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.

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