Friday, October 30, 2015

Karl Polanyi: The Contradictions of Market vs. Self-Protection

Karl Polanyi wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US. It is a ringing critique of the market economy.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement, followed by "Great Depression Failure of the English System" and "History of Exchange Prior to the Modern Market" and "The Self Regulating Market and Its Fictions" and "Speenhamland and the Poor Law" and "The Social Crisis of Poverty and Commodity Labor" and "The Market Economy Means Annihilation of Land and People."

It all comes down the the utopian economic liberal creed, and so Polanyi takes a look it in "The Special Pleadings of the Laissez-faire Creed."

The market destroys the traditional relationships between man and labor and between man and land, so it's not surprising that the workers and the landowners resisted, demanding protection from the market as we discuss in "Land and Labor and Resistance to the Market."

It wasn't just workers and landowners that couldn't take the heat.
Even capitalist business itself had to be sheltered from the unrestricted working of the market mechanism.
In effect, central banking is capitalism's way of making sure that the market doesn't destroy "its own children, the business enterprises of all kinds" in financial panics and crashes. It is not just the vagaries of the financial markets that threaten business. There is also the problem that it is difficult for businesses to lower fixed costs, like wages for labor, when prices are falling for its products.

The problem is commodity money, like gold and silver, which do not increase in step with production and thus tend to cause deflation. The solution, "token money", is difficult to use in a global economy because it "cannot circulate on foreign soil." Hence the need for the gold standard.

But the gold standard works by imposing credit restrictions and lowering prices on currencies facing depreciation, and that is "a standing danger to business." The solution was central banking; it could "avoid the wholesale dislocation of business" by absorbing the shock of deflation across an entire nation. But this cure could be worse than the disease and throw the whole economy into disorganization and unemployment.

There is a contradiction in an economy with both commodity money and token money. Commodity money is a means of exchange, while token money is merely purchasing power, guaranteed by the state. In the 19th century the world believed in commodity money, but actually mostly used token money. When the world went off the gold standard in the 1930s commodity money ceased to exist, and the purchasing power concept replaced it.

The problem with the gold standard was that it was one thing when the central bank acted to keep its currency value between the "gold points"; it was another when changes in the internal price level required much larger responses. At this point, central banking was drawn into the orbit of politics. Thus, although all educated people in the 19th century were nominally free traders and internationalists, after 1870 national governments started acting "on the impulses of nationalism and self-sufficiency."

Again, the problem with central banking under the gold standard was that in a mere liquidity crisis "reserves and foreign loans would tide over the difficulty". But if the imbalance were something more, then painful economic adjustment would be needed beyond the ability of central bankers and financiers to finesse. And politics would be needed to decide the who-whom question. And in 1929 to 1933 central bankers and the gold standard utterly failed, and the money sector of the market economy failed with it. And politics rushed into the gap.
A new set of ruling ideas superceded the world of the self-regulating market... [U]nsuspected forces of charismatic leadership and autarchist isolationism broke forth and fused societies into new forces.
The commodification of land and labor results in their annihilation, according to Polanyi. So people act in self-protection against the market. The commodification of money unleashes gales of panic and crashes. So governments institute central banking to ward off the chills; when there is an economic crisis, governments are expected to respond. Nationally and internationally, "political methods were used to supplement the imperfect self-regulation of the market." But political methods often did not resolve the problem, not while the gold standard reigned.

So the contest between market and protection set off warring contradictions.
The protection of man, nature, and productive organization amounted to an interference with markets for labor and land as well as for the medium of exchange, money, and thereby, ipso facto, impaired the self-regulation of the system.
In other words, the protective measures to give men "some security of status" impaired the flexibility of the system. In international relations states acted to protect their citizens against foreigners, and within countries they acted to "transform competitive markets into monopolistic ones."
Economic adjustment became slow and difficult. The self-regulation of markets was gravely hampered.
Unadjusted prices and costs prolonged depressions, and delayed liquidation of failing investments. Economic problems had to be solved by political means, yet politics and economics were supposed to be separate.

The strain was unbearable, and only when the final market mechanism, the gold standard, failed was the strain released.

Next, in Part III: Transformation in Progress,  we will look at Polanyi' proposals, made in the 1940s in the middle of World War II, to solve the world crisis.

Thursday, October 29, 2015

Karl Polanyi: Land and Labor and the Resistance to the Market

Karl Polanyi wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US. It is a ringing critique of the market economy.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement, followed by "Great Depression Failure of the English System" and "History of Exchange Prior to the Modern Market" and "The Self Regulating Market and Its Fictions" and "Speenhamland and the Poor Law" and "The Social Crisis of Poverty and Commodity Labor" and "The Market Economy Means Annihilation of Land and People."

It all comes down the the utopian economic liberal creed, and so Polanyi takes a look it in "The Special Pleadings of the Laissez-faire Creed."

What Polanyi really dislikes about the market in labor and in land is this:
To separate labor from other activities of life and to subject it to the laws of the market was the annihilate all organic forms of existence and to replace them by a different type of organization , an atomistic and individualistic one.
 The idea of freedom of contract meant that the ties of "kinship, neighborhood, profession and creed were to be liquidated" as a restraint on the freedom of the individual.

You can see how the idea of a market for labor breaks up traditional society by looking at the (in the 1940s) colonies of the western powers.
The natives are forced to make a living by selling their labor. To this end their traditional institutions must be destroyed[.]
The motivating idea to make the natives submit to the market is that in an individualistic market for labor the worker must either work or starve. In traditional rural society things are different. "There is not starvation in [traditional] societies living on the subsistence margin." (Really?)
The protection of society, in the first instance, falls to the rulers, who can directly enforce their will. However it is all too easily assumed by economic liberals that economic rulers tend to be beneficial, while political rulers do not. 
In the run-up to the Industrial Revolution it fell to the landlords to protect the people, and they did, in their way, with Speenhamland. And after the Poor Law reform in 1834 they continued to fight for the people with factory acts.

(Really? Or did the landed gentry merely hate the upstart industrialists the way that Lady Glencora Palliser hated Mr. Bott.)

What the working people really wanted, according to Polanyi, was to "discover a form of existence that would make man the master of the machine," and that was the purpose of the Owenite Movement. It was "a religion of industry, the bearer of which was the working class."  Then there was the Chartist Movement with its Six Points that "demanded an effective popular suffrage."

When the Industrial Revolution arrived in continental Europe it lured the peasants into the city with the promise of higher wages. And the peasants found there a lower middle class that could teach them "an urban tone." While the British working class left politics to his "betters" the European worker "became a political socialist." Social insurance, with the help of the reactionary elite, came earlier to Europe than to England.

The purpose of all the resistance to economic liberalism was to hinder the absolute rule of the market in labor, and that is what the "social legislation, factory laws, unemployment insurance... and... trade unions" achieved. They were intended to interfere with the laws of supply and demand, and they did.

No less weird than the idea of a market in labor was the idea of a market in land. Land is "tied up with the organizations of kinship, neighborhood, craft, and creed[.]" The market destroys these ties.

Really, the process was driven by the need of industrial towns for an unlimited supply of cheap food. Thus we get the "commercialization of the soil, mobilizing the feudal revenue of the land." Then comes the need to feed the towns in the industrializing nations. Then comes the extension of this system to the world, forcing everyone into the orbit of the market.

Common law and statute law sometimes encouraged, and sometimes slowed this process with respect to land. But the feudal and landed proprietors did what they could to slow down the commerce in land and slowing the migration to the city. And, with wars and rumors of wars, they could point to the importance of self-sufficiency in food.

Next, Polanyi shows how the conflict between the market ideology and peoples' instinct for self-protection created impossible economic and political contradictions and strains.

Wednesday, October 28, 2015

Karl Polanyi: The Special Pleadings of the Laissez-faire Creed

Karl Polanyi wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement.

In "Great Depression Failure of the English System" Polanyi explains why the the "self-regulated market" and the gold standard failed in the years after World War I.

In "History of Exchange Prior to the Modern Market" Polanyi tells us that humans in the pre-market world lived perfectly happily without markets for everything.

In "The Self Regulating Market and Its Fictions" Polanyi talks about the commodification of labor, land, and money as "fictions."

In "Speenhamland and the Poor Law" Polanyi looked at how that the Speenhamland welfare law lowered wages in Napoleonic era England.

Then, with Speenhamland having demoralized the workers of England, along came the full-on commodification of labor in the national labor market, in "The Social Crisis of Poverty and Commodity Labor."

And according to Polanyi, "The Market Economy Means Annihilation of Land and People" because of commodification.

All this disaster, on Polanyi's account issues from the "utopian" creed of economic liberalism, the idea of the "self-regulating market." It is time, therefore, to inquire more deeply into the birth and development of the "liberal creed." For him, the "fanaticism" of economic liberalism arose in response to the "magnitude of the sufferings that had to be inflected on innocent persons" in order to realize a "fully deployed market economy." It had to be a fighting faith to push through to victory.

It is a mistake to date economic liberalism to the invention of the term "laissez-faire" in the 18th century. In England it initially just meant "freedom from regulation in production" rather than free trade in general.
Not until 1830 did economic liberalism burst forth as a crusading passion and laissez-faire become a militant creed.
And despite the warning from numerous pens that the "allowances" under the Poor Law should be reduced over a period of decades, the newly victorious middle class of 1832 abolished "outdoor relief" in one fell swoop.

Likewise in money: it was not until after the crash of 1825 and its "enormous number of financial casualties" that the "automatic steering mechanism of the gold standard" become holy writ. In fact, economic liberalism needed all three legs of its stool, a free market in labor, in land, and a rigid gold standard.
The expansion of the market system in the nineteenth century was synonymous with the simultaneous spreading of free trade, competitive labor market, and gold standard; they belonged together. 
And here Polanyi makes an unusual argument. Economic liberalism did not do away with intervention in the economy. On the contrary, it required an "enormous increase in the administrative functions of the state."
The road to the free market was opened and kept open by an enormous increase in continuous, centrally organized and controlled interventionism... [It] was a most complicated affair.
On the other hand, Polanyi writes, the reaction to laissez-faire was unplanned and spontaneous. The Liberal A.V. Dicey looked into the origins of "anti-lassez-faire" and "collectivism" in public opinion.
He was surprised to find that no evidence of the existence of such a trend could be traced save the acts of legislation themselves... The legislative spearhead of the countermovement against a self-regulating market as it developed in the half century following 1860 turned out to be spontaneous, undirected by opinion, and actuated by a purely pragmatic spirit.
The epigones of laissez-faire, "Spencer and Sumner, Mises and Lippmann", do not dispute this. They just say that "protectionism was a mistake due to impatience, greed, and shortsightedness." But they are blind. Our age will see "the end of the self-regulating market." From the heights of its fame in the 1920s to its depths in the 1930s to its defeat in the 1940s, economic liberalism is over.

It was the "weaknesses and perils inherent in a self-regulating market" that called forth the spontaneous and practical movement of self-protection. He cites four main supports for his argument. First, there were numerous areas in which action was taken having nothing to do with collectivism, from water analysis to inspections to child labor to vaccinations. Second, legislation such as workmen's compensation acts make an employer as responsible for damage to his workers as to his customers. How collectivist is that? Thirdly, all governments did it, from Victorian England to Bismarck's Prussia. Fourthly, "liberals themselves advocated restrictions on the freedom of contract and on laissez-faire" in a number of instances.

The facts are clear. The movement of self-protection was natural and spontaneous. Its truth is emphasized by the similarities between the Marxist theory of the 19th century and the liberal theory. While economic liberals argue that protectionism was the result of "sinister interests of agrarians, manufacturers, and trade unionists," the Marxists argue that "protectionism was the result of class action... [serving] the economic interests of the members of the classes involved." No difference.

But these class arguments put the cart before the horse. Of course sectional interests battle for advantage, but "the ultimate cause is set by external forces... The 'challenge' is to society as a whole; the 'response' comes through groups, sections, and classes." Of course economic matters are important, but they are not as important as purely social matters such as "standing and rank... status and security."

For sure, the development of machine production meant that "trading classes" came to the fore. But it was also natural for the landed and working classes to act in defense of the "social fabric." And in an emergency -- in the frequent panics and crashes -- the landed classes looked to a return to martial virtues and the workers to "a cooperative commonwealth of labor."

Some economic historians are now arguing that the Industrial Revolution was not as bad as advertised. After all, were not the workers better off afterwards? But this misses the fact that great changes always involve cultural catastrophes. The Industrial Revolution transformed in half a century the rural "settled folk" of England into "shiftless migrants", their ancient way of life destroyed. We see this happening now across the world, from the disaster of the village community in India in the late 19th century to the injection of the market economy into Africa.
The competitive labor market hit the bearer of labor power, namely, man. International free trade was primarily a threat to the largest industry dependent upon nature, namely, agriculture. The gold standard imperiled productive organizations depending for their functioning on the relative movement of prices.
It is hardly surprising that people rose up to protect themselves from this utopian scheme.

In the next installment, Polanyi looks at the specificities of the movement to resist the process of the commodification of labor into the labor market, and land into private ownership.

Tuesday, October 27, 2015

Karl Polanyi: The Market Economy Means Annihilation of Land and People

The Austrian Karl Polanyi wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement.

In "Great Depression Failure of the English System" Polanyi explains why the the "self-regulated market" and the gold standard failed in the years after World War I.

In "History of Exchange Prior to the Modern Market" Polanyi tells us that humans in the pre-market world lived perfectly happily without markets for everything.

In "The Self Regulating Market and Its Fictions" Polanyi talks about the commodification of labor, land, and money as "fictions."

In "Speenhamland and the Poor Law" Polanyi looked at how that the Speenhamland welfare law lowered wages in Napoleonic era England.

Then, with Speenhamland having demoralized the workers of England, along came the full-on commodification of labor in the national labor market, in "The Social Crisis of Poverty and Commodity Labor."

We now turn to Polanyi's "Part II. Self-Protection of Society," in which he develops the idea that the anti-capitalist politics and legislation of the later 19th century was "more than the usual defensive behavior of a society faced with change."

The growth of the market economy meant that, by 1914, "a new way of life" had spread across the world, like any religion. But this was a way of life solely "on a purely material level." It was a "dislocation which attacked the very fabric of society[.]"
Robert Owen's was a true insight: market economy if left to evolve according to its own laws would create great and permanent evils.
"Production is interaction of man and nature" and the market economy requires that labor and land be commodified, for sale, with labor for sale at a "price called wages" and land "at a price called rent".
Capital invested in various combinations of labor and land could thus flow from one branch of production to another, as was required for an automatic levelling of earnings in the various branches.

But while production could theoretically be organized in this way, the commodity fiction disregarded the fact that leaving the fate of soil and people to the market would be tantamount to annihilating them. 
For Polanyi, the self-protective politics of interventionism arose to stop this annihilation. And, of course, an enterprise could be annihilated not just by a "fall in costs" elsewhere in the economy but by "monetary" factors.

Thus factory legislation was "required to protect industrial man" from the "commodity fiction [of] labor power", "land laws and agrarian tariffs" were needed to protect land from the commodity fiction of land rent, and "central banking and the management of the monetary system" were needed to protect from the "commodity fiction as applied to money."

So we have a "double movement" that had a class basis. The trading classes believed in economic liberalism and a "self-regulating market" and free trade. The "working and the landed classes" believed in "protective legislation, restrictive associations... and intervention" to push back against the market. But the trading classes could not see the damage they were causing, in "exploitation... of the worker, the destruction of family life," etc., that "did not affect profits."

It all ended up with the various interests using political and economic means as weapons in their sectional struggles, and that led, after World War I, to the fascist crisis that sent Karl Polanyi into exile.

Obviously, the driving force behind the push for the market economy was "the liberal creed" and Polanyi devotes the next two chapters to this topic.

Monday, October 26, 2015

Karl Polanyi: The Social Crisis of Poverty and Commodity Labor

The Austrian Karl Polanyi wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement.

In "Great Depression Failure of the English System" Polanyi explains why the the "self-regulated market" and the gold standard failed in the years after World War I.

In "History of Exchange Prior to the Modern Market" Polanyi tells us that humans in the pre-market world lived perfectly happily without markets for everything.

In "The Self Regulating Market and Its Fictions" Polanyi talks about the commodification of labor, land, and money as "fictions."

In "Speenhamland and the Poor Law" Polanyi looked at how that the Speenhamland welfare law lowered wages in Napoleonic era England.

Now he sets the Speenhamland laws in context, between the era of labor regulated by the Elizabethan Poor Law and Statute of Artificers and the Poor Law Reform Act of 1834 that passed immediately after the middle class came to political power through the Reform Bill of 1832 and plunged the working poor into a full-scale labor market.

The Statute of Artificers was passed in 1563 and "enforced labor, seven years apprenticeship, and yearly wage assessment by public officials." After about a century its provisions became less rigorously enforced and the wage and apprenticeship clauses were repealed in 1813 and 1814.

The Poor Law covered the relief of all those -- unemployed, aged, infirm, and orphaned -- in a society where "there was a place for every Christian." Beggary and vagrancy were severely punished. But a further Act of Settlement and Removal was passed after 1660 to prevent the poor from moving around because the poor naturally moved to parishes with the best benefits. In 1795, as the Industrial Revolution was getting into gear, this "parish serfdom was abolished" and labor mobility restored. At the same time the Elizabethan "enforced labor" system was ended and replaced by a "right to live" under Speenhamland. On the one hand the government was setting up a national labor market; on the other hand it was destroying the labor market by subsidizing wages with "grants-in-aid of wages.

This all may seem clueless. That's because it was.
On the eve of the greatest industrial revolution in history, no signs and portents were forthcoming. Capitalism arrived unannounced. No-one had forecast the development of a machine industry; it came as a complete surprise.
Indeed, people were expecting "a permanent recession of foreign trade" just as the world lurched "toward a planetary economy." Instead, everyone was concerned about the rise of pauperism, and wondering where the poor came from and writers were found aplenty to come up with wacky ideas to explain everything.

Polanyi inclines towards Engels' theory of the "industrial reverse army" under which the slow increase of overall employment was masked by the sudden increases in unemployment caused by fluctuations in trade.

But nothing can hide the fact of brutal transformation. On the one hand, "Speenhamland was an unfailing instrument of popular demoralization...  an automaton for demolishing the standards on which any kind of society could be based", encouraging shirking and trapping the poor in the poorhouse. But then Speenhamland was repealed in 1834 in a sudden move that pitched the entire working class into the wage system "making nonsense of the legend of English gradualism... The memory of that brutal shock haunted for generations the British working class.
In 1834 industrial capitalism was ready to be started, and Poor Law Reform was ushered in. 
Speenhamland had protected the laborers against "the full force of the market mechanism" but had "eaten into the marrow of society." Yet reform led to a "denial of responsibility" by the well-to-do. "Unheard-of wealth" combined with "unheard-of poverty." Pro-market activists proclaimed that science showed how the world worked, and removed compassion and human solidarity "in the name of the greatest happiness of the greatest number."

"Human labor had to be made a commodity", and the reactionaries "tried in vain to resist." It was a blind rush into a "utopian market economy."

But where had the poor come from?
It was in the first part of the sixteenth century that the poor first appeared in England; they became conspicuous as individuals unattached to the manor, "or to any feudal superior"[.]
The poor were experienced at that time as a hostile army: hence the Poor Law. But by the 18th century the poor were "merely a burden on the rates" and writers were generally agreed that poverty came with increased trade: "pauperism and progress were inseparable."

Everyone had an idea about what to do about the unemployed poor. The Quakers proposed "Colleges of Industry" It was the first of numerous plans to make the poor profitable. Jeremy Bentham proposed using the poor to run machinery; his Panopticon was a way to run prisons on a cost-effective plan. Robert Owen revived the Quaker plan and called it Villages of Union.  Nothing seemed to work, and meanwhile the cost of the poor kept going up, from 400,000 pounds in 1696 to 8 million pounds in 1818.

Meanwhile men like Adam Smith were coming to think that they knew how the "economy" worked. On his system "Self-interest merely prompts us to do what, intrinsically, will also benefit others". On the other hand were those like Joseph Townsend who reckoned that "it is the quantity of food which regulates the number of the human species." Edmund Burke had a different concern. He saw a link between the security of white slave masters in the West Indies and the security of the better classes in England. All in all, the Smithian notion of self-interest could combine with Townsend's notion of the natural limit of population and the need for security and end up with a policy that farmed out the poor to factories where "'the more persistent and more minutely detailed authority of the employer' took the place of the government's and the parish's enforcement of work."

Whereas Adam Smith seemed to prophesy an overall increase in prosperity, the Townsend idea and the growing ranks of paupers helped popularize the iron law of wages  that explained why wages stayed at bare subsistence level. It was not till a century after Smith that it was "clearly realized that under a market system the factors of production shared in the product".

"One man alone" understood the "meaning of the ordeal" of the working man, writes Polanyi, and that man was Robert Owen. He rejected the "animalistic approach" of the iron law of wages. But he also rejected the individualism of Christianity, that made men "incapable of union though all eternity."
[Owen's] socialism, one might say, was based on a reform of human consciousness to be reached through the recognition of the reality of society.
Society was the reality, not the individual. And to Owen,
the general diffusion of manufactures... generates a new character in its inhabitants... on a principle quite unfavorable to individual and general happiness [and] it will produce the most lamentable and permanent evils, unless its tendency be counteracted by legislative interference and direction.
Polanyi now proceeds to the discussion of this tug of war, between the market economy and legislative intervention, in "Part II. Self-Protection of Society."  It is the next exciting installment in this review. 

Friday, October 23, 2015

Karl Polanyi: Speenhamland and the Poor Law

The Austrian Karl Polanyi wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement.

In "Great Depression Failure of the English System" Polanyi explains why the the "self-regulated market" and the gold standard failed in the years after World War I.

In "History of Exchange Prior to the Modern Market" Polanyi tells us that humans in the pre-market world lived perfectly happily without markets for everything.

In "The Self Regulating Market and Its Fictions" Polanyi talks about the commodification of labor, land, and money as "fictions."

Now Karl Polanyi takes up the question of the English Poor Law, that was enacted at the end of the Elizabethan era in response to the first wave of enclosures at the beginning of the agricultural revolution, and was notably expanded in 1795 by the so-called Speenhamland Law. This law (actually a set of protocols agreed to at a meeting of rural justices) set up an allowance system indexed to the price of bread to guarantee the poor a minimum standard of living. But one result was to lower wage rates into the cellar.

In Polanyi's view the market economy demands that everything have its market price, including labor, and this is a bad thing because it subordinates society to the economy. But if Britain was going to have a market economy it had to have a market in labor. Speenhamland delayed the creation of a labor market in Britain until the support of the poor under the Poor Law was destroyed by the Poor Law reform of 1834, and the workers were probably worse off under Speenhamland than they would have been if there had been no Poor Law.
[T]he absence of a market for labor [proved] a greater evil even to the common people themselves than the calamities that were to accompany its introduction. In the end the free labor market, in spite of the inhuman methods employed in creating it, proved financially beneficial to all concerned.
But the benefits of the market system "could not make up for the social destruction wrought by" the labor market, leading to regulation to protect labor, such as trade unions and factory laws, that "ultimately destroyed the [market] system."

All in all it was a rough time to be poor. Speenhamland was designed "to prevent the proletarianization of the common people", but instead it pauperized them. Then the Poor Law Reform of 1834 suddenly removed support for the poor, and many "of the most needy poor... were left to their fate." But the effect of plunging the working poor into the labor market was the worst, tossing working people from an admittedly threadbare community into an unfeeling market mechanism.

The crisis of community caused by the sudden creation of the labor market led to the discovery of "society," starting with political economy, and for Polanyi, it was only Robert Owen that understood that "human possibilities were limited, not by the laws of the market, but by those of society itself".

Should the rulers have seen all this coming? Not really, because in the next exciting installment we shall see that nobody had a clue about what was happening and what was coming -- this during the greatest social revolution of all time! But they were not short of proposals to deal with the crisis.

Thursday, October 22, 2015

Karl Polanyi: The Self-Regulating Market and Its Fictions

Karl Polanyi, a native of Austria, wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement.

In "Great Depression Failure of the English System" Polanyi explains why the the "self-regulated market" and the gold standard failed in the years after World War I.

In "History of Exchange Prior to the Modern Market" Polanyi tells us that humans in the pre-market world lived perfectly happily without markets for everything.

For Polanyi, a market system is ruled by three "fictitious" commodities, labor, land, and money. And above all prices. The supposed self-regulation depends upon prices. It assumes that supply will equal demand at the market price; it assumes the presence of money; it assumes that production and distribution will be controlled by prices. In other words "everything is for sale on the market" and "all incomes derive from such sales."

If everything is bought and sold at a price then everything, including labor, and, and money, are treated as commodities, completely different from the pre-industrial era when they were not commodities but rather "part of the social organization itself," In the feudal order, land was a military, political thing, removed from buying and selling. So also was labor in the guild system run according to custom and rule of the town. Things were no different in the mercantilist era: all interests, whether crown or town or noble, oppposed "commercializing labor and land". Then came the birth of the self-regulating market and a complete upset of old relationships, in particular the "separation of society into an economic and a political sphere." This was new.

The separation of economy and politics means a subordination of society to the economy, for labor and land are human beings. Now they were to be subordinated to the market system as commodities. But labor is not a commodity; it is an "activity that goes with life itself". Land is just "another name for nature". Money comes into being through "banking or state finance." These commodities are "entirely fictitious."

And yet it is on this fiction that the entire market economy is based, a "postulate that cannot be upheld." It would mean the "demolition of society." You cannot just shove around humans as commodity "labor power". Nature as commodity would be destroyed, human settlements defiled and rivers polluted. Shortages and surfeits of money are just as band as "floods and droughts." Society must be protected against this "satanic mill."

Why then did this inhuman system and its reduction of labor, land, and money to fictitious commodities arise? It was the complications introduced into the economy by the factory system. If the factory system was to work, everything "had to be on sale" and thus society had to be subordinated to the market.

It was natural for the fictitious commodities to rise up and object to their commoditization.
Social history in the nineteenth century was thus the result of a double movement: the extension of the market in respect to genuine commodities was accompanied by its restriction in respect to fictitious ones... Society protected itself against the perils inherent in a self-regulating market system[.]
Next up is the history of society's great effort to resist its commodification: the English Speenhamland Law.

Wednesday, October 21, 2015

Karl Polanyi: History of Exchange Prior to the Modern Market

Karl Polanyi, a native of Austria, wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement.

In "Great Depression Failure of the English System" Polanyi explains why the the "self-regulated market" and the gold standard failed in the years after World War I.

But how did the English ideological system of liberal government, self-regulating markets and the gold standard get started? And why did it achieve astonishing improvements in the "tools of production" while causing "catastrophic dislocation in the lives of the common people?" In other words, was it the "satanic mills... new physical conditions... new economic dependencies" and how did the "old social tissue" get destroyed?

Polanyi answers the question immediately.
Fired by an emotional faith in spontaneity, the common-sense attitude toward change was discarded in favor of a mystical readiness to accept the social consequences of economic improvement, whatever they might be.
So Polanyi sets the stage for understanding the modern economy by looking at markets prior to the modern age. But first he must make the history of the enclosure movement that began in Tudor England look like a walk in the park compared to the grueling forced march of the industrial revoluion

Discovering the profits obtainable from enclosing the common land and converting it to pasture or intensive tillage the owners of land started at the end of the 15th century to run the common people off the land and turn them into thieves and vagabonds.  There were efforts to mitigate the rate or reverse the rate of enclosures, but nothing changed the basic trend, leading many to argue that it was useless to oppose it. But this misses the point. Government has a role to play in "altering the rate of change." But for the policy of "Tudor and early Stuart statesmen, the rate of progress might have been ruinous". Things were different in the Industrial Revolution. Here there was no brake upon change, and the resulting social dislocation was far worse.

The point is that suddenly, in a matter of years, all human activity came under the control of markets, an economy directed by prices, with the consequent "gain and profit [that] never before played an important role in human economy." Viewing the new economy Adam Smith and others proposed that "truck, barter and exchange" was a natural human thing. But Polanyi argues that exchange was a minor factor in human life prior to the industrial revolution. Change, when it came, flowed more through "statecraft, literature, and the arts". Polanyi backs this up with a long disquisition into anthropology and scholarly investigations into hunter-gatherer and agricultural societies. Society was organized on the basis of "reciprocity or redistribution or householding" or some combination. "Custom and law, magic and religion" induced individual cooperation, not "gain."  True, markets became important in the 16th century but there was no "control of markets over society" that came suddenly in the 19th century.

What was this new market culture, and where did it come from? It came, initially, from long-distance, "external" trade that began more in the nature of "adventure, exploration, hunting, piracy, and war than of barter." The local economy was little affected. But still, the purpose and operation of both external and local trade were complementary, the reciprocal exchange of unlike goods. But there is a third type of trade, "internal" trade, and it is different from the other two, because it is competitive, it occurs in markets where "similar goods... are offered in competition with one another." Prior to the modern era governments were pretty careful to separate local and external trade and to limit the scope of internal trade. They wanted to avoid ruinous competition. Under mercantilism, just before the 19th century,
The economic system was submerged in general social relations; markets were merely an accessory feature of an institutional setting controlled and regulated more than ever by social authority.
The stage is now set for the entry of full-blown exchange and the reduction of social relations to commodity relations in the next exciting episode.

Tuesday, October 20, 2015

Karl Polanyi: Great Depression Failure of the English System

Karl Polanyi, a native of Austria, wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement that ruthlessly imposed its will on Europe in the mid 19th century.
Now Polanyi explains why the English System failed in the years after World War I.

In the first place, it had already failed, but nobody understood that, so world leaders through national and international institutions tried fruitlessly to restore the gold standard in the post-war period but utterly failed in a chaos of inflations and "flights of capital." "An almost unbroken series of currency crises" buffeted the various countries in Europe and the Americas until "the United States itself was engulfed by the effects of the premature stabilization of European currencies."

Ths was all because of a profound belief in the gold standard. Everyone agreed on the centrality of money, from Marx to Ricardo, from Mises to Trotsky, but the effort to return to gold (and thus, the hope to return to pre-war stability) broke the weaker nations and then the stronger, with the US providing "support to the pound sterling in 1927". Then came the crash and with the US going off gold in 1933 "the last vestige of the traditional world economy vanished." And why? Because the efforts to preserve currencies drove countries "into an autarchized economy." The effort to return to gold standard parity and full participation in the world economy could only be done by separating a national economy from the world. And the effort destroyed the old world economy.

"The snapping of the golden thread was the signal for world revolution." The failure of the world economy and its gold standard also encompassed the destruction of many 19th century national institutions and the replacement of many liberal states with totalitarian dictatorships. And many of the new states instinctively knew how to exploit the weaknesses of the old order and hasten its destruction.

What was the factor that underlaid the collapse of the balance-of-power, the gold standard, the liberal state. It comes down to the notion of the "self-regulating market." For never before in history had society been built upon economic foundations. Never before had "gain" been "raised to the level of a justification of action and behavior in everyday life".
The mechanism which the motive of gain set in motion was comparable in effectiveness only to the most violent outbursts of religious fervor in history. Within a generation the whole human world was subjected to its undiluted influence.
And then it all broke down, most especially in Germany, Italy and Austria. But the place to look for "the long-run factors which wrecked that civilization should be studied in the birthplace of the Industrial Revolution, England."

And that is the next exciting installment in this series.

Monday, October 19, 2015

Karl Polanyi: Capitalism as a Utopian Movement

Karl Polanyi, a native of Austria, wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US. He argued that capitalism was an ideological movement that ruthlessly imposed its will on Europe in the mid 19th century. On his view the reaction against capitalism in the late 19th century was a natural movement of "social protection" against the scouring tide of the supposed "self-regulating market." Today the paperback features a Foreword by the center-left economist Joseph E. Stiglitz who argues that:
His arguments -- and his concerns -- are consonant with the rioters and marchers who took to the streets in Seattle and Prague in 1999 and 2000 to oppose the international financial institutions.
So Polanyi stands in the great tradition inaugurated by Marx that capitalism and free markets are a murrain on a truly social society.

Polanyi begins with an appreciation of the Hundred Years Peace in the 19th century.
Nineteenth century civilization rested on four institutions. The first was the balance-of power system... The second was the international gold standard... The third was the self-regulating market which produced an unheard-of material welfare. The fourth was the liberal state.
The center of this was the "self-regulating market." The other institutions were really supporting players.
Our thesis is that the idea of a self-adjusting market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society; it would have physically destroyed man and transformed his surrounds into a wilderness. Inevitably, society took measures to protect itself, but whatever measures it took impaired the self-regulation of the market, disorganized industrial life, and thus endangered society in yet another way.  
 To Polanyi, the cataclysm of two world wars mark the end of "the idea of a self-regulating market system... it closes a distinct stage in the history of industrial civilization." But the fundamental fact of the Hundred Years Peace from 1815 to 1914 was an "acute peace interest." "The backwash of the French Revolution reinforced the rising tide of the Industrial Revolution in establishing peaceful business as a universal interest." Initially the peace interest was maintained by the old reactionaries like Metternich and his Holy Alliance. Later it was regulated by the Concert of Europe and that shadowy institution, "haute finance". Although the bankers then and now try to keep "in" with government and power, war disrupts their carefully laid plans, and so while bankers aren't exactly pacifists they have a solid interest in "peace, if it was possible to attain it without [excessive] sacrifice."

But then it all fell apart when Britain and France and Russia formed the Triple Alliance, and Europe was reduced to "two hostile power groupings" in the fateful years that led to World War I.

What was the "true nature of the highly artificial economic organization on which peace rested"? Stay tuned for the next exciting installment of Karl Polanyi's Great Transformation.

Friday, October 16, 2015

The Failure of the "Real" Obama Doctrine Is America's Opportunity

One thing seems clear about Barack Obama. He lied.

He lied in his 2004 convention speech waffle about red states and blue states. He lied about being a racial healer. And he lied about foreign policy. The Obama doctrine was not merely to correct the Bush errors and ease back from a forward policy in the Middle East; it was much more. Richard Fernandez peels back the layers.
Obama was not out to merely repudiate Bush, but to deliberately undo Ronald Reagan, indeed dismantle the entire postwar edifice from Harry Truman onward. He had a vision of restoring the world to its paradisal state before Western meddling: “to create the international coalition and atmosphere in which people across sectarian lines are willing to compromise and are willing to work together in order to provide the next generation a fighting chance for a better future.” 
 You can see that this is the real foreign policy of every Democrat since Gene McCarthy in 1968. It is inspired by the Lenin accusation of "imperialism" and the subsequent leftist agenda of "anti-colonialism." On this view the last 500 years have been a ghastly western rape of the world. Karl Polanyi in The Great Transformation makes the point better than most. It all comes down to the establishment of a labor market rather than traditional work outside the market system.
To separate labor from other activities of life and to subject it to the laws of the market was to annihilate all organic forms of existence... [as] is conspicuously apparent in colonial regions today. The natives are to be forced to make a living by selling their labor.
On this view the Western adventurers and capitalists of the last 500 years marched across the globe to annihilate old forms of life and make everything subordinate to the market. And this was wrong.

The problem is, as Marx puts it, that the "need of a constantly expanding market for its products chases the bourgeoisie over the entire surface of the globe." It was not mere greed and ambition of individual adventurers that conquered the world, but the internal logic of the market system.

The left lives on the hope of stuffing the market system back into the bottle of expert knowledge and administrative system. But its efforts have consistently failed, for an obvious reason. The market revolution of the last 500 years is an order of magnitude bigger than the petty manipulations of thinkers, politicians and bureaucrats. You may not like it, but the market system is here to stay.

And now we can see what the blundering Bush was saving us from. Under seven years of Obama's foreign policy the Middle East has blown up into a gigantic human tragedy as petty tyrants and piratical brigands turn the whole region into a riot of loot and plunder, forcing millions to abandon the land of their fathers. Not surprisingly, they have attempted to move to the peaceful lands of Europe.

Only, of course, the Europeans fear that the migrants will bring war and mayhem to their peaceful land, and are right now in the middle of sending the migrants back where they came from.

"Everybody" is now citing the exchange between Mitt Romney and Barack Obama in the 2012 presidential debates, where Romney fingered Vladimir Putin as our new adversary.
The 1980s are now calling to ask for their foreign policy back,” [Obama] jeered, “because the Cold War’s been over for 20 years.”
In fact, of course, the 1980s are back, and more. And Vladimir Putin is taking advantage of the "Real" Obama Doctrine to restore a flicker of the past glories of Mother Russia.

Let us return to Karl Polanyi. The unspoken point of his book is that, whenever and wherever it appears, the market revolution is an ideological force that  attempts to totally transform society at a brutal cost in human misery as it lashes the masses to the mast of the market economy.

It is true. First the Brits had their society turned upside down by the agricultural revolution that began a centuries-long transformation of the food economy from a world of self-feeding agriculturalists to wage workers that got food from the store. Then the revolution spread to Europe and went global when the North American plains got connected to the world with railroads and steamships and starved peasants all over the world with their cheap wheat and corn. The 20th century saw the revolution spread to India and China. They resisted for a while with socialism in India and communism in China, but by 2000 both had capitulated to the revolution.

Now the market revolution is spreading to the backward areas of the world: the Middle East and Africa. I suppose it doesn't really matter whether we have Bumbling Bush or Oafish Obama in charge. The revolution, like any revolution, will be a human tragedy and hundreds of millions will have their lives disrupted and suffer humiliating misery.

The market, it must be admitted, is a terrifying task-master. If it does not leave welts from the cowskin whip on the backs of the people, it certainly requires utter submission to its rule.

The problem for conservatives like me is that progressives like Obama are making things worse, by encouraging them to resist the market economy with promises of safe spaces from the macroaggressions of the marketplace. There is no substitute for the market economy, because there is nothing that can replicate the record of the Great Enrichment that has increased per-capita income in the market lands by 3000 percent in 200 years. The policy of the left, that leads people into liberal plantations and neo-serfdom, is a cruel hoax and a lie.

The Good Thing about the Obama years is that the monstrous failures, both at home and abroad, will by January 2017 have demoralized liberals enough to have cleared the decks for action. It will permit the development of a new global strategy for US foreign policy and a new agenda of market-based reform in domestic policy.

So the failure of the "Real" Obama Doctrine really just creates an opportunity for America.

Thursday, October 15, 2015

5 Reasons Why I'm Sick and Tired of Clinton's Emails

They say that the best moment of the recent Democratic Presidential Debate on the Clinton News Network was Bernie Sanders' comment that "the American people are sick and tire of hearing about your damn emails." He was talking about Hillary Clinton's emails.

Me too, Bernie. Let me count the ways.

Reason #1: Judgement. What kind of idiot would conduct business as Secretary of State using a home-brew email server? It doesn't matter that Secretary Clinton might know nothing about email and hacking. That's why government officials are loaded down with advisers.

Reason #2: She Broke the Rules. The whole point of a government of laws, not of men, is that we all follow the rules. Clinton didn't.

Reason $3: It Sets a Bad Example. There are lots of comments from former military telling about how they get severely reprimanded for even leaving a flash drive around. Really, people like Clinton should be held to a higher standard than the little people. In the army the subaltern officer is supposed to make sure that his men have been bedded down for the night before he looks to his own comforts.

Reason #4: People Go to Jail for This. The reason for big people to obey the law is that little people go to jail for violations of government secrecy laws.

Reason #5: It Sends the Wrong Message. The Democrats' big problem is that people think they don't care about US National Security. Taking a casual attitude towards the security of high government official communications shows that you don't care about America and you don't care about its national security.

I could go on and on. But you get the point. No wonder Bernie Sanders and the cheering Dems at the debate want this to go away. It is the kind of mini-issue, like the House Bank Scandal of the early 1990s that symbolizes elite condescension and special privileges.

And of course given that we now have tens of thousands of laws, all with frightful penalties, and just about every government agency has its own SWAT team, it's about time that high government officials started to take note.

I'd say that the only thing for Hillary Clinton is to go into a nunnery. That's what they used to do with high-status women who had been a bit naughty, and I don't see why we should change not.

Get Thee to a Nunnery, Mrs. Clinton, and be quick about it.

Wednesday, October 14, 2015

The Appeal of Polanyi's "Double Movement"

In his The Great Transformation Karl Polanyi wants to argue that the movement in the mid 19th century that established laissez-faire capitalism was an ideological movement that, in the last three decades of the century, was pushed back by a natural and undirected movement of "social protection." He calls this the "double movement."
The one was the principle of economic liberalism, aiming at the establishment of a self-regulating market, relying on the support of the trading classes, and using largely laissez-faire and free trade as its methods; the other was the principle of social protection aiming at the conservation of man and nature as well as productive organization, relying on the varying support of those most immediately affected by the deleterious action of the market... using protective legislation, restrictive associations, and other instruments of intervention as its methods.
But while economic liberalism was a self-conscious movement, if you look at the protective legislation of the late 19th century, he argues, you do not see a "movement" pushing it. He proposes A.V. Dicey, who tried to find evidence of a "collectivist" movement in Britain in the 1860s.
The upshot of his penetrating inquiry was that there had been complete absence of any deliberate intention to extend the functions of the state, or to restrict the freedom of the individual, on the part of those who were directly responsible for the restrictive enactments of the 1870s and 1880s.
Laissez-faire, on Polanyi's account, was a great leap of faith, whereas the reaction to it was a natural desire on the part of many people, from landowners to workers, to protect themselves from the brutal forces that the "self-regulating" economy had unleashed on the world.

Although I don't like it, I have to agree that he has a point. The idea of demolishing all the traditional social structures, from the lord's protection of the peasantry to the guild's protection of craft workers, to the Poor Law subventions to paupers, and dissolving the traditional powers of the landed gentry, is a breathtaking and frightening thing. Of course people spontaneously rose up against it.

And Polanyi makes a serious argument that, when economic liberals argue that the protectionist workers didn't know their real interests, they are missing the point. If people don't want to live in the bracing air of the free market, they gotta right to do so. Not only that, but the laissez-faire economy was established by "intervention," the the conscious changing of the rules of trade and a move to establish labor for cash wages to replace the old rural system in which ordinary people produced for their own use rather than for others.

But what is his point? His point is fascism. To Polanyi the contentions between the trading class and the working class, this double movement, evolved into a sectional fight.
[C]ontending parties were making government and business, state and industry, respectively, their strongholds. Two vital functions of society -- the political and the economic -- were being used and abused as weapons in a struggle for sectional interests. It was out of such a perilous deadlock that in the twentieth century the fascist crisis sprung.
On his reading, the contending nationalisms leading up the World War I are a consequence of the rigidities of laissez-faire capitalism creating impossible strains on people and nations. And then the fascism of the post World War I era was a consequence of the nations trying to restore the gold standard and its attendant deflation on the backs of the workers and traders.

Polanyi is right. Economic liberalism is a mad and crazy leap of faith into the unknown. It is ridiculous, really, that anyone could have thought that people could produce and trade without the rigorous and watchful supervision of political force.  Only the amazing thing is that it works, every time it is tried. But it begins with a personal and fateful decision, in every participant, to submit to the decision of the market. Each of us has to make the fateful leap, to say that if the market says that my idea or my job, or my investment, or my industry, is toast, then toast it is. That is why you see, in the business start-up culture, cultural ideas that reckon failure just a rite of passage, which is better experienced sooner rather than later.

By the way, it is notable that the monotheistic religions also tend to feature submission. Islam means submission, and Christianity features the abandonment of rough, tough will to power and the submission to the love of God.

But there are tons of people, maybe most people, for whom the act of submission to the market makes no sense and never will. They may be people that want to get a job and keep it for life. They may be people that are naturally subordinate and cannot perceive any life except one attached to a powerful person that protects them from the other powers. They may be people with just the normal human "risk aversion," people that just want to avoid at all costs having to deal with a losing situation.

The problem with interventionist government is not that all intervention is bad. It is that there is no way to tell whether the proposed sweet use of force is going to improve things. This point is made by Richard A. Epstein in a review of Robert B. Reich's Saving Capitalism. It's all very well to propose a bunch of liberal policy proposals, but will they work?
There is a large point that comes out of Reich’s social agenda. Notwithstanding his long service in government, he seems to have no understanding of the enormous slip that takes place between an ambitious program for social reform and its successful implementation...

In all of these areas, I have come to the conclusion that the modern progressive state has wrought untold damage for two very simple reasons. First, it has no sense as to when government should intervene and when it should stay its hand. The regulation of competitive labor markets is almost always a loser, and the ever-heavy hand of government in this area does much to explain the decline in working class incomes.

Second, the government has no sense of which means work and which do not. If the risk is monopoly, control it with an antitrust law that is limited to monopoly. But don’t wreck competitive industries, and by all means don’t use government power to prop up monopolies, as in labor markets.
Polanyi makes an important point that many people in the 19th century rose up instinctively against the free market because it failed, or seemed to fail, to protect them. But it is one thing to propose a protective measure. It is another thing to propose a protective measure that actually works and does more good than harm.

Polanyi judges that the contending politics of the late 19th century and early 20th century set the stage for fascism. Maybe. But the problem is that most people instinctively go to the state for protection and the state has only one way to help: force. It does not do nudging and suggesting. The only thing it knows is force.

Does it really help the worker to nail up the workforce in a major corporation with a labor union? The record seems to be that the lack of flexibility that results from unionization means that the corporation is unable to get concessions out of its labor force when the economic weather turns cloudy. And that can, and often has, led to the failure of the corporation and all its jobs.

You could say that back in the 19th century nobody knew what would result from intervention and "social protection." So it was right to experiment and see what happened.

But the problem is that when some people apply to the government for protection then everyone starts to pile on. And what people want from government is protection from the tides of the economy. Theoretically it is possible that government can save us all from harm. Only it doesn't. It can't.

Also, many of the big economic dislocations were a consequence of war. When a government goes to war is always warps the credit system to supply its war needs. After the war there is always a period of adjustment in which ordinary people often get shafted. This was compounded up to World War I because governments tended to deflate to resume gold payments at the pre-war price.

In other words, the laissez-faire advocates were as stupid as everyone else. They were unwilling to recognize that, when the government commands resources to fight a war, it destroys value that can never be restored. Governments on the gold standard should not try to make creditors whole after a war with resumption at the old parity. Creditors must take a haircut to win the war just like everyone else. After all, a haircut is nothing compared with the haircut suffered by the young men that gave their limbs and lives to the victory.

The record is that modern government and its experts are as stupid and short sighted as the pre-modern governments before laissez-faire capitalism. They do things for reasons of state, or to win the next election. They pile up promises with debt and with unfunded promises of entitlements in the future. What happens when the music stops?

I will tell you what happens when the music stops. Fascism. Only we don't call it fascism these days because you can't have fascism when our so-called "progressives" and the center left do it.

Everybody knows that.

Tuesday, October 13, 2015

Why Government is Ruling-Class Conceit

I've been reading Karl Polanyi's The Great Transformation over the past few days. It's a book that amounts to an apology for the interventionist politics of today's center-left ruling class. Thus the anti "neoliberal" Joseph E. Stiglitz gets to write the new foreword.

Polanyi's basic argument is expressed by Fred Block in the Introduction:
The Great Transformation provides the most powerful critique yet produced of market liberalism -- the belief that both national societies and the global economy can and should be organized through self-regulating markets.
Capitalism, Polanyi argues, makes society an adjunct to the market; it makes society a bystander to the mechanical gratings of supply and demand. And that leads to unimaginable misery, such as pauperism and unemployment.

And that is where Polanyi gets into trouble. He has to explain the rise of pauperism in England starting at the end of the Elizabethan age all the way up to the rise of industrialism. He proposes that markets and pauperism -- or at least low wages in the countryside -- go together, as he recites the history of the Poor Law from the Elizabethan Statute of Artificers and its Poor Law down to the Speenhamland Law of 1795 and the eventual reform of the Poor Law in 1834. Fluctuations in trade create sudden unemployment while additions to trade and industry are gradual: thus Engels' "reserve army of the unemployed." Then the workers rebelled against the inhumanity of the market and demanded unions and wage-and-hour laws, etc.

But there is a simpler explanation for the growth of pauperism. The agricultural revolution that started roughly in the 16th century "hurled," in Marx's words, the useless feudal retainers off the land as landowners started to think more like businessmen than feudal lords. The people displaced by the agricultural revolution would have died except that the Poor Law kept them alive. The Poor Law could support the poor because the agricultural revolution provided enough wealth to have some left over to distribute to the poor. The more that trade and industry thrived the more money could be provided for the poor and the more people that could exist on welfare. Thus the reserve army of the unemployed grew and grew until the Industrial Revolution and the abrupt end of the old Poor Law in 1834 hurled the unemployed into the new factories and mines.

But all along the ruling class and obliging pamphleteers kept coming up with new ideas to "solve" the problem of pauperism. It is all distressingly familiar. There are always bright men proposing new schemes for the politicians to execute with the sweet use of force, and time after time the schemes turn out to be fatuous failures that succeed only in moving the pieces around on the chess-board of high politics.

But really, nobody has a clue what they are doing with regard to the poor, not then, not now. And that is why I say that Government is Injustice, the pompous conceit of a ruling class divided between "doing something" about some crisis and landing a blow on the opposition while rewarding one's own political supporters. The history of the Poor Law is one long string of disasters that has kept a significant proportion of the population demoralized and "on the dole" and out of work right up to the present moment. Today we have the "underclass" of men that don't work and women that don't marry; so what has changed? And all the time the pompous ruling class and their cringing sycophants have assured us of their nobility and compassion and the necessary success of their pompous schemes and programs that promise to "do something."

But what about the "self-regulating" market economy? Polanyi has a point, I think, that the enthusiasts for the market economy tend to overpraise it. The market is not "self-regulating" in the sense that it can avoid vicissitude. What is does do is signal changes in supply and demand to market actors. What it does do is force market actors to adapt early and often to their own failures of anticipation. What it does do is react sensibly and relentlessly when something goes wrong. It is half way to recovery before the politicians and their hangers on have got up on the morning of a disaster.

Nor can the market boss society around. Indeed the market economy requires a government enforcement mechanism and a culture that values peaceable acceptance of market decisions over the natural instinct to strike out and use force to cover up mistakes and embarrassments. An economy without society and without government enforcement is piracy and plunder. The law of supply and demand will still work, but everyone will ruthlessly cheat when the game goes against them.

OK. So we can see that the opponents of what they call "neoliberalism" are probably putting up a straw man to demolish. Let us push the straw man aside and think about what the proponents of "market liberalism" really propose.

We say first of all that society should be founded on the principle that we should reward people for fair dealing and serving other people before they go to grab their share. The definition of "fair dealing" is necessarily a cultural thing that is decided before people go into the exchange economy.

We say that the value of the market is that it signals information to market participants with a power and a timeliness that governments and experts cannot begin to match. We do not say that the market is infallible, just relentless.

We say that government and its laws can really help adjudicate when things go wrong, when a business fails and fingers are pointing and someone has to decide who takes the haircut. And government can help in a financial panic by acting as lender of last resort.

We say that the problems of want and unemployment can best be handled by mutual-aid societies where workers themselves help each other out. After all, the workers themselves are probably the best judge of who needs help and who needs a swift kick in the pants. And maybe government can help out when there is a real economic dislocation. Or maybe, even better, the rich and well-to-do people help out struggling mutual-aid societies with their own money rather than the government stepping in with other peoples' money.

We say that almost any system would be better than the current system of political lordlings and their academic hangers-on coming up with new ways to spend other peoples' money, rile people up with cries of justice, and not coincidentally reward their political supporters with free stuff.

Monday, October 12, 2015

Liberal Rubbish on Columbus Day

I get what liberals are about in their attack on Columbus Day. They want to taint the triumphant story of the Rise of the United States to world leadership. They want to replace the story of reciprocal justice and individual freedom with their own story of social justice and liberation and emancipation.

And of course the history of Euro-dominated America is a grubby and shameful story. And that's to say nothing of the Columbian Exchange, the extraordinary tale of the consequence of ocean travel between Europe and the Americas and also Asia and the Americas.

Did you know, for example, that corn and sweet potatoes traveled to China and were grown by the landless pengmin or "shack people" on hillsides all over China -- resulting in disastrous floods when the hillsides came down into the valleys and sent great floods down the Yellow River and the Yangtze River?

The point is that migration and war and colonization and disease is as human as homo sapiens and humans have always been pretty ruthless about it.

However, our modern era probably takes the biscuit when it comes to war and colonization. There is a movement of educated youth and "best men" that arose in Europe and North America in the 19th century that has brutally conducted a war of what J├╝rgen Habermas and others have termed "internal colonization" with the naked goal of destroying the culture of responsible individualism that flourished in Europe starting with the birth of the monotheistic religions three thousand years ago. The idea is to institute a regime of "creative individualism" in the stead of the responsible individualism that created Europe and capitalism and the Great Enrichment of the last 200 years. This culture of creative individualism will be led by the best and the educated, and you will like it or else.

Of course this movement of the best and the educated has provoked the most depraved and cruel political regimes in history, with a death toll in the hundreds of millions. It takes an educated man to think up really sordid cruelties.

You can say that working-class Columbus and his pals accidentally set in motion a huge demographic and flora/fauna tsunami by connecting Europe with the Americas. But the result of Columbus and the "discovery" of America was, as we say, mostly unanticipated consequence, pirates and merchants and adventurers stumbling and bumbling their way around the world.

But the progressive movement of the best and the educated has been a self-conscious semi-religious movement determined to save the world from its superstitions and its follies, or else.

We will see, courtesy of the best and the educated, more evils and more follies, and we will see more heaps of skulls as their poisonous conceits and delusions wreak more havoc across the world.

Perhaps it is time for the People of the Responsible Self to start trashing the favorite holiday of the progressives, May Day, as the very omphalos of death and destruction and the inspiration of the anti-human cult of Big Government and Totalitarian Injustice.

Friday, October 9, 2015

So the GOP's Just a Joke?

All the cognoscenti were sneering yesterday at the clown-car wreck in the House of Representatives. Apparently it's laughable, according to the president's spokesman, that the House GOP can't get its act together in electing a new Speaker.

As usual, it's the Democrats whose slip is showing. It reminds me of Nancy Pelosi's confidence back in 2009 that the Tea Party was an AstroTurf outfit. Of course it was, Nance, because in the Democratic Party, it would have been.Think Occupy Wall Street.

So the Democrats are sneering because a cock-up on the Speaker front could never happen in the Democratic Party. Exactly, because nothing moves in the Democratic House without Nancy Pelosi approving it. Well, she's such an amazing fundraiser. House members could never do without her.

Also, the Democratic Party lives to keep its various interest groups, from gentry liberals to #BlackLivesMatter, separate from the American mainstream and angried up. It doesn't work the same way on the Republican side.

As I see it, the Republican base is something of an embarrassment to the GOP leadership. And it is something that it doesn't control. Let's compare with gays on the Democratic side. Gays and Democratic leaders are in sync. They know what's on the agenda; they know what the sound bites are. They know what to say and what not to say. All stitched up.

But the GOP leadership is out of sync with the Republican base. I'm not quite sure why that is, but it may have something to do with the fact that the Republican base really doesn't want too much from government. It just wants to be left alone.

But what do you do with a base that just wants to be left alone? How does a politician deal with that? The answer is: not very well. The name of the game of politics is that the politician finds something that need the government to act: protecting America from the world; and then the politician reels in the supporters with promises of free stuff.

So the GOP leadership can't really order the rank and file around. And it can't angry them up with immigration and welfare because political correctness forbids such right-wing extremism. The result is chaos.

But it's a healthy kind of chaos. It's the people demanding that the politicians start paying attention to their concerns. And it's independent representatives breaking with the party leadership because they don't owe their political lives to the leadership, as apparently do Democratic representatives.

So if you ask me, the current confusion and disarray is a sign that democracy is happening in the Republican Party. The politics of the next year heading up to the 2016 election ain't gonna be pretty and it ain't gonna be smart. The only time it is pretty and smart is when it is completely in the hands of the professional imagemakers and completely separated from the people. As in, for example, 2008.

The problem with politics in America right now is that, for about a generation, the political system has been paying absolutely no attention to "typical Americans." It's all been about the marginalized, the minority, the special, the beautiful, the cool. So "typical Americans" are as mad as hell and they aren't going to take it any more.

The amazing thing is that "typical Americans" have put up with it for so long.

Thursday, October 8, 2015

Plouffe's "Stray Voltage". Maybe it only worked for Obama

Why does President Obama never let sleeping dogs lie? Why does he have to stir the pot over "gun violence?"

The simple answer is David Plouffe's "stray voltage" theory.
The theory goes like this: Controversy sparks attention, attention provokes conversation, and conversation embeds previously unknown or marginalized ideas in the public consciousness.
This theory also applies to Alinsky's Rules for Radicals. The idea is for the community organizer to keep his followers all angried up; it correlates with the need for army commanders to keep the morale up in their soldiers.

But. There is a counter-narrative, which says that while you may want to keep your followers angried up, you definitely don't want to angry up the opposition.

Now I think that the Obamis did a pretty good job of angrying up their supporters in 2008 and 2012. And they managed pretty well to demoralize the opposition. In 2008 they blamed President Bush for everything, and they had a point. In 2012 they painted the caring, exemplary Mitt Romney as a corporate monster that sent the wives of laid-off workers to their doom.

As I understand, the point of negative ads on TV is not so much to blacken the reputation of a candidate as to demoralize his supporters.

But let's be clear. Any time you are playing the angry-up game you are playing with fire. You could, unless you are smart and/or lucky, end up demoralizing your side and angrying up the opposition.

So when President Obama decides to "politicize" the Roseburg, Oregon, shooting, is he going to energize the liberal gun-control nuts or the NRA gun-rights nuts? You tell me.

Since we are talking about the nation's First Black President, let us talk about a slightly different issue, the rage that inner-city black males express when they are "dissed" or disrespected.

Now, as a libertarian conservative I'd say that the record of the Obama administration is one long "diss" to people like me. I'd say that the popularity of candidates like Trump, Carson, and Fiorina is that they are pushing back against the day-in-day-out disrepecting of ordinary middle-class white people that is baked in the pie of liberal politics.

I'd say that the mobilization of minorities and women and young people that the Obamis achieved in 2008 and 2012 just ain't gonna work no more in 2016. Because minorities and women and young people got screwed in the Obama years. Sure, the Dems can roll out the same angry-up techniques in 2016 but I have the feeling that they won't get the same voltage, stray or otherwise, they got back when Hope and Change was new, and President Bush was the worst president ever.

I believe in the old idea that it's OK to angry up the partisans at election time. But after the election the wise leader extends the hand of friendship to the defeated side and talks up the fact that we may disagree as Democrats and Republicans, but at heart we are all Americans.

I believe that the politician that doesn't do that is sowing the wind and that after he leaves the stage his party will find that it has reaped the whirlwind.

Wednesday, October 7, 2015

David Brooks Calls for Kinder, Gentler University

The job of David Brooks, and it is an important one, is to gently nudge the gentry liberal elite that reads the New York Times and watches PBS and gently suggest that liberals maybe could fix a few things at the office.

Now, in "The Big University," he blandly talks up a reform movement in university America.
[F]or the past many decades colleges narrowed down to focus on professional academic disciplines, but now there are a series of forces leading them to widen out so that they leave a mark on the full human being.
But, he continues, universities need to "find a way to talk about moral and spiritual things while respecting diversity." And he comes up with four ways to do this: "reveal moral options... foster transcendent experiences... teach new things to love... apply the humanities."

The problem is, of course, that in reality the universities are merely implementing mandatory study of their secular religion, as in the American Spectator's "Professor Raccoon Brings Home the Bacon." The Deans and the administrators know that critical thinking and "departments of ethnic, gender, identity, and grievance studies are suddenly no sale." But instead of Brooks' proposed high concept they are implementing "Engaged Scholarship and Learning."
 Curricula promise “collaborative and interdisciplinary solutions to local and global challenges” and “deep and transformative experiences.” They vow to promote civic responsibility, democratic values, and public leadership through personal involvement and growth.
What they are really doing is pouring the old wine of political correctness and liberal activism into new wineskins, as in conducting "research and activism related to the experiences of Latina housecleaners."

So you can see that Brooks' high-minded call for transcendence is already churning out more of the same-old-same-old liberal political activism.

Brooks begins his article noting that most universities were "founded as religious institutions, explicitly designed to cultivate their students’ spiritual and moral natures" and then branched out into "career training." But the truth is that the religion has been there all along. Only today the universities are teaching the secular religion of liberal activism, rather than the Christianity or Deism of their founders.

Brooks is a good guy, but the current university model cannot reform itself: big bureaucratic institutions seldom do. If you want moral options, transcendence and something to love you won't get it in any big institution.

Today's universities are the secular seminaries of the big government state. They are funded by the state and they serve the state. They are great big bureaucratic systems and system is domination. If you want moral options and transcendence and love then you are going to have to get away from system and disentangle yourself from bureaucracy.

The reality is that today's university is a very unfriendly place for anyone that treasures moral options and transcendence and it's not going to change any time soon. And it's going to get worse, if Professor Raccoon has anything to do with it.

Tuesday, October 6, 2015

Government's Job is To Protect

It goes without saying that the job of government is to protect us. But from what? Obviously from enemies foreign and domestic. But then what?

Should the government protect us from shooters like the young man that shot and killed young people at Umqua Community College in Roseburg, Oregon, last week.

Well, yes, of course. But what should the college actually do? Should it establish a secure perimeter and search everyone that comes through the perimeter? Should it have an armed corps of first responders ready to respond to a shooting incident? Should the government just take away everybody's guns?

You can see that, as soon as you dig down from pure generality to specifics that things get complicated. Because the simple fact is that government cannot "keep us safe." It cannot be everywhere all the time preparing for a one in a million chance that a perp will start shooting people.

And then there is the catchphrase that, when seconds count, the government is minutes away.

Government's job, to protect us from enemies foreign and domestic, is also government's game. If you are in politics almost every issue that you use to get elected comes down to protection. Here is a climate change activist from "Know Tomorrow" playing this game.
To face climate change it’s going to take all of us — a movement in which each and every one of us takes action to motivate our political and business leaders to protect our planet and our society. [my bold]
 And really, every liberal protest movement is an attempt to establish and enforce, by collective "action," some new danger from which political leaders should "protect" us.

We want government to protect us, with the minimum wage, from employers that don't pay their workers enough. We want government to protect us from greedy bankers and short-term corporate CEOs. We want government to protect us from racists, sexists, and homophobes. And we want government to protect the environment.

The thing about protection is that it easily turns into a protection racket, as in "nice little business you got here, pity if something should happen to it." It's not just criminal gangs that make that offer of protection. Governments do it all the time. So much so that St. Augustine asked, 1,500 years ago what was the difference between a government and a gang of robbers. His answer? The "addition of impunity."

And the thing that governments do, most thoroughly, is say that unless you pay the government, you don't work and you can't run a business and you can't hire people and you can't sell goods and services.

It's the old, old game. Who will protect us from the protectors? Quis custodiet ipsos

You tell me.