Economics and Its Discontents - Jedrzej Malko
Transcript of Economics and Its Discontents - Jedrzej Malko
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ATROPOS PRESS
new york • dresden
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General Editor:
Wolfgang Schirmacher
Editorial Board:
Giorgio AgambenPierre AlferiHubertus von AmelunxenAlain BadiouJudith BalsoJudith Butler Diane Davis
Chris Fynsk Martin Hielscher Geert Lovink Larry RickelsAvital RonellMichael SchmidtFredrich UlfersVictor VitanzaSiegfried ZielinskiSlavoj Žižek
© 2015 by Jędrzej MalkoThink Media EGS Series is supported by the European Graduate School
Cover art: Adam Borowski
ATROPOS PRESS New York • Dresden
151 First Avenue # 14, New York, N.Y. 10003
all rights reserved
978-1-940813-77-6
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E conomics and Its Discontents
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Acknowledgements:
I am grateful to many for their invaluable discussions, insights, and
Borucki, Prof. Vivienne Brown,
Prof. David Hawkes, Prof. Jerzy Jedlicki, Jakub Krzeski, Dr Bartosz
Prof. Germano Maifreda, Krzysztof Pacewicz, Tadeusz
and to Aleksandra Piejka, my love, for taking their time to
read the early manuscript of this book and help me refine the argument. I
am also very grateful to Elena Rozbicka for proof-reading the manuscript
cover idea.
I would like to express my gratitude to the internet communities of
anonymous pirates and intellectual property thiefs who break copyright
laws and let academic books and articles into circulation. Without you I
would never have been able to do my research.
Finally, I would like to thank my family and my dear friends for the
support they gave me while I was working on these pages. Also,
apologies are in place for all those times I lost myself in the library anddidn’t show up when I should have. I owe you one!
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Contents:
Chapter 1…………………………………………………………………..…………..11
In which the purpose of this study is outlined.
Chapter 2…………………………………………………………………..…………..13
In which the analytical approach of discoursive materialism is explained.
Chapter 3…………………………………………………………………..…………..19
In which the myth of barter is debunked.
Chapter 4…………………………………………………………………..…………..23
In which the concept of debt regime is introduced.
Chapter 5…………………………………………………………………..…………..29
In which the violent beginnings of the institution of money are recalled.
Chapter 6…………………………………………………………………..…………..35
In which it is shown how Greek economic discourse was shaped by opposing political
factions.
Chapter 7…………………………………………………………………..…………..41
In which it is argued that the existence of a longing for the good old days doesn’t mean
that they have ever existed.
Chapter 8…………………………………………………………………..…………..45
In which we point out that economic growth is relatively new phenomenon.
Chapter 9…………………………………………………………………..…………..51
In which the interplay between religious and economic discourses is introduced.
Chapter 10…………………………………………………………………..…………55
In we recognize the institutional character of private property and visit time when it was
of secondary importance to constellations of power.
Chapter 11…………………………………………………………………..…………61
In which it is argued that the issue of usury was so dire because it violated the logic of
arithmetical justice and endangered interests that hinged upon it.
Chapter 12…………………………………………………………………..…………67
In which, by acknowledging the significance of Arabic economics, we pretend that this
study is not so Eurocentric.
Chapter 13…………………………………………………………………..…………71
Which puts Friedmanite monetarism in an appropriate, medieval, context.
Chapter 14……………………………………………………………………………..77
In which a transition from feudal to capitalist Europe is sketched.
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Chapter 15…………………………………………………………………..……….. .83
Which shows how the market became a space of spontaneous order and how exchange
ceased to be arithmetical.
Chapter 16…………………………………………………………………..…………87
In which it is shown how money became capital.
Chapter 17…………………………………………………………………..…………91In which we s ee that the Italian R enais s ance didn’t give rebirth to humanity;
nevertheless it left offspring in the form of modern bookkeeping.
Chapter 18…………………………………………………………………..………..99
In which historical, static patterns of consumption are explained, and then their
breakdown, as well as legal attempts to defend them are presented. Chapter 19…………………………………………………………………..………..107
In which we study an economic school that has never existed.
Chapter 20…………………………………………………………………..………..115
In which the emergence of population as an economic subject is considered.
Chapter 21…………………………………………………………………..………..119
In which the synthesizing effects of bodily and organic metaphors are explained.
Chapter 22…………………………………………………………………..………..125
In which the relationship between Protestantism and the rise of capitalism is discus sed.
Chapter 23…………………………………………………………………..………..129
In which it is explained that supposedly secular liberal political economics are more
sacral than the economics of Aquinas ever were. Chapter 24…………………………………………………………………..………..133
In which two main outlooks on international commerce are outlined.
Chapter 25…………………………………………………………………..………..145
Which shows how perilous passions were turned into legitimate interests.
Chapter 26…………………………………………………………………..………..149
In which iconoclasm as a mode of critique is critiqued.
Chapter 27…………………………………………………………………..………..153
In which an example of iconoclas tic argument from seventeenth-century E ngland is
presented.
Chapter 28…………………………………………………………………..………..157
In which we see that economic freedom was instrumental for the market equalizing
machine.
Chapter 29…………………………………………………………………..………..165
In which we see the roots and fruits of the scarcity figure.
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Chapter 30…………………………………………………………………..………..173
In which it is shown how liberal political economy was used to legitimize nineteenth-
century economic genocide.
Chapter 31…………………………………………………………………..………..179
In which a time is shown when everyone understood that economic and political
freedoms aren’t the same.
Chapter 32…………………………………………………………………..………..183
In which we see that classic liberals were rebellious pro-statists.
Chapter 33…………………………………………………………………..………..191
In which impact of banking on the regime of debt is inspected.
Chapter 34…………………………………………………………………..………..199
A short but important chapter which shows how economics is blind to the political nature
of money and its disciplining effects. Also, a chapter in which the worthlessness of the
radical notion of value is outlined.
Chapter 35…………………………………………………………………..………..205
In which it shown how intellectual property was established by business fighting business
in British courts.
Chapter 36…………………………………………………………………..………..211
Which argues that Adam S mith was not the father of economics .
Chapter 37…………………………………………………………………..………..215
Which shows that socialist and liberal economics are not that different.
Chapter 38…………………………………………………………………..………..221
Which inspects a few important tropes of labor struggles.
Chapter 39…………………………………………………………………..………..229
In which essential shortcomings of Marx’s economics are outlined.
Chapter 40…………………………………………………………………..………..239
Which explains why the “working class” can never win the “class struggle.”
Chapter 41…………………………………………………………………..………..245
In which we take look at the so-called “marginalist revolution.”
Chapter 42…………………………………………………………………..………..249
In which psychological premises and logical tautologies behind the figure of homo
economicus are ins pected.
Chapter 43…………………………………………………………………..………..257
In which the historical role of historical schools of economics is outlined.
Chapter 44…………………………………………………………………..………..265
In which mathematicization of economics and its use of abstract theorizing is criticized.
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Chapter 45…………………………………………………………………..………..273
Which shows why Keynes was no Keynesian.
Chapter 46…………………………………………………………………..………..279
In which it is explained why in the twentieth century the enthusiasm for central planning
was shared on the both sides of the Iron Curtain.
Chapter 47…………………………………………………………………..………..283
Which shows that economic game theory is a war game.
Chapter 48……………………………………………………………………………291
In which modern consumption is studied as a field of power and domination.
Chapter 49…………………………………………………………………..………..299
In which the sad frutilessness of the postmodern left is explained.
Chapter 50…………………………………………………………………..………..307
Notes ……………………………………………………………………………………311
Bibliography………………………….………………………………………………353
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Chapter 1:
In which the purpose of this study is outlined.
Already too many spectres have haunted the people, and for too long
the people have unreflectively worshipped various spectres. Countless
manifestos have fruitlessly promised to lead the people on the road from
serfdom, out of the dark tunnel of necessity, and into the daylight of
abundance. And yet, few people have asked: what is this spectre? Andhow is it possible that the more unwaveringly it promises to unchain the
people, the heavier are the shackles which ultimately bind them?
There is an urgent need for a narrative on economics that will allow
us to grasp the role it has been playing in the constellations of power
throughout the ages. An attempt at such an analysis is the main purpose
of this study. It should be noted that at no point is it postulated that all
historical power struggles could or should be reduced to the realm of
economy. The cognitive value of bringing all dimensions of social reality
under one common denominator is negative. The search for any one
prime mover, the true and hidden structure, or some general logic of
history is always harmful. The attraction of simple answers lies not in
what they reveal about the world, but in how much they hide from us,
making life less complicated than it should be. That said, one doesn’t
have to fall into traps of crude economic reductionism to acknowledge the
role economics plays in modern systems of power. On the contrary, it is
hardly possible to analyse the economics of power without appreciationfor the power of economics.
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Economics and Its Discontents 12
Political struggles that shape worldwide economic infrastructures are
largely informed by economic discourses, and the legitimacy of the
decisions that affect the lives and livelihoods of billions of people and,
ultimately, the natural environment of this planet are often derived from
this or that economic doctrine. What’s more, in the course of this study it
will be shown that today economistic narratives, figures, and modes of
thinking have contaminated areas of life whose economic nature until
recently had not been considered self-evident. Economics has burst its
banks and spilled over a terrain so vast that today we don’t even speak
about society, culture, and people, but rather about social capital, cultural
capital, and human capital. Resources to be invested with hope for a nice
rate of return.
To challenge the status quo one has to first understand it. Without
untangling the relationship between economics and other discourses,
cultural formations, and institutions, there can be no meaningful response
to problems arising at the multiple tangent points between politics,economy, and economics. Hopefully, this study will productively
contribute to a debate on such a response, providing some insight into the
basic dynamics of mainstream economics and its pivotal motifs. This
historical perspective is meant to provide a much needed context for the
most present issues. Only if we really grasp the fact that there has never
been a critical difference between the main schools of economics, if we
appreciate how much they are alike and recognize the synthesizing logic
with which they operate, will we be able to cut through the threadbare
and barren debates between left and right and work out a truly fruitful
understanding of political economy.
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Chapter 2:
In which the analytical approachof discoursive materialism in explained.
In the past two or three decades, it has been often claimed that the
discussion on economics is changing. The rigorous modernist claim that
economics is a positive, norm-free science has been challenged numerous
times. Klamer argued in 1990 that “seeing economy as a discourse and
exploring its rhetorical dimensions, to which their works inspire, seems to bring new life to the conversation about economics.”1And indeed, some
discoursive analysis of the economic genre has been applied. Economists
are not completely unaware of what poststructuralist theory has to offer,
and they occasionally employ the devices of (a kind of) literary
deconstruction or (a rudimentary) genealogical analysis. To name a few
examples, there were attempts to apply poststructuralist critique to
Marxist thought,2 to treat neoliberalism with Gramsci,3 to show
foundationalism of liberal doctrines4 and to apply rhetorical analysis to
Friedman5 or Keynes.6 Henderson pointed to the potential benefits of
conceptualising economics in literary terms,7 while Klamer made a case
for appreciating the discursive and rhetorical dimensions of economics.8
McCloskey published several interesting books on the latter subject. All
in all, economics is supposed to enter a “tempestuous season.”9
Yet, this tempest seems to be ultimately a sort of dry thunderstorm,
both in economic discourse and discourse on economics. Possibly it
shouldn’t be surprising that mainstream economists couldn’t care less for
some philosophical, epistemological quibbles. But not only the
“interpretive turn” hasn’t reached mainstream economics,10 but the
challenges formulated on the margins of the discourse usually utilize
poststructuralist arguments only as a way to establish themselves as the
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Economics and Its Discontents 14
new orthodoxy. It seems that the trench warfare between different
economic schools continues, while all sides slowly learn to use new
stylistic armaments. And as will be shown later, it is hardly a new thing in
the history of economics.
No comprehensive critique of economic genre has been formed yet. I
would argue, that without providing a more general framework for
thinking about economics, the cognitive value of discoursive analysis will
be lost and will deteriorate into the very blind instruments of power it
seeks to dismantle. Whilst deconstructing economic knowledge is
certainly indispensible to understanding it, it needs to be a part of a much
bigger project. Otherwise it may be that studying rhetorical devices used
to established legitimacy for this or that theorem will end up just another
way to publish an academic paper. The sole claim that “economists have
become to some extent prisoners of their tools” 11 is as much true as it is
analytically barren.
Such comprehensive critique of economics must be based on a study
of its history. Without proper historical context, it is simply impossible tograsp the dynamic of power struggles on a systemic level. Debord warns
that:
The precious advantage that the spectacle has drawn from the outlawing ofhistory, from having condemned the recent past to clandestinity, and fromhaving made everyone forget the spirit of history within society, is aboveall the ability to cover its own history of the movement of its recent worldconquest. Its power already seems familiar, as if it had always been there.All usurpers have wanted to make us forget that they have only justarrived.12
The analytical value of the idea of the spectacle will be discussed later
(Chapter 27), but for now let us concur that oblivion of the past ensures
that the present remains unchallenged. Even if one tries to do so, without
the knowledge of the past he or she is stuck in the vicious circle of
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Economics and Its Discontents 15
repeating the same age-old arguments in the same age-old debates and
making the same “groundbreaking” discoveries as had been made
countless times before.
Therefore, to a significant extent this is a historical study.
However, it is neither a history of ideas nor is it purely a materialistic
history of economic practices. As hopefully will be illustrated by this
thesis, a proper examination of social phenomena needs to abandon the
timeworn methodological dichotomy between spirit and body (which has
typically expressed itself in the Christian preference for the former or the
materialist for the latter). As Schmitt argues, constructing a contrast
between these two spheres only to dissolve it by reducing one into the
other must result in a caricature.13 Thus, I will be looking for
interdependencies between economic discourses, institutions, and
practices, trying not to privilege any one of them. Study of discourse that
disregards study of practice is rootless and toothless. Study of practice
that doesn’t see its discoursive underpinnings is no study at all.
Vries rightly complains that “historians are prone to labour under themisapprehension that one can answer fundamental questions about a
phenomenon by seeking its origins. There one hopes to observe naked,
innocent acts that reveal the true character of what is later shrouded in
mystery.”14 The search for such original sin is futile. Thus, instead of
giving way to such archaic methodology and looking for points of rupture
that put in motion successive historical periods, I propose to analyze
history as a story about a multitude of discourses, institutions, and
practices that dynamically change their configuration, forming various
power structures. Perhaps it could be described not by a genealogical
metaphor, which suggests themes of evolution, generational succession
and family resemblances, but, if you forgive me this high-flown
metaphor, as a history of constellations. Hardly ever does a really new
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Economics and Its Discontents 16
star appear on the night sky or an old one vanish from it, but each of the
myriad stars pulsates with varying brightness, and time after time we
decide to look at a chosen few of them as if they were somehow
meaningfully connected. And, after all, on some level they really are
interconnected, influencing each other constantly by their gravitational
and electromagnetic forces.
For some decades now, social theory has been growing in the climate
of, to use Lyotard’s clichéd expression, incredulity toward
metanarratives.15 It is accepted to study localized politics of resistance,
explore “the lonely struggle of the prisoner in his cell,” 16 to give voice to
groups previously silenced and expelled to the margins. Narratives that
are scaled to a more general level of analysis stink of sorcery, of crude
Marxism, of Enlightenment hubris. But while distrust towards totalizing,
or homogenizing narratives is understandable, it too often becomes an
excuse not to think on a more global and general level. The justified
hostility towards the way of thinking associated with grand narratives is
too easily extended to the object of such analysis. Rejection ofstructuralist approaches too often leads to refusal to analyze global
structures. I would argue that this is the equivalent of throwing the baby
out with the bathwater.
Today, to find our feet in the world, we desperately need narratives
that are big, even grand, along with those that are small and localized. As
long as we remember that they all have their blind spots and limitations,
as long as we resist the temptations of reductionism, they can serve us
well. What’s indispensable in this endeavor is a sort of intellectual
humility that allows for no more than just pointing to some impermanent
tendencies, shaky patterns, and a few cautious generalizations. As little as
this. A much as this.
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Economics and Its Discontents 17
This discussion is not to be enclosed within one subdivision of
academic field. It will bring in diverse issues, ranging from the military
conquests of Alexander the Great to Elizabethan theater, from the
scholastic stance on probability to the birth of modern consumer credit.
However, it would be imprecise to say that the approach will be
multidisciplinary. Rather, one can expect from this work an attempt at an
unidisciplinary approach. It is not about bringing together various
perspectives on one subject but proposing an analytical framework that
could be used to further our understanding of various subjects.
The book is structured around 50 short chapters, each of them
tackling a specific topic and presenting yet another side of the problems
at issue. The chapters are organized more or less chronologically,
although that rule is sometimes bent. I recommend that they are read
consecutively, however, the narrative is not strictly linear and at times a
topic touched on in one chapter is picked up in another one. Such links
are usually indicated by the number of the chapter put in brackets. The
argument will proceed in a somewhat discontinuous way precisely because the broadness of the subject at issue renders linear narratives
useless. Perhaps it cannot be cut open with a one-dimensional, however
sharp, argument, but must be entwined by a net-like one. Hopefully, the
insights we are fishing for will not slip through.
Finally, I must acknowledge that the decision to operate on a level of
general analysis in search of systemic interdependencies comes at a cost.
Tackling a wide range of issues means that none of them is fathomed
completely, and many are certainly treated with less attention than they
deserve. This is also partly due to an attempt to make this work as
succinct and to the point as possible. Writing lengthy papers is a threefold
sin: of smugness, style, and lack of consideration for the reader.
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Economics and Its Discontents 18
Although I stand by my research and have put a lot of effort into
ensuring that no factual mistakes were made, I accept that in many fields
I remain an amateur. I therefore welcome all possible corrections and
criticisms.
My only hope is that these criticisms will not bring the discussion
back to the level of particulars. Succumbing to the terror of details bars us
from any chance of understanding the world we live in. To say that things
are more complicated is always true, but only at times does it contribute
to our understanding of the issues at stake.
Thus, demolish my arguments all you want, but please, do it in order
to go beyond them and not to step back.
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Chapter 3:
In which the myth of barter is debunked.
Barter (verb)mid-15c., apparently from Old French barater , to cheat, deceive, haggle
Online Etymology Dictionary
Few concepts are more central to modern economics than that of
barter. After Adam Smith proclaimed that “the propensity to truck, barter,
and exchange one thing for another” 17 is inherent in human nature, this
claim has been repeated countless times, becoming “the great founding
myth of the discipline of economics.”18 The existence of barter has been
often presented as a historical fact, usually in narratives telling stories of
the gradual progress of humanity: once upon a time there was barter,
which was natural, but very inconvenient, so people came up with money
to supplant it. “It needed conscious reasoning power of Man to make the
step from simple barter to money-accounting” tells Crowther, who was
editor of The Economist from 1938 to 1956, in his Outline of Money.19
This story has become a sort of common sense understanding.
One can notice that in modern economic textbooks, barter is no
longer presented as a stage in economic history, but rather as a imaginary
figure. Graber collected several instances of this: “To see that benefits
from a medium of exchange imagine a barter economy,” write Begg,
Fisher and Dornbuch. “Imagine the difficulty you would have today, if
you had to exchange your labor directly for the fruits of someone else’s
labor,” propose Maunder, Myers, Wall and Miller. “Imagine,” suggest
Parkin and King, “you have roosters, but you want roses.”20
This move from grounding argument in historical narrative toabstract theorizing surely is linked with the general concession to abstract
reasoning (see chapter 44), but it has another quality as well. Being solely
an abstract figure in a thought experiment, it cannot be falsified with
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Economics and Its Discontents 20
historical evidence. This is priceless, because the fact is that there is no
historical evidence that an economy sustained by barter has ever existed.
Anthropologists have “discovered an almost endless variety of economic
systems. But to this day, no one has been able to locate a part of the world
where the ordinary mode of economic transaction between neighbors
takes the form of ‘I’ll give you twenty chickens for that cow’.”21 In the
words of one Cambridge anthropologist: “No example of barter economy,
pure and simple, has ever been described. […] all available ethnography
suggests that there never has been such thing.”22
Of course, there are specific cases in which barter exchange occurs,
and does so on a significant scale. It is a legitimate form of settling
accounts in all capitalist markets. In the 1980s around 40 percent of East-
West trade involved some degree of barter.23 Inmates in many prisons use
various barter systems to exchange items on a black market. However, it
has never been employed as a regular way of handling economic
interactions between fellow villagers. Abundant data on various exchange
systems that could be labeled as barter shows that it only “takes place between strangers, even enemies,” 24 and “all such cases of trade through
barter have in common that they are meetings with strangers who will,
likely as not, never meet again, and with whom one certainly will not
enter into any ongoing relations […] each side makes their trade and
walks away.”25
Confusion about the pervasiveness of barter amongst humans may
have arisen from the fact that many regimes of exchange may appear to
the unaided eye like barter systems, although in fact they are nothing of
the sort. The prevailing system of settling accounts within European
societies, a system that predated capitalist and even feudal modes of
exchange and for a long time co-existed with them, was the system of
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Economics and Its Discontents 21
account money, which was “an ideal unit of measure that allows the
evaluation of goods that are exchanged.”26
It existed only in the mind and in writing. It was a measure of value usedfor accounting purposes, and the value of other commodities, includingactual coinage, would be measured against this standard. The system ofmoney of account most common in medieval Europe was that of pounds,shillings, and pence, which was based on multiples of twelve (theduodecimal system), as opposed to ten (the decimal system). It wasintroduced possibly as early as the seventh century, but given prominence by the financial reforms of the Emperor Charlemagne in the late eighthcentury.27
- writes Wood, but account money and object money (see chapter 5) have been used long before the seventh century. It was used in ancient Egypt,
where the unit was grain, whose value was subjected to careful regulation
by administrative authorities.28 One can also see in the Homeric epics that
we all know from school that people measured the value of ships and
armor in oxen, but of course they never actually paid for anything in
oxen.29 Davies argues that because the taming of animals preceded
agriculture, cattle preceded the use of grain as the unit of account
money30 and have occupied a role so central in it’s evolution that
etymologically the term “capital” is a derivative from cattle.31
In early Germanic law codes, a monetary value was assigned not
only to property but to people as well (“wergild”), detailing
compensations due for various degrees of bodily harm, murder, and
manslaughter, somewhat prefiguring modern insurance calculations that
evaluate people’s health in terms of percentages of bodily damage.
Everything and everybody quite literally had a price. For example, fromthe earliest known Anglo-Saxon laws, the dooms of Aethelberht of Kent(602–3) we read that “If anyone lies with a maiden belonging to the king,he is to pay 50 shillings compensation.” But of course 50 shillings would
not have been paid, not just because the economy was largely non-monetary at that stage, but because neither the shilling, nor even the penny, was then in circulation.32
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Economics and Its Discontents 22
This imaginary money was used to settle accounts even in seventeenth
century Europe, providing a matrix for economic exchange that had
nothing to do with the direct exchange of goods for other goods and
everything to do with communal debt regimes, which are the subject of
the next chapter.
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Chapter 4:In which the concept of debt regime is introduced.
The debt shall be paid, said Crito;is there anything else?
Plato
Many readers may remember that in the Homeric epics, which
are set in a pre-monetary context, the exchange of gifts plays an important
role in establishing relationships between the protagonists. 33 Another
well-known, or perhaps even the best known, instance of gift exchange isthe one between the Queen of Sheba and Solomon.34 Although the figure
of barter is so well-rooted in economic discourse that sometimes gift
exchanges are presented as a yet another form of barter, 35 ever since
Malinowski’s studies of the Kula ring in the Trobriand Islands and
Mauss’s conceptualization of gift economies, there has been enough
research on the structures of reciprocity that it is generally recognized as
a separate institution, with its own specificities. Modern mainstream
economists may still struggle with the very concept of giving gifts and
consider it a wasteful ritual, hence “any transfer of resources which was
not chosen by the recipient through the market will generally be
inefficient.”36 However, few would argue that gift economies didn’t exist,
or that elaborate gift exchange systems didn’t play important social
functions both within communities and in diplomatic encounters between
them.
For that reason, some radical thinkers look to “gift economies”
as a potential site of resistance to capitalist ordering of the economy.
However, gift systems have never constituted the primary regime of
economic life. They are interesting institutions, certainly worth exploring,
but all things considered, they should be rather treated as phenomena that
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Economics and Its Discontents 24
were historically of secondary importance to the distribution of power.
Leaving aside the instances of Mesopotamian kingdoms and ancient
Egypt where circulation of wealth was centrally managed with only an
embryonic market system functioning on the sidelines of a highly
regulated temple economy,37 for a very long time, the majority of day-to-
day dealings were not subject to administrative decrees or to the monetary
market economy, but were part of a social debt regime.
Debt regime can be understood as a system of recognizing mutual
obligations within a given group that ensuries stability and the continuity
of economic exchange by disciplining the parties engaged in it to abide
by their agreements. And the fact is, that long before the establishment of
monetary economy, through the Middle Ages and even far into the
eighteenth century, a majority of everyday transactions operated on the
basis of personal credit, through the use of imaginary account money as
well as with the aid of various tallies, tokens, and ledgers.38 The
commonly repeated narrative of the credit system being a late
development in the history of economic exchange, which supposedlymoved from the most concrete forms (barter) to the most fictitious ones
(financial derivatives), a story about the victory of abstract over
concrete,39 is simply not true. Credit was central to everyday communal
life constituting “a complex and intricate network of personal ties, […]
based on personal agreements, many of which were struck verbally in
face-to-face interactions.”40 And it was central to wholesale trade and
manufacturing as well; “wholesale trade in wool, cloth, wine, tin and so
on […] all stages in the woolen clothing industry […] sales of land and of
rents […] were commonly conducted through extending credit.”41
English merchants, shopkeepers, farmers, manufacturers, and consumershad developed an elaborate credit network based on personal agreements.One historian estimates that by the first half of the seventeenth century, the
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ratio of personal credit to coin transactions was 11:1. This statistic isfurther substantiated by Craig Muldrew’s study of how people insixteenth-century King’s Lynn, a then-vibrant coastal town north ofCambridge, used a wide array of credit contracts, such as sales credit, bills, bonds, and pledges, to mediate their commercial interactions. Thesuccessful employment of such instruments generated an extensive web ofcredit that connected people throughout the community, sometimes ascreditors and sometimes as debtors.42
Discipline was ensured mainly by means of informal social control, and
for a long time operated without appealing to the mechanisms of state
violence such as police or bailiffs. That was especially the case in the
Middle East, where after converting to Islam commercial classes largely
dispensed with the state structures.43
The livelihood of the masses depended in the first instance on
such informal credit regimes and on the commons. The commons can be
understood as an inseparable combination of a social practice and a
resource that was both its condition of possibility and the object of this
practice. It was an institution that forwent the regime of property rights,
in which, for instance, a village cooperative communally used land on
which (individually owned) cattle was herded. Collective management of
the commons ensured that no “tragedy of the commons” (i.e., no
depletion of the common resources caused by unrestrained individual
usage) would occur, deciding on the rules and fines for breaking them,
e.g. “when the increasing number of cattle raised the risk of overgrazing
the pasture, the cooperative issued an ordinance for the pasture […]. It
limited the number of cattle, impounding them if necessary and levied
fines and enforced their collection.”44
The regime of debt was enforced from within but was also influenced
from above. The most important regulations were ones designed to
counter the tendency to accumulate wealth in the hands of a small elite
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and to protect debtors. Sumerian and Babylonian kings typically on
assuming power and sometimes later over the course of their reigns
issued declarations of “clean slates,” voiding all outstanding consumer
credit, returning land to its original owners and freeing the debt-peons. 45
As Graeber notes, “the Sumerian word amargi, the first recorded word for
‘freedom’ in any known human language, literally means ‘return to
mother’ – since this is what freed debt-peons were finally allowed to
do.”46 The Old Testament rule on the jubilee years served a similar role:
every 7 years debt-induced slavery was to be annulled, and every 49 years
all debts were forgone and land returned to its owners. 47 The deeply
political dimension of debt regime was also appreciated by Solon, whose
famous reforms laid foundations placing the political sphere above the
most immediate financial interests of the lenders.48 As Reddy writes:
[Solon] set that society on the road to democracy by decreeing that debtscould no longer be secured against the persons of Athenian citizens.Defaulting debtors who had been sold into slavery were immediatelyfreed; others liable to the same fate were declared free of their debts. Fromthis reform arose that stark distinction between citizen and slave in Athens
upon which civil equality and popular sovereignty were later built.
49
Both in the case of communal debt regimes and the practice of
the commons, there was some room for motives, practices and discourses
that were not strictly economic.
[C]ivic organization in the ancient world gave first place to non-economicrelations, even in the case of commercial enterprises connected to the political-administrative sphere. This gave rise to a sort of personalrelationship between authorities and citizens, due to a “civic sense” in theGreek polis, to ambition and patronage in the Roman Republic, andfinally, in the Roman Empire, to the “benevolence/beneficence” of theemperors, who, whatever they did, were called benefactors 50
In Attic tradition “the city, although being a community, is treated ‘as
a friend’, or, the benefited partner of the euergetic [characterized by
generosity – JM] relationship between two individuals.”51 These themes
of friendship and solidarity were an important part of this discourse of
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benevolence. However, perhaps to the disappointment of those leftist
theoreticians who like to point to the commons as a new utopian project
of social organization that could replace the discredited project of
communism, we have to remember that the commons, as all institutions,
were open to power struggles and practices of violent domination.
Vesting power over one’s access to economic resources in the hands of
the local community made for a very efficient disciplining tool that
ensured one’s compliance with local social, cultural, and religious
hierarchies. Neither social debt regimes nor the commons should be cast
in the role of a horn of plenty that automatically brings about some
version of an utopian future.
Also, some neo-Keynesians utilize this history to claim that debt is a
primordial mode of social being, its essence even, and that granting
government the power to create money means simply reconciling the
political sphere with the underlying economic structure.52 This is perhaps
an interesting, but ultimately a marginal approach. For our discussion, a
more important stance on debt is that taken by mainstream liberaleconomists. And it is an approach marked by a hard-line hostility towards
debt and a utopian vision of a society of individuals free from any
obligations to each other and at liberty to settle all their accounts in cash
(see chapter 34). It is, perhaps, precisely due to this hostility that the
history of social debt regimes has been generally consigned to oblivion,
since if it was remembered, it would certainly give the lie to liberal
economic mythology.
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Chapter 5:
In which the violent beginnings
of the institution of money are recalled.
Money, it’s a crime.Pink Floyd
Although there is nothing universal about money – out of six
“grand civilizations” in human history, the Sumerian, Egyptian, Minoan,
Chinese, Mayan, and Andean, the last two developed highly sophisticated
social structures without any use of coinage53 – today money isinstrumental to the modern debt regime and thus to all economic power
struggles, so it is worth exploring its history.
The first Lydian coins were struck out of electrum – a gold-silver
alloy – during the 7th century, BCE. In Greece, as in India and China,
coinage was probably invented and first manufactured by jewellers, but
soon thereafter it was monopolized by the state. It is often argued that the
biggest force behind the spread of coinage was warfare. 54 The invention
of money correlates in time with changes in the techniques of warfare and
the replacement of old armies made up of aristocratic warriors and their
servants with trained professionals. This new class of mercenaries was
paid salaries, not only the plunder and spoils of war. But plunder and
pillage contributed to the development of coinage as well, as during wars,
large amounts of precious metals, previously stockpiled in temples, were
dethesaurized, as the economic historians like to say; [they were] removedfrom the temples and houses of the rich and placed in the hands ofordinary people, […] broken into tinier pieces, and began to be used ineveryday transactions. […] How? Israeli Classicist David Schaps providesthe most plausible suggestion: most of it was stolen. This was a period of
generalized warfare, and it is in the nature of war that precious things are plundered.55
It is telling that the Phoenicians, the greatest merchants and bankers
of antiquity, didn’t strike coins until they were “forced to do so to pay
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Sicilian mercenaries.”56 Business could be and had been conducted using
ingots and promissory notes. But warfare demanded coinage.
Probably the single most influential event for the popularization
of the institution of coinage was the military campaign of Alexander the
Great, whose conquests led to “the most rapid extension of any single
monetary system in world history – until the advent of euro in 2002.”57
Not only had Alexander destroyed the ancient Mesopotamian debt
regimes and dethesaurized gold held in their temples, but he also ensured
that his coins were the only legal tender in his empire meaning that all
taxes had to be paid in Macedonian drachmae.58 This meant that civilians
in the conquered lands found themselves in a position in which they had
to accept payments in the currency of the conquerors. When Alexander’s
army was fully engaged in Asia Minor, the total cost of his campaign
reached daily payments of some half a ton of silver. 59 This meant around
120,000 drachmae transferred every day into a multitude of private, often
armed, hands. Unsurprisingly, the coinage soon became accepted both as
a concrete instrument of exchange and its abstract structure. As Davieswrites:
Coins followed – indeed accompanied – the sword; payment for troops andfor their large armies of camp-followers was generally the initial cause ofminting. Only the best was good enough for an all-conquering army, andwhat was good enough for the army, even if at first accepted throughcompulsion, was soon universally accepted by everyone with alacrity.Although armies could always take, or “requisition”, whatever theywanted, payment in good coinage was a better way of getting eager co-operation.60
From that time, control over coinage became one of the first priorities to
be assumed by any conquering army, even until this day, with the British
Authority money in the Second World War or dinars issued by theCoalition Provisional Authority after the Second Gulf War.
Issuing money always performed not only an economic role, but a
political one as well. Austin and Vidal-Naquet show that “in the history
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of Greek cities coinage was always first and foremost a civic emblem. To
strike coins with the badge of the city was to proclaim one’s political
independence.”61 Emblems and symbols struck on coins were arguably
“by far the best propaganda weapon available for advertising Greek,
Roman or any other civilization in the days before mechanical printing
was invented.”62 And today, quite a bit of political energy is still
mobilized around issues of currency sovereignty, for instance in
European countries in which adoption of euro is debated, or in Central
and Southern American countries which adopted the US dollar as their
official currency.
Wherever state coinage was imposed, it had to prevail over
previously existing systems of exchange consisting of the abstract
account money, social debt regimes, and finally, object money
(sometimes described as “primitive money”). Davies gives us a whole
alphabet of items used as object money:
amber, beads, cowries, drums, eggs, feathers, gongs, hoes, ivory, jade,kettles, leather, mats, nails, oxen, pigs, quartz, rice, salt, thimbles, umiaks,
vodka, wampum, yarns and zappozats, which are decorated axes – to name but a minute proportion of the enormous variety of primitive moneys63
Setting aside the issue of gold being also a kind of object money used
successfully (and without calling it “primitive”) by leading capitalist
countries up until the twentieth century, it should be noted that the most
successful object monies such as manillas – which were metal bracelets
used as currency in West Africa – were in circulation even after the
Second World War, and it took a long and painful struggle to displace
them with British pounds.64 In fact, an indispensable part of the European
colonial enterprise was always a long and painful struggle to enforce new
forms of discipline by drawing people into the cash-nexus and
supplanting local exchange systems with state-money. It usually involved
some sort of poll tax that had to be paid in cash, 65 and penalization of the
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traditional rituals of gift exchange and conspicuous consumption. For
instance, the 1927 Revised Statuses of Canada stipulated a penalty of no
less than two months in prison for engaging in “any Indian festival, dance
or other ceremony of which the giving away or paying or giving back of
money, goods or articles of any sort forms a part.” 66
However, it always takes power to establish a monetary regime, and
sometimes invaders found it impossible to achieve. At times shortages of
coinage and other problems with establishing a generally accepted
monetary system led colonists to officially recognize as currency object
money of the conquered peoples. For an instance, in the seventeenth
century, wampum was made legal tender in several American colonies,
making strings of beads both a currency in dealings with indigenous
communities and among the colonists themselves.67
As monetary regimes are so closely interconnected with the political
powers upholding these regimes, an essential part of a great number of
modern revolutionary movements was the creation of revolutionary
money. Two great revolutions of the late eighteenth century, the Frenchand the American, were financed by experiments in creating inconvertible
paper money:
The first action of the second Continental Congress [a convention ofdelegates from the Thirteen Colonies that started in 1775, soon after breakout of the American Revolutionary War – JM] was to create an army.Armies have to be paid for and the Congress had no taxing powers. Ittherefore arranged for the issue of $2 million of Bills of Credit in June, andanother $1 million in July. […]. Needless to say the Bills of Credit werenot “as good as gold” but moral persuasion was used to induce people toaccept them: Any person who shall hereafter be so lost to all virtue and regard for hiscountry as to refuse the Bills or obstruct and discourage their currency orcirculation shall be deemed published and treated as an enemy of the
country and precluded from all trade and intercourse with its inhabitants.(Resolution of 11 January 1776)68
Eventually, there was a complete default [of the revolutionary money].Thomas Jefferson said that the public feared that this would shake theConfederacy to its very centre, but instead:
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Their annihilation was not only unattended by tumult but was everywherea matter of rejoicing and congratulation. Their great services as a supportof the War were known and felt by all and all knew and felt theirdestruction was a certain public good…. In Rhode Island—anobstreperous little commonwealth—some Continental bills were buriedwith the honours of war. They were enclosed in a special repository, andover this a eulogy was pronounced as over the remains of a departed friend and benefactor.69
The close relationships between war, debt, and money will be studied
later on (chapter 33), but for now, let us note that exposing the bloody
origins of coinage shouldn’t be taken as a proof that it is an essentially
violent, oppressive institution. It seems to me that this is the mistake
David Graeber makes in his otherwise captivating account of the social
history of debt. The narrative on money that dominates economic
discourse today is one that sees money as a sort of atemporal, natural, and
neutral thing. Liberalism sees it often as primary to political institutions,
while mainstream economics doesn’t see it at all (chapter 34). 70
Therefore, the challenge lies not so much in condemning money for its
gory genesis, but rather in putting it in a historical context, seeing it as an
institution and exploring the functions it played in the power struggles
through the centuries. Economic reflection shouldn’t be concerned simply
with the politics of distribution of money in a given society, but muat
rather recognise the political dimension of the institution of money as
such and study the various effects different exchange systems have.
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Chapter 6:
In which it is shown how Greek economic discoursewas shaped by opposing political factions.
economy (noun) from Greek οἰκονομία,
literally; management of the house, law of the houseEtymology Online Dictionary
The first Greek text on economy is Hesiod’s poem Works and
Days, in which he argued against the admiration for war and martial
virtues and praised the new ideal of peaceful husbandry.71
The mostimportant principle of Hesiod’s household economic teaching is the
traditional, timeless order which:
shows itself in the careful division of work according to the season. [e.g.]Wood must be brought from the mountains in winter, and even the age of people and animals is taken into account in the division of labor—the 40– year-old is the youngest able to dig a straight trench and not just lookaround.72
Other themes of his teaching were care, which should be applied at
all times, and neighborly reciprocity. He warned that profit can confuse
the senses and bring out aggressive behavior in people. Nonetheless, he
recommended that one should seek to increase household profit and
engage in sea trade on a limited scale.73 Hesiod also advised that since sea
trade is hazardous, a man’s entire property should never be risked on a
single ship’s excursion,74 thus voicing around 700 BCE the intuition for
whose mathematical formulation Harry Markowitz earned a Nobel prize
in 1990.
After Hesiod, bits and pieces of economic reflection can be
found in philosophers such as Heraclitus and Democritus, but certainly
the fullest and also most successful Greek economist was Xenophon. HisOikonomikos became a best-seller for generations, not only in Ancient
Greece, but also in the Roman empire and long afterwards.
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In the 15th century, it was streamlined into a separate Italian economic
discourse,75 but was influential on its own as late as 1652 (date of
publication of Blith’s Dedication to the Nobility and Gentry)76 or even
1727 (Bradley’s translation of Oikonomikos under the title of The Science
of Good Husbandry).77 Xenophon emphasized the same principles as
Hesiod, praising order (“nothing is useful or fine for human beings as
order”78) and diligence.79
In both Works and Days and Oikonomikos the household was
conceived as a private sphere that was understood without reference to
the local or national economy. However, this doesn’t mean that the
Greeks were not capable of a more macroeconomic analysis. For
instance, Isocrates’ Trapeziticus treats the specific situation of the
Athenian economy, with its fiscal and monetary problems.80 And
Xenophon’s less known work, Ways and Means, also shows a general
orientation to the economy of the whole polis and proposes a series of
policies to promote trade, strengthen manufacturing, and attract capital
from abroad.
81
In a proposal that could be called proto-Keynesian, if wewere interested in such retrospective readings of history, he argues for a
proactive stance of the polis in promoting industrial entrepreneurship and
tries to calm objections that public initiative will have adverse effects on
private business.82 In his other work, Cyropaedia, he describes the
division of labor, linking it (as Adam Smith would do later) to the size of
the market.83 And Aristotle’s abstract conceptualization of the geometric
exchange matrix proved essential for scholastic economic theories
(Chapter 15).
There is a general tendency in economic historiography to exclude
analyses critical of a given economic order from its body and focus solely
on theories that accept it either openly or implicitly, by assuming that it is
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morally neutral. Thus, the bulk of Greek economic theorizing is
disregarded as moral philosophy and not strictly economic theory. 84 But,
of course, all economic theories are, explicitly or not, moral and political
philosophies as well. And the fact that the elite of Greek philosophy
shared a distrust of economic motives and were wary of commerce does
not mean that they didn’t theorize about them.
Probably the most hostile attitude towards commercial society was
Plato’s. He conceived economic activities as morally degrading and the
profit motive as unacceptable. He especially held retail trade, which in his
eyes was an unproductive speculation on goods, in contempt. He argued
that politics must be purified from the polluting effects of the commercial
mentality or otherwise, when “the desire for more growth has reached its
technical limits, the feverish mentality of the opulent city sets loose the
spirit of war with other city-states.”85 Therefore, in The Republic he
envisioned a society whose economic activities are regulated in great
detail by a cast of ascetic philosopher-kings. If trade is left to be
determined by hedonistic demand it will lead to a new ordering of theworld, based on a “calculation, that could be handled mathematically and
that [would] replace the traditional ordering of life forms according to
various dimensions, with a one-dimensional measurement,” 86 alienating
people from moral ideals and destroying the natural environment in the
process.87
Similarly, Aristotle goes into great lengths to describe mis-
development of the polis into a commercial society animated by the
“chrematistic spirit”:
For him [Aristotle], the development of a monied market economy that prospers on commercial exchange between socially unrelated individualsand that is moved by a chrematistic mentality, would adversely affect thetraditional values of the community and gradually undermine the publicspirit of the polis and of its citizenry.88
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However, Aristotle was slightly less hostile to commerce than Plato.
Indeed, he married Pythias, a daughter of Hermias, the powerful banker
who ruled the polis of Atarneus and a close friend of Aristotle.89
Philosophically, as always, he recommended the golden mean as the
answer to economic problems. In his eyes both poverty and excessive
wealth can be equally corrupting, and the possession of wealth as such is
not something negative. However, as the gain motive theoretically can be
infinite (and in practice often is), it cannot be treated with the golden
mean solution, and thus is inherently harmful.90
Also, Isocrates and Gorgias, Sophists who are usually treated as
technocratic pragmatics, considered the commercial spirit it to be the
source of injustice and corruption.91
There has been a long-lasting dispute on whether the Greeks
employed the notion of linear time at all (or perhaps it was a Judaic
invention, and the Greeks followed a “more natural,” cyclical vision of
time?), and if so, whether it told a story of advancement or maybe of progressive decadence. There are numerous examples in support of all
three options,92 and arguably this debate can be only resolved by
discarding the idea of the homogenous “Greeks” to whom one or another
world-view could be ascribed and acknowledging that there were
numerous tensions in Greek culture, one of which concerned the issue of
progress.
The aforementioned authors (apart from Hesiod) all wrote in a
rapidly changing social environment in which two political prospects
contended for primacy: a commercially growing society based on trade
against a traditional and static society based on agriculture – merchant
classes supported by democratic structures against an aristocratic culture
supported by the elites – the nouveau riches against the traditional
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establishment.93 The lines of demarcation, as always, were not clear, but
one can see these two tendencies in the political discourse of Classical
Athens.
In Ancient Greece, this tension between “perfect gentlemanship” and
the commercial spirit, between “love of honor” and “love of gain”, was
perhaps overcome only in Sparta, where citizens were forbidden to have
anything to do with money-making, leaving economy in the hands of
enslaved helots.94 In The Human Condition, Hannah Arendt liked to
romanticize Ancient Greece as a place where public life was free from
lowly economic concerns, which rightly belonged to the private realm. I
would argue that she misreads some of the philopohical writings that
constituted a conservative defense of the power held by the elites for the
general climate of the era. For all Arendt’s originality, this mistake is
surely of the most trite in the historiography of ideas, it almost falls in the
realm of cliché.
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Chapter 7:
In which it is argued that the existence of a longing for the good olddays doesn’t mean that they have ever existed.
I remember the time when a man who was atolerable workman in the fields had generally,beside the apartment in which he carried on hisvocation, a small summer house and a narrow slip of a garden, at the outskirts of the town,where he spent his Monday, either in flying his pidgeons, or raising his tulips. But those gardens are now fallen into decay. The little summer-house and the Monday's recreation are
no more. John Thelwall, year 1795
Two of the tropes that appeared in the Greek debates described in the
previous chapter made a terrific career in economic discourse. Namely,
themes of nostalgia and moralistic anti-consumerism.
One of the most widespread myths of the pre-modern cultures, the
myth of the lost Golden Age, was also an important part of Greek culture.
Originally, goods were abundant and people could obtain them without
much effort, but eventually human pride and desire for knowledge led
them to disobedience and a conflict with the gods. The consequent godly punishment sentenced humanity to life of suffering and poverty, made
possible only by painful labor. In this respect, the biblical story of the fall
from Eden closely resembles Greek mythology. Interestingly, these myths
may have reflected actual historical developments, telling the story of the
Neolithic Evolution, which by introducing new agricultural technologies
enabled the birth of civilization as we know it, but at the same time most
likely drastically degraded quality of life.95
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In any case, in many ancient texts:
there is considerable nostalgia for the solidarity of the frugal agriculturalsociety, content with its poverty. This mythical model is contrasted withthe society of the time, in which trade had introduced a love of easy richesand, along with it, selfishness and a disdain for moral values. Roll remindsus that the biblical prophets expressed this nostalgia because they werewitnessing the decline of the tribal economy and the rise of private property, which also brings trade, the division of labour, class distinctions,and poverty. A similar process took place in ancient Greece.96
In Dicaearchus of Messana (c. 350 – c. 285 BCE) we find the first
formulation of the theory of economic stages. History moves through a
series of phases, each characterized by one main type of production.
However, in his eyes, this was a theory of the decline of man and not of
his progress.97
Also, in Book I of Aristotle’s Politics, we can find a discussion on
the dynamic of the decay “from an economy based on natural art of
household management towards an acquisitive system stimulated by the
profit motive.”98 He makes a distinction between a natural and legitimate
procurement of goods in order to live well and an unnatural management
of goods oriented towards profit and the limitless increase of one’s estate.
Regress from the Golden Age is said to be fuelled exactly by yielding to
such low and artificial motives. One can see that this argument works
only when a divide between natural and artificial needs is introduced.
Natural is legitimate, limited, and simply good. Unnatural is artificial,
threatening, and luxurious. Of course, these criticisms are necessarily
divorced from any historical sense, as they fail to see that all traditional
and natural goods were once considered unnatural novelties.99
Nevertheless, they have found a place in the economic and politicaldiscourse for good.
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As Perrota notes:
The opposition between natural and “artificial’ needs (and consumption)has had an enormous success. It was repeated in the Middle Ages, by StThomas among others. In the modern and contemporary age it has become, and still is today, the main argument of all the critics of increasedconsumption, of all those who are nostalgic for the simplicity – real or presumed – of the past. With this function it was adopted by the moralistsof the seventeenth and eighteenth century; by Rousseau; by all kinds ofUtopians in the nineteenth century; by the Marxists Baran and Sweezy inthe 1960s; and, lastly, by many advocates of a conservationist reduction incon-sumption. Today this distinction is still part of the common culture ofso-called “anti-consumerism.”100
At times the division between acceptable and unacceptable
consumption was voiced in explicitly political terms; for instance, Plato
argues in Republic against unregulated economic development by
warning that it leads to rising social inequalities and discord, whose effect
is that eventually “the State falls sick, at war with herself.”101 (For more
on political regulation of consumption patterns see chapter 18.) But
generally, the natural/artificial division was part of a moralistic discourse
that sought to influence individuals for the sake of their own moral
standing. If the “original affluence” was lost due to the sins of pride and
greed, then perhaps it could be regained by turning away from worldly
pleasures. Thus, affluence can be achieved only through individual
restraint and asceticism.
This idea has been repeated countless times over the course of
history. Xenophon’s Socrates proclaimed that being controlled by the
“harsh masters” of gluttony, lust, and foolish ambitions is no better than
slavery.102 Plato, of course, voices the same argument for moderation and
restraint. The Stoics warned that one should never rely on more than isabsolutely necessary (which, in their view, included possession of
slaves).103 Also, early Christians drew on the Stoic tradition, and the more
radical passages of the gospel, to campaign for indifference towards
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earthly goods. In the Middle Ages, the Aristotelian division between
natural and unnatural wants was picked up by Thomas Aquinas, who
explicitly repeated his calls for moderation.104 Aristotle was used as a
major point of reference long into the sixteenth century,105 and later, the
same tropes can be found in Montesquieu 106 and Adam Smith,107 and in
the twentieth century, in Keynes.108 Marxist critics, even though they rise
above the level of crude moralism, in their treatment of consumerism as a
sort of false consciousness brought about by the media complex to
manipulate consumers into buying things they don’t really need or truly
want, also often presume this dichotomy between natural and artificial
needs.109
It will be seen in this work that the themes of nostalgia for the lost
serenity of life and the moral discourse of individual restraint, often
working in pair, are recurring elements of economic discourses through
the centuries (Chapters 10, 18, 48). And in any case, this longing for the
good old days seems of little analytical value. Nostalgia appears to be a
constant trope in European culture, working rather as a mode ofexperiencing the present than as an approach to understanding the past. It
can and often is mobilized by political (especially, but not exclusively,
nationalistic) movements, but it is doubtful whether it can become a
valueable feature of any analytical framework that would improve our
understanding of power struggles.
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Chapter 8:
In which we point out that economic growthis a relatively new phenomenon.
It's a zero sum game, somebody wins, somebody loses.
Gordon Gekko in “Wall Street”
The conservatism of the Greek elites and their ascetic ethics should
be put in the context of pre-modern economy, the most important
characteristic of which was, perhaps, that it didn’t know economic
growth. Product per capita was generally static. Until the eighteenth
century, all societies were caught in a Malthusian Trap, in which
increases in output translated into larger populations but no significant
increases of wages or quality of life for the masses. Clark notes that
the average person in the world of 1800 was no better off than the average person of 100,000 BC. Indeed in 1800 the bulk of the world’s populationwas poorer than their remote ancestors. The lucky denizens of wealthysocieties such as eighteenth-century England or the Netherlands manageda material lifestyle equivalent to that of the Stone Age. But the vast swathof humanity in East and South Asia, particularly in China and Japan, ekedout a living under conditions probably significantly poorer than those ofcavemen. The quality of life also failed to improve on any otherobservable dimension. Life expectancy was no higher in 1800 than forhunter-gatherers: thirty to thirty-five years. Stature, a measure both of thequality of diet and of children’s exposure to disease, was higher in theStone Age than in 1800. And while foragers satisfy their material wantswith small amounts of work, the modest comforts of the English in 1800were purchased only through a life of unrelenting drudgery.110
The perception of steady progress through the ages comes from a
cultural overrepresentation of the lifestyles of small elites, which indeed
have been progressing, but constituted only a margin of the population.
Jane Austen may have written about refined conversations over tea servedin china cups. […] While even long before the Industrial Revolution smallelites had an opulent lifestyle, the average person in 1800 was no better offthan his or her ancestors of the Paleolithic or Neolithic.111
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Economics and Its Discontents 46
As Malthus himself noted, “the histories of mankind that we possess are
histories only of the higher classes.”112
Economic activities in this pre-growth era were largely governed by
tradition and custom. “It isn't the knowledge or the ignorance of the
farmers that causes some to be well off and others to be poor,”113 says
Xenophon. This knowledge didn’t need to be written down or codified, as
the rules of economic conduct were considered to be obvious. 114 For
centuries the rhythm of economic life was set by weather cycles. Periods
of famine were interlaced with periods of relative abundance, and the best
one could hope for was a stable comfort of living.
In such an environment, consumption patterns were very different
from the ones we know today. The greater hazard to a community’s
interests lay not in scarcity, but in surplus, as its unequal appropriation
endangered the social cohesion of the group. Hence, in pre-growth
economies, one can see so many rituals of collective feasting, destruction
of goods in potlatches or religious sacrifices, and finally, burying goodsin the ground as treasures.115 Some of these rituals have survived to this
day, e.g., the Christian customs of Easter feasting can be tracked directly
to old Slavic rituals of gluttony. On the other hand, traits such as
entrepreneurship or willingness to take risks were often considered to be
unsavory or outwardly threatening in pre-growth economies.
The Catholic condemnation of usury certainly was instrumental in
securing the Church’s economic and political interests (Chapter 16), but
one can also argue that in a pre-growth economy it contributed towards
securing social (albeit feudal) cohesion. Following Piketty’s “r>g
argument”,116 that whenever rate of return on capital is greater than the
rate of growth, inequalities must rise, it is easy to see that when g is 0,
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Economics and Its Discontents 47
any return on capital must result in a concentration of resources and an
increase in economic inequality.
The static economy accommodated static economics (Chapter
11). When economic growth was unthinkable, exchange was understood
as a zero-sum game in which the profit of one party must cause the loss of
another party. This is why Aristotle states that trade “is justly discredited
(for it is not in accordance with nature, but involves men's taking things
from one another).”117 By definition, the accumulation of wealth led to
the impoverishment of others and therefore was immoral. This was the
meaning of Augustine’s warnings that “the superfluities of the rich are the
necessities of the poor” or that “you possess what belongs to others when
you possess more than you need.”118 Mass enrichment was not possible.
As Aristophanes observes in Plutus, a society can have general affluence
only if it is built on the enslavement of some other group.119 The
moralizing discourses described in the previous chapter are best
understood this context, perhaps put in the most concise terms by Seneca:“The objects of your desire […] cannot be transferred to one person
without being snatched from another.”120
In Malthusian economies, wages always tended to be low, no matter
how much people worked or how productive they were. Good times
could last only for short periods of time triggered by a new technique of
production, intensification of labour or, most famously, as a consequence
of famines, plagues and wars, which by decreasing the numbers of
mouths to feed could temporarily bring higher real wages to those who
survived the purge. But as the population grew, individual incomes fell
back to subsistence levels. In this situation, the only possible welfare
policy that could be implemented was one of work prohibition. In the
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Economics and Its Discontents 48
long run, it didn’t affect the production per capita and wages, but
improved life quality by increasing leisure time. This was precisely the
economic impact and social importance of the Catholic prohibition of
work on Sundays or the Judaic Sabbath.121
Finally, we should note that recently the very notions of economic
growth and gross domestic product (GDP) as its measure have come
under harsh criticism. Simplifying it a bit, GDP is an estimation of the
total sum of money spent in a given economy within a given time. The
conventional approach to it is that the higher GDP per capita, the more
developed the economy and the happier the people. This alleged identity
is so far-fetched that even some mainstream economists, such as Nobel
prize laureates Joseph Stiglitz and Amartya Sen, argue that GDP “may be
a poor measure of well-being, or even of market activity,”122 as it fails “to
capture some of the factors that make a difference in people’s lives and
contribute to their happiness, such as security, leisure, income distribution
and a clean environment – including the kinds of factors which growthitself needs to be sustainable.”123 Thus, in recent years a number of other
approaches to measuring economic and social progress have been
developed, such as the United Nations Human Development Index or the
OECD Better Life Index, that take into account factors such as life
expectancy, education levels, or quality of the natural environment.
However, none of these attempts have gained significant standing in
mainstream economic discourse.
Another criticism of relying on gross domestic product
measurements can be the “gross” part of the formula. GDP is the ultimate
economic aggregate, which amasses all economic activity in a given
country and unifies it in one figure. This can have a dangerous effect,
creating a perception of economy as a unitary entity in which all internal
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Economics and Its Discontents 49
tensions are synthesised out of existence. This is not inconsistent with the
historical purpose of national accounting. From its very beginnings, it
was devised with the aim of providing knowledge not about quality of life
issues but about the total military potential of a given country. William
Petty’s 1665 estimates of Britain’s production were to provide an
assessment of British resources available for the Second Anglo-Dutch
War, while Davenant’s 1695 measurements were explicitly called “An
Essay upon the Ways and Means of Supplying the War.”124 And the GDP
itself was chosen over indexes that would be more focused on wellbeing
than simply total output in 1942, when the US Government needed a
basis for planning their military expenses during the Second World
War.125 This was done despite the fact that the economists who devised
the GDP formula explicitly stressed the need for relying on other
measures:
It would be of great value to have national income estimates that wouldremove from the total the elements which, from the standpoint of a moreenlightened social philosophy than that of an acquisitive society representdisservice rather than service. Such estimates would subtract from the
present national income totals all expenses on armament, most of theoutlays on advertising, a great many of the expenses involved in financialand speculative activities.126
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Chapter 9:
In which the interplay between religiousand economic discourses is introduced.
Remember the Lord your God, for it is he who gives you the ability to produce wealth.
Deuteronomy 8:18
To claim like Foucault127 that economics is an atheistic discipline, a
discipline without God, is an easily made mistake. Nevertheless, it is
undoubtedly a mistake. It is a godly discipline in many respects. Some
scholars argue that economics should be simply understood as a branch of
religion.128 Such arguments are probably meant to shake our faith in the
scientific legitimacy of economics, and may be valuable as such, but it is
doubtful that they really further our understanding of economic
discourses and practices. One can always describe one discipline in terms
of another, but such pleasures of redescription are vulgar. When
Encyclopedia of the World’s Religions included dialectical materialism in
its directory,129 it was undoubtedly a way of discrediting Marxism, but
the cognitive value of such a move was, at best, vague.Therefore, it is our job to study economics not as religion, but to
explore the interplay between the two. One can see three main (though
often overlapping) dimensions of this interplay: first, there is explicitly
religious discourse on economy; second, there are ways in which
economic discourse shaped religious dogmas; and third, there is
economic discourse that is not strictly religious, but uses religious figures
and formulas as a way of establishing its legitimacy.
Many examples of religious discourse on economy can be found in
the holy texts of all three Abrahamic religions. The ancient Persian
discourse on economic justice and equity filtered by the rabbinical
tradition appears as one of the main topics in prophetic books, with
Amos, Micah, and Isaiah articulating radical critiques of economic
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development that creates social inequality and fails to provide for the
poor and the weak.130