Democracy and Economics — Demos Kratia 6
Demos kratia
People power.
This is about economics and its role in undermining democracy.
Let’s begin with Martin Wolf.
He gives us, in this morning’s Financial Times, an excellent and succinct overview of Trump’s inevitable failure to deliver new manufacturing jobs. He wheels out all sorts of technocratic, and thus highly sensible, arguments based on economic reasoning in order to prove his point. Then, towards the end he shifts to politics. Right wing populism, he suggests, is a consequence of the divergence in outcomes that less educated men and the technocratic overclass have experienced during this era of post-industrialization of the American economy. Whereas employment in manufacturing was once an avenue upwards in status, now it is much diminished and a whole section of society is blocked from improvement.
So far so good. There is nothing remarkable in this narrative. It is well worn.
There are, however two very notable aspects I want to daw your attention to,
First, yes, the argument is well worn. So why has nothing been done? Why has an entire section of society been cut out of the aspiration that drives the American myth? This, surely, is an epic political failure.
Second, perhaps the answer is implicit in Wolf’s narrative. He seems to regard arguments based on the logic of economics as unimpeachable — of course manufacturing was going away as a source of employment. Of course it won’t come back. Of course those workers were cut adrift. Economic logic and the relentless search for efficiency dictate it [note the coercion implied in this logic]. How can anyone argue against that? But then. He suddenly shifts to politics and away from economics — the cause of populism may be economics, but the consequences are all political.
In sum, he is suggesting that politics ought to have cleaned up the mess economic logic made.
And so, in a nutshell, we can perceive the problem we have inherited from one of the greatest shifts in modern intellectual history — one that goes mostly unreported. When economics took on the mantle of being the source of legitimacy in social organization, it displaced politics. That was the point. It remains the point of technocracy everywhere: we make decisions based on supposed logic and reason in order to expunge the messiness of sentiments, passion, and morality all of which motivate politics.
That this is impossible, given that we are all human, is one of the reasons economics generally fails outside of the classroom. Humans, unfortunately for economists, just aren’t that reasonable or logical.
With that all said …
“In many ways the political thought of the two centuries after Locke constituted a long commentary on the three themes just discussed: the equating of government with physical compulsion, the emergence of society as self-subsistent entity, and the willingness to accept compulsion from an impersonal source.”
That’s Sheldon Wolin in 1960. A few lines later he says this:
“In recent years this same cluster of ideas reappeared when classically minded liberals attacked the notion of “planning”. Once again the same pejorative contrasts was drawn between “the spontaneous forces of society” and the “coercion” employed by political direction. Once again the same suspicions of power exercised by a determinate, identifiable authority were coupled with an explicit preference for “the impersonal and anonymous mechanism of the market”. Since the market represented merely the registered response of the consumers, i.e., “society”, the resulting compulsion and inequalities had the advantage of being not only an impersonal, collective judgment but also a “democratic” one”.
And so there we have it. Economics is associated with the liberal tradition with its focus on the use of implicit rather than explicit compulsion. The hidden hand drives us inexorably towards a result. We have no choice. It is an act of compulsion, but it is hidden. One that, somehow and in the minds of many, is preferable to an act of politics where compulsion is overt.
The key to the whole trick is that everything becomes passive. There is no intent. No purpose. No direction, and thus, crucially, no politics. The outcome is drained of overt controversy where we can all say that we did this to us … we did it collectively to ourselves. So no one is to blame. It just is. It just happens. The logic of economics may produce anti-social results, but it is logical. It is reasonable. It is defensible. No one can, or ought, argue with such logic. Not unless, that is, they want to be accused of pre-modern ignorance.
With society transposed into something called a market, and thus drained of discussion and debate about the ends of the work being done within it, everything is sanitized. It is whitewashed. It becomes colorless and devoid of possible critique. It can be presented as something outside of human intervention even whilst it being consequent to palpable human activity.
It is, as Wolin would say, impersonal. I would call it inhuman.
How did we get to this supposedly “apolitical” moment?
The liberal reaction to centuries of intense politics and religious strife lapped over into this process of dehumanization. The point was to lower the temperature, open spaces for new entrants into elite participation, and to deconstruct ancient and corrupt centers of authority. The problem, though, was that power still existed — the new elite was in need of justification. How better, then, to accommodate it by claiming that there was no center of power? There was simply a marketplace full of actors of equal status. No one had outsized influence. Stuff simply happened. Spontaneity was the order of the day. And all that unfettered activity automatically produced the optimal result. By definition. No authority was needed. Just a hidden hand.
This was somehow interpreted as democratic. Society still existed, but in the background where it played no part in the structuring of the outcome of work. Only the market could possibly coordinate all that emerging complexity. Which is ironic because it was the market creating all that complexity also. What interdependence the division of labor brought was more than offset by more intense self-interest. The greater the interdependency, the greater the social conformity needed to ensure an efficient outcome. The more collective enterprise became, the less unique each individual could be.
Economic logic required the elimination of the individual as an independent being and its replacement by a cipher — powered not by self expression but by social complicity. Complicit that is in the application of economic logic.
That Smith could misinterpret this complicity as personal interest is understandable because in his time the complexity of society and not run beyond comprehension. His successors, though ought to have realized what they were saying: what they called “self interest” had nothing to do with the ”self”, it was entirely dictated by whatever was necessary to produce the collective magic of efficiency.
To accomplish this magic, economics replaced the laws of politicians with the laws of “nature”. People are driven in both cases. In one case they can resist. In the other they cannot. In order to guarantee the production of efficiency economics had to displace politics as the primary source of social engineering. It had to take on the mantle of being the legitimating epicenter of the structure of society. Of greater satisfaction for the thinkers of that early industrial era, economics spoke in terms of implicit rather than explicit compulsion. The great citadels of ancient authority could be overthrown and replaced by more subtle and less obvious centers of power.
This displacement of politically driven social construction by the supposed spontaneity of something called the market is simply a sleight of hand. In order to carry off the trick, economists have to abstract away from their theorizing any human touch. In order to achieve the democratic or “spontaneous” outcome they prefer, economists have to expunge the active demos from the calculation. Passivity is substituted for activity, but passivity needs justification in an age of action, so they predetermine the outcome as being optimal so long as we ignore the collective and throw the weight of responsibility onto mythic individuals, each endowed with superhuman qualities of calculation and data collection.
They distract us with the glitter of the mythic perfect in order to force us to march according to their logic. They put us into the harness of rationality in order to optimize.
Then, to ensure liberty for all, they need to force us all into what they call an “equilibrium”. For only when we are corralled at equilibrium can we be assured of having arrived at a point of cooperation that brooks no improvement. Finally, the mechanism of the market is, we are told, governed by laws that cannot be resisted lest we interfere with the market’s mechanism and consequently fail to arrive at the most efficient allocation of our collective resources. We are given choice as long as we arrive at only one answer and follow the predetermined logic scrupulously. So, the choice of economists is no choice at all but the dictatorship of reason. Or, rather, what passes for reason in the minds of economists.
The logic of rationality replaces the logic of strategy. Individuality is lauded and then crushed.
Some democracy.
Delivered as if spontaneous, and as if the consequence of free choice, it is limited to the achievement of only one thing: maximum efficiency, which replaces the old attainment of a good or moral life as the sole goal of society. Economics triumphs over politics.
It is a victory of technocratic idealism. It depends on perfect data gathering and calculation without any actual active data collection and calculation. Not that is, into any center of collection and calculation because it declares that such centers cannot do the work sufficiently. Then, having eliminated the center it proclaims that the periphery is quite capable of that same task. Authority is removed and re-introduced around the edges, but is dissipated so as not to become oppressive or intentional. For, supposedly, it is — please recall — entirely spontaneous. It lacks such intent. It lacks personality whilst embracing individuality. Most importantly of all: it lacks politics.
And that is its purpose.
Politics, you see, can be interpreted as the expression of power in order to achieve a distribution of wealth, incomes, consumption, or resources. Such power is vested in an authority, which, of necessity, is an overt intrusion in the activities of the individuals that it oversees. And, in modernity, we want those individuals to be “free”. So, economics, like all products of the rise of liberal thought, wants to liberate the individual and put them front and center. It wants decisions to flow bottom-up and not top-down. It wants to prove the efficacy of decentralization. Economics is, in fact, a rebellion against pre-induistrial authority.
Where did this revolution against politics begin?
This intellectual heritage of the hyper-individuality and decentralization central to economics, which yet produces superior collective results, is found deep in the religious civil wars of the 1500’s and 1600s. It owes its origins to the likes of Luther and Calvin who sought to destroy the centrally planned authority of the Catholic church. It was their philosophy that then was infused into subsequent liberal thought. They invented the modern conception of the individual precisely as counter to the authority of the Catholic Church, which by their time had become synonymous with corruption. The purpose being to undermine the explicit coercion inherent in the traditional church-to-congregation power relationship. Instead of power being visibly concentrated in a central authority, it was to be diffused invisibly throughout the whole. Collective power displaced authoritarian power. It was a great act of democratization of faith.
Economics simply transferred these same notions of individuality and decentralization from the congregation into the market to achieve its effect. Coupled with the rising confidence in the reasoning of science of that era, the invention of the market as a substitute center for social construction did away with the oppression of the old order. It instituted a new order.
A consequence of this institution was to rob politics of its primary purpose — the structuring of society and the infusion of a concomitant moral system — and replace it with something that was pre-political. It was a vision that depended on the existence of a natural world uncluttered and uncorrupted by overt authority, which was subject only to natural laws — the laws of economics, which, by being pre-political, were also assumed to be objective and immune to human biases. If these laws were allowed to operate uninterruptedly they would guarantee the best possible outcome.
At its inception this seizure of the right to structure society by economics was a more modest construction than it became through time. Its earliest and greatest proponents — Smith and Hume amongst others — suffered from none of the hubris that its later proponents did. However, as the economy multiplied in complexity their initial simplicity was overrun by the scale of activity. Industrialization introduced new social relationships unknown to the founders of economics. And far from power being diffused throughout the new economy it was concentrated ever more in the hands of actors able to own capital rather than behave as the self-sufficient artisans described by Smith. In other words far from being a sea of interdependent and equal individuals, the economy was fragmenting into a patchwork of centers of power and hierarchies of wealth and status. Conflicts arose within this new environment. The very debates that economics wanted to crush re-appeared.
Politics flooded back and challenged the pre-eminence of economics. Society was re-emerging as a challenge to the market. The demos, far from being pacified and merely adhering to the logic of the market, expressed disappointment in the outcome — an outcome that appeared far from optimal. There was a rising recognition that the market was a little less spontaneous than had been promised and that there were considerable biases in the system. That game, people began to argue, was rigged.
Even worse: far from running smoothly, the market occasionally had major problems. All that supposed efficiency and those mechanics had glitches now and again that caused doubts to arise about the efficacy of the entire economic project. Especially since it seemed that it was the demos bearing the brunt of the subsequent damage.
Which gets us back, does it not, to Martin Wolf.
In a world dominated by technocratic calculation and the presumption that we can calculate our way through the uncertainties of the future, economics plays a critical role in structuring socio-economic outcomes. It leaves manufacturing workers aside as its logic rumbles on. It assumes that the unemployed will find new work because growth is inevitable. After all growth is the common factor of the entire industrial era. And growth seems to have carried on, albeit somewhat more slowly, into the post-industrial era. So economists do not have to concern themselves with unfortunate downsides to their logic. Everything, they say, will be right. Just wait for more growth.
And the distribution of the benefits of this efficiency? Well that all flows to those who contribute the most. Inequalities of wealth, income, or consumption are logical outcomes of that application of those laws we must not transgress lest we diminish the potential. Lest we miss that optimal. Lest we disturb the equilibrium.
So, yes, Trump will fail to create more manufacturing jobs. The logic is impeccable.
But it is profoundly anti-democratic. That logic says that the attainment of peak efficiency is more desirable than social cohesion and any semblance of fairness. It says that the less fortunate ought be left to fend for themselves as a sort of sacrifice along the way towards the greater good. Unfair? Certainly. But logical? Absolutely.
Justified by all that supposed spontaneity. Unemployment in the rust-belt? That’s just how we self-organized things. Tough. There was no intention to ruin lives. It just happened. Honestly. Besides we all followed the logic. Spontaneity has no authority exposed to blame. How fortunate. For the technocrats pulling the strings.
And that is why economics replaced politics. The rising industrial elite needed cover for its accumulation of wealth and power. How better to accomplish that than by claiming there is no center of wealth and power dictating the structure or society? Replace the demos of politics by subsuming it into the anonymity of the market. Where it is demos no more.
Wolf recognizes the problems that economic logic has created. But he then refuses to ask economics to produce a solution. He is content with its destruction of the democratic expression of power through politics and its neutralization by that very same logic.
It was the intention from the very beginning of economics to eliminate the power of the demos in order to enforce the discipline and conformity of its logic. It wasn’t the expression of self-interest that produced the collective good. It was the subjugation of self-expression and idiosyncrasy in order to be part of a machine that did the trick. Authority was not dissolved, it was simply hidden when explicit coercion was made implicit.
Wolf is cheeky, is he not, to suggest that the loss of democracy is a problem of politics and not economics. On the other hand, perhaps he is correct. Economics needs to be made subordinate to politics in order to elevate the demos above the logic that currently subjugates it.
Demos kratia
People power
