This is an essay on the approach to economics suggested by Maurice Glasman’s essay ‘Labour as a Radical Tradition’. Glasman’s essay forms part of the ebook ‘The Labour Tradition and the Politics of Paradox’.
I’m not particularly keen on the ‘Blue Labour’ moniker, but the ideas behind Maurice Glasman’s approach bear serious examination. Interestingly, his approach bears some comparison with that recently espoused by Amartya Sen in his book ‘The Idea of Justice’. This is that it is difficult to win political arguments with abstract ideas, and that practical and localised amelioration of well-recognised wrongs is the best way forward. Glasman (in Labour as a Radical Tradition) looks back to the early days of Labour when the movement of which it was part was defined by relationships and ‘practices that strengthen an ethical life’. These practices included reciprocity, mutuality and solidarity, and they led to actions such as the formation of mutual societies, co-operatives and trades unions. These may not and need not have had an explicit or even coherent philosophical underpinning.
According to Glasman, however, ‘The founders of the labour movement understood the logic of capitalism…and the threat this posed to their lives, livelihoods and environment.’ Maybe they did, but this is somewhat in contradiction of Glasman’s narrative, since the ‘logic of capitalism’ is itself an abstract idea. And it’s not at all clear that we understand this ‘logic’ today, or if we do, whether we know how to refute its conclusions.
‘Capitalism’ can be a slippery concept, but the relevant definition here is a society in which market exchanges are the default mode for organising the matching of goods and services from producers to users and some form of non-commodity means of payment (money) is the default medium with which these exchanges are carried out. Clearly, pre-requisites for such a system are clear and enforceable property rights and widely trusted forms of money. One of the consequences of this is to automatically bring in the first ‘contradiction’ of capitalism. While market exchange may be the default mode of allocation it cannot be the only mode, since justice, policing and bank regulation are not feasibly provided by the market.
Such a capitalist system has great advantages in the abstract and frequently also in practice. Market exchanges depend on the mutual consent of the exchanging parties. Rational participants in a market only exchange when they expect a gain, so all market activity produces gains for all its participants. Preventing or reversing any market transaction must make one or more people worse off. With a trusted medium of exchange, essentially any re-allocation of goods and services desirable to all those involved is feasible. Unless a non-market system can somehow replicate the exact distribution of the market then the market system will be preferable. The usual assumption is that the information-gathering power required would be beyond any single human institution. I’m not going to dispute this assumption here.
So, whatever the practices of the labour movement, the logic of capitalism always appears to have been a strong opponent. And it remains so today, despite many failures of the practice of capitalism. The logic of capitalism has to be tackled on its own abstract level. Like all logic, it stands or falls on its assumptions. Logic needs facts before it can give us any conclusions, and not all the assumptions of capitalist logic are fully-fledged facts.
Capitalism’s most problematic assumptions include:
1) All individuals affected by the outcome of a transaction have a say in that transaction;
2) The transacting individual has the necessary amount of information to make the best decision for him or herself;
3) The transacting individual knows the future;
4) Individuals access to and power in the market depends entirely on the value of the skills and resources they bring to the market and nothing else;
5) The ‘logic’ of money doesn’t interfere with the ‘logic’ of market exchange.
No economist would deny that the first three of these issues detract from the success of market systems – the debate centres more around to what extent they can be corrected by collective actions such as taxation, regulation, insurance and information management. The fourth is fairly obviously untrue. The last is somewhat more controversial, since traditional economic theory regards money as having little independent consequences for economic activity and distribution.
The falsity of the first three of these assumptions has some well-recognised results. For example, transactions may not take place because one or both parties aren’t sure of what they are getting or whether they are being taken for a ride. This is why some things can’t be insured against. Sometimes transactions that have a total negative effect on society take place because the negative is ‘external’ to those doing the transacting in that the cost is largely borne by someone else now or in the future. This is the problem of dealing with climate change. Sometimes transactions that have a total positive effect on society do not take place because the positive is largely ‘external’ to those doing the transacting. This is the problem of ‘public goods’; items such as clean air and national defence that cannot be produced for private profit because once produced they can be enjoyed by everybody.
Economists earn their money by analysing these ?market failures’ and devising corrective taxes and regulations, so perhaps it is less than surprising that most of them are unwilling to propose more radical reformation of such a flawed system. The intellectual justification of this unwillingness is primarily contained within two standard conventions of economics. The first is the use of a so-called ‘representative agent’ that replaces the multitude of interactions between market participants with a single individual who may be both consumer and producer, may be infinitely lived and may well have perfect knowledge and foresight. The second is the so-called ‘neutrality’ of money (and frequently the complete absence of it) in economists’ models.
The gap between the real world of markets and the economists’ world of the self-contained representative agent should be obvious – the real uncertainties and complexities in the meshing of human behaviours, incentives and use and abuse of natural resources are simply glossed over and ignored. The gap between a world with and without money, beyond that simply of convenience, is perhaps less obvious. Standard economic theory has little time for analysing how money acquires and keeps value. Money just arrives from outside the world of humans and real goods and is valued. No source of this money is identifiable. If there is more of it compared to goods available for transactions then prices will rise across the board (including wages); if there is less of it compared to goods available for transactions then prices will fall across the board. No other effects are allowed.
The real features of money in a modern economy are rather different. It does have identifiable sources; either a government-backed central bank or licensed commercial banks. Since money is a claim on real goods and resources these institutions can only give value to money by ‘capturing’ goods and resources on which these claims can be exercised. The processes by which these goods and resources are captured either by the state on behalf of the central bank, or by the commercial banks, are critical to economic outcomes. These processes are triangular transactions between the issuers of money, its recipients and the holders of the goods or resources to be ‘captured’. These transactions are prone to similar failures as ordinary goods transactions and so add a further distance between the economists’ economy and the real world economy. Moreover, money transactions often produce total anonymity between the producers and ultimate users of goods, magnifying any information deficits. In addition, because the total ‘quantity of money’ is neither easy to ascertain nor fixed it is difficult to grasp how much any particular quantity of money relates to the total goods upon which its claim can be exercised. This tends to veil issues of market access and power.
The role of markets and money in ‘oiling the wheels of commerce’, and so expanding economic activity and fostering new goods and technologies, is unquestioned. They simply allow more permutations of resources and skills. The question frequently left unanswered is how the permutations that result are selected. Which technologies are used to mass-produce which goods? In a market economy there are two criteria: demand (in terms of monetary sales) and profit (monetary sales revenue exceeding production costs). The ‘logic’ of capitalism equates these to the true expression of choice of consumers. With fully-informed consumers demand represents a true choice from all available possibilities. Demand brings revenue to producers. When revenue exceeds costs, there is a surplus of money for the producer to expand production. The fully-informed consumer chooses the price he is willing to pay to allow this expansion to take place. So all producer activity is driven by consumer choice with all alternatives open to view. No non-market intervention could produce a better outcome.
But as we have made clear above, capitalism’s logic is based on many assumptions that simply cannot be true. No individual knows all the possibilities that are open to him or to the producer, or all the effects of their decisions. Not all those possibilities have even been articulated before choices are made. Few consumption or production decisions are completely free of consequences for those not involved in making them. Money and the price mechanism speed up the way choices are made while narrowing the information available to the consumer about the producer, to the producer about the consumer, and to everyone else about either. What is ‘external’ is actually made invisible. Shifts in distribution and economic power are disguised as streams of monetary numbers. Demand may be a result of informational errors, so that excess revenue is not pre-allocated to consumer-demanded production expansion and profits then become free claims for producers.
As soon as free claims are in the hands of producers (including the producers of money, banks), the logic of capitalism breaks down further, because markets are not free-floating but are embedded in a complex social and political network of information, norms and regulation. Once claims received are no longer pre-committed to consumer-driven uses, the producer is open to find ways of manipulating his market through its contacts with the social network. Advertising, sponsorship, lobbying and more underhand techniques now become available. And this is before considering the possibilities free claims give to producers for market manipulation, such as temporary under-pricing to damage competitors. As Glasman implies – this sort of freedom is opposed to the common-sense understanding of ‘liberty’ for the individual.
Most of these problems are well known to economists, but there is a tendency to see them as fixable by technical ‘patches’ of taxation and regulation by the state. But this ‘fixability’ is limited by two crucial considerations. Firstly, actual (as usually opposed to theoretical) taxation and regulation are expensive to administer. They require monitoring of the activities of producers. Full monitoring of those whose own interests are aligned with escaping monitoring may require resources equivalent to the value of the escape. Secondly, when the holding of free claims gives additional access to the political and social network, powerful levers become available to limit the application of taxation and regulation. Anything other then a complete fix always allows the producer to continually add to his war-chest in the battle against the ‘fixers’. Thanks to the positive feedback effect of free claims, he’s always winning, just winning more or less slowly. Justice and fairness move even further out of reach however much they may be willed politically.
‘Commodification’ is an ugly enough word, and probably isn’t a great help in winning political arguments these days, but if we translate it as being what happens when we give money prices more weight in decision-making than they can bear, then we are on the right track. The early Labour institutions of co-operatives, mutuals and trade unions arose from this recognition, and sought to bring people together to discuss and plan action in ways that utilise the full panoply of human communication: intellectual, emotional and empathic. These institutions mirror humanity – they can be messy, dysfunctional and inefficient – but they cannot ignore huge swathes of people and their concerns simply because these cannot easily be fitted easily into price vectors to be processed by capitalism’s steely ‘logic’.
I think it is in this sense that a return to ‘tradition’ is required – a return to real human beings coming face to face with our common problems (even when they desire different outcomes from those problems). Here communication is not mediated through technology of any sort, it just exists at its most basic level. Without this possibility in all spheres of life Glasman is right that pluralism and diversity – while goods in themselves, much like markets and money – can accelerate the undermining of solidarity, when they erode old understandings between people without allowing new ones to develop.
Glasman dislikes abstraction, and feels it has led the labour movement astray. In the sense that the abstractions of money and market signals have been exalted against more complex human interaction, he is correct. But abstractions in politics are powerful – ‘free markets’, ‘economic growth’, the ‘nanny state’ and ‘fairness’ will not be pushed aside without a fight – so what is our countering abstraction when challenged? I would suggest that it should be a new understanding of equality – neither the dull impossibility of ‘equality of outcome’ nor the impotent posturing of ‘equality of opportunity’ – but ‘equality of voice’, where all who have a stake in the outcome of any decision, whether economic or political, have the right to state their interest and case in some common forum. The link of this ‘abstract’ concept with the co-op, the mutual and the union should be obvious when these institutions are compared with big business and even ‘modernised’ (read marketised) public services. How exactly this equality of voice is to be put into effect in these latter spheres in a globalised and consumerist world is the great challenge for the labour movement. We must not shirk it if we are to have any right to claim its legacy.