Class Bound?
First, let me re-iterate my core message:
- Modern democracy emerged only because society was generally prosperous enough to support the social benefits and other forms of risk mitigation required in an industrial economy prone to business cycles
- The redistribution essential to the establishment of democracy was seen by the more affluent as a necessary, if much disliked and costly, alternative to the sorts of revolution and industrial unrest that characterized the 1800s
- What we call “liberal democracy” is a combination of two somewhat contradictory elements [1] Liberty aka liberalism; and [2] equality aka democracy … echoing Tocqueville’s definition of democracy as being an “equality of conditions” rather than simply power sharing which is still offensive to many on the right in politics. They prefer technocracy or rule by the educated class — who presumably know a thing or two about society
- BUT, and especially since the poor response to the financial crisis of 2007/2008, economic growth has declined noticeably, thereby putting pressure on the compromise because the costs of democracy loom much larger during times of slow growth
- The causes of this slowdown are many including: [1] a shift in demographics; [2] a slowdown in technological and scientific discovery; [3] a noticeable increase in industry concentration and quasi-monopolistic behavior — especially in “big tech” which has created a bias towards rent extraction rather than mere profitability; and [4] policy failure, or, rather, a shift away from a social orientation to one based on hyper-individuality
- All this is the root cause of the much discussed demise of liberal democracy … we have too much liberty and not enough equality
With that all said, I refer you to this morning’s Financial Times and Rana Foroohar’s commentary under the title “Why Class Matters in America”.
Class, it seems, is having something of a revival here. About time.
My perspective is simple. Too simple perhaps. The past few decades can be best described as a prolonged reaction by the American ruling class against the inconveniences and costs of democracy. It began under Reagan and has gone on since, albeit with occasional tentative opposition from the Democratic Party — but only when things became obviously stressed.
That reaction was underpinned by an intellectual shift away from seeing uncertainty, risk, and insurance as key factors in social policy, back to a more certain, rational, and deterministic view that social totality is simply an aggregation of individuals. There are no intervening or emergent qualities to concern ourselves with.
This simplistic approach is appealing because it eliminates the collective. It reduces everything in order to remove any possibility of cooperation. It is intensely legalistic because it sees the world as a set of contracts between individuals. It limits, or rather it ignores, anything that might disrupt the maximization of the consequences of all that contracting. It is, in other words, a highly selective and reduced view of reality. One chosen carefully to avoid any engagement with the uncertainties that seem to pervade reality but which would then require inclusion in subsequent analysis.
Why let reality intrude when you need to erect an ideology to support your sponsors?
Yes, I am jaundiced.
It is tiring watching economists discuss the economy when, in fact, they are discussing exchange. They make little or no reference to the workplace which is where, as Herbert Simon once noted, most economic activity takes place. It is the product of the workplace that gets exchanged. Everything that comes before entry into the market is neatly swept away as something for other people to talk about.
This is, of course, deliberate.
The workplace is precisely where power and our various relations to it enter discussion, and since economics was conceived plumb in the middle of the great debates of the 1800s, and was largely an effort to sanitize social debate of the messiness of the politics of power, it is no surprise to see that ideological inheritance deeply ingrained in everything that has been developed since.
Yes, I know there are exceptions. Big ones. Marx and Keynes perhaps.
But our focus is on the last few decades and the triumph of the school of economics that was invented to support the demise of democracy.
The Cold War, naturally, played a part. How can it not? It was the great unifier of American, and by extension Western, thought. Anything tainted by the collective had, in such a strained context, to be sidelined. Economics was recruited and altered to defend the principles of liberty that were seen to be the great distinguishing characteristic of the American way.
But, as I noted in my introduction, liberty and equality are at odds, at least in their respective more extreme versions. Too much of one collapses the space for the other to thrive at all. And modern economics with its excessive focus on rational individuality doesn’t simply overwhelm democracy it throttles it. On purpose.
The greatest reason for this is the need for economists to be able to pursue their preferred formality. Democracy is not as amenable to modeling as is the maximization of a rational singleton. Collectives and their inevitable internal contradictions require narratives and debates rather than simple explication. Democracy is notoriously messy and indecisive. It seeks consensus and not clearcut outcomes. Economics has no room for such conversation and unresolved loose ends. Its tradition sits firmly in the 1800s belief that everything can be reduced by a scientific method into a set of rules that produce, inevitably, optimal outcomes. Democracy laughs in the face of such hubris.
Which is why our more committed economists are so overtly willing to express their affection for limitations on democracy.
They are willing to mobilize the masses, when needed, to limit what they touchingly still refer to as the “Leviathan” — presumably to demonstrate their knowledge of Hobbes. But thereafter democracy is seen as nothing but a sordid sullying of their method. It gets in the way of the steady clockwork of arrival at a maximum. It is, horror of horrors, “inefficient”.
And there is nothing in this world worse in an economist’s mind than inefficiency.
Everything, you see, must be bent in the direction of achieving efficiency. For it is by being efficient that we progress steadily towards ever and ever greater productivity. Which, in turn, is the spigot from which prosperity flows. So anything, like democracy for instance, that slows the search for hyper efficiency, must be kept at a safe distance from policy.
Economics in this form is the social engineering required to maintain economic growth. It is performative. It needs us — it instructs us — to undertake actions that confirm to its methods and analysis. It is not a description of an economy. It is a prescription for how to build one.
And by so being it negates itself. For by being prescriptive it seeks to determine policy, but it was to eliminate politics from economic decision-making that gave the initial impetus to its invention. So economics has become anti-political politics.
Which, to put it bluntly, is a big mess.
This is not to say, obviously, that the body of economics as it has been constructed over the past hundred years or so has nothing in it of value. Of course it does. It is simply that in its recent more performative version it has foregone any pretense at political neutrality and has become a tool for the reduction or occlusion of democracy.
But around the fringes — sad to say only around the fringes — there are voices attempting to change this.
The question that arises within those fringes is, as far as I can see, how to build a democratic and thus less efficiency-obsessed economics, without falling into the trap of reducing liberty excessively. The goal is to avoid the problem of substituting one intellectual dream for another. Utopias, no matter how well meant are oppressive. They are designed to submit humanity to the preferred mechanism of whomsoever created them.
And, unfortunately, humanity doesn’t fit well into anything that denies its inevitable crookedness.
So, the focus ought be on risk, uncertainty, and the necessary insurance we need as the great complexity and interconnection of modern economies plays out. We need to admit that we simply don’t know. That absence of knowledge is based on our inability to compute. Reality sits the other side of the divide between the tractable and the intractable. We are ignorant of it until we experience it. And even then we comprehend it only in hindsight when much of the information is lost and we see only that sufficient to reconstruct what we believe might have happened.
All this meandering of mine is a consequence of thinking about liberal democracy, that happy nonsense that defies description because it is a vast compromise between extreme views and thus open to attack from clever people on both sides.
And is open to destruction if one of those sides gains the upper hand.
Which is what has happened.
And I very much fear that economics played a role in that destruction.
Which implies that if we are to recover democracy and re-balance the system we need to recover economics from its current role as handmaiden to the ruling class.
The history of the industrial era has taught us, if it has taught us anything, that the governing class must choose between revolution and the costs implied by democracy.
That is inefficient.
It is, however, stable. And stability is a quality rather than a quantity much appreciated by us all. It might not be optimal. It might not maximize things. But then what can? We live in an open system called life, not in a test tube.
Economics needs a dose of that reality.
