight into this significant subject, while making it easily accessible to a general audience.
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As Zucman explains, the post-World War I spike in taxation across war-depleted Europe sent the rich looking for havens for their wealth, and neutral Switzerland stepped forward to fill that role. Since then, the limited, essentially regional service has, along with the increasing volume, speed and convenience of financial flows, and the integration of the world economy at all levels, grown into a global system of tax havens across Europe, Asia and the Caribbean, each with their own specialties (Luxembourg for mutual funds, Ireland for monetary funds, the Cayman Islands for hedge funds), still largely Swiss-centered (via strategically located overseas branches of those Swiss banks at the key locations).
In endeavoring to compute the extent to which household wealth is offshored in that system, Zucman sets aside for the time being banknotes, insurance contracts and nonfinancial assets like paintings (admittedly, comprising a significant share of the world's wealth), and focuses solely on financial assets, which he assesses through a check of the global balance sheets. He totaled up the listed household liabilities as greater than assets ($96 trillion to $89 trillion), to the tune of $7.6 trillion, a guess he substantiates with another, more solid figure: Switzerland's admitted holdings of $2.3 trillion in foreign wealth, a one-third share of the total that he considers reasonable.
Altogether the total offshore wealth comes to some 8 percent of household wealth worldwide, with Zucman figuring that the proportion is higher for some nations than others--high-tax Europe than the United States, and commodity-producing developing nations rather than industrialized powers (in the case of Russia and Middle East oil producers, perhaps as much as fifty percent).
In an age of endless and steadily worsening inequality, deficits and austerity, this tax evasion would seem a significant problem, especially for those developing states most in need of the resources, while the current system adds to it by facilitating subtler forms of evasion. (Where assets do not "disappear," it enables corporations to shift assets and earnings to low-tax zones on paper, adding yet again to the losses.)
Naturally, there have been attempts at redress of the problem, but as he notes, they have been limited and full of holes--alas, like tax policies in general--leading him to propose a comprehensive package of reforms as an alternative. This would begin with the folding of the current system of multiple, regional registers for financial assets into a single, global register easily accessible to the world's tax authorities; a global wealth tax on undeclared wealth "at the source" (before any interest or dividend payouts) that would be reimbursable only when the owner declares themselves; and the taxation of corporations on overall income with taxes apportioned according to territory. Recalcitrant tax havens would be forced to comply through trading and other sanctions.
As Zucman describes it, the plan appears eminently logical in its mechanisms, in the sense that it would work if enacted; but its enactment is very difficult to picture in anything resembling the prevailing political climate. Even at the height of progressive taxation in the mid-twentieth century, it is arguable that such arrangements were tolerated only because the rich had their opportunities for evading the full weight of that taxation. It may well be that, in these times of crisis and backlash, such opportunities for evasion are looking more rather than less important than before (as demonstrated by the spectacle of the wealthier residents of traditionally capital-friendly Britain panicking over the mere prospect of a Labor government, and responding in, among other ways, a transfer of their assets offshore to precisely such locations).
They can be counted on to oppose any such measures. Especially given the need for a fairly high degree of international cooperation, this would seem to make any such move easier to frustrate. Moreover, even if such a program were implemented, the problem of major governments enforcing the program's dictates would remain--with the conduct of regulatory states in regard to the wealthy, again, doing little to inspire confidence in anything like today's political atmosphere. Still, if the evidences of popular protest around the world are anything to go by, things may be changing in that regard--and even if one is not yet to credit Zucman with devising a feasible plan, he can still be credited with providing considerable insight into this significant subject, while making it easily accessible to a general audience.
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Wednesday, December 19, 2018
The Clinton Legacy: Domestic Policy
Bill Clinton's supporters prefer to identify him with the cleanup of the fiscal mess left by his Republican predecessors; the strongest burst of economic growth in the half century since the end of the post-war boom in which, for once, gains extended beyond the most affluent; and a long list of positive acts in the areas of worker, consumer and environmental protection after Reaganite misrule.
Alas, in dealing with the deficit Clinton merely extended the work of George W. Bush, and in respects even the profligate Reagan, in his fixation on cutting government and spending, in substantially the same ways, with Reinventing Government, with Medicare cuts. At the same time, for all the talk of making the rich pay their "fair share" of taxes, he was very restrained in regard to their incomes--even as he raised taxes on Social Security benefits and fuel--such that relative to their wealth they paid less at the end of his administration than at its beginning.
Indeed, Clinton pursued the Reaganite project more generally of cutting government even where it didn't save money, or even cost additional money, with his welfare "reform" that ended its status as an entitlement; with enthusiastic privatization and deregulation of the economy, as it transferred major utilities to the private sector and released such restraints as remained on a Wall Street chomping at the bit to go back to the "Roaring Twenties"; with outright corporate welfare, most notoriously giving away $70 billion worth of broadcasting licenses in the course of the 1996 telecommunications reform, which not incidentally fed into the sector's rapid monopolization.
Perhaps unsurprisingly given the latter, the measure of success he achieved as a deficit-citter and macroeconomic manager was substantially due to a technology boom--a technology bubble--that had little to do with his personal action, his reappointment of Ayn Rand fanboy Alan "easy money" Greenspan to the chairmanship of the Federal Reserve, while bursting on his watch (a problem Greenspan met by inflating another bubble).
At the same time the list of actions that might be regarded as positive from a progressive's perspective is comparatively meager on examination, certainly next to what he promised--whether the ambitious Goals 2000 education standards, the rebuilding of the national infrastructure, or the health care reforms that would "cover everyone" with the help of a "public option." After adjustment for inflation the Department of Education's budget remained flat, while Clinton pushed hard for school privatization, and the country never got anywhere near the Goal 2000 objectives. The infrastructure program was dropped, with job creation instead left to neoliberal enterprise zones (while the infrastructure continued its decay). And there were almost as many uninsured at the end of his administration as at the start, while health care costs ran the same big slice of the GDP, in spite of the comparatively good times (this job, too, left undone).
In the end the problems Clinton was supposed to resolve were left to fester, while he conserved his energies for policies that, ultimately, furthered the very neoliberal project he was elected to halt and reverse--and in ways that proved costly for the American public. Along with the promises unkept, the crippling of the government's capacity to protect workers, consumers, the environment, even to the extent of enforcing regulation on the books; the destruction of the social safety net; the deregulation and easy money policies that permitted the monopolization of the media, the malfeasance of Enron and ultimately the crash of 2008; are all undeniably as much a part of the Clinton legacy as any achievements that administration can claim.*
* Those interested in the details, and sources for all this, are directed toward the author's SSRN-published paper, "Was the Clinton Administration Neoliberal?"
Alas, in dealing with the deficit Clinton merely extended the work of George W. Bush, and in respects even the profligate Reagan, in his fixation on cutting government and spending, in substantially the same ways, with Reinventing Government, with Medicare cuts. At the same time, for all the talk of making the rich pay their "fair share" of taxes, he was very restrained in regard to their incomes--even as he raised taxes on Social Security benefits and fuel--such that relative to their wealth they paid less at the end of his administration than at its beginning.
Indeed, Clinton pursued the Reaganite project more generally of cutting government even where it didn't save money, or even cost additional money, with his welfare "reform" that ended its status as an entitlement; with enthusiastic privatization and deregulation of the economy, as it transferred major utilities to the private sector and released such restraints as remained on a Wall Street chomping at the bit to go back to the "Roaring Twenties"; with outright corporate welfare, most notoriously giving away $70 billion worth of broadcasting licenses in the course of the 1996 telecommunications reform, which not incidentally fed into the sector's rapid monopolization.
Perhaps unsurprisingly given the latter, the measure of success he achieved as a deficit-citter and macroeconomic manager was substantially due to a technology boom--a technology bubble--that had little to do with his personal action, his reappointment of Ayn Rand fanboy Alan "easy money" Greenspan to the chairmanship of the Federal Reserve, while bursting on his watch (a problem Greenspan met by inflating another bubble).
At the same time the list of actions that might be regarded as positive from a progressive's perspective is comparatively meager on examination, certainly next to what he promised--whether the ambitious Goals 2000 education standards, the rebuilding of the national infrastructure, or the health care reforms that would "cover everyone" with the help of a "public option." After adjustment for inflation the Department of Education's budget remained flat, while Clinton pushed hard for school privatization, and the country never got anywhere near the Goal 2000 objectives. The infrastructure program was dropped, with job creation instead left to neoliberal enterprise zones (while the infrastructure continued its decay). And there were almost as many uninsured at the end of his administration as at the start, while health care costs ran the same big slice of the GDP, in spite of the comparatively good times (this job, too, left undone).
In the end the problems Clinton was supposed to resolve were left to fester, while he conserved his energies for policies that, ultimately, furthered the very neoliberal project he was elected to halt and reverse--and in ways that proved costly for the American public. Along with the promises unkept, the crippling of the government's capacity to protect workers, consumers, the environment, even to the extent of enforcing regulation on the books; the destruction of the social safety net; the deregulation and easy money policies that permitted the monopolization of the media, the malfeasance of Enron and ultimately the crash of 2008; are all undeniably as much a part of the Clinton legacy as any achievements that administration can claim.*
* Those interested in the details, and sources for all this, are directed toward the author's SSRN-published paper, "Was the Clinton Administration Neoliberal?"
Bill Clinton's Neoliberal Record: A Cheat Sheet
Remarkably, the matter of whether the Democratic Party has become a neoliberal party has recently become controversial, with this going, for example, for Bill Clinton's term in office (1993-2001).
For as long as I can recall, the clear answer would seem to have been yes. Elected as part of a backlash against neoliberalism, with a more progressive tax code, a Keynesian infrastructure-building plan, and universal health care including a public option all central to his campaign platform, Clinton implemented none of these objects, spending his eight years in office vigorously implementing neoliberal policies, setting "structural adjustment (a smaller state, a balanced budget, a paydown of the debt, all as the rich pay less rather than more), laissez-faire (privatization, deregulation, a reduction of the social safety net), and free trade (NAFTA, GATT, etc.) above all other goals. (Indeed, many of us remember how the administration told its supporters they wouldn't be getting health care reform and explained that they spent all their political capital fighting for NAFTA--getting the acquiescence of Democrats in a right-wing policy rather than getting the acquiescence of Republicans in a progressive policy.)
Still, I decided to check the Clinton record systematically, taking as a starting point the "Timeline of Major Actions" on the Clinton White House's own web site (hardly an unfavorable source to that administration).
At the end of that check my answer to the question "Was Bill Clinton a Neoliberal" was an even more emphatic "Yes" than before.
If you want the long version, with all the details, and footnotes for all the details, you can click here.
If you want the short version, just keep reading.
During the Clinton administration deficit reduction and free trade were indeed the twin priorities of economic policy. Where deficit reduction was concerned, one should remember that his tendency was to minimize tax increases, particularly on the affluent. The 1993 tax act raised the uppermost income bracket to 39.6 percent, but this was still markedly below what it was in the first six years of Reagan's administration (50 percent), while the 1997 Taxpayers' Relief Act lowered capital gains taxes to the 20 percent mark that even in Reagan's day was thought overambitious--all as taxes on fuel and Social Security benefits went up. Unsurprisingly, a check of the statistics from the conservative Tax Foundation shows that, relative to their share of Adjusted Gross Income, the rich were carrying less of the tax burden in 2000 than in 1992, never mind 1980.
Instead Clinton emphasized cuts in spending. This was ultimately to include Medicare cuts (passed on the very same day as the capital gains tax cut), but the cornerstone was the ultimately Reaganesque Reinventing Government (whose accomplishments Clinton trumpted with the declaration that "The era of big government is over"). Ultimately reducing the Federal government by a fifth, to its pre-New Deal size relative to the size of the country, it accomplished this by having government simply govern less. The nature of regulatory agencies like the Environmental Protection Agency and the U.S. Department of Agriculture became much more "hands-off," with inspectors treading lightly, while the budget-cutting, "hands-off" approach similarly applied to social spending. Rather than repairing the damage done to domestic Federal programs by Reagan's reign, departments like Housing and Urban Development also took cuts, while grant money was dispensed to states, communities and even private actors to which it delegated its mission--with the approach carried even further in regard to new initiatives. It kicked the infrastructure plan to the curb, entrusting jobs creation to its enterprise zone scheme instead. And what could not be delegated was outsourced--with the Defense Department an early, massive, and ultimately notorious example.
All of this fit in with a broad tendency toward deregulation generally, which went beyond significant deregulation of electricity, telecommunications and finance (most notoriously the winking at violations of the Glass-Steagall Act like the Citibank-Travelers' Group merger, on the way to the Act's complete repeal), to handicapping Federal regulation as such with the 1999 Regulatory Improvement Act--which sought to keep regulators off the backs of business by tying up the regulators themselves in red tape (ironic, in light of the Reinventing Government spirit); while those free trade agreements tied regulators' hands yet again. (That food not up to local safety standards? Tough, it's getting imported anyway.)
The trend also fit in with the privatization of much government functioning, with telecommunications an especially dramatic example, with the privatization of the National Science Foundation's Network (the "backbone of the Internet), and much of the electromagnetic spectrum (the Clinton deficit hawkishness that saw it cut enforcement of worker, consumer, environmental safety, and Medicare spending, not keeping it from giving Big Media the broadcast licenses it could have auctioned off for $70 billion in a colossal act of corporate welfare). It fit in, too, with the cutting of the safety net, the most striking example of which was the 1996 welfare reform, which eliminated welfare's status as an entitlement, capped off benefits (five years' lifetime use, maximum) and turned welfare into "workfare"--all while allowing states to outsource the determination of welfare eligibility, and relied on a private business alliance, the Welfare-to-Work Partnership, to get recipients off the rolls and into the work force, where they constituted an underclass, deprived of the same rights enjoyed by other workers.
Much of this is, alas, not spelled out in the aforementioned Timeline, which instead emphasizes an impressive-seeming number of acts taken by the administration on behalf of the public, particularly in regard to education, health care and worker protection. Still, it must be noted that all of this occurred within that framework of budgetary austerity, government downsizing, deregulation which limited the resources put to realizing any of these goals. Where education is concerned, it is worth remembering the extreme distance between the Goals 2000 (a 90 percent-plus rate of high school graduation, American students first in the world in math and science) and the results. Where the administration made more progress was in, again, that neoliberal object of privatization, as it promoted and enlarged funding for charter schools, and set to work privatizing "Sallie Mae." Where health care is concerned, the sum total of its acts fell far short of the effort toward a genuine health care reform promised in the campaign (emphatic about how Clinton would get "tough" with the industry), let alone the result. Even with the help of boom times, they did not put a dent in the system's costs (evem in terms of its share of national income), nor reduce the number of uninsured.
Where the situation of workers is concerned, the results were similarly meager, reflecting the modest goals and limited push for them, which made their neutralization easy--an increase in the minimum wage that only partly restored its earlier purchasing power (actually a sixth under what it was in 1981 after two rises) before being eroded by inflation; a ban on Permanent Striker Replacement blocked in court; new ergonomics standards for the Occupational Safety and Health Administration Congress repealed almost as soon as Clinton left office; and a number of decisions of the National Labor Relations Board containing some progressive content that were promptly overturned under the next administration. Even the administration's most enduring success, the Family and Medical Leave Act, still afforded only brief, unpaid leave to a limited portion of the work force (in contrast with the norm in the rest of the developed world).
"But what about the environment?" one might wonder. After all, wasn't Mr. Al "Inconvenient Truth" Gore Vice President? The Clinton administration did sign the Kyoto protocol--but let it go unratified. In any event, the administration, never terribly interested in energy or climate, acquiesced in the fossil fuels-based policy driven by Big Oil's needs as his predecessors had done before him. Indeed, more remarkable where energy policy is concerned is the rush to privatize Federal utilities, both civilian and Defense Department, and such assets as the country's civilian uranium enrichment program and Naval Petroleum Reserve (most of which, interestingly, went to that Gore family sponsor through the generations, Occidental Petroleum).
One can argue about whether these policies were desirable, or simply the best a Democrat could have done at the time. But they cannot argue that they were not neoliberal.
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For as long as I can recall, the clear answer would seem to have been yes. Elected as part of a backlash against neoliberalism, with a more progressive tax code, a Keynesian infrastructure-building plan, and universal health care including a public option all central to his campaign platform, Clinton implemented none of these objects, spending his eight years in office vigorously implementing neoliberal policies, setting "structural adjustment (a smaller state, a balanced budget, a paydown of the debt, all as the rich pay less rather than more), laissez-faire (privatization, deregulation, a reduction of the social safety net), and free trade (NAFTA, GATT, etc.) above all other goals. (Indeed, many of us remember how the administration told its supporters they wouldn't be getting health care reform and explained that they spent all their political capital fighting for NAFTA--getting the acquiescence of Democrats in a right-wing policy rather than getting the acquiescence of Republicans in a progressive policy.)
Still, I decided to check the Clinton record systematically, taking as a starting point the "Timeline of Major Actions" on the Clinton White House's own web site (hardly an unfavorable source to that administration).
At the end of that check my answer to the question "Was Bill Clinton a Neoliberal" was an even more emphatic "Yes" than before.
If you want the long version, with all the details, and footnotes for all the details, you can click here.
If you want the short version, just keep reading.
During the Clinton administration deficit reduction and free trade were indeed the twin priorities of economic policy. Where deficit reduction was concerned, one should remember that his tendency was to minimize tax increases, particularly on the affluent. The 1993 tax act raised the uppermost income bracket to 39.6 percent, but this was still markedly below what it was in the first six years of Reagan's administration (50 percent), while the 1997 Taxpayers' Relief Act lowered capital gains taxes to the 20 percent mark that even in Reagan's day was thought overambitious--all as taxes on fuel and Social Security benefits went up. Unsurprisingly, a check of the statistics from the conservative Tax Foundation shows that, relative to their share of Adjusted Gross Income, the rich were carrying less of the tax burden in 2000 than in 1992, never mind 1980.
Instead Clinton emphasized cuts in spending. This was ultimately to include Medicare cuts (passed on the very same day as the capital gains tax cut), but the cornerstone was the ultimately Reaganesque Reinventing Government (whose accomplishments Clinton trumpted with the declaration that "The era of big government is over"). Ultimately reducing the Federal government by a fifth, to its pre-New Deal size relative to the size of the country, it accomplished this by having government simply govern less. The nature of regulatory agencies like the Environmental Protection Agency and the U.S. Department of Agriculture became much more "hands-off," with inspectors treading lightly, while the budget-cutting, "hands-off" approach similarly applied to social spending. Rather than repairing the damage done to domestic Federal programs by Reagan's reign, departments like Housing and Urban Development also took cuts, while grant money was dispensed to states, communities and even private actors to which it delegated its mission--with the approach carried even further in regard to new initiatives. It kicked the infrastructure plan to the curb, entrusting jobs creation to its enterprise zone scheme instead. And what could not be delegated was outsourced--with the Defense Department an early, massive, and ultimately notorious example.
All of this fit in with a broad tendency toward deregulation generally, which went beyond significant deregulation of electricity, telecommunications and finance (most notoriously the winking at violations of the Glass-Steagall Act like the Citibank-Travelers' Group merger, on the way to the Act's complete repeal), to handicapping Federal regulation as such with the 1999 Regulatory Improvement Act--which sought to keep regulators off the backs of business by tying up the regulators themselves in red tape (ironic, in light of the Reinventing Government spirit); while those free trade agreements tied regulators' hands yet again. (That food not up to local safety standards? Tough, it's getting imported anyway.)
The trend also fit in with the privatization of much government functioning, with telecommunications an especially dramatic example, with the privatization of the National Science Foundation's Network (the "backbone of the Internet), and much of the electromagnetic spectrum (the Clinton deficit hawkishness that saw it cut enforcement of worker, consumer, environmental safety, and Medicare spending, not keeping it from giving Big Media the broadcast licenses it could have auctioned off for $70 billion in a colossal act of corporate welfare). It fit in, too, with the cutting of the safety net, the most striking example of which was the 1996 welfare reform, which eliminated welfare's status as an entitlement, capped off benefits (five years' lifetime use, maximum) and turned welfare into "workfare"--all while allowing states to outsource the determination of welfare eligibility, and relied on a private business alliance, the Welfare-to-Work Partnership, to get recipients off the rolls and into the work force, where they constituted an underclass, deprived of the same rights enjoyed by other workers.
Much of this is, alas, not spelled out in the aforementioned Timeline, which instead emphasizes an impressive-seeming number of acts taken by the administration on behalf of the public, particularly in regard to education, health care and worker protection. Still, it must be noted that all of this occurred within that framework of budgetary austerity, government downsizing, deregulation which limited the resources put to realizing any of these goals. Where education is concerned, it is worth remembering the extreme distance between the Goals 2000 (a 90 percent-plus rate of high school graduation, American students first in the world in math and science) and the results. Where the administration made more progress was in, again, that neoliberal object of privatization, as it promoted and enlarged funding for charter schools, and set to work privatizing "Sallie Mae." Where health care is concerned, the sum total of its acts fell far short of the effort toward a genuine health care reform promised in the campaign (emphatic about how Clinton would get "tough" with the industry), let alone the result. Even with the help of boom times, they did not put a dent in the system's costs (evem in terms of its share of national income), nor reduce the number of uninsured.
Where the situation of workers is concerned, the results were similarly meager, reflecting the modest goals and limited push for them, which made their neutralization easy--an increase in the minimum wage that only partly restored its earlier purchasing power (actually a sixth under what it was in 1981 after two rises) before being eroded by inflation; a ban on Permanent Striker Replacement blocked in court; new ergonomics standards for the Occupational Safety and Health Administration Congress repealed almost as soon as Clinton left office; and a number of decisions of the National Labor Relations Board containing some progressive content that were promptly overturned under the next administration. Even the administration's most enduring success, the Family and Medical Leave Act, still afforded only brief, unpaid leave to a limited portion of the work force (in contrast with the norm in the rest of the developed world).
"But what about the environment?" one might wonder. After all, wasn't Mr. Al "Inconvenient Truth" Gore Vice President? The Clinton administration did sign the Kyoto protocol--but let it go unratified. In any event, the administration, never terribly interested in energy or climate, acquiesced in the fossil fuels-based policy driven by Big Oil's needs as his predecessors had done before him. Indeed, more remarkable where energy policy is concerned is the rush to privatize Federal utilities, both civilian and Defense Department, and such assets as the country's civilian uranium enrichment program and Naval Petroleum Reserve (most of which, interestingly, went to that Gore family sponsor through the generations, Occidental Petroleum).
One can argue about whether these policies were desirable, or simply the best a Democrat could have done at the time. But they cannot argue that they were not neoliberal.
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Review: Absentee Ownership, by Thorstein Veblen
Thorstein Veblen's 1923 book Absentee Ownership continues his earlier analysis of how classical liberalism's premises (property and contract rights) and economic and political prescriptions (laissez-faire) were becoming irrelevant to an age of high technology, high finance and Big Business.
In brief: the developing industrial system was increasingly sophisticated and productive, yet fragile as well, with the latter point all the more problematic because of the way in which power over that system was distributed. The corporatization of economic life, and in turn, financial control of industrial corporations, such that shareholders' "absentee ownership" had become "the main and immediate controlling interest in the life of civilized man"--with interests different from, and in conflict with, all the rest of society. Where society as a whole needed life's essentials to be as abundant and cheap as possible, business subordinated production to profit, or more precisely, the largest possible "net gain in dollars," charging what the "traffic will bear," and to that end holding down supply, as they are permitted to do--Veblen calling the rights of property a "vested right of use and abuse over the current industrial knowledge and practice," a "legal right of sabotage." Still other industrial practices threw additional sand in the gears of the machinery. ("Competitive selling"--advertising--is an increasingly costly zero-sum game in his analysis.) And on top of all this, the conflicts between management and labor (where trade unions, too, get in on the game of sabotage for the sake of what the "traffic will bear" as they strike for higher wages) worked in a like manner. As all this generated more frequent disruptions that spread more quickly and widely, law and politics actually worked ever more in favor of business control; while at the same time the development and proliferation of the "machine process" makes the very foundations of that control (that sacredness of property and contract) seem less legitimate (as the unions, for all their limitations and flaws from this perspective, demonstrate).
Given my having just reviewed his earlier exposition of most the fundamentals of this argument (in his 1904 Theory of Business Enterprise) it seems appropriate to concentrate on those things this later book brings to Veblen's line of research.
First, there is a good deal of synthesis of earlier work here--as in his integration of his thinking in earlier works like The Vested Interests and the Common Man on the subject of the nation-state. An institution similarly devoted to a "pursuit of unearned income" by way of sabotage, it is increasingly on behalf of the same businesses engaging in such sabotage in private economic life, for it is they who control it and benefit from it in a "democratic" age.1
Second, those ideas he treated previously are presented here with a greater clarity and force, evident not just in the concision of his summation of the essentials in the brief introductory chapter, but in his being at the "top of his game" with regard to his prose, and particularly his penchant for linguistic "defamiliarization" effects of a kind we expect in experimental literature rather than social science texts--scandalizing adherents of the "conventional wisdom" just by calling familiar things what they really are (as the quotations given above serve to show).
Third and finally, in addition to presenting a fuller and better worked out outline of the new "order of things," he affords the reader a number of close looks at key parts of the system, ranging from the rise and decline of the inventor-entrepreneur "captain of industry" (since supplanted by the "captain of business"--the financial magnate, the "corporate financier"), to the ascent of technology based on basic chemistry and physics to the forefront, to the evolution of ever larger and more elaborate financial structures (as holding companies and "interlocking directorates" have become routinized, and the "investment banker" has waxed in prominence, while the sector as a whole has increasingly consolidated).
As might be expected, Veblen was especially interested in these as they operated in the United States, and devoted most of the second half of the book to close examination of elements within the American version of the situation. Notable among these are the American ideals of the self-made man, the independent farmer, the country town; and by way of these, the outlooks of American business and American politics more generally, from the obsession with rising real estate values, to the lack of public-spiritedness in regard to "public service" (the population in America accepting that "public office is a private job" to a degree other nationalities would not credit). These, in turn, are all explicable in relation to the cultural assumptions of the new country. (What others call the American Dream, Veblen declares in one of his most memorable turns of phrase, the expectation of "something for nothing," an expectation rooted in the experience of the frontier. In theory it was a "democratically equal opportunity of seizure" of all natural resources for the sake of a private gain identified with the public weal, leading to a rush to grab for oneself as much as one could as quickly as one could while leaving as little as possible to others--a process he deemed not just predatory but economically inefficient and ecologically disastrous in its "rapid exhaustion, with waste, of the natural supply." He who succeeds in this "pursuit of something for nothing" so as to achieve a "competence" is a respectable, "substantial" citizen, whereas he who "falls short . . . and so fails to avoid work in some useful occupation is a shiftless ne'er do well"--needing to have a job making you failure, loser, "bum.")
All of this comes together in Veblen's comprehensive image of a modern and especially American Big Business economy, centered on large industrial corporations within which "key industries" whose provision of energy, transport and essential materials to the rest sets the pace for the whole (coal, oil, electricity, railroads, steel); with the whole owned by an increasingly intricate, concentrated financial system obsessed with further consolidation and recapitalization; and the wheels of its machinery greased by the new Federal Reserve's sustaining the expansion of credit that he identified as the basis of economic boom, and which had been ongoing during and after the recent First World War. That war had two other consequences--inflation, behind which it seemed to him that (the rich who did well apart) the country was actually poorer rather than richer, and an intensification of conflict between labor and management. However, at the moment it seemed to him that, even if the triumph of the machine process and its associated ethos remained the long-term trend, the short-term outlook for progress was not very good, those on the side of things as they were still very much in power and still relentless--and successful--in propping up a system badly in need of change, with the likelihood in his view worsening disruption, with a "progressive, widening margin of deficiency in the aggregate material output and a progressive shrinkage of the available means of life" as the last sentence of the book states.
Reading all this nearly a century later it is undeniable that some of what Veblen wrote seems less than completely persuasive. The statistics we now have show that, in spite of indisputable inflation and inequality, the period during and after World War I was of extraordinary increases in American wealth.2 It is clearer still that the American economy, however short it may have been falling of its potential, attained extraordinary new peaks of efficiency as industry assimilated and refined Fordist mass-manufacturing. It may seem, too, that he did not show sufficient regard for the ways in which American finance had become bound up with global finance, which were to soon prove fateful; and that he took too much for granted the consistency of "easy-money policies" on the part of central banks (in that decade, moving toward austerity).
However, Veblen was more often right than wrong in his characterization of the American economy in the 1920s, and what he had to say about its fundamental mechanisms. As he expected, the 'twenties proved a very conservative decade, while financial control and the nation-state system did prove highly disruptive of industrial life. The post-war reparations payments system, and the international credit sustaining it, tied to a Wall Street bubble as bankers and brokers built up a colossal and colossally rickety structure of ownership and obligations, helped turn a stock market correction into an unprecedented, global crash. In the aftermath national governments quickly resorted to beggar-they-neighbor economic policies in the hopes of extricating themselves, a move that has been widely charged with deepening the downturn, and indisputably helped put the great powers on the road to a still greater war than the one that had so recently wrecked their credit and currencies--and a new order beyond that which was to see business' power moderated, finance reined in and the trading system reopened.
Veblen did not live to see the issue of these events, but in hindsight it seems that while Depression and war were followed by an era of reform and boom, it proved a brief aberration, with business and especially finance reasserting themselves in the name of those eighteenth century doctrines he regarded as having had their day--in alliance with a resurgence of those forces of intellectual torpor and social conservatism he identified at the century's outset. The result is that, for all the changes between our time and his, I suspect he would be disappointed but not confused by the situation of the world a hundred years later--where neoliberalism has prevailed over reform, fascistic politics are widespread and ascendant, and a vast, endlessly churning financial sector fueled by easy-money policies drives credit-inflated speculation booms that contribute to periodic crisis and continuing stagnation that leaves the population at large stressed and increasingly deprived while finance's beneficiaries reap historic riches.
1. The term "vested interest" in Veblen's use refers to a claim on such unearned income. The democratization of the Western nation-state, Veblen observes, merely transfers the absurdity of royal sovereignty by divine right--what he memorably calls "an inferiority complex with benefit of clergy"--to the populace at large in nominal terms, so that "each of these sovereign citizens . . . by grace of God owes unqualified and unalienable allegiance to his own person in perpetuity," and just as much as before "an establishment of force and fraud . . . against the outside," as starkly revealed in the "national graft" that is imperialism, with business the principal beneficiary in the external game as it is the internal one.
2. Admittedly, amid wartime inflation and post-war slump, and interest in living standards rather than growth and profits, he had plenty of reason to doubt.
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In brief: the developing industrial system was increasingly sophisticated and productive, yet fragile as well, with the latter point all the more problematic because of the way in which power over that system was distributed. The corporatization of economic life, and in turn, financial control of industrial corporations, such that shareholders' "absentee ownership" had become "the main and immediate controlling interest in the life of civilized man"--with interests different from, and in conflict with, all the rest of society. Where society as a whole needed life's essentials to be as abundant and cheap as possible, business subordinated production to profit, or more precisely, the largest possible "net gain in dollars," charging what the "traffic will bear," and to that end holding down supply, as they are permitted to do--Veblen calling the rights of property a "vested right of use and abuse over the current industrial knowledge and practice," a "legal right of sabotage." Still other industrial practices threw additional sand in the gears of the machinery. ("Competitive selling"--advertising--is an increasingly costly zero-sum game in his analysis.) And on top of all this, the conflicts between management and labor (where trade unions, too, get in on the game of sabotage for the sake of what the "traffic will bear" as they strike for higher wages) worked in a like manner. As all this generated more frequent disruptions that spread more quickly and widely, law and politics actually worked ever more in favor of business control; while at the same time the development and proliferation of the "machine process" makes the very foundations of that control (that sacredness of property and contract) seem less legitimate (as the unions, for all their limitations and flaws from this perspective, demonstrate).
Given my having just reviewed his earlier exposition of most the fundamentals of this argument (in his 1904 Theory of Business Enterprise) it seems appropriate to concentrate on those things this later book brings to Veblen's line of research.
First, there is a good deal of synthesis of earlier work here--as in his integration of his thinking in earlier works like The Vested Interests and the Common Man on the subject of the nation-state. An institution similarly devoted to a "pursuit of unearned income" by way of sabotage, it is increasingly on behalf of the same businesses engaging in such sabotage in private economic life, for it is they who control it and benefit from it in a "democratic" age.1
Second, those ideas he treated previously are presented here with a greater clarity and force, evident not just in the concision of his summation of the essentials in the brief introductory chapter, but in his being at the "top of his game" with regard to his prose, and particularly his penchant for linguistic "defamiliarization" effects of a kind we expect in experimental literature rather than social science texts--scandalizing adherents of the "conventional wisdom" just by calling familiar things what they really are (as the quotations given above serve to show).
Third and finally, in addition to presenting a fuller and better worked out outline of the new "order of things," he affords the reader a number of close looks at key parts of the system, ranging from the rise and decline of the inventor-entrepreneur "captain of industry" (since supplanted by the "captain of business"--the financial magnate, the "corporate financier"), to the ascent of technology based on basic chemistry and physics to the forefront, to the evolution of ever larger and more elaborate financial structures (as holding companies and "interlocking directorates" have become routinized, and the "investment banker" has waxed in prominence, while the sector as a whole has increasingly consolidated).
As might be expected, Veblen was especially interested in these as they operated in the United States, and devoted most of the second half of the book to close examination of elements within the American version of the situation. Notable among these are the American ideals of the self-made man, the independent farmer, the country town; and by way of these, the outlooks of American business and American politics more generally, from the obsession with rising real estate values, to the lack of public-spiritedness in regard to "public service" (the population in America accepting that "public office is a private job" to a degree other nationalities would not credit). These, in turn, are all explicable in relation to the cultural assumptions of the new country. (What others call the American Dream, Veblen declares in one of his most memorable turns of phrase, the expectation of "something for nothing," an expectation rooted in the experience of the frontier. In theory it was a "democratically equal opportunity of seizure" of all natural resources for the sake of a private gain identified with the public weal, leading to a rush to grab for oneself as much as one could as quickly as one could while leaving as little as possible to others--a process he deemed not just predatory but economically inefficient and ecologically disastrous in its "rapid exhaustion, with waste, of the natural supply." He who succeeds in this "pursuit of something for nothing" so as to achieve a "competence" is a respectable, "substantial" citizen, whereas he who "falls short . . . and so fails to avoid work in some useful occupation is a shiftless ne'er do well"--needing to have a job making you failure, loser, "bum.")
All of this comes together in Veblen's comprehensive image of a modern and especially American Big Business economy, centered on large industrial corporations within which "key industries" whose provision of energy, transport and essential materials to the rest sets the pace for the whole (coal, oil, electricity, railroads, steel); with the whole owned by an increasingly intricate, concentrated financial system obsessed with further consolidation and recapitalization; and the wheels of its machinery greased by the new Federal Reserve's sustaining the expansion of credit that he identified as the basis of economic boom, and which had been ongoing during and after the recent First World War. That war had two other consequences--inflation, behind which it seemed to him that (the rich who did well apart) the country was actually poorer rather than richer, and an intensification of conflict between labor and management. However, at the moment it seemed to him that, even if the triumph of the machine process and its associated ethos remained the long-term trend, the short-term outlook for progress was not very good, those on the side of things as they were still very much in power and still relentless--and successful--in propping up a system badly in need of change, with the likelihood in his view worsening disruption, with a "progressive, widening margin of deficiency in the aggregate material output and a progressive shrinkage of the available means of life" as the last sentence of the book states.
Reading all this nearly a century later it is undeniable that some of what Veblen wrote seems less than completely persuasive. The statistics we now have show that, in spite of indisputable inflation and inequality, the period during and after World War I was of extraordinary increases in American wealth.2 It is clearer still that the American economy, however short it may have been falling of its potential, attained extraordinary new peaks of efficiency as industry assimilated and refined Fordist mass-manufacturing. It may seem, too, that he did not show sufficient regard for the ways in which American finance had become bound up with global finance, which were to soon prove fateful; and that he took too much for granted the consistency of "easy-money policies" on the part of central banks (in that decade, moving toward austerity).
However, Veblen was more often right than wrong in his characterization of the American economy in the 1920s, and what he had to say about its fundamental mechanisms. As he expected, the 'twenties proved a very conservative decade, while financial control and the nation-state system did prove highly disruptive of industrial life. The post-war reparations payments system, and the international credit sustaining it, tied to a Wall Street bubble as bankers and brokers built up a colossal and colossally rickety structure of ownership and obligations, helped turn a stock market correction into an unprecedented, global crash. In the aftermath national governments quickly resorted to beggar-they-neighbor economic policies in the hopes of extricating themselves, a move that has been widely charged with deepening the downturn, and indisputably helped put the great powers on the road to a still greater war than the one that had so recently wrecked their credit and currencies--and a new order beyond that which was to see business' power moderated, finance reined in and the trading system reopened.
Veblen did not live to see the issue of these events, but in hindsight it seems that while Depression and war were followed by an era of reform and boom, it proved a brief aberration, with business and especially finance reasserting themselves in the name of those eighteenth century doctrines he regarded as having had their day--in alliance with a resurgence of those forces of intellectual torpor and social conservatism he identified at the century's outset. The result is that, for all the changes between our time and his, I suspect he would be disappointed but not confused by the situation of the world a hundred years later--where neoliberalism has prevailed over reform, fascistic politics are widespread and ascendant, and a vast, endlessly churning financial sector fueled by easy-money policies drives credit-inflated speculation booms that contribute to periodic crisis and continuing stagnation that leaves the population at large stressed and increasingly deprived while finance's beneficiaries reap historic riches.
1. The term "vested interest" in Veblen's use refers to a claim on such unearned income. The democratization of the Western nation-state, Veblen observes, merely transfers the absurdity of royal sovereignty by divine right--what he memorably calls "an inferiority complex with benefit of clergy"--to the populace at large in nominal terms, so that "each of these sovereign citizens . . . by grace of God owes unqualified and unalienable allegiance to his own person in perpetuity," and just as much as before "an establishment of force and fraud . . . against the outside," as starkly revealed in the "national graft" that is imperialism, with business the principal beneficiary in the external game as it is the internal one.
2. Admittedly, amid wartime inflation and post-war slump, and interest in living standards rather than growth and profits, he had plenty of reason to doubt.
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Review: The Theory of Business Enterprise, by Thorstein Veblen
Thorstein Veblen's The Theory of Business Enterprise takes as the starting point of its analysis classical liberalism--specifically the doctrine of "natural rights" of absolute, individual property ownership (rooted in the ownership of the labor involved in making or at least appropriating that piece of property) and freedom of contract (on a one-to-one, personal basis) as the foundations of economic and social life. While he views the notion of natural rights as colored by a primitive "anthropomorphism," he regards the premise of such rights, and the view that they conduced to the greatest good, as plausible within an eighteenth century, pre-industrial context of small-scale, owner-managed enterprise and handicraft production, as represented by the independent artisan.
However, the Industrial Revolution centering on what he called the "machine process" fundamentally changed the character of both economic life, and culture. (By "machine process" he makes clear that he does not simply mean mechanical industry, but includes also such sectors as chemicals, the fundamental point being the replacement of individual craft by scientific precision and standardization.) What it eventually produced was a worldwide, high-technology economic system, extraordinarily productive but also extraordinarily delicate and susceptible to disruption. What had also happened was an increasing differentiation between production on the one hand, and "pecuniary management" on the other--"industry" on the one side, and "business" on the other--which he found problematic.
What seemed to best serve the needs of society was the uninterrupted, efficient functioning of the industrial system, for the sake of its maximum efficiency, and highest and most "serviceable" possible output. However, that system was ultimately controlled by business, a step removed from the object of production--its interest, instead, in the maximum of profit ("what the traffic will bear"), which might or might not be served by that maximum of efficiency and output. Indeed, with the rise of the business corporation and modern high finance trafficking in "vendible corporate capital" (stock) rather than "vendible goods," the controlling business interest was actually a second step removed from that concern with production--centering its "endeavors upon the discrepancy between the actual and the putative earning-capacity rather than upon the permanent efficiency of the concern," and even prepared to compromise the latter for the sake of the former (again, at the expense of the social good).
Veblen makes the case that this conflicting interest, combined with business dominance, leads to much business conduct that is "useless or detrimental" to society, and in fact a constant disruption of industrial output, and "parasitism" on what occurs. Anti-competitive practices aimed at destroying competitors rather than besting them in the marketplace (like railroad rate wars), and financial operations aimed at raising and lowering the valuation of firms for the sake of "tactical maneuvering" ("A convincing appearance of decline or disaster will lower the putative earning capacity of the concern below its real earning capacity and so will afford an advantageous opportunity for buying with a view to future advance or with a view to strategic control") are examples of such disruption. "Competitive selling" (entailing such activities as advertising) is in his view similarly parasitic, adding nothing to the stock of goods, and forcing every enterprise to engage in it simply because others are. There is also the duplication of effort and failure to realize efficiencies of scale (for example, consolidating the rail networks or Great Lakes region iron ore mining operations).
Finally there is the periodic, large-scale, systemic idling of workers and plant in the business downturns he explains as above all due to a "malady of the affections of the business men," laying out a theory of depressions that even more than all the rest is key to his reading of the system's long-term viability, and warrants commensurate discussion here. The affections of which he wrote were for rising financial valuations (businessmen being more concerned with nominal valuations than real valuations--"current dollars" rather than "constant dollars" because they falsely imagined currencies to be stable).1 These were increasingly based not on material capital but optimistic readings of "earning-capacity," based on the inclusion of "intangible assets" like the involvement of star entrepreneurs, and rising demand and prices. These led to what one might, to use a more contemporary phrase, call "irrationally exuberant" recapitalizations and commensurate credit extensions (boom times!), which led to overvaluations, tightening credit, firms going out of business and the redistribution of the associated property on an eventually systemic scale (hard times), clearing the way for a return to the beginning of the cycle (which, he claimed, seemed to alternate between ten to twelve year upturns and downturns in the 1816-1873 period). However, since the 1870s the deflationary effect of increasing productivity, which more than offset the effect of demand on price, prevented those price rises and recapitalizations from happening in the old manner, resulting in what he characterized as "chronic" depression for the last three decades, in his view the new tendency of the system.2
In short, the imperatives of business were getting in the way of the optimal functioning of the industrial system that had grown up under it. This, moreover, threw into question its legitimation in the eyes of population, not just its claims to efficiency, but in others as well--like the challenge that corporate stock presented to the idea of property. (As Veblen put it, "the general body of owners are necessary reduced to the practical status of pensioners dependent on the discretion of the great holders of immaterial wealth.") The same went for the matter of contract--the disadvantage of workers in relation to owners in such "free" contract-making compelling them to resort to collective bargaining which had no place in the old logic, interfering as it did with owner's prerogatives in relation to their own property, and individual contract. (While less criticized, he noted that it was even the case that business itself was inverting the old natural law philosophy for its own ends, in regard to its justifications for property, which rather than being the fruit of productive labor, was increasingly argued for as a prerequisite to it.)
Most fundamental, however, was the changing ethos that went with exposure to and participation in that "machine process." This drove a turn to a materialistic, cause-and-effect-based, "matter-of-fact," scientific outlook, especially among skilled industrial workers and still more, scientists. Imbued with it, the old natural rights view--and along with it the older aristocratic ("barbarian") ethos that still colored much of contemporary life and thought with an anthropomorphic "metaphysics," and a stress on pecuniary acquisitiveness, and personal force and personal subordination--were "no longer self-evident or self-legitimating to [their] common sense."3 In more concrete terms this meant a diminished attachment to the old patriarchal family, religion, patriotism and most at issue here, property, with a secular, cosmopolitan and ultimately socialist ethic in the ascendance, to the horror of cultural traditionalists, the power elite, and especially those who were both. That certainly included businessmen, whose "metaphysics" was of the older kind, with property and contract the unquestioned starting point and "final ground" of their thought, which ran to "explanations of phenomena in terms of human relation, discretion, authenticity, choice" rather than a coming to terms with impersonal fact, and "the interpretation of new facts in terms of accredited precedents, rather than a revision of the knowledge drawn from past experience in the matter of fact light of new phenomena," making "facts conform to law."
The result was that, as the dominance of business became less compatible with the development of industry, the sway of the traditional values congenial to a business culture, too, were faltering, and the conflict between the associated ideologies and social models sharpening. As business enterprise could not do without the machine process it had unleashed, but the machine process could do without business; and technological advance meant that the machine process was exerting its influence more widely and deeply; it appeared that history was on the side of industry, not business.
Still, in his closing chapter Veblen does note that the scene is somewhat more complicated than that, identifying a number of powerful, reactionary forces at work across the Western world. Mass education was tailored to the needs and values of business, and even conducted on business-like lines, while stressing "conviction over inquiry," rather than training young minds. The popular press catered above all to that audience "in moderately easy circumstances . . . the respectable middle class . . . of various shades of conservatism, affectation and snobbery," with content designed to be even further to the right than they, and intellectually of the lowest common denominator--all "pointlessness" and "edifying, gossipy optimism." Meanwhile, the rising tide of nationalism, imperialism and the associated militarism and militarization were a conditioning to servility. (As he put it, military training was training in "ceremonial procedures, arbitrary command" and "unquestioning obedience," while "martial law puts civil rights in abeyance.") However, threatening as all these were, it was his long-range expectation that the machine process would triumph over them all.
As all of this suggests, Theory is one of Veblen's longer works, and a fairly dense one at that, more difficult than I had expected it to be in its discussion of finance, growth, boom, bust, depression, which comprises about half the book. It strikes me that this is partly because this was less familiar territory for him, but partly because older writing on these matters, preceding the richer vocabulary we have developed and the wealth of statistical and other data we take for granted in such discussions, was unavailable to him; partly because Veblen's discussion is so abstract and intricate at the same time, with little in the way of concrete examples to provide clarification and points of reference. (Perhaps reflective of a certain strain, Veblen's biting humor and linguistic flair are not much on display here.) Still, if less efficient or striking than usual he was not without considerable insight here. Veblen's theory of depression, if perhaps looking thinly sketched today, still has its interest, bound up with that analysis of what economic life means when high finance dominates non-financial industry, a matter still timely a century on--its core in the significance of inflated values and corrections for the business cycle to which he was so attentive, and the effect they have on actual production, not just of importance in understanding his time, but our own as well.
Veblen's writing also reacquires its accustomed sharpness and vibrancy when he turns to the other aspects of his chosen subject matter, ranging from his lucid exposition of the roots of the "natural law" philosophy, to the ways in which it had become problematic in the nineteenth century. Considering his last chapter it strikes me that little is said now of the failings of our education system and the press, or the dangers of militarism, that he did not say then, if only in outline. Indeed, in the contrast between the older value system of the traditionalists, and the more skeptical outlook of those touched by the machine process, we get an adequate description of the stuff of the culture wars that rage on today in tiresome, destructive fashion--devotees of flag, cross, family values and capitalism-as-freedom clashing with socially liberal, secular progressives then as now.
To be fair, Veblen would go on to say much of this elsewhere, in more developed, sophisticated fashion. But this important, early exposition is strong enough to enrich the understanding of them (as I found when I took a second look at Absentee Ownership). Similarly I have found this book an aid to understanding not just Veblen's body of work, but that of the numerous writers who followed in his footsteps over the twentieth century--the preoccupations and analyses of figures like C. Wright Mills, John Galbraith, Gabriel Kolko and Paul Sweezy, all of whom have considerable debts to him. In short, even after having read a good deal of Veblen previously, The Theory of Business Enterprise more than rewarded my pushing on through its less even patches.
1. Veblen took a comparatively dim view of businessmens' intellects, observing that "short-sightedness and lack of insight beyond the conventional routine seem to be fairly universal traits of the class of men who engage in the larger business activities"--and even suggested that if the class as a whole got wise to the realities, "business traffic as now carried on might conceivably collapse through loss of its base line."
2. Veblen acknowledged that there had been efforts to restore growth without changing the system, namely "wasteful expenditure," as on arms; and the effort to control competition, by way of the "trusts"; but viewed both as undesirable, with trusts particularly ineffective (the latter, due to the implausibly comprehensive character they would have to attain).
3. The aristocratic, barbarian ethos was, of course, the principal subject of Veblen's The Theory of the Leisure Class.
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However, the Industrial Revolution centering on what he called the "machine process" fundamentally changed the character of both economic life, and culture. (By "machine process" he makes clear that he does not simply mean mechanical industry, but includes also such sectors as chemicals, the fundamental point being the replacement of individual craft by scientific precision and standardization.) What it eventually produced was a worldwide, high-technology economic system, extraordinarily productive but also extraordinarily delicate and susceptible to disruption. What had also happened was an increasing differentiation between production on the one hand, and "pecuniary management" on the other--"industry" on the one side, and "business" on the other--which he found problematic.
What seemed to best serve the needs of society was the uninterrupted, efficient functioning of the industrial system, for the sake of its maximum efficiency, and highest and most "serviceable" possible output. However, that system was ultimately controlled by business, a step removed from the object of production--its interest, instead, in the maximum of profit ("what the traffic will bear"), which might or might not be served by that maximum of efficiency and output. Indeed, with the rise of the business corporation and modern high finance trafficking in "vendible corporate capital" (stock) rather than "vendible goods," the controlling business interest was actually a second step removed from that concern with production--centering its "endeavors upon the discrepancy between the actual and the putative earning-capacity rather than upon the permanent efficiency of the concern," and even prepared to compromise the latter for the sake of the former (again, at the expense of the social good).
Veblen makes the case that this conflicting interest, combined with business dominance, leads to much business conduct that is "useless or detrimental" to society, and in fact a constant disruption of industrial output, and "parasitism" on what occurs. Anti-competitive practices aimed at destroying competitors rather than besting them in the marketplace (like railroad rate wars), and financial operations aimed at raising and lowering the valuation of firms for the sake of "tactical maneuvering" ("A convincing appearance of decline or disaster will lower the putative earning capacity of the concern below its real earning capacity and so will afford an advantageous opportunity for buying with a view to future advance or with a view to strategic control") are examples of such disruption. "Competitive selling" (entailing such activities as advertising) is in his view similarly parasitic, adding nothing to the stock of goods, and forcing every enterprise to engage in it simply because others are. There is also the duplication of effort and failure to realize efficiencies of scale (for example, consolidating the rail networks or Great Lakes region iron ore mining operations).
Finally there is the periodic, large-scale, systemic idling of workers and plant in the business downturns he explains as above all due to a "malady of the affections of the business men," laying out a theory of depressions that even more than all the rest is key to his reading of the system's long-term viability, and warrants commensurate discussion here. The affections of which he wrote were for rising financial valuations (businessmen being more concerned with nominal valuations than real valuations--"current dollars" rather than "constant dollars" because they falsely imagined currencies to be stable).1 These were increasingly based not on material capital but optimistic readings of "earning-capacity," based on the inclusion of "intangible assets" like the involvement of star entrepreneurs, and rising demand and prices. These led to what one might, to use a more contemporary phrase, call "irrationally exuberant" recapitalizations and commensurate credit extensions (boom times!), which led to overvaluations, tightening credit, firms going out of business and the redistribution of the associated property on an eventually systemic scale (hard times), clearing the way for a return to the beginning of the cycle (which, he claimed, seemed to alternate between ten to twelve year upturns and downturns in the 1816-1873 period). However, since the 1870s the deflationary effect of increasing productivity, which more than offset the effect of demand on price, prevented those price rises and recapitalizations from happening in the old manner, resulting in what he characterized as "chronic" depression for the last three decades, in his view the new tendency of the system.2
In short, the imperatives of business were getting in the way of the optimal functioning of the industrial system that had grown up under it. This, moreover, threw into question its legitimation in the eyes of population, not just its claims to efficiency, but in others as well--like the challenge that corporate stock presented to the idea of property. (As Veblen put it, "the general body of owners are necessary reduced to the practical status of pensioners dependent on the discretion of the great holders of immaterial wealth.") The same went for the matter of contract--the disadvantage of workers in relation to owners in such "free" contract-making compelling them to resort to collective bargaining which had no place in the old logic, interfering as it did with owner's prerogatives in relation to their own property, and individual contract. (While less criticized, he noted that it was even the case that business itself was inverting the old natural law philosophy for its own ends, in regard to its justifications for property, which rather than being the fruit of productive labor, was increasingly argued for as a prerequisite to it.)
Most fundamental, however, was the changing ethos that went with exposure to and participation in that "machine process." This drove a turn to a materialistic, cause-and-effect-based, "matter-of-fact," scientific outlook, especially among skilled industrial workers and still more, scientists. Imbued with it, the old natural rights view--and along with it the older aristocratic ("barbarian") ethos that still colored much of contemporary life and thought with an anthropomorphic "metaphysics," and a stress on pecuniary acquisitiveness, and personal force and personal subordination--were "no longer self-evident or self-legitimating to [their] common sense."3 In more concrete terms this meant a diminished attachment to the old patriarchal family, religion, patriotism and most at issue here, property, with a secular, cosmopolitan and ultimately socialist ethic in the ascendance, to the horror of cultural traditionalists, the power elite, and especially those who were both. That certainly included businessmen, whose "metaphysics" was of the older kind, with property and contract the unquestioned starting point and "final ground" of their thought, which ran to "explanations of phenomena in terms of human relation, discretion, authenticity, choice" rather than a coming to terms with impersonal fact, and "the interpretation of new facts in terms of accredited precedents, rather than a revision of the knowledge drawn from past experience in the matter of fact light of new phenomena," making "facts conform to law."
The result was that, as the dominance of business became less compatible with the development of industry, the sway of the traditional values congenial to a business culture, too, were faltering, and the conflict between the associated ideologies and social models sharpening. As business enterprise could not do without the machine process it had unleashed, but the machine process could do without business; and technological advance meant that the machine process was exerting its influence more widely and deeply; it appeared that history was on the side of industry, not business.
Still, in his closing chapter Veblen does note that the scene is somewhat more complicated than that, identifying a number of powerful, reactionary forces at work across the Western world. Mass education was tailored to the needs and values of business, and even conducted on business-like lines, while stressing "conviction over inquiry," rather than training young minds. The popular press catered above all to that audience "in moderately easy circumstances . . . the respectable middle class . . . of various shades of conservatism, affectation and snobbery," with content designed to be even further to the right than they, and intellectually of the lowest common denominator--all "pointlessness" and "edifying, gossipy optimism." Meanwhile, the rising tide of nationalism, imperialism and the associated militarism and militarization were a conditioning to servility. (As he put it, military training was training in "ceremonial procedures, arbitrary command" and "unquestioning obedience," while "martial law puts civil rights in abeyance.") However, threatening as all these were, it was his long-range expectation that the machine process would triumph over them all.
As all of this suggests, Theory is one of Veblen's longer works, and a fairly dense one at that, more difficult than I had expected it to be in its discussion of finance, growth, boom, bust, depression, which comprises about half the book. It strikes me that this is partly because this was less familiar territory for him, but partly because older writing on these matters, preceding the richer vocabulary we have developed and the wealth of statistical and other data we take for granted in such discussions, was unavailable to him; partly because Veblen's discussion is so abstract and intricate at the same time, with little in the way of concrete examples to provide clarification and points of reference. (Perhaps reflective of a certain strain, Veblen's biting humor and linguistic flair are not much on display here.) Still, if less efficient or striking than usual he was not without considerable insight here. Veblen's theory of depression, if perhaps looking thinly sketched today, still has its interest, bound up with that analysis of what economic life means when high finance dominates non-financial industry, a matter still timely a century on--its core in the significance of inflated values and corrections for the business cycle to which he was so attentive, and the effect they have on actual production, not just of importance in understanding his time, but our own as well.
Veblen's writing also reacquires its accustomed sharpness and vibrancy when he turns to the other aspects of his chosen subject matter, ranging from his lucid exposition of the roots of the "natural law" philosophy, to the ways in which it had become problematic in the nineteenth century. Considering his last chapter it strikes me that little is said now of the failings of our education system and the press, or the dangers of militarism, that he did not say then, if only in outline. Indeed, in the contrast between the older value system of the traditionalists, and the more skeptical outlook of those touched by the machine process, we get an adequate description of the stuff of the culture wars that rage on today in tiresome, destructive fashion--devotees of flag, cross, family values and capitalism-as-freedom clashing with socially liberal, secular progressives then as now.
To be fair, Veblen would go on to say much of this elsewhere, in more developed, sophisticated fashion. But this important, early exposition is strong enough to enrich the understanding of them (as I found when I took a second look at Absentee Ownership). Similarly I have found this book an aid to understanding not just Veblen's body of work, but that of the numerous writers who followed in his footsteps over the twentieth century--the preoccupations and analyses of figures like C. Wright Mills, John Galbraith, Gabriel Kolko and Paul Sweezy, all of whom have considerable debts to him. In short, even after having read a good deal of Veblen previously, The Theory of Business Enterprise more than rewarded my pushing on through its less even patches.
1. Veblen took a comparatively dim view of businessmens' intellects, observing that "short-sightedness and lack of insight beyond the conventional routine seem to be fairly universal traits of the class of men who engage in the larger business activities"--and even suggested that if the class as a whole got wise to the realities, "business traffic as now carried on might conceivably collapse through loss of its base line."
2. Veblen acknowledged that there had been efforts to restore growth without changing the system, namely "wasteful expenditure," as on arms; and the effort to control competition, by way of the "trusts"; but viewed both as undesirable, with trusts particularly ineffective (the latter, due to the implausibly comprehensive character they would have to attain).
3. The aristocratic, barbarian ethos was, of course, the principal subject of Veblen's The Theory of the Leisure Class.
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