3 Jan 2018 – New times call for new ideas. In a desperate situation, like that of South Africa today, some people may be willing to consider the new ideas that are on offer, going on the lookout for measures that might work. Others may have their minds already made up; they might be already sure that they know what miracle, if it would only happen, would save South Africa. A third group may be so confused and depressed that all they want to do is crawl in a hole and die, or –what may be psychologically the same thing– kill someone or set something on fire.
Howard Richards, January 2017
What I most want to say is that social chaos and ecological disaster cannot be avoided without transforming basic cultural and social structures. Otherwise no economic policy will work. For structural reasons, all economic policies lead to unacceptable results. The reason why this is the case is that the basic social structure has unacceptable consequences, while the economy lives, and moves and has its being inside it. Operating inside the basic structure, the economy cannot, with any model or with any policy, reliably meet the needs of all the people in a sustainable harmony with nature.
Let me now relate these abstract concepts (whose meanings I will explain below) to today’s politics. I believe the popularity of Donald Trump and Paul Ryan and their fellow believers in America First and in 18th century French natural rights, philosophy and 20th century Austrian economics will soon suffer a precipitous decline. Although I personally agree with Trump on rapprochement with Russia and on anti-globalism, and I agree with Ryan that something must be done about the fiscal crisis of the state, I expect Trumpism to tank and Ryanism to recede regardless of whatever you or I may agree with or disagree with.
I regard these hypotheses as probably true: Progressives will succeed in loosening the establishment’s grip on the Democratic Party. 2017 will bring disillusionment and misery. 2018 will bring a Democratic congress. Then and starting now, the time will be ripe to transform basic cultural and social structures.
The American people already know from recent experience with Jimmy Carter, Bill Clinton, and Barack Obama that the Democrats do not have good answers either. I will argue that not even the best and the brightest Democrats, and specifically not even Robert Reich and Joseph Stiglitz , have proposed solutions that will work without structural change. I do not mean that Reich, Stiglitz, Bernie Sanders, Elizabeth Warren, and other voices of sanity are wrong. I mean that the best progressive proposals will only work with and as part of structural change.
Since the phrase “social structure” is a contested concept that is used in many ways, I begin by explaining how I use it. My point of departure is Chapter Four titled, “What ever happened to social structure?” in Douglas Porpora’s new book Reconstructing Sociology. After reviewing the main current uses of the phrase, Porpora endorses a critical realist definition: Social structure is material relations among social positions and social constructs.
Here the main point is that the social world with all of its rules and roles is material. When the law –a social construction—punishes alike the rich and the poor for sleeping under bridges and for stealing bread, or decides who is legally entitled to eat (those with money) and who is not entitled to eat (those without money) in a famine , the bridges, the bread, and the human cells that die for lack of nourishment are material.
Although the social relations (like the relation of buyer to seller, or the relation of employer to employee), the social positions (like the position of owner), and the social constructs (like contracts) are constituted by cultural rules, the social structure thus constituted is material. It cashes out on the ground as some eating and others not, some sleeping under dirty blankets on sidewalks while others sleep between clean sheets in beds, some living and others dying. Agreeing with Jürgen Habermas that in our contemporary world the primary institution is the market, and that governments are secondary to it, I use the phrase “social structure” mainly to refer to the relations and positions established by the legal and moral rules that constitute markets. Those rules can be placed in these four categories that I call the four sides of “the box”:
1. Property, who owns what
2. Contracts, the rules of buying and selling
3. The autonomous juridical subject capable of owning property and making contracts
4. Prohibitions against intentionally harming other people. Without them there could be no markets because the strong would simply overpower others and take what they wanted. (But there is no affirmative duty to help people.)
Where there are such rules, there are markets; without them there are no markets. To the extent that such rules prevail, people are no longer in a traditional social structure where one’s livelihood depends on mutual duties among kinfolk and clan folk, but in a modern social structure. In a modern social structure, one’s livelihood depends on selling enough to get enough money be able to meet one’s needs by buying.
Suppose you know that the basic social structure is established by the constitutive rules that organize market exchange (i.e. the box just outlined). You know that people sell for money and buy with money.
If you already know these things about the basic social structure, then you already can deduce basic economics: In this kind of society (our kind) in order to live people have to produce a product, or else sell their labor-power for wages to someone who produces a product, or else position themselves to capture some of the surplus left over after the products have been sold and all the costs of production have been paid.
I call this social structure “basic” because it governs meeting the necessities of life. Thus, for the Hopi people the basic cultural structure organizes the production and distribution of corn; for a pastoral people the basic cultural structure revolves around their herds. (I prefer the word “cultural” rather than “social” when speaking of non-modern societies, and I prefer it in some contexts even when speaking of modern societies.)
Once you know the basic rules of the game that organize livelihoods in a society you can deduce a great deal more about it. Concerning the United States and similar societies you can deduce two staggering never-to-be-forgotten facts: 1. Life depends on investor confidence. Meeting the basic needs of life depends on consumption, which depends on production, which depends (not entirely but mainly) on investment, which in turn depends on the expectation of profit, i.e. “confidence.” 2. Life depends on selling. Meeting the basic needs of life depends on buying, which depends on selling something to generate the money needed to do the buying.
These staggering facts are not empirical findings of economists. They are sociological facts or historical facts more than they are economic facts. Sociologically, they are consequences of the basic social structure.
As historical facts, they are outcomes of long processes.
As history has turned out, in the 16th, 17th, 18th and 19th centuries the European peoples conquered the other peoples of the world. They turned the entire planet into one big market –in the process marginalizing innumerable indigenous basic cultural/social structures. In Immanuel Wallerstein’s terms the European world-system became the modern world-system.
Schematically, we can represent key tendencies of history as stages in the evolution of markets. In the first stage, peasants brought their geese and cabbages to market-fairs to buy a fat pig, and then went home again jiggety-jig to salt it and save it for sustenance during long cold winters (selling in order to buy); and then as a second stage merchants went to market to buy grains in order to sell them again in the winter when the price of grain would be higher, or else in order to move them elsewhere to where the price of grain would be higher (buying in order to sell); and then entrepreneurs bought labor-power and other inputs in order to produce merchandise to sell (buying in order to produce in order to sell). Then financial calculations estimated from the get-go the net return from investing in order to produce in order to sell for profit (buying to turn money into more money). Since money turned into more money can then be thrown afresh into new and larger investments, it can accumulate as compound interest accumulates (capital accumulation). Increasingly in recent times, finance capital dominates productive capital, and often prefers the global casino to the real economy. Money turns into more money without the intervening phase of producing goods and services (capital accumulation divorced from the real economy).
Adam Smith was among the first to observe that the accumulation of capital made possible the navies and armies that in turn made possible the European conquest of the rest of the world.
I want to suggest that it was not an accident that history has turned out as it has, nor has its outcome been mainly the result of the intentional actions of individuals and groups. There is a tendency to exaggerate the power of people, for example the power of the 1%. But the main power, i.e. the main cause moving history, is social structure. Once market exchange gets started, it is virtually inevitable that human life will come to depend on investor confidence and on selling. At the point where capital accumulation becomes the objective, then something like Alfred Marshall’s law of substitution comes into play. When a more effective and more efficient way to accumulate capital is found, it will tend to expand and grow and, correspondingly, older ways of profit-seeking will tend to shrink and decline.
The full significance of these causes that push history step by step from Simple Simon selling pies on the way to the fair to Lehman Brothers selling derivatives on the way to the crash, cannot be understood without considering two corollaries of the two Staggering Facts. The corollaries –like the Staggering Facts themselves—are consequences of the basic social structure. They are:
1A. There is a chronic insufficiency of inducement to invest. It is not only the case that the bread and butter of the people, their employment and their dignity, depend on the confidence of investors. It is also the case that investor confidence perpetually flags, lags, and threatens to collapse. For example, in the USA today “inner city” denotes “a place where there is little or no inducement to invest.”
2A. There is a chronic insufficiency of effective demand. This is no small matter because profits depend on sales, while investment, and therefore output and employment, depend on expectations of profit.
Putting 1 and 2 together with 1A and 2A yields a double whammy. Life depends on investments and on sales. Both are fragile and tend to fail. For those who cannot think outside the box, whenever the machine stalls, as it did in 2008, the motive to do whatever it takes to crank up the stalled old machine and make it go again, could not be stronger. “Whatever it takes” includes bailouts, zero or near zero interest rates, quantitative easing, astronomical public and private debt and so on. In general, the chronic insufficiency of effective demand implies that cash sales are never enough; the world must run on credit and ever more credit. Ever higher mountains of unpayable debt are also consequences of the social structure.
Some see 1A (lagging investment) and 2A (lagging sales) as truths discovered by Thomas Malthus, and then operative in economic reality but swept under the rug by economic theory until they were rediscovered a century after Malthus by John Maynard Keynes; and then in the capitalist revolution that began on or about September 11, 1973, they were once again swept under the theoretical rug by Chicago economics and similar bogus pseudo-sciences. Like a repressed trauma simmering away in a Freudian unconscious, 1A and 2A (the weakness of the inducement to invest and the weakness of effective demand) continued throughout the eighties and the nineties to act at levels of reality invisible to mainstream economics. Then (some say) what politically dominant but scientifically bogus economics swept under the rug exploded into full view in 2008.
The above is what “some say.” My view is slightly different. 1A and 2A are consequences of 1, 2, 3, and 4. Malthus and Keynes noticed the tip of the iceberg, not the whole iceberg, not the social structure. I hope these numbers are not too confusing. 1A means too few investors. 1B means too few buyers. Both are consequences of basic social structure, i.e. the box. The box is 1 2 3 4. 1. is property. 2. are contract. 3. is the individual autonomous juridical subject. 4 is the duty not to harm others with the conspicuous absence of a duty to help others.
The basic social structure also might be summarized in three words as “liberty without solidarity.” (Thinking, as Milton Friedman and similar thinkers often do, of 1 2 3 and 4 as four aspects of the one idea of liberty, also called freedom). In five words the basic social structure is “liberty without equality and fraternity.”
Once again, the corollary Staggering Facts are not so much economic facts as facts about the basic cultural and social structure. The basic rules of the game of life already provide as a matter of law, as a matter of morals, as a matter of custom, and as a matter of conventional common-sense, that although everybody is expected to earn a living by selling something, nobody has a duty to buy. Although people need jobs, there will almost always be more job-seekers than job-offers.
Reliably meeting human needs in harmony with the natural environment is not even the objective. It is not likely to be achieved.
From the moment when the game of life is constituted as the buy-and-sell-game, the double whammy begins to operate. The double whammy –i.e. everybody’s bread and butter physically depends on keeping investor confidence strong, while investor confidence is perpetually shaky because sales are perpetually shaky– has made it inevitable, or nearly so, that history would turn out as it has in fact turned out.
Insufficient appreciation of the force of the double whammy explains why Robert Reich, when interviewed on television shortly after the 2016 election, could declare himself unable to comprehend why the president-elect had chosen as head of the Environmental Protection Agency someone who does not believe in global warming, as Secretary of Education someone who does not believe in public education, and as Secretary of Labor someone who does not approve of the labor laws he is supposed to administer. Reich described their thinking as “neolithic.”
But the double whammy is not neolithic. Capital accumulation is the motor that drives the economy now in the 21st century. It is a perpetually defective motor. It tends to stall. It is not simply a matter of the greed of the capitalists outweighing the needs of the people because the capitalists buy the politicians. No. It is worse than that. It is a matter, ceteris paribus, of the poor not eating, and the government not having any streams of income to tax, unless the rich have confidence that their investments will be profitable. More often than not (here comes the double part of the whammy), there are reasons to fear that if investment (“growth”) does not improve quickly, the tendency to low confidence coming from the chronic insufficiency of effective demand will breed even lower confidence in a negative feedback loop spiraling downward into depression. Therefore, when profits can be made by mining dirty coal, or by making schools even more closed to critical thinking than they already are, or by breaking unions, there are unrelenting temptations to sin. All this is built into the social structure, and will not change until the structure changes. Reich was amazed when he should have been unsurprised.
For Joseph Stiglitz, a central message of his latest book is that “…the level of inequality of America is not inevitable; it is not the result of inexorable laws of economics. It is a matter of policies and politics.” Robert Reich could have written identical words. Reich chronicles an endless parade of foolish policies that according to him (and to Stiglitz) could be reversed by intelligent legislators elected by intelligent voters. One example Reich gives is colloquially called the Mickey Mouse Act of 2003. Mickey Mouse was created in 1928. The U.S. Constitution provided for giving artists exclusive rights to their creations for a “limited time,” originally set by Congress at 14 years. Now corporate owners of intellectual property have exclusive rights for 75 years. After the Mickey Mouse Act the Disney Corporation can exact payment from anyone who uses Mickey’s name or image until 2023, for a total of 95 years. Even that deadline is expected to be extended. The parade goes on. Reich’s book is packed with examples of foolish laws that sacrifice the public welfare, the environment, social justice and whatever else to one sine que non: profit.
I have said perhaps enough about why in the United States (and by implication also in other countries) social chaos and ecological disaster cannot be avoided without the transformation of basic cultural and social structures. I have explained that the physical welfare and the sense of self-worth of the people depend too much on an unreliable economic motor with built-in tendencies toward social chaos and ecological disaster. This excessive dependency is a consequence of a basic social structure that has evolved to become today’s global capitalism starting from foundations laid long ago in Roman antiquity and in early modern Europe. Now I need to say something about why social chaos and ecological disaster can be avoided with the transformation of basic cultural and social structures. When guided by thinking outside the box, humanity can reorganize itself to remove itself from the endangered species list.
Today there are many proposals for “structural” changes of one kind or another. My structural proposal is to reduce human dependence on the capitalist sector (defined as the part of the private sector that invests accumulated capital for the purpose of accumulating more capital) by strengthening desirable non-capitalist sectors. It is to cut capitalism down to size by making it a smaller part of the total economy, to make it governable while still enjoying its benefits. (The qualification “desirable” excludes, for example, the criminal sector.) Among the structural change proposals already on the table mine comes closest to Latin American and European economia solidaria, which has roots in the social teachings of the Roman Catholic church; and to the proposals of Amartya Sen, Martha Nussbaum and Jean Dreze. It is not intended as a condemnation of traditional democratic socialism or social democracy but as a way to revive them by making them feasible. Its name is “unbounded organization.”
Capital accumulation, and therefore (by definition, or rather by one definition , capitalism) is not in itself a bad thing. It is quite necessary, although it is not necessary that it be concentrated in a few private hands. Without it there is no surplus to redistribute. There is no possibility of financing big projects, including the biggest project of all: retooling humanity with green technologies that do more with less. Way back in 1873, Walter Bagehot, in a book explaining how the high finance of the City of London worked, wrote that from that time forward no worthy project, be it a port or a railway or some other, anywhere in the world, need fail for lack of capital. The banking system was capable of pooling savings and creating credit to raise any required sum. What Bagehot had in mind was a project able to repay a loan at a rate of interest profitable for a bank; but worthy unprofitable projects also require capital accumulation. If Andrew Carnegie had not accumulated capital, there would be no Carnegie libraries and no Carnegie Endowment for International Peace.
The problem is not that capital accumulation happens. The problem is that it tends to control everything else, at the same time that it is unreliable. Its normal tendency is to maximize profits by minimizing costs, and that means minimizing wages, minimizing employment, and minimizing taxes. Capitalist firms can provide quality employment, pay good wages and contribute their fair share of taxes. Some do. Creating a society where the only capitalist firms that exist are like today’s best firms requires social and cultural transformation.
The kind of transformation of the basic social and cultural structure that is required is a transformation that would make society governable. If and when the required transformation is achieved, fear of capital flight, layoffs, plant closings, disinvestment and so on; will no longer deter people from cooperating intelligently to do what needs to be done to achieve the social integration of released offenders, meaningful livelihoods for everybody with nobody left sleeping on the sidewalk, levels of carbon dioxide in the earth’s atmosphere below 350 ppm, and so on. Such a transformation will build an economy that keeps running even when the big investors do not invest. Without the transformation (i.e. now) they put the brakes on the economy whenever they no longer have confidence that investment will be profitable. Or (as happened in Chile in 1973 and is happening in Venezuela now) they may torpedo the economy deliberately to create an economic crisis for the purpose of bringing down the government.
Amartya Sen writes of the “… mean streets and stunted lives that capitalism can generate, unless it is restrained and supplemented by other– often nonmarket– institutions”. It is necessary to emphasize Sen’s word “supplemented”. Restraint is not enough. When capital is restrained, for example, by requiring a minimum wage or by forbidding the release of PPCPs into groundwater, capital still has the options of shutting up shop or moving elsewhere. It can still exercise what Samuel Bowles and Herbert Gintis call “the exit power of capital.” The transformation of the social structure that is required is one that neutralizes exit power by making sure other ways to meet human needs can swing into action and fill the breach when one or more of the standard ways fail. That is why “supplemented” should be emphasized along with “restrained”.
The long list of alternative ways to meet human needs, like the somewhat shorter but still long list of ways to meet human needs in harmony with nature, has no end. It is a motley list. Some items on it are more independent of capital accumulation than others. It is a list that grows as social innovations come on line. It includes volunteer fire departments and families that function as an economic unit and run motels together, backyard gardens and urban rooftop gardens and community supported agriculture, permaculture, dentists in private practice, longshoremen who load and unload ships as a worker-owned cooperative, mutual insurance companies owned by the insured, municipally owned electric power companies, the State Bank of North Dakota, symphony orchestras funded by music lovers, feminist collectives who share housing and cooking and child care, as well as autonomous public entities like the Port Authority of New York, and as well as churches that derive an income from owning apartment buildings and use the money to serve the poor, and indigenous peoples who still live in tribal communities and still practice their traditional ways of doing things, … The list has no end. Think unbounded organization.
I mention specially two kinds of non-capitalism that at first glance might be left off the list because they might seem to be capitalism. One is the mile upon mile of little businesses you see driving through a big city. It should not be assumed that just because they are businesses they are accumulating capital; many of their owners earn less than they would earn working for wages. A second non-obvious non-capitalism is found in the behavior of capitalists themselves when they choose not to pursue single-mindedly the goal of enjoying on their deathbeds the satisfaction of having piled up the maximum amount of money they could possibly have piled up. There is no unbreakable psychological law that compels capitalists to act like capitalists. If Bill and Melinda Gates decide to spend a billion dollars to cure the children of Asia of diseases, instead of investing it at compound interest until it turns into two billion dollars, who is to stop them? If Mark Zuckerberg and his partner Priscilla Chan decide to spend their money while they are alive contributing to building a better world, and not to found a dynasty by leaving fortunes to their children, who is to stop them?
Let us agree with Bernie Sanders that the young people who voted for him represent the future of the Democratic Party and the future of the United States of America. Let us further agree with him that to compete successfully with the Republican Party at all levels, and to renew itself with progressive ideas and progressive leadership, the Democratic Party must become a participatory grassroots organization with numerous active members in every nook and cranny of the nation. It would then remain to ask what the numerous young progressive activists who are breathing new life into the Democratic Party will talk about when they meet from Bangor to San Diego in church basements, in union halls, and in the cafeterias of community colleges. What will they do?
I have a specific suggestion, or, rather, a specific idea about a general area to consider working in. The grassroots Democrats should consider working to improve their local neighborhoods and communities. Make them more self-reliant, more neighborly, more like real communities and not merely locations where separate individuals happen to be spending the same time in the same space. You can read about community-building at www.abundantcommunity.com. That website gives many examples of good things already happening in town after town, city after city. It is as if people all over this land have already sensed by intuition that community is the way to go.
The community approach has several advantages. It gives people a reason to come to the meetings. The meetings are not just about whom to campaign for in the next election. They are about being sure Tillie, the elderly woman who lives alone in the house on the corner, will have someone to drive her to the hospital if she has another attack. The meetings are about people becoming more secure and happier here and now. Another advantage is that community is a good talking point when running for the School Board against the local Tea Party candidate. “Community” is a word that puts “freedom” in perspective as one value among others; it is a word that suggests defining freedom as Martin Luther King Jr. defined it (as a call to moral responsibility) and as Martha Nussbaum and Amartya Sen define it (as capability to do things).
Seen in historical perspective, community-building is a way (not the only way) to transform the basic cultural and social structures. Building community is part and parcel of people becoming less isolated and therefore less defenseless; and therefore, it is part and parcel of building a social structure that will reliably meet human needs even when the confidence of investors plummets.
Let me say a little more about how the social structure that now both blesses and oppresses humanity was built. Already in the second century after Christ, the Romans needed a Great Simplification. Like the British in the nineteenth century, the Romans in the second century found that they could not trade or govern in a vast diverse empire without imposing some simplicity on it. Roman Law, and especially the jus gentium that applied alike to Roman citizens and to non-citizens, was a Great Simplification, and by the same token it was an eclipse of community. The empire was an overwhelming military force interested in collecting tribute and in protecting merchants, but not interested in how its component ethnic groups gave meaning to their lives and exchanged matter and energy with the physical environment. The law abstracted from the empire’s multicultural diversity with its wealth of languages, spiritual and material practices, moral codes, kinship and marriage obligations, patterns of mutual obligations, ceremonies, rituals, and stories. Simplifying for the sake of commerce and for the sake of public administration, it classified certain rules as “natural”. The word “natural” meant “the same everywhere.” In practice, “everywhere” meant “wherever Rome rules.”
Fast forwarding past the Middle Ages, a millennium and a half later, in the sixteenth to eighteenth centuries, the successor states of the Roman Empire were constructing the cultural and social structures of modernity. For their Great Simplification, they “received” the ideal of rule of law that antiquity had bequeathed them, but only to encounter another obstacle to modernization. Living in a Europe (formerly known as “Christendom”) dotted with great cathedrals, the modernizers had to achieve a certain distance from God. God had then and still has today the inconvenient trait of telling people what to do. (“Islam” means “submission” or “submission of desires to the will of God.”) It was impossible to build a social and cultural structure around market exchange while God was constantly butting in commanding people to feed the hungry, give drink to the thirsty, clothe the naked, bury the dead, shelter the traveler, comfort the sick, and ransom the captive. Enlightenment minds like Jean-Jacques Rousseau rose to the occasion by substituting “Nature” for “God.” What Nature commanded was first and foremost what Roman Law said was natural, which was in turn first and foremost the constitutive rules of markets. Although the idea that Nature had decreed laissez faire economics framed by a social contract guaranteeing pre-existing natural rights, encountered much opposition in France and in England with their long and complex intellectual traditions, it encountered little opposition in the new United States of America. As has been outlined above, once such ideas and their corresponding institutions are in place it becomes inevitable, or nearly so, that the physical welfare of the people will come to depend on an always precarious confidence of investors. It was not the 1% who created the double whammy to serve their own interests, and it was not created during Ronald Reagan’s presidency in the 1980s. The double whammy was created by history; its roots go back at least to an eclipse of community in the second century; and it does not serve anybody’s interests.
As of 2017, I think I perceive shining through the storm clouds a growing minority doing a culture shift toward a fundamentally different basic structure: toward sharing more with others and toward falling in love with Mother Earth. Score one for hope. Call it a growth point. But what about the fiscal crisis of the state? And the global race to the bottom? And the warfare state? Are these consequences of the basic social structure not cementing the system into place while we granola types are enjoying life in the counter culture? I refrain from suggesting answers to these questions here because this note is already too long. I am aware that to some it might seem too short, to promise more than it delivers, or even to stop where it should begin. I have offered answers to the questions just posed in other writings that are included below in a list of suggested further readings. Goodbye for now.
Howard Richards, “The Impossibility of Politics,” 2016, available on Google. This essay includes a series of “trimtabs” for transforming the basic social and cultural structures of the modern world, including coping with the global race to the bottom and the fiscal crisis of the state.
Joseph Stiglitz et al, “Rewriting the Rules of the American Economy.” New York: Roosevelt Institute, 2015, available on Google. In this and other writings Stiglitz makes important distinctions between profits with social functions and rents, paving the way for alleviating the fiscal crisis of the state through the effective capture of rents.
Riane Eisler, The Real Wealth of Nations. San Francisco: Berrett-Kohler, 2007. Eisler proposes partnership as a basic structural principle and caring as a basic value.
Evelin Lindner, A Dignity Economy. Lake Oswego OR: Dignity Press, 2013. The author is a leading researcher on the psychology of dignity and humiliation who brings findings from contemporary psychology to bear on social transformation.
Michael Porter and Mark Kramer, “Creating Shared Value,” Harvard Business Review. 2011. Pp. 499-513. The authors argue that profit per se can no longer be considered the goal of business.
Howard Richards and Joanna Swanger, The Dilemmas of Social Democracies. Lanham MD: Rowman and Littlefield, 2006. This book introduces the concept of “cultural resources” defined as existing capacities to cooperate to meet needs in harmony with nature.
Gavin Andersson and Howard Richards, Unbounded Organizing in Community. Lake Oswego, OR: Dignity Press, 2015. A step-by-step guide to community building drawing on experience in South Africa, Botswana, and California.
Howard Richards, Understanding the Global Economy. Santa Barbara CA: Peace Education Books, 2004, available as a Google Book. This book shows how causal explanation in economics draws on the basic cultural structure for its premises. There is an appendix on peacebuilding that considers aspects of the warfare state.
Howard Richards, Letters from Quebec. San Francisco and London: International Scholars Press, 1995. Chapters 26 through 50 are subtitled “Methods for Transforming the Basic Structures of the Modern World.”
Keynes’ Limitations and Trump’s Disasters Howard Richards, November 2016
In this note I will review some ways John Maynard Keynes exposed fallacies in classical economics, especially the fallacy that supply creates its own demand. Today the same fallacies have made comebacks in theory and in practice. On my view the failures in practice of social democratic and New Deal policies associated with Keynes’ ideas –in spite of the accuracy of his diagnosis of the problems to be solved– led to the rise of today’s neoliberalism and neo-conservatism. The failures and the reactions that followed them produced and are producing (with important assists from other factors) what I will call three kinds of Trump disaster: (1) the disasters Donald Trump has been denouncing, such as the North American Free Trade Agreement (NAFTA); (2) the disasters Trump will aggravate, such as global warming; (3) the racial, ethnic, and gender conflicts that threaten to end in chaos and repression. My recommended way forward will be to deepen Keynes’ macroeconomic analysis to make it an historical analysis of social structure leading to a communitarian reformulation of social and economic democracy. This theoretical move supports a flexible approach to practice called “unbounded organization.”
Near the beginning of his General Theory (1936) Keynes lists three fallacies of classical economics that his book will be devoted to refuting:
1. Wages are equal to the lowest amount the last worker hired is willing to work for.
2. There are jobs for everyone, or would be if workers were willing to accept lower wages. There is no such thing as involuntary unemployment.
3. There is no such thing as overproduction. Supply creates its own demand. If some goods produced remain unsold, it is because the producer has made a mistake and produced what people do not want instead of what people do want. People in general never stop desiring more things, and never run out of money to buy them with.
Keynes writes that these three fallacies logically imply each other and stand or fall together. In what follows I will consider only the third, the fallacy that economies never falter for a general lack of demand. Keynes has this to say about it: “The celebrated optimism of traditional economic theory, which has led to economists being looked upon as Candides, who, having left this world for the cultivation of their gardens, teach that all is for the best in the best of all possible worlds provided we will let well alone, is also to be traced, I think, to their having neglected to take account of the drag on prosperity which can be exercised by an insufficiency of effective demand.” Since the insufficiency of effective demand undermines profits, Keynes often also writes frequently of a parallel insufficiency of inducement to invest. These are not minor matters, since the dynamic that moves a capitalist economy –without which it does not move—is investment in the expectation of profits from sales.
The arguments Keynes advances to prove that classical economics is mistaken and his approach is superior rely on adjusting the definitions of key terms to empirically observed realities, on proposing mathematical models, on history, on observations about the psychology of human behavior, and especially on accounting identities. I will comment on accounting identities.
It is crucial at several points in Keynes’ reasoning to bear in mind that total purchases must equal total sales. A sale from the seller’s point of view is a purchase from the buyer’s point of view. Therefore, it is impossible for everybody to take in more money than they pay out. It is impossible for everybody earn more from sales than they spend on purchases. It is impossible for all firms simultaneously to have bigger accounts receivable than accounts payable.
Once the accounting identity TOTAL SALES EQUAL TOTAL PURCHASES is appreciated, it is only a short step to the conclusion that classical economists (and therefore the supply side economists who advise Trump) underestimate the insufficiency of effective demand. Keynes quotes Hobson: “But though men have the power to purchase, they may not choose to use it.” “But”, Mr. Hobson continues, “he fails to grasp the critical importance of this fact, and appears to limit its action to periods of ‘crisis’.”
Keynes baptizes the institutional fact that one person’s desperate need to sell something to get money to live on does not impose on any other person a duty to buy as “liquidity preference.” People, firms, and governments have good reasons for keeping cash in reserve, not spending it. (Keynes makes lists of those reasons.)
The concept of “liquidity preference” implies that capitalist economies are inherently unstable. It implies that there is a constant tendency for sales to lag behind the levels needed to induce enough investors to invest in the expectation of profits. Investment, to repeat, is what keeps the system going. The capitalist world is moved by the profit motive and without the profit motive it does not move.
Not surprisingly, Keynes’ “liquidity preference” concept has given rise to endless academic debates. Conservatives argue that the system is after all inherently stable (provided that wages are not distorted by unions, prices are not distorted by “tax wedges” etc.) because when people keep cash in reserve they do not just put it under a mattress. They put it in a bank. The bank then lends it out again to someone who spends it. So, conservatives argue, if only the leftists would get out of the way and let the free market do its thing, there would, after all, be plenty of effective demand to induce investors to keep investing and to keep creating wealth. Paul Krugman has persuasively argued that whatever may be the practical outcome of the crisis that began in 2008, at the level of academic economics the theoretical outcome is that Keynes has been proven right by history. There really is a chronic insufficiency of effective demand. It is the conservatives, not Keynes, who were dreaming.
Whether or not conservatives admit defeat on the battlefield of economic theory, as Krugman says they should, if one steps back to take a wider view of historically evolving social structures, it can be seen that Keynes’ insight into the chronic insufficiency of effective demand, or something very like it, must be true. Nowadays most people acquire the necessities of life most of the time by market exchange. In a market, it is not possible to have a sale without a purchase. Purchases are voluntary. Purchases may or may not happen. There can be no general guarantee that there will be enough sales to induce investors to invest sums sufficient to create full employment or general prosperity. There can be no general guarantee that there will be enough sales to enable all the poor people who need to sell something to make a living to get by.
Given that there must be something basically right about Keynes’ diagnosis of the chronic insufficiency of effective demand, at this point in history it is clear that Keynesian prescriptions do not cure the ills Keynes’ diagnosed. He never thought they would. He died prematurely at age 62. If he had lived longer he might have pursued his own advice to pursue an historical analysis of social structure and seek communitarian alternatives. Such advice is implicit in passages in his General Theory like these: “It is certain that the world will not much longer tolerate the unemployment which, apart from brief intervals of excitement, is associated— and, in my opinion, inevitably associated— with present-day capitalistic individualism. But it may be possible by a right analysis of the problem to cure the disease whilst preserving efficiency and freedom.” And: “But we must not conclude that the mean position thus determined by ‘natural’ tendencies, namely, by those tendencies which are likely to persist, failing measures expressly designed to correct them, is, therefore, established by laws of necessity. The unimpeded rule of the above conditions is a fact of observation concerning the world as it is or has been, and not a necessary principle which cannot be changed.”
The limitations of Keynes are, in short, that although he showed that a system that runs on profits that depend on sales, where sales are not reliably sufficient to keep it running well, does not succeed in effectively mobilizing resources to meet human needs; and although he was aware that satisfactory solutions to the problems of such a system would require modifying capitalist individualism, he did not propose sustainable solutions. The partly satisfactory “Keynesian” solutions of the pre-and-post-World War II years proved to be unsustainable. They were followed by reversions to neoliberalism and to neo-conservatism.
“Unbounded organization” is an umbrella name for an open-minded and flexible search for the sustainable satisfactory solutions that Keynes felt a need for. It regards the number of possible solutions as potentially infinite, and the ultimate goal as a fully nurturant society that meets human needs in harmony with the natural environment. It calls for the alignment of all sectors in pursuit of the common good, and it expects satisfactory large solutions to be sums of many small solutions.
As a transition to making a case for unbounded organization, let us consider another researcher who also takes a short cut temporarily bypassing the need for empirical data by demonstrating what must be true because of accounting identities. Randall Wray demonstrates that it is logically impossible for the private sector and the public sector (considered as two wholes) to run a surplus simultaneously. If the private sector is piling up aggregate net profit, then the public sector must be sinking deeper into net debt; and vice versa. Having demonstrated that this result must be true because of accounting identities, Wray produces data showing that in the “Goldilocks” years of the Clinton administration when the federal government was taking in more money each year than it paid out, the public surplus was in fact exactly matched by private debt; while in normal years aggregate private surpluses exactly match aggregate public deficits.
Thus, two scientists, Keynes and Wray, deduce important conclusions from accounting identities. They shatter the common-sense dreams of business people who imagine a United States where business people as a whole will pay fewer taxes and be hampered by fewer regulations; and therefore, will in the aggregate invest more, create more wealth, and create more employment; while the government simultaneously will cease profligate spending, and pay down its old debts. The stage is set for a Trump disaster type two. What seemed true when seen from points of view derived partly from bogus supply side theory but mainly from the personal experience of Donald Trump and his supporters, is false.
One might ask what more can science do? If the purpose of science is to discover truth, then its purpose might seem to be fully achieved when an economic principle is proven to be an accounting identity. There is nothing more true than a tautology. A tautology is logically true by the definitions of its terms. An accounting identity is a tautology.
This is not a happy conclusion because after science knows that because of accounting identities, there must be a chronic insufficiency of effective demand, and that not all businesses can have more receivables than payables, and that a balanced public budget necessarily impedes growth in the private sector; the world goes on as before. The mendacious poor continue to turn to begging, the audacious poor continue to turn to stealing, little children continue to watch terrified while their parents quarrel about money; lack of profit opportunities and lack of employment opportunities elsewhere continue to make the millions who cash its paychecks want to believe that the military sector is not just de facto where their bread and butter comes from, but also de jure a force for good and an antidote to evil.
Ludwig Wittgenstein faced a similar question in his later philosophical work –similar in that he also considered a tautology where it might seem that once pure truth is found, science is over. Having in his early work gone about as far as you can go in purely logical analysis of what must be true at all times and places, in his later work he embarked on a different approach he called “more anthropological.” He took a close look at what actually happens when words and numbers are used. But when he came to consider the proposition that a thing is identical with itself , as in A = A, as in Total Sales Equal Total Purchases, he appeared to confront what he was trying to get away from: a perfectly general truth that required no interpretation and no context.
It turns out that Randall Wray responds in a manner similar to the response of Ludwig Wittgenstein, and similar to Keynes’ questioning whether what is logically inevitable within individualistic capitalism must be inevitable everywhere and always. Having discovered some truths about money that could not possibly be false, Wray says too that our lives are too monetized, and that we should be thinking about what social purposes are served by buying and selling with money. In Wittgenstein’s terms, the language games we play by buying and selling things with money are language games we should play less often and play differently.
This is the cue for unbounded organization to come on stage. The human species has existed on planet earth for perhaps two hundred thousand years. For most of that time humans lived in clans and tribes that did not do market exchange. For most humans throughout most of prehistory and history a necessary truth like it is impossible for every business to have more receivables than payables was not true. It was not even meaningful. What is necessarily true inside the rules of a language game is not necessarily true where and to the extent that the game in question is not being played. Think unbounded. Think with Amartya Sen and Jean Dreze: market exchange is only one way to get human needs met. It is not always the best way. There are many others.
To sum up:
Trump disasters of type one (disasters Trump denounced) can be understood as consequences of successive efforts to cope with the chronic insufficiency of effective demand and the chronic insufficiency of inducements to invest. Jimmy Carter gave up on fighting insufficient demand with low interest rates when he appointed Paul Volcker to head the Federal Reserve. Ronald Reagan reversed the Keynesian policy of stimulating demand by backing organized labor and promoting high wages; he went back to the old-fashioned method of stimulating investment by tilting the scales in favor of capital and boosting consumer spending by lowering taxes (and by the same token ballooning government borrowing). Bill Clinton went one better: he made all of North America into a single free trade area, with neoliberal rules of the game obligatory both north and south of the border. With new opportunities to earn greater profits by moving operations abroad and hiring cheaper labor, investment got a boost for a while. Under G.W. Bush and Barack Obama globalization ran amok, with every round of it inducing new investments while it pitted domestic workers against foreign workers. Wages sank and job security evaporated as 196 nation-states competed with each other to attract capital. The rust belt workers of America were not only impoverished by free trade, runaway industries, weakened unions and porous borders, but also humiliated. They were cast in the role of the uneducated, the xenophobic, the prejudiced, the homophobes, the sexists and the racists. The new world order sells free trade as a humanitarian ideal not only by packaging it as impeccable rationality which only the stupid fail to understand, but also by packaging it as love for neighbor on a global scale that only the hardhearted fail to appreciate. The flipside is that American workers are cast in the role of the stupid and the hateful. The losers become the deplorables.
Trump disasters of type two (disasters waiting to happen): These too can be understood in the light of Keynes’ insights into how the system works. For example, the ecological Trump disaster waiting to happen can be understood in the light of Keynes’ insight that the economy always tends toward stagnation. This tendency is always at work even when it is not empirically observable because its effects are masked by countervailing causal powers. In the absence of the different economy Keynes demonstrated the need for but did not design, there will necessarily tend to be pressure to sacrifice the earth to save jobs and profits.
The chronic insufficiencies of demand and inducement to invest are also the context and the background for the exotic steps recently taken to prevent the system from collapsing such as bailouts, quantitative easing, and negative or nearly negative interest rates. The chronic need for sales explains why cash sales are never enough, why insufficient cash sales need to be augmented by credit sales, why ever higher mountains of debt are needed to keep effective demand strong enough to avoid a descent into debt deflation.
Keynes helps us to see that the system is fragile. It depends on many kinds of confidence. I fear that a businessman whose economic advisers are supply siders with dubious professional credentials will sooner or later do something or other to provoke a collapse of confidence. The system is already tenuously shored up by exotic shenanigans, and already burdened by astronomic levels of public and private debt higher than anything history has seen before. It is probably already so fragile that it is on its way toward collapse anyway, with or without Trump.
Other Trump disasters waiting to happen cannot be fully understood without acknowledging that on a crucial issue the simplifying Keynes of 1936 has become a wholly misleading Keynes of 2016. Keynes simplified his analysis by assuming that employment was a function of investment. In 1936 investment tended to mean more production and more jobs. Today that simplification is not valid partly because today, as Keynes in 1936 feared, “enterprise becomes the bubble on a whirlpool of speculation.” It gets worse: Think of robots, of 3D printers, of artificial photosynthesis replacing agriculture as we know it; think in general of an exponentially growing trend toward labor-saving technologies. Human labor is fast becoming obsolete as a factor of production. Do I exaggerate? I wish I were exaggerating, but I fear I am not. My immediate point is that Trump’s plan to create good jobs by tilting the balance of economic power even farther in the direction of capital is a disaster waiting to happen. There is no reason today to equate having more money with investing it in the real economy. There is no reason today to equate increased production with hiring more humans at higher wages. There never has been any reason to equate the availability of more funds to invest with the appearance of customers willing and able to buy the products.
My larger point is that nothing short of unbounded organization can cope with the future. Economics and law as we know them ought to be bracketed in parentheses, while the human family rethinks its relationships to each other and to the earth. This crying need to rethink the basic social structure in the light of disappearing jobs and dying nature in the 21st century collides with another Trump disaster waiting to happen. He will appoint to the Supreme Court judges hell-bent on preserving intact with no concessions to present-day reality the Constitution’s 18th century principles of property rights and limited government.
With respect to what I have been calling Trump disasters of a third kind: Both the achievements and the limitations of Keynes General Theory reveal causal powers of underlying social structures that together with intentional human actions and the laws of nature act to move history.
Some fear that Trump’s electoral victory signals that American history is at the beginning, or is at a mid-point, of a downward spiral descending into fascism. Keynes’ achievements explain the why of the stagnation, exclusion and inequality behind the unfolding drama of social conflict. They explain the underlying structures that set the stage for the economic frustrations behind the angers that engulf not only white nationalists, but also blacks harassed and sometimes killed, local police, the global military, immigrants and anti-immigrants, Muslims and other embattled minorities, workers suffering year after year the erosion of the economic security they or their parents used to have, drug gangs, evangelists announcing the imminent end of the world, intemperate conservative talk show hosts, blacks who fight back, and whoever may feel dissed, betrayed, and threatened. As I write this, my granddaughter writes me that she is scared because the new president is anti-woman and anti-latino and she is a latina. She reports that in her town some fascist types already have the attitude “we won” and “we’re taking over.” They express their prejudice against her more openly than they did before the election. Meanwhile, as I write this, Congressman Tom Ryan of Ohio is challenging Nancy Pelosi for the post of Minority Leader of the House of Representatives. Ryan argues that if the Democratic Party is to have any hope of retaking political power it must communicate to the American people a “deep economic message.” Truer words were never spoken.
In this note I have argued that the new deep economic message should not be a warmed-over Keynesian New Deal. Instead it should be an open-minded and flexible search for the sustainable satisfactory solutions Keynes felt a need for. It should follow Amartya Sen and Jean Dreze in regarding market exchange as only one way to meet human needs and often not the best way. Instead of acting over and over like a horse with blinders on stubbornly trying to force itself forward in the same direction even when it runs into a brick wall; that is to say, instead of looking over and over for one way or another to stimulate an economy that depends on sales to generate profit to induce investment; hearers of the new deep economic message should constantly bear in mind the ultimate goal of a fully nurturant society that meets human needs in harmony with the natural environment. Keeping the ultimate goal in mind, it will be seen that there is more than one way to serve it. The new deep economic message should call for the alignment of all sectors in pursuit of the common good. It should expect satisfactory large solutions to be sums of many small solutions.
Suggested Further Reading
Gavin Andersson and Howard Richards, Unbounded Organizing in Community. Lake Oswego, OR: Dignity Press, 2015.
Riane Eisler, The Real Wealth of Nations. San Francisco: Berrett-Kohler, 2007.
Evelin Lindner, A Dignity Economy. Lake Oswego, OR: Dignity Press, 2011.
Michael Porter and Mark Kramer, “Creating Shared Value,” Harvard Business Review. January-February 2011, pp. 62-77.
Howard Richards and Joanna Swanger, Gandhi and the Future of Economics. Lake Oswego, OR: Dignity Press, 2013.
Link to PDF:
The Impossibility of Politics, Howard Richards
The Impossibility of Politics
and how to make politics possible
I begin with the word “politics”. The English language does not allow me to assign any meaning to that word that I may fancy, but neither does it limit me to only one option. There is a vast literature on politics and political science. Although most of it I have not read, I have read enough to know that there are many definitions of politics. Many revolve around something called “power”. The definitions never stand alone. They are always embedded in theoretical contexts, in historical contexts, in their authors’ Sitzen im Leben, in academic Methodenstreiten and/or in the Weltanschauungen prevailing at particular times and places. Without knowing these contexts one cannot appreciate the true dimensions of the thoughts summarized in a short definition.
Faced with a situation that does not give me either full freedom or a single command, my choice is to distill a definition of politics from two founding works of traditions that have given meaning to the English word “politics” and to its counterparts in other Western languages. They are Politeia by Plato and Politiká by Aristotle. Although the Greek words that are the titles of the two books are slightly different, they reveal that they deal with the same issues and that both are ancestors of the current word “politics.” The practice of assigning to English translations of Plato’s Politeia the title “The Republic” and only to the Politiká of Aristotle the title “Politics” conceals similarities that the original Greek titles disclose.
I do not claim that my option to distill a definition of “political” from two founding texts of Western thought is the only permissible option. I maintain only that this option is within the range of permissible options. Then I will derive from texts of Jürgen Habermas, Michel Foucault and others grounds for assigning a specific meaning to the word “impossible.”
Roots of the concept of politics (Part One): Plato
I will call attention to a few key points in Plato’s Politeia. I highly recommend reading the entire work. I trust that a full reading will confirm the conclusions that I draw from my selections.
Plato’s Politeia is divided into ten books, each a dialogue with various speakers. The first book already introduces typical themes of the philosophy of its author. What most needs to be investigated is justice (dikaiosyne) i.e. rules. In a first approximation justice is defined as “pay what you owe”. Socrates, Plato’s spokesperson poses a question: Put the case that you loan a friend a knife. Then the friend goes crazy and becomes dangerous. He demands what you owe him, the return of the knife. Should you return it? Of course not.
Thus another typical theme of Plato is introduced: Adjusting moral standards to the infinitely varied circumstances of human life requires necessary conversations, endless conversations, without unquestionable premises. The authority of those conversations is not located in any person, but in the logic of the arguments (the logos).
Please read the entire document online.
Link to PDF:
The Impossibility of Politics, Howard Richards
The Impossibility of Politics
and how to make politics possible
Politicians are not dumber than other human beings. They are no more wicked or greedier, no more mendacious. Of course among them there are stupid people, evil people, greedy people, and liars. But everywhere there are. Everywhere there are also intelligent, benevolent, generous and honest people. I suggest that what most distinguishes politicians from the practitioners of other trades and professions is not the presence or absence of any mental or moral quality but rather the fact that they attempt to achieve objectives that in the age in which we live cannot be achieved. Politicians might be joined in the category of practitioners of the impossible by medical doctors if it were imagined that the task of medicine is to prevent death. But medicine does not in fact seek immortality for its patients, but only to achieve for them a healthy life during the years prior to the inevitable fatal outcome of every human life. Politicians, in contrast, seek to govern. Governing is impossible.
The thesis that politics today is impossible (or stated a bit less briefly, that the goals that politics sets out to achieve are unattainable) is so far more a provocation than a hypothesis. To make it into a meaningful claim I have to assign meanings to the word “politics” and to the word “impossible.” Only when there is some conceptual clarity concerning what my thesis affirms and what it denies will it be time to give reasons for believing it or not believing it.
Tentative Title: Economic Theory and Community Development:
In this Introduction we will do three things. First we will comment on its relationship to the earlier book to which it is a sequel. Second, we will make some remarks comparing our views with some key claims of Jürgen Habermas. Since Habermas’ philosophy is well known and since his project can be construed as bearing some similarity to ours — also offering a critique of the role of economic theory in the world and a foundation for an ethics of solidarity — the comparison of his well-known views with our nearly-unknown views may make it easier for the reader to understand the latter. Third, we will provide an outline of this book’s eight chapters.
1. The Relationship of this Book to the Earlier Book to which it is a Sequel
The earlier book was not about Paulo Freire. We begin with Freire because he provides a bridge (Freire would say a “hinge”) for introducing what it was about. Freire identifies the central problem of our age as “dehumanization.” To solve it, i.e. to humanize or to re-humanize, he proposed and practiced consciousness-raising (or concientizacion). Clodomir Santos de Morais, a constant friend, sometime prison cell-mate, and frequent collaborator of Freire in north-east Brazil in the 1960s proposed and practiced going beyond “consciousness-raising” to foster “organizational consciousness.” If the excluded are going to be included, if the dehumanized are going to claim their humanity successfully, they must learn to organize. They must become capable of forming and joining “enterprises.”
De Morais pioneered the development of an educational methodology for learning to organize that has come to be known in English as the “Organization Workshop.” (OW) In de Morais’ own thinking (especially in his 1987 doctoral dissertation in sociology at the University of Rostock) and still more so in the thinking of his followers the Chilean psychologists Isabel and Ivan Labra, OW practice has been improved and given theoretical coherence using concepts borrowed from Cultural-Historical Activity Theory (CHAT).
In an OW (Organization Workshop) a large number of participants, perhaps 400 typically drawn from the ranks of the marginalized and excluded, manage a common resource pool to do practical work (fencing, welding, remodelling or constructing buildings, developing a farm, planting trees, digging irrigation canals…) for about six hours a day and attend classes on the theory of organization for about two hours a day. They are paid for their practical work if and when they succeed in organizing themselves to negotiate contracts, to assign tasks and control performance, and properly invoice the work done.
The object of CHAT has been briefly described as understanding the unity of consciousness and activity. CHAT can also be described as doing social psychology taking activity systems as the units of analysis. It is commonly thought of as now being in its third generation. Its founder and the leader of its first generation was the Soviet-era Russian psychologist Lev Vygotsky (1896-1934). Alexei N. Leontiev (1903-1979), who became Dean of the Faculty of Psychology at Moscow State University, and who directly influenced de Morais and the Labras, is identified with a second generation. A leading figure in third generation CHAT is Yrjo Engeström, Professor of Adult Education and Director of the Centre for Research on Activity, Development and Learning (CRADLE) at the University of Helsinki.
In the 1980s Gavin Andersson was a social development practitioner in rural Botswana helping country people to organize production cooperatives and in the process to achieve some dignity and some power. Meanwhile, Isabel and Ivan Labra, having been driven from their native Chile by its military dictatorship, were invited to neighbouring Zimbabwe to run OWs. From the Labras Andersson first learned about OWs and about Leontief’s insights. Later he himself directed many organization workshops in Botswana and in South Africa. He wrote a doctoral dissertation on popular development organization for the Open University in the UK, in which he drew on CHAT. Out of his experience and reading grew the central ideas of the book to which the present book is a sequel, Unbounded Organization: Embracing the Societal Enterprise.
Drawing on de Morais’ broad concept of “enterprise” Andersson coined the notion of “two enterprise planes.” Every enterprise exists on two planes. On one plane it has its own specific objectives. On another plane it contributes to achieving the overall objectives of society. The “societal enterprise” can be defined as “the overall activity system whose object is the nurturance of everybody.”
These same ideas will be treated in a little more detail at various points later. In any event the earlier book speaks for itself. Anyone can read it. Let us turn now to the motivation for this its sequel.
In 2008 Gavin Andersson, together with Kate Philip, Oupa -Ramachela, and Sidwell Mokgothu formed the nucleus of a team that created South Africa’s Community Work Programme (CWP). It was and is an innovative programme designed to use public employment to catalyse community development. CWP solved a practical problem not solved by OW or by CHAT. Formerly marginalized and excluded people who achieved organizational consciousness while learning to weld or mend fences or keep accounts did not necessarily continue to have an income when the OW ended. The cooperative enterprises they formed among themselves did not necessarily find buyers willing and able to buy their goods and services; their marketable skills did not necessarily find markets. Now at several sites OW participants were able to move directly into CWP when their organization workshop ended. There they could continue to use their organizational and technical skills – indeed they could continue doing the same useful work: remodelling an old people’s home, building a pre-school, caring for AIDS victims, planting orchards and gardens….
Large group capacitation programmes like OW have an important role to play in starting with the excluded, accepting them as they are, and then moving them to a point where they are eligible to be participants in a modern society of organizations, a knowledge society. The question then arises how to pay for running programmes like OW on a large enough scale to add up to significant social change. If public employment doing community service as in CWP is an emblematic part of the answer to the question how to finish the job of including the excluded, then the question arises: how to pay for public employment? Similar questions arise concerning any other solutions to social and ecological problems that require moving money away from where there is a surplus of it toward where money is needed but lacking. These questions arise in an epoch characterized by a permanent fiscal crisis of the state; by increasing scepticism concerning any and all economic theories and models; and since 2008 by bizarre public policies like near zero or even negative interest rates, flooding the world with astronomical sums of newly printed money through quantitative easing and the like, and imposing austerity on the masses as if the punishment of the victims were the rational solution to the problem.
Hence our first book centred on management and psychology requires a sequel on economic theory and community development. The second book answers the first book’s question, how can humanizing and/or re-humanizing, which we now know how to do, escape the fate of all the socialisms, populisms, and welfare states that that foundered and sunk when they struck the rock of economic reality? Reciprocally, the approach of the first book, the approach we call unbounded organization, resolves – and indeed, we shall argue, dissolves – wicked and intractable social and ecological problems that seem not to have, and indeed, we shall argue, really do not have, solutions as long as our Epoch remains an Age of Economics; in other words as long as our Epoch remains an Age of Bounded Organization.
2. Jürgen Habermas Revisited
A first comparison with Habermas that may help the reader to understand where we are coming from turns on his employment of the word “emancipation.” That word plays a larger role in his vocabulary than it plays in ours. For example, he writes that the natural sciences derive from an interest in technical control; the disciplines he calls hermeneutic derive from an interest in understanding; while psychoanalysis and Marxism properly understood serve a third interest: emancipation.
We employ nutmeg, red pepper and “emancipation” sparingly. We can use its etymology as a bridge (or “hinge”) to introduce our reservations. Its root is the Latin mancipum, ownership, which in turn comes from manus, hand. From the point of view of early Roman law, although not necessarily from the point of view of religion and custom, the Roman pater familias was supreme and unfettered in his little kingdom. In the course of history, first older sons and then others came out from under the hand — out from under the ownership– of the all-powerful pater familias. There have been successive waves of emancipation: of men when they come of age, of slaves, of women etc. The downside of this upside has been that the substance of the freedom of the emancipated has tended to be assimilated to a tradition that began with the supreme and unfettered power (read irresponsibility) of the pater familias. This tendency was aggravated in early modern times by thinking like that of the fearsome duo Isaac Newton/Immanuel Kant. Everything in nature, including natural human inclinations, was conceived to work according to fixed mechanical laws. Freedom (and therefore emancipation) could then only be conceived, as Kant put it, as complete independence from the determining causes of the material world.
Our realist view sees the institutional and intellectual rules of the games of ancient Rome, medieval Europe, early modern Europe, and –agreeing with Immanuel Wallerstein that the modern world-system in an expansion of the European world-system– today’s global economy, as part and parcel of particular culturally and historically constructed activity systems, when not as outright hocus pocus. We see cultures as patterns of story, art, technique, norm, and ceremony that evolve historically with resources provided by nature and within limits set by nature (i.e. by physics, chemistry, and biology). We applaud although with nuances Habermas’s critiques of positivism and his exposés of the twisting of science into pseudo-science to veil the exploitation of the many by the few. But we dissolve into a larger vision Habermas’ proposal to see science as a three-part enterprise driven by the three drivers of technical control, understanding, and emancipation. We see science –and along with science the rest of culture– as an infinitely varied and always changing set of tools for organizing collective responses to the challenges and opportunities of life.
To cope with today’s fast-changing realities –including but not limited to robotizacion, unpayable debt, and the rapid replacement of fossil fuels by new technologies that are the intellectual property of a tiny elite—we need organizational flexibility that sees beyond rigidities bequeathed to us by history, including the rigidities bequeathed by Roman Law and Enlightment ideals. For this reason among others we must add nuances when we applaud Habermas’s commitments to “emancipation,” to “dignity,” and to “reason.”
Where we pivot on “culture” Habermas pivots on “social formation.” He suggests classifying social formations into four types, of which the fourth is the one that mainly interests him: late capitalism:
First come the social formations Emile Durkheim called “archaic.” Their organizational principle is the division of labour by age and sex. Their institutional nucleus is the kinship system, the family, the clan, the tribe.
Second come the traditional societies. Their principle of organization is hierarchy, class. Politics was the art of government in a social formation consisting of governors and governed.
The third social formation is liberal capitalism. Its organizational principle is the relation between wage labour and capital established by its civil law. Social decisions about investment, production, and the distribution of goods are made by autonomous private owners. They conduct business routinely without the intervention of the state. Nevertheless it is only within the state’s territory and through its sanctions that it is possible to constitute the markets for merchandise, for labour, and for capital. Habermas speaks here of “de-politizacion.” Class power becomes anonymous. The state becomes a “tax state.” The state is a secondary institution complementing the primary institution, the self-regulating market.
The remark we make here is not so much about this particular triple classification –archaic, traditional, and liberal—as it is about classification in general. Although classification has its place, the practical task of prospecting for cultural resources we might be able to use to organize cooperation to feed the hungry and heal the sick is often better served by paying close attention to individual cases. We cite the endless variety of the institutions humans have created as evidence of the social creativity of our species and as a treasure-trove of ideas that might turn out to be useful. We fortify our reluctance to over-classify by remembering that Ludwig Wittgenstein in his youth devoted himself to making explicit the single necessary logical structure of any possible science, and then when he became older and wiser devoted him to seeing clearly the multiplicity of the language-games people play. Adding this plea for diversity, we echo in a slightly different key Habermas’s point that because we are a learning species we can improve our institutions.
Habermas’s fourth type of social formation he calls “late capitalism” (Spätkapitalismus), and also sometimes “organized capitalism,” or “capitalism of organizations,” or “capitalism regulated by the state.”
Late capitalism is defined both by (1) the concentration of economic power, including that of the great multinationals and transnationals, which brings with it the “organization” of the markets for goods and services, labour, and capital; which means the end of competitive capitalism, and by (2) the intervention of the state to correct the failures of the market, which means the end of liberal capitalism.
In late capitalism Habermas finds three main sectors, approximately equal in size:
1. A sector that is still competitive, still regulated by the market. Profits are low and little capital is accumulated. Relative to the other two sectors it employs more workers but pays them less.
2. A sector governed by the market strategies of the great oligopolies. It is capital-intensive and knowledge-intensive. This is the most dynamic sector, the one with the greatest capacity for innovation, the greatest wealth, the highest level of globalization, and the strongest trade unions.
3. A public sector that includes organizations directly controlled by the state, but also all private firms that depend on government subsidies and/or contracts, including the arms and space industries, much of agriculture, much nominally private education and health care, and much research and development.
We remark that these three sectors may constitute what Louis Althusser would call a structure in dominance, but they certainly do not constitute all of society. We quote from a recent white paper of the Government of Spain: “In our country the cooperatives and worker-owned enterprises provide employment directly for almost 335,000 people. The Special Employment Centres and the Insertion Enterprises employ more than 75,000 workers. To these one must add, besides, those employed in other forms of social economy, such as, for example, the foundations, the associations, the mutual benefit corporations, or the fraternities of fishermen.” Unbounded Organization is about alignment across sectors for the common good. In principle there is no limit to the number of sectors.
In late capitalism public administration assumes tasks it did not have in liberal capitalism. Its primary task is not administering a welfare state. Its primary task is to improve conditions for business. The welfare state comes second. Public administration must first promote economic growth (read capital accumulation); it must fortify the nation’s competitiveness in international markets. Only if the state succeeds in guiding the economy toward greater productivity and greater profitability can there be a surplus large enough to pay the expenses of the state itself and then enough left over to fund a welfare state.
In Habermas’ analytic scheme there is an economic system and a politico-administrative system, and then also a third system, a cultural system otherwise known as a legitimation system. The coupling of the economic system with the politico-administrative system repoliticizes the relations of production that liberal capitalism had depoliticized. The upshot is a heavier burden for the legitimation system –but at a time when the cultural norms that constitute the legitimation system are rapidly losing credibility. The conditions of life in late capitalist society shred the ethical fabric of everyday life that Habermas, following Kant, calls “practical reason.”
There is a legitimation crisis on two planes: On the economic plane the regulation of the system that is expected to steer the state toward economic growth and social welfare at the same time proves to be impossible, or at most only sporadically possible. The economic system is in the hands of private property owners who do what they choose to do. They can only be indirectly motivated to choose do what public policy aims to guide them toward doing. For example, public policy may aim for lower rates of unemployment and higher wages, but these aims do not lead to taking action to directly produce those results. They lead at most to modifying the few variables that the government can modify, following advice based on one or another economic theory. The hope is that pushing or pulling the policy levers available to government will tend to produce more employment and higher wages. Expectations are routinely disappointed. On the political plane, the government faces an electorate that increasingly demands its economic and political rights (rights which Habermas calls “generalizable interests.”) Since the legal framework effectively separates those who make the promises the electorate wants to hear–the politicians—from the power to keep the promises, expectations are disappointed.
Although the public may think that the performance of the economy is determined by public policies, the truth is that economic performance is mainly driven by private decisions. The state’s power has narrow limits. The state cannot attempt redistribution of great accumulated fortunes for fear of provoking an investment strike that would paralyze the country, or a wave of capital flight that would have the same effect. It cannot prevent the downward swings of the business cycle. Its efforts to mitigate pain and suffering when the economy slows down, as it regularly does, lead to inflation and/or deficits that in turn lead to debts.
Intense international competition to attract the investments of the major corporate players compels the state to spend ever more money on infrastructure, training, R & D, subsidies and many other kinds of inducements. Even local capital must be granted expensive favours because even though it is local in origin it can always leave, just as foreign capital can always decline to come. The favours include lower taxes. Meanwhile the steady growth of ever-more-efficient and ever-less-labour-intensive technologies raises the amounts the state is compelled to spend on the unemployed, the criminals, the police, workers who retire earlier and live longer, jails, students who spend ever more years at school, unwed mothers on welfare, the insane, the addicted and others who do not earn a wage.
The result is a permanent, and permanently deepening, fiscal crisis of the state.
We remark that the events of the past forty years have confirmed that the legitimation crisis Habermas sketched in 1975 is real. The fiscal crisis of the state is indeed deepening, especially in Europe, Japan, and the United States, but also in Brazil, Russia, India, China, and South Africa. It is indeed proving to be impossible to fund a high wage welfare state and simultaneously compete with 195 other sovereign states to attract and keep capital. Legitimacy is indeed eroding.
Bounded Organization, characterized by rigid institutions and a naïve ethic that expects an invisible hand to transmute selfishness into the common good with no help from education or psychology, is indeed unsustainable. Habermas stated the conditions of the problem. Hic Rhodus, hic Salta!
We have emphasized the fiscal crisis of the state in outlining Habermas’s account of today’s civilizational crisis. We add that at a more profound level the fiscal crisis can be seen as a manifestation of an ethical crisis. We add that the solution to the ethical crisis cannot lie in the direction of rejecting modernity’s ethics of autonomy. The solution to the economic crisis cannot lie in the direction of a centrally planned command economy. The solution to the juridical crisis cannot lie in the direction of a totalitarian state where, as Hannah Arendt says, “anything can happen.” On these three points we think we are agreeing with Habermas.
Habermas devoted the latter part of his book on the legitimation crisis and much of the rest of his academic career to foundational issues in social ethics –believing, or at least we believe he believed– that ethics was a good place to start. He echoes from distant Germany on the other side of the Atlantic Ocean Lawrence Kohlberg’s concern with moral development conceived as achieving ever-higher stages in the understanding of justice. He echoes from the Global North the concerns of Paulo Freire and Clodomir Santos de Morais with the struggle of the oppressed conceived as reclaiming what it means to be human. He contributes to building an ethics of moral and political responsibility beyond autonomy. He moves from autonomy to autonomy-with- responsibility. He moves from autonomy-with-responsibility to autonomy-with-responsibility-with nurturance.
For Habermas and for us the locus of the reconstruction of ethics and of humanity is in the lived-world of persons. Too often the lived-world of persons tends to be bypassed and undermined by technocratic systems of governance like those Habermas’s favourite intellectual enemy Niklas Luhmann tends to condone. They attempt to solve the problems of the people without including the people in the problem-solving process. They are pseudo-scientific and tragically ineffective. They are not capable of integrating human motivation with the tasks that must be performed to operate today’s complex societies. These are Habermasian themes we take up in the present book as we seek to integrate community development with economics and economics with community development, and as we celebrate ways South Africa’s Community Work Programme is already integrating them.
3. An Outline of this Book’s Eight Chapters
Chapter One (no title yet)
The first chapter begins with riots in South Africa and ends with a call to re-examine economic theory. The progression from this beginning to that end is the following.
The poor are indignant. Their riots express both material demands and moral outrage. Twenty years of democracy have been twenty years of broken promises. The poor also have a glorious tradition of righteous struggle against apartheid. They demand fulfilment of those struggle´s economic promises.
The chapter then moves on to consider South Africa´s National Development Plan (NDP). The NDP is not a dry-as-dust document. It is solid content packaged in lyrical poetry calling on all South Africans to come together and work together for the common good. It pleads with the people to resist the demagoguery of populist politicians. It offers instead the moral high ground of patriotic cooperation. It offers scientific economics. It offers participation. It is a widely-owned document. The process that produced it consulted all sectors and thousands of individuals.
In particular, the document asks the people not to torpedo the NDP by frightening investors away from South Africa.
Our Chapter One points out that the NDP´s promises cannot be better than its science. Its science is mainstream liberal economics, give or take a few nuances. The nuances include distancing itself from the anti-state excesses of recent neoliberalism. The NDP´s ethical appeal rests on theoretical claims about causes and effects. If the nation follows the plan (the causes) then cet. par. absolute poverty will be eliminated by 2030 etc. etc. (The effects).
The historical context calls for re-examining economic theory. If economic theory can be improved, then the path to social transformation can be smoothed. The plea to the people to refrain from violence can be made more credible and more effective.
But economic theory has already been re-examined, not once but many times. This book contributes to a vast and exponentially growing literature in three ways. First, it advocates a new approach, a new worldview, unbounded organization. (UO). UO is more than an economic theory. It could be said that UO dissolves economic theory into management (organization science) and into social psychology. Second, this book is an empirical study of a South African programme mandated to use public employment to catalyse community development. It proposes a theory-approach-worldview that already has is feet on the ground in practice. Third, it takes seriously John Maynard Keynes´ remark: “The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.” Hence its proclivity to go everywhere and comment on everything.
Chapter Two: How to Make the Economy Work for the Poor
In the second chapter we go back not all the way to the beginnings of mainstream liberal economics but as far back as Adam Smith. We develop a limited, or pure, concept of “the economy.” The economy in this limited sense corresponds approximately to what Smith observed, and precisely to what he said he would observe under conditions of free competition governed by natural liberty. The economy in this limited sense does not work for the poor. It tends to drive wages down. There is no guarantee that everyone who needs to sell something (labour power or something else) to make a living will find buyers for what she or he has to sell. It is characterized by two Staggering Facts: (1) Production depends on investment for the sake of making something to sell (accumulation). (2) Not everyone who needs a buyer finds one (chronic insufficiency of effective demand).
When in history and in the future the society’s institutions do work for the poor it is not because a pure market economy alone (although it does tend to generate productivity that makes it not completely off-the-map for Smith to claim that even the poorest person in a modern society lives better than a king among the savages), but, generically speaking, because of what Gunnar Myrdal called, in deliberate contrast to Smith’s natural liberty “created harmony.” Such a harmony is created by regulating and supplementing markets with many material practices. When we regard their number as in principle unlimited, and when we regard it as a psychological possibility that humans can align across sectors for the good of all, creating combinations of practices that sum to solve problems, we arrive at the rudiments of unbounded organization.
It is sometimes convenient to think of “community” as what the economy as not, as its necessary complement and foundation, as Gemeinschaft as distinct from (and/or as Max Weber would have it as a prerequisite for) Gesllschaft, or as what today is sometimes called social capital. South Africa is currently complementing private-investment-to-produce-for-sale-for-profit with public-investment-to-meet-needs-without-sales-not-for-profit, and with community development, in its Community Work Programme (CWP).
Chapter Three: Origins of the Community Work Programme (CWP)
South Africa’s experience in fighting poverty provides empirical support for the ideas we express in chapter two as Staggering Fact one and two. Government programmes that can only reach their goals if markets pick up the baton after the government has run the initial lap by paying start-up or incubation costs (for example a government-funded data bank to match unemployed youth with available jobs) have accomplished little or nothing. Where public sector resources have played a larger role (as in housing, where large injections of public funds complemented a people’s housing self-help movement and private bank lending) something substantial was accomplished. It is indeed unlikely (some of us would say impossible) that employment in the private sector making products-to –be-sold-at-cost-covering prices with a margin left over for profit will ever solve the unemployment problem in South Africa. Imminent advances in robotics and information technology make it unlikely (some of us would say impossible) that a pure market economy will in the future ever solve the unemployment problem in any country.
CWP brings hope that chronic structural unemployment can be overcome without going down the Roman Decadence path of simply giving people bread and circuses, and without going down the Orwellian path of grey faceless bureaucracy. In the origins of CWP this communitarian hope came from the inspiration provided by prior experience in South Africa with Organization Workshops (OW). Organization workshops began in Brazil, spread to three continents, and preceded CWP at two of its three pilot sites. With a theoretical basis in the social psychology of Cultural Historical Activity Theory, OWs in South Africa showed how to design CWP to be community-driven public employment.
Chapter Four: India’s Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA)
CWP is regarded by some as a prototype and a laying down of infrastructure for a true employment guarantee. MGNREGA already is an employment guarantee although it applies only in rural areas and has other limitations. MGNREGA’s proponents sold it to the public and to parliament as a way to comply with the right to employment enacted in the Constitution of India and in international conventions on economic and social human rights signed by India.
Courts have held that economic and social human rights even though they are in some sense law are not enforceable. Governments when sued can allege that they lack sufficient resources. They can plead that the treaties were signed and the constitutions were ratified subject to the proviso that the rights guaranteed on paper would be implemented in practice only if and when governments could afford to implement them. Unbounded organization replies to this legal argument. It calls for changing the status of rights by moving the boundary that separates the possible from the impossible. UO suggests that livelihoods for all usually can be achieved with existing resources.
In an atmosphere charged with mainstream liberal economics, MGNREGA could only win approval in parliament by making labouring in it so unattractive that nobody would prefer it to working in the private sector. For this reason among others working for MGNREGA is more miserable and more poorly paid than it needs to be. Nevertheless because MGNREGA pays the minimum wage, it raises wages in the countryside by putting pressure on employers who pay less than the minimum allowed by law.
Rural India’s anomalies are the stuff Kuhn’s paradigm shifts are made of. Huge quantities of grains are purchased by the government, put in warehouses, and left there. The purpose is to keep farmers in business by keeping prices above the cost of production. Meanwhile millions go hungry. At the prevailing prices they cannot buy enough food. Farmers are driven to suicide by debt bondage while their workers rightly complain that they are not paid enough to live on. Unhappy and inefficient farms are preserved because no better way to create livelihoods for the farmers, their families, and their workers is perceived.
Chapter Five: The Swedish Model
Chapter five begins with a précis of the personal experiences that led Gavin Andersson to formulate the concept of unbounded organization. Then it turns to the decline of the Swedish Model.
The lesson to be drawn from the decline of the Swedish Model is that within the basic rules of the game of the global economy –which are those of Smith’s natural liberty— it is impossible –except under unusual circumstances like those prevailing in Sweden immediately after World War II— to sustain full employment with good wages and social security. Sweden lost the race to the bottom because its wages were too high. Its taxes were too high. Capital fled. Volvo itself fled to Brazil. But Brazilian workers did not win what Swedish workers lost. The Brazilian economist Paul Singer wrote, “The effect of neoliberal globalization is to level wages downward in all countries.”
The balance of the chapter is devoted to how to make the global economy governable for humanity’s sake and for the biosphere’s sake. A first step is to free minds from pies. The pie image –the image that tells us that first we must grow GDP before the poor can get a bigger slice of it—is what Ludwig Wittgenstein would call a picture that holds us captive. A second step is to make the importation of goods produced in labour conditions that violate human rights illegal like fencing stolen goods is illegal. A third step is to tie capital to a social purpose and to a territory. These three steps –which of course are only a beginning— are sufficient to show that with a UO paradigm even the most fundamental laws of capitalist accumulation –including those that tanked the Swedish Model– can be changed.
Chapter Six: The Imaginary World that Holds the Real World Captive
Mainstream liberal economics prescribes exactly the opposite. It holds that the global economy should not be governed, or what amounts to the same thing that it should be governed by natural liberty. Chapter six is devoted to details of economic theory. It does some detective work to solve the mystery of how an imaginary world (epitomized but not exhausted by the theory of Walrasian general equilibrium) came to be (for example in the rules of the World Trade Organization) a normative standard with the force of law in the real world. It connects with CWP by criticizing an OECD proposal to evaluate CWP not according to how well it uses public employment to catalyse community development but according to how well it prepares the unemployed for employment in the private sector.
The chapter shows that major currents of economic thinking do not describe the real world. They do not describe even a possible world because in general equilibrium profits go to zero and it is impossible for the global economy to function with zero profits. Instead, business strategy achieves sustainable profits by making use of Michael Porter’s five forces: maximizing bargaining power Vis à Vis suppliers, maximizing bargaining power vis à vis customers, erecting barriers to entry to keep competitors out of the industry, working together with other players in the industry against substitute products, and gentlemen’s agreements not to compete too aggressively on price.
The real world practices of business guarantee that the theoretical ideal of maximum consumer satisfaction will never happen. They make corporate social responsibility a more realizable ideal than any neoliberal free market utopia. The fundamental theorem of welfare economics (that general equilibrium is a Pareto optimum), in addition to prescribing a world that does not and cannot exist, is not a defensible ethic. It is an unethical distraction from the physical welfare of people and planet.
Chapter Seven: (no title yet)
The seventh chapter goes into detail on exactly how CWP uses public employment to catalyse community development with an in-depth case study of CWP at a single site, the district known as Orange Farm on the south side of Johannesburg. It begins and ends by sandwiching life as it is lived on the ground on the south side of Joburg between discussions of a key issue in the global economy, the issue of debt.
On a UO worldview cancelling or restructuring debt, as the ancient Hebrews did periodically according to the Old Testament, is just one more way to adjust culture to its physical functions. But to make what would be sensible doable in the neoliberal world that has been socially constructed in the last several decades, debtor communities must become resilient to resist the inevitable consequences –such as bank runs and capital flight—of pressure from rapacious creditors. The pressure comes, in the last analysis, not from creditors as people but from the systemic imperatives of the system itself –a system which must either re-organize itself or continue to produce one dysfunctional result after another.
Chapter seven shows the nitty-gritty of how a government programmes administered through non-profits can build resilient communities. It shows communities mobilizing resources to meet needs in practical ways that do not depend either on the price signals of markets or on top-down planning. The point is not to rid the world of the price signals provided by markets, nor to rid the world of governments, but to complement both in an unbounded approach to organizing the exchange of matter and energy with the environment that is the metabolism of society. The chapter provides empirical support for UO by showing how it is a psychological and sociological possibility for human beings to work together in diverse and creative ways to meet needs. The necessity for building community to cope with structural flaws of the global economy revealed by a series of debt crises at the global and national levels is connected with a case study demonstrating the possibility of UO.
Chapter Eight: How to Pay for Social Programmes
Mainstream thinking is trapped in a mindset where economic growth as measured by GDP is regarded as a prerequisite for opening up fiscal space to pay for social programmes. This mindset is not just thinking. It is thinking that reflects, that builds, and that sets in stone existing institutions. Nevertheless, freeing our minds to embrace UO at the level of thought –which activity theory tells us can best be done learning organizing by organizing—is a necessary part of necessary institutional reform.
Chapter eight finds steps toward UO in the Bachelet Commission report to the ILO suggesting numerous creative ways to open up fiscal space to pay for social programmes. It finds more in Thomas Piketty’s research suggesting that rentier wealth might be taxed to make the global economy governable, to reduce inequality, and to pay for social programmes with little or no damage to production. And still more in Alfred Marshall’s classic formulations and Joseph Stiglitz’s updates of the economic theory of rent. The chapter includes a critique of Say’s Law (a law that implies that if only we had perfect markets every seller, including every seller of labour-power, would find a buyer) that complements chapter six.
The initial question, how to pay for social programmes, and specifically how to pay for expanding CWP to make it a true employment guarantee, becomes the general question how to recycle wealth from where it is not needed in order to use it intelligently where it is needed. This then leads to the question how to make redistribution compatible with the social functions now performed (not always well) by inequality. Profits have social functions. Prices have social functions. Interest rates have social functions. Saving has social functions. Accumulated wealth has social functions. At the curtain call, when all the actors in the play make their bows, unbounded organization appears as a theory-approach-worldview-paradigm suitable for solving problems (like making redistribution compatible with production) that cannot be solved by rigid (read neurotic) adherence to inflexible patterns of thought and action.
Since 2001 I have built several sites for Dr. Richards. I have had to abandon them as the underlying support teams for the content management software would disperse. Meanwhile, the original files are safe because they are backed up in the cloud.
The site is newly running on WordPress, which seems to have enough depth in its support team to keep the software current and clean.
Behind this site, right here, is the site as it existed from 2005 to 2010.
El Papel de la Empresa en la Eliminación de la Pobreza
Howard Richards, July 18, 2013
Howard Richards: El tema que nos convoca es la eliminación de la pobreza.
Alfonso Muena: Un tema difícil.
Howard Richards: Hoy en día hay un progreso grande en este sentido, y no me refiero solamente a las cifras que muestran la pobreza dura se retrocede tanto en números absolutos como en porcentaje de la población, tanto en Argentina como en Chile. También me refiero al consenso cada vez mayor que la sociedad entera, tanto la sociedad civil como el gobierno, e incluso la empresa, debe comprometerse a trabajar para eliminarla.
Alfonso Muena: Siempre cito a un amigo quien es uno de los grandes agricultores de la décima región. Él suele decir, “No vale la pena ser rico en medio de tanta pobreza.”
Howard Richards: Quizás se puede decir que en el siglo veinte había una lucha de clases. Ganó el capital. Perdió el trabajo. Hoy en día los capitalistas, o por lo menos una parte importante de ellos, se dan cuenta que su victoria no les conviene. No le conviene vivir en un mundo con los trabajadores aplastados, con pobreza, con tanta violencia; con tanta delincuencia, droga, y alcoholismo; con gente sin educación o con mala educación y por lo tanto inculta; con gente sin acceso a la medicina y por lo tanto enferma.
Alfonso Muena: Ni le conviene vivir en un mundo contaminado. Déjame decir al respecto que la industria salmonera no es de ninguna manera una industria contaminante. El salmon requiere sobre todo el agua pura. Funciona como un “fusible ecológico.” Cuando la pureza del agua se pierde hasta el punto que el salmon ya no puede vivir, se sabe que hay amenaza también a los otras especies, menos delicadas que el salmon. Lo que más conviene a la industria salmonera, su primera necesidad, es la defensa de la calidad del agua.
Howard Richards: O sea, no es cierto el clamor de ciertos ecologistas contra la industria salmonera.
Alfonso Muena: El ecologismo mismo no deja de ser a veces una especie de industria. Si se puede recolectar fondos de gente de buena voluntad esgrimiendo discursos plausibles aunque falsos sobre amenazas imaginables aunque irreales, ya hay base económica para un cierto tipo de emprendimiento social.
Howard Richards: ¿Un emprendimiento social irresponsable?
Alfonso Muena: Claro que hay responsables también. Cuando volvió la democracia en Chile había cierta atmosfera contraria a la industria salmonera porque supuestamente estaba contaminando el agua. Invité al primer intendente democrático, un socialista del norte, que me acompañara a ver nuestras instalaciones. No vió nada contaminante. Le invité a beber el agua. Yo mismo bebé el agua. Por supuesto no me pasó nada mal. Él fue convencido y llegó a respaldar a nuestra industria tanto que unos le llamaron el “Intendente Salmonero.”
Howard Richards: O sea, es cosa de ver los hechos.
Alfonso Muena: Hoy en día tenemos que proceder sobre la base de datos concretos, sea cuestión de eliminar la pobreza, o sea cuestión de contaminación ambiental.
Howard Richards: Se habla cada vez más de la responsabilidad social de la empresa. ¿De qué se trata? ¿Se puede decir que la eliminación de la pobreza sea responsabilidad de la empresa? ¿De los empresarios?
Alfonso Muena: Es mejor hablar de la responsabilidad en general. Hay una falta de responsabilidad en todas partes, a todo nivel. No tiene sentido decir que los empresarios debemos ser responsables, sin decir que los demás también lo deben ser. Te puedo dar un ejemplo. Viajo mucho en LAN. A veces me pasa que se suspende el vuelo de repente. Llego al aeropuerto con mi maleta y me boleto y no hay vuelo. El personal me dice, “LAN suspendió el vuelo.” Como si fuera LAN alguna entidad abstracta que no tuviera cara ni voz, o como si fuera LAN solamente quienes aportan el capital o quienes son ejecutivos de plano mayor. Yo les digo, “Vd. es LAN. Yo tengo contrato con la empresa, y en este momento Vd. representa la empresa.”
Howard Richards: O sea la gente en general no quiera asumir la responsabilidad por el papel que tenga en la sociedad, sea lo que sea su papel. Imaginan que las instituciones son algo aparte que circula en las nubes, cuando en verdad las instituciones son integradas por personas.
Alfonso Muena: La empresa no es el inversor que pone el dinero, o pone una parte del dinero, ni es el gerente ni el subgerente, ni es solamente la mesa directiva. Es la sumatoria de todas las personas quienes forman una comunidad de trabajo colaborando juntos en una actividad común.
Howard Richards: El tema que nos convoca no tiene que ver en primer término con las relaciones entre sí de las diversas personas quienes constituyen la empresa, sino más bien con las relaciones exteriores de la empesa, con la pobreza que abunda en el mundo que nos rodea.
Alfonso Muena: El estado tiene que asumir un protagonismo en el asunto. El estado en fin de cuentas somos todos nosotros.
Howard Richards: ¿Me puede dar un ejemplo?
Alfonso Muena: Un primer ejemplo pueda ser la acción del gobierno de Noruega para eliminar la pobreza en el norte de su país, justamente en este caso resultó ser por la promoción de industrias pesqueras.
Howard Richards: O sea la eliminación de la pobreza fue la finalidad, y la industria pesquera fue la solución.
Alfonso Muena: Así resultó, pero no comenzó así. El gobierno de Noruega disponía de datos sobre la pobreza en el país, y se dio cuenta que en el norte había gente aislada, sin recursos, sin empleo. Sobre la base de los datos que tenía, pidió más estudios sobre el problema y sus posibles soluciones.
Howard Richards: ¿A quién pidió los estudios?
Alfonso Muena: A las universidades. Hizo convenios con universidades de su país.
Howard Richards: O sea, las universidades también tienen que asumir un protagonismo en la eliminación de la pobreza.
Alfonso Muena: Las universidades, y todas las instituciones productores de conocimientos. Hoy en día el factor clave en la producción no es tanto el trabajo, aunque sea siempre básico contar con mano de obra responsable y capacitada …
Howard Richards: …allá entra otra vez la educación…
Alfonso Muena: … entra dos veces. La educación debe servir sobre todo en el antiguo sentido de la palabra, de formar a gente educada, o sea gente honesta, responsable, capaz de colaborar en equipos, auto-disciplinada. . Es también imprescincible la formación técnica. El trabajador raso sin especialidad técnica sirve cada dia menos en la industria moderna.
Howard Richards: Pero ibas a decir que en todo caso el factor trabajo no es la más clave en la producción y por ende en la eliminación de la pobreza.
Alfonso Muena: Ni tampoco el factor capital. Lo que es cada dia más clave es el conocimiento. Me refiero otra vez a la industria salmonera. Lo que es determinante, y lo que determina el éxito o el fracaso, es la mortalidad de las peces. Son las enfermedades de las peces la gran amenaza.
Howard Richards: O sea, la defensa contra las enfermedades es la clave del éxito de la industria.
Alfonso Muena: Y éste depende de la investigación. Las enfermedades están siempre mutándose. Cada vez que inventamos una estrategia contra las enfermedades, los enemigos naturales de las peces evolucionan de tal manera que tenemos que seguir siempre alertos, siempre tomando mediciones y medidas, y siempre adecuando las estrategias a las nuevas realidades.
Howard Richards: O sea, si se puede generalizar del caso de la industria suya, frente a los hechos de la naturaleza, en la lucha para eliminar la pobreza tienen que colaborar empresas, gobiernos, e instituciones académicas.
Alfonso Muena: Asumiendo un rol coordinador los gobiernos. Siguiendo con el ejemplo de Noruega, los estudios hechos por los equipos universitarios mostraron la factibilidad de industrias pesqueras, y especialmente la producción de salmón.
Howard Richards: ¿Un caso semejante al caso chileno antes de la introducción de la industria salmonera en el sur de Chile?
Alfonso Muena: Gente aislada, sin conocimientos técnicos, sin recursos, pero con aguas y condiciones climáticas aptas para la producción de algo que tiene amplia acogida en los mercados mundiales.
Howard Richards: ¿Y cuál fue el papel del gobierno? Siempre me ha llamado la atención que la democracia social en los paises escandinavos, y la efectiva eliminación de la pobreza, se ha logrado sin nacionalizar ni una sola industria.
Howard Richards on a Governable Plural Economy
Magnus Haavelsrud commented on the video on growth points that we created on 23rd April 2012 as follows (1st May 2012): “Thank you Howard and Evelin for this — make more! How about corporate responsibility as a topic and the new and reformed capitalism you are mentioning. Good business in other words and implications for Departements of Economy and research in economy and their great need for transdisciplinarity — also in economic thought. Greetings from oslo – magnus”
In response to Magnus’ comment, this video dialogue between Howard Richards, philosopher of social science, and Evelin Lindner was created on 1st May 2012 in Chile, in Howard’s Dialogue Home and Centro para el Desarrollo Alternativo in Limache, Chile. The video was recorded by Shelley Damaris Richards Higgins.
– As for the relationship between economics and history and the error made by looking for invariate relationship between variables, see Robert Boyer, L’économiste face aux innovations qui font époque : les relations entre histoire et théorie, in Revue Économique, Vol. 52, No. 5, Sept. 2001, pp. 1065-1115
– For a plural economy see the work of Pierre Calame, see, for example:
– Ethics: Paradigm Shifts that Need to be Made for the Transition, by Pierre Calame, the Charles Leopold Mayer Foundation for Human Progress, French Collective Rio+20, January 21 2012
– Turning the European Union into a Model of Multilevel Governance Founded on the Principle of Active Subsidiarity, a proposal by Pierre Calame, 2009
– As for an experimental society, see John Dewey, The Public and its Problems, 1927.
– As for an open society, see Karl Popper, The Open Society and Its Enemies, 1945.
Published on Apr 23, 2012
This video dialogue between Howard Richards, philosopher of social science, and Evelin Lindner was created on 23rd April 2012 in Limache, Chile. The video was recorded by William Thompson. Howard Richards makes the point that we need to cultivate “growth points,” if we want to create a more viable world.
Please see more information on Howard Richards on
The website of the Human Dignity and Humiliation Studies (HumanDHS) network is www.humiliationstudies.org.
The website of the World Dignity University (WDU) initiative, launched by the HumanDHS network in 2011, is www.worlddignityuniversity.org.
For Dignity Press and Howard Richards’ book “The Nurturing of Time Future,” 2012, see www.dignitypress.org.