Our Magic Money Tree: Fixing the Financial Crisis

•March 24, 2013 • 3 Comments


“There is no magic money tree.” — David Cameron, UK Prime Minister

Regular readers of this blog will be well aware that David Cameron is quite wrong here. In fact, creating money is as easy as the flick of a pen and the clattering of some computer keys. While the UK’s “magic money tree” is currently controlled by the private banking system, the UK government is quite capable of altering this situation. All it requires is the political will to act. Once the nature of our current monetary system is understood by the public and they are clamouring for action from their elected representatives, it is actually trifleingly easy to get out of this financial crisis and reduce people’s indebtedness. It just takes a little creative accounting. Part 2 of Positive Money’s new book Modernising Money, for instance, has some nice concrete suggestions for us.

The rest of  this article will go on to explain some simple ways to get out of the crisis without inflicting further painful sacrifices upon the UK population. My suggestions and commentary here are lifted directly from Prof. Richard Werner’s excellent book New Paradigm in Macroeconomics, which all concerned citizens should rush out to read!

Stimulating demand – three proposals

The problem we have during a recession is lack of effective demand caused by insufficient creation of credit by private banks (plenty of empirical evidence for this statement is provided in Prof. Werner’s book). With aggregate demand down, individual banks are reluctant to make new “loans” (i.e. create new credit) because they are worried about not turning a profit when indebted and/or unemployed consumers can’t afford new goods and services. If our government would like to “get the banks lending again”, how could it go about this? In chapter 18 of his book, Prof. Werner suggests three ways:

1:- The govenment (meaning, in our case, the Bank of England) can issue bonds (basically, government I.O.Us) and sell these to the private sector investors in exchange for funds to stimulate the economy.

2:- The government can borrow money directly from the private banking sector, by allowing private banks to “lend” directly to the Bank of England.

3:- The government can create new digital money debt free to invest in new infrastructure and stimulate demand.

The first option is the one currently being pursued by EU governments. According to Prof. Werner, it is the worst of all three options, because it both incurs debt to private investors and does not create new purchasing power – it merely transfers purchasing power from the private sector bond-buyers to the government, so net demand is not increased. This is called “crowding out” by economists – each pound of increased government  investment is only achieved via a £1 reduction in private sector purchasing power.

The second option has been suggested for the UK by Prof. Werner in a recent letter to the Financial Times. There would be no problem getting private banks to lend directly to the government, since the government is basically zero-risk as a borrower – governments cannot go bankrupt so long as taxpayers exist! Its key advantage over the first options is that new net purchasing power is created, rather than existing purchasing power being transferred from the private sector to the government. This is due to banks’ creation of  new money when they make a “loan” to the government. The disadvantage is that interest payments must be made to the private sector investors the government has gone into debt to (option 1 has the same problem, but is without option 2’s advantage of net credit creation).

The third option is the best of all, according to Prof. Werner, since like option 2 it creates new purchasing power to stimulate more demand, but unlike option 2 does not need to incur debt to private investors to do so. However, option 3 is not currently allowed by UK laws and so would require financial reforms such as those Positive Money is proposing to be passed by parliament.

In conclusion, for the meanwhile, option 2 is the most realistic and sensible stopgap measure. Think of it as “QE for the people.” What has been called QE thus far is actually the creation of additional central bank reserves – the money that banks use to make payments to each other and NOT the money businesses require for new investment and job creation. Prof. Werner (who actually coined the expression “quantitative easing” –  ryouteki kinyuu kanwa in Japanese) comments that:

“It is such a broad policy of broadly expanded credit creation [such as option 2] that should properly be referred to as ‘quantitative monetary easing’ in line with the traditional Bank of Japan nomenclature (ryouteki kinyuu kanwa). The policy adopted since March 2001 of increasing banks’ reserves with the central bank cannot properly be called that, since it does not increase the quantity of credit creation.”

Cleaning up the toxic mess – magicing away “bad debts”.

Another reason we are stuck in recession is the accumulation of “toxic assets” / “bad debts” on banks’ balance sheets in the aftermath of the sub-prime mortgage bubble bursting. These “bad debts” make it difficult for banks to expand their balance sheets and issue new “loans” (i.e. create additional purchasing power required to invest in business and job creation). What this means is that millions of people are being made to suffer because a fairly simple accounting problem is not being addressed – mostly because politicians and the public don’t understand the problem (and vested interests may not particularly want them to – for example, Prof. Werner gives several examples of obtuse statements from Bank of Japan officials that have mislead the public about what they were doing throughout the 80s and 90s. To cut a long story short, interest rate manipulations were little more than a cover story for what the bank was really doing – (mis)allocating credit. Interest rates don’t really matter, as Prof. Werner shows convincingly in chapter 6 of his book).

Prof. Werner suggests how the government can clean up the banks’ dirty balance sheets without costing taxpayers anything:

“For bank credit creation to rise, banks’ risk aversion needs to be reduced, which can be done by writing off the bad debts. To do so the banks require money. The question is therefore reduced to determining where this money should come from. A non-exhaustive list would be: the taxpayers / the government, the central bank and private investors. Concerning each sector, many different schemes are possible, each time hinging on the issue of just how much money is put up and what would be received in return. …

“Economists can, however, suggest the most efficient scheme from the viewpoint of the entire economy. This would be for the central bank, in fulfillment of its function, to solve the bad debt problem in the banking system at zero cost to society, namely by conducting a one-off purchase of all declared bad debts from the bank at the original book value. The banks’ balance sheets would be among the strongest in the world and they could begin to engage in their normal credit business again. Unlike a normal fiscal bank bailout [i.e. option 1] this would not burden the taxpayer and thus would also not crowd out the private sector. Moreover, it would be a ‘free lunch’, since there would be no cost to the economy. The central bank could simply keep these assets on its books at face value ad infinitum.” [my emphasis, in bold]

So basically, the Bank of England could just make up the money required to purchase the bad debts from private banks, at zero cost to society. The money it makes up would be accounted as a liability on the central banks’ balance sheet, to balance the accquired assets. But the central bank is actually “liable” to no-one – there is no social cost, as Prof. Werner explains in a later footnote:

“Central banks often argue that they should not expand their credit creation during times of crisis, as they would make a loss and/or their balance sheets would deteriorate. This argument has no merit for several reasons. First of all, even if central banks’ balance sheets were to deteriorate, there are no negative consequences. Loss of reputation cannot be an argument, since not adopting the right policies,as has occurred in the case of the Bank of Japan, would cause a more severe loss of reputation. Further, if central banks were not to engage in such transactions in times of crisis, when should they engage in such transactions? They certainly would not be necessary in times of financial boom. Most of all, the argument that central banks’ balance sheets and reputation would suffer is based on the assumption that the balance sheet of the central bank is of the same nature as the balance sheet of a private sector corporation or bank. However a central bank is special.

“Take the case of a central bank purchasing bad loans from banks at book value (say for £10 billion) although their market value is lower (say only £2 billion). It may superficially appear as if a loss of £8 billion is made. This would be true in the case of agents other than the central bank. The central bank, however, in this case will make a profit of (at least) £2 billion (since it creates money at zero cost and obtains something worth £2 billion with it). While it is possible to represent this transaction on the central banks’ balance sheet such that the false impression of a loss of £8 billion is created, there is no logically compelling reason to do so. The habit of treating note issuance as a liability is only a bookkeeping convention due  to the historical experience when cash was to be exchanged into gold on demand, and today does not imply that the central bank has any costs or actual liabilities when issuing new money.”

[Note: I took the liberty of changing Prof. Werner’s original example figures in yen for similar amounts in pounds sterling. Incidentally, in the reforms Positive Money proposes, new money created by the central bank is more sensibly accounted as an asset of the central bank, and not a liability to nobody for some non-existent gold!]

It is just a clever piece of accounting “magic” to fix an accounting problem. It is time to demand a bailout for the people along such lines. It is certainly possible and actually quite straightforward – assertions by Prime Ministers (or central bankers) to the contrary.

There is an alternative: making banking socially useful

We can (and arguable should) go further than simply getting out of this recession. The problem with our current financial system is not just that private banks are allowed to create money, largely unregulated. They are also allowed to allocate it. In the real world, as Prof. Werner explains at length in his book, information is imperfect and markets do not clear. In the real world, there is no magical, impersonal “free market” deciding things – rather, allocators decide things. In the credit market, demand for credit vastly exceeds supply (and is perhaps even infinite) and so the supply of credit is rationed by its allocators – the banks. New money is thus channeled into whatever activity is most profitable to private banks – certainly not the same as whatever is socially optimal.

But David Cameron is quite wrong to suggest that “there is no alternative” to the government’s present “hands off” banking policies. In the past, governments have been much more “hands on” with private banks – in Japan and Germany for instance (the worlds third and fourth largest economies, respectively) for decades quotas were set for the allocation of credit by private banks to different sectors of the economy. This sectoral allocation of credit is called “window guidance” (madoguchi shido in Japanese) and Prof. Werner concludes that its judicious use largely accounts for Japan’s post-WW2 “economic miracle”. China is currently pursuing a similar strategy, incidentally.

The empirical evidence suggests that under this “window guidance” system both economic growth and various social health metrics were significantly higher than for more “hands-off” banking systems such as the US and UK. There are also dangers however, pointed out by Prof. Werner in his book, if central banks become too “independent” and over-allocate credit to dubious sectors of the economy prone to asset inflation bubbles (as happened in Japan in the 1980s with its real estate bubble, caused by the Bank of Japan forcing banks to over-allocate credit to this sector, Prof. Werner concludes). Thus, it is very important that money creation and allocation to different sectors of the economy is made both transparent and accountable to the public through proper checks and balances upon central banks’ decisions.

I would argue that democracy is largely a sham if a handful of unelected central bank officials (or equally, “big five” CEOs) are able to “independently” make key economic decisions affecting the lives of millions of people. As anarchist Mikhail Bakunin wryly observed long ago of “democracies”: “When the people are being beaten with a stick, they are not much happier if it is called the People’s Stick”. As anarchist David Graeber, author of Debt: The First 5000 Years has argued much more recently in an interview with Steve Paulson:

“I think there’s a kind of democratic awakening happening.  It’s what’s happened in places like Spain and Greece and it’s spread to the U.S.  There’s this realization like, no, this isn’t true.  Money is just a promise.  It’s a social construct, it’s something we make up.  If banks can lend us money, it’s not because they have that money.  It’s because we, the people, have given them the right to make up money.  Well, if that is the situation, we have given them the right to make up money because we think it will help people have houses, it will help the economy grow.  The economy isn’t growing, people don’t have houses, something went wrong.  We can change that around because it really comes from us to begin with, so I think if democracy is to mean anything, it has to mean that everybody can weigh in on that process of deciding what kind of promises we make and what kind of promises we readjust when we have to do that.”

So, let’s demand the democratisation of money creation and allocation, loud and clear, in unison. It is our money, after all – when the banks get into difficulties, who rides to their rescue? That would be the government, meaning taxpayers, meaning all of us. So shouldn’t we all have a say in what our money is used for? How about schools, hospitals, jobs, poverty alleviation, public infra-structure investment, de-carbonising our economy and repairing the damage wrought to global ecosystems, for starters? Prof. Werner concludes his book with the proposal that citizens could vote on how their money is allocated. I’ll give him the last word:

“Once the facts of credit creation and its potential are more widely known, democratic processes can be used to decide upon the goals that should be achieved and the most suitable mechanism to achieve them. A clever use of institutional design and credit allocation will allow far more ambitious goals to be implemented than has thus far been the case. Not only recessions, boom-bust cycles and unemployment, but also poverty and destitution can in principle be eliminated.

“As an example, an improved form of macroeconomic management can thus take the following form: through democratic institutions society decides upon overall goals that the economy should fulfill. This may for instance be environmentally sustainable, stable economic growth which gives highest priority to quality of life of present and future generations. To achieve this goal, the democratically accountable credit control mechanism would openly discuss and decide upon a priority ranking for the issuance of  credit. Thus research into new environmentally friendly energy sources may be given priority, as well as the creation of green urban spaces and leisure areas. Credit would then be created to fund such research and investment in such projects. Meanwhile, purely wasteful or environmentally destructive types of activities or activities that affect the well-being of people negatively would not receive newly created purchasing power. The decisions would have to be made in the open and subject to debates and voting.”


The ethics of IOPS

•January 25, 2013 • 3 Comments


[This blog was also posted on the IOPS website, generating a quite extensive discussion. What is IOPS? Watch a short introductory video here].

“The most fatal error that ever happened in the world was the separation of political and ethical science” Percy Bysshe Shelley

I’ve been meaning to write this piece for some time and was in part spurred into doing it by something IOPS member Peter-Lach Newinsky wrote on the EARTH forums a while back:

“IOPS also has an ethics that motivates its core values and vision. That ethics (all ultimately ‘spiritual’ if you think about it) should be discussed and made more explicit, I reckon, because it’s what motivates all of us in the end.”

While there are quite a lot of specific commitments outlined on the mission and vision statements that new members check a box to say they agree with, like Peter I think that these more specific commitments ultimately derive from a more concise shared ethical foundation. If this ethical foundation were to be spelled out some more, it could perhaps broaden our appeal significantly without compromising on any of our commitments.

My own personal preference would be for  IOPS to think of itself as a broadly (but not shallowly!) focused libertarian socialist “umbrella” type organisation, with the potential to welcome, appeal to and unite many diverse activist groups struggling to make an impact within such an atomised society as ours (as well as many more people not currently engaged in activism at all) under a shared ethical framework (such as is outlined here, thought I hope other members will contribute their own suggestions). I worry that we have not so far been explicit enough here, and that perhaps non-members sharing our ethics will instead mistake us for yet another narrowly focused effort providing yet another set of inflexible solutions to social problems. You may disagree though, and that is fine – I am posting this in part to gauge the feelings of other IOPS members.

When new members first join IOPS they are asked to check a box saying that they agree to the IOPS organisational description. I think it is useful at this point to identify three broad tiers of IOPS organisational commitments:

1 –  ethical values: what fundamental value principles is IOPS based upon?

2 –  organisational principles: what “rules of thumb” then suggest themselves given the IOPS ethics?

3 –  institutions: what forms of organization could consistently incorporate these “rules of thumb”?

Our founding documents at the moment read as a a sort of “laundry list” of jumbled ethical values and organisational principles (and one or two suggested “institutions” e.g. workers and consumers councils). They do not really identify which of many statements are more foundational than others and which ethical values lead to which organisational principles. There is not much said about institutions or alternative political/economic/cultural/kinship models in the founding documents – this is left more to discussions amongst the members. This last point is as it should be, I think, but the other points could do with addressing.

So now I’d like to try and sketch out what an ethical basis for IOPS could constitute and which of our founding statements I see as more foundational than others. Nothing said here is intended to be definitive and I hope people will have their own take on IOPS ethics and discuss this in the comments. But I’ll take a stab at it anyway.

I said earlier that I see IOPS as a broad libertarian (or anti-authoritarian) organisation. What is meant by “freedom” though? John Stuart Mill in his famous essay On Liberty gave a definition I rather like:

“The only freedom which deserves the name is that of pursuing our own good, in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it.”

I contend that if we really think it through, we can derive more or less the entire IOPS founding documents from the implication of the above statement by Mill. Let me give examples from each of the different IOPS “spheres”:


Let’s first take the example of IOPS’ stance on property rights. Pro-capitalist “libertarians” confuse the issue (I think…) by identifying freedom as the freedom of a property owning elite to do whatever they wish with their property, regardless of its impacts upon the capacity of others to pursue their own good in their own way. They are ignoring Mill’s very important caveat about the effects of their freedoms upon others.  What about the IOPS position then? In our founding documents it is stated that:

“No individuals or groups own productive assets such as natural resources, factories, etc., so ownership doesn’t affect anyone’s decision making influence or share of income.”

I suggest that the above is an example of an organisational principle which follows on from a more foundational ethical principle – the idea that as a proto- libertarian socialist movement we strive towards a society characterised by greater aggregate freedom (as Mill defines it). As Noam Chomsky has pointed out in his book Profit over People:

“There are no rights of property, only rights to property that is, rights of persons with property. Perhaps I have a right to my car, but my car has no rights. The right to property also differs from others in that one person’s possession of property deprives another of that right: if I own my car, you do not; but in a just and free society, my freedom of speech would not limit yours.”

The individual may require a certain amount of non-productive personal property in order to pursue their own good in their own way, but when private property rights are extended to ownership of “productive assets” this can deprive many others of these same rights. We (IOPS) want to avoid this, so our economics is socialist – we reject the private ownership of productive assets. People’s self-actualisation is our aim, but beyond a certain base level this is not actually helped by material acquisition and may in fact be harmed by it, as Oscar Wilde has pointed out in The Soul of Man Under Socialism:

“For the recognition of private property has really harmed Individualism, and obscured it, by confusing a man with what he possesses. It has led Individualism entirely astray. It has made gain not growth its aim. So that man thought that the important thing was to have, and did not know that the important thing is to be. The true perfection of man lies not in what man has, but in what man is.

Private property has crushed true Individualism, and set up an Individualism that is false. It has debarred one part of the community [the poor] from being individual by starving them. It has debarred the other part of the community [the rich] from being individual by putting them on the wrong road [materialism], and encumbering them.”

I’d also argue that our principle of economic justice, that “there is no payment according to property, bargaining power, or the value of personal output” but rather there is payment for effort and sacrifice at socially valued work, should be seen as an additional founding ethical principle. To the extent that we wish to emphasise it as a membership condition it is an important ethical difference between IOPS members and, say, market socialists.


Similarly our political organizational principle of self-management – to “convey to all citizens a self managing say in legislative decisions proportionate to effects on them” is seen to result from people’s right to self-determination – “pursuing our own good in our own way”, because the individual is an end in him or herself and not a means to another’s ends – and the right to object when people “deprive others of theirs, or impede their efforts to obtain it” in proportion to the degree that this happens.

Likewise, an organisational principle like IOPS “seeks to incorporate seeds of the future in its present projects” (and our commitment to prefigurative politics in general) makes perfect sense for an organisation striving towards a free society, since as Bakunin (for example) argued, one does not expect to liberate a people by first enslaving them, since:

“All dictatorship has no objective other than self-perpetuation … slavery is all it can generate and instill in the people who suffer it. Freedom can be created only by freedom”


You can more or less “derive” our feminist kinship principles from Mill’s conception of individual freedom and self-determination – which of course should apply equally to women and men – as Mill himself went on to do, very radically for his time, with his essay The Subjugation of Women, which opens with the decleration that:

“The legal subordination of one sex to another — is wrong in itself, and now one of the chief hindrances to human improvement; and that it ought to be replaced by a system of perfect equality, admitting no power and privilege on the one side, nor disability on the other.”

And, of course, one can substitute the word “sex” above for the word “race”, “sexuality”, “religion”,  etc.


As an example of the cultural life IOPS ethics might imply, take the following from our vision statement:

“IOPS seeks a new cultural and commuinity system that ensures that people can have multiple cultural and social identities, including providing the space and resources necessary for people to positively express their identities, while recognizing as well that which identity is most important to any particular person at any particular time will depend on that person’s situation and assessments.”

Again, one could see that as applying the notion of “pursuing our own good in our own way” to the notion of being enabled to pusue the development of diverse cultural spaces within our society.  In today’s capitalist world the demand for such “public goods”  goes greatly under-supplied: markets merely minimise transaction costs for individual consumption, not collective consumption, and production for profit creates major biases towards both extensive waste (such as forms of “planned obsolescence” meaning essentially the same commodities are needlessly resold many times over, perhaps at great environmental cost) and harmful acts of psychological manipulation.

I would argue that there is nothing natural or inevitable about the domination of our public spaces by leering corporate billboards, or indeed the entire existence of a multi-billion dollar advertising “industry” which squanders the time and talents of many creative individuals upon acts of crass manipulation and deception. What if our public spaces weren’t sold to the highest bidder? What message would you deliver to the world with your own billboard – would it be something more worthy than: Mcdonalds is better than Burger King; Pepsi is better than Coke; nobody will like/respect you if you don’t buy commodity X; or anything similarly vile/ inane? What would a diverse public space created by its participants be like? What messages would it choose to share?


Here I think we can identify an additional foundational ethical principle as the idea that “We do not inherit the planet from our ancestors, we borrow it from our children” and so we ought to explicitly take into account their right to a future life not to be fatally compromised by any unwise decisions we might make today (whilst you might argue that Mill’s “others” could refer to unborn future generations this isn’t by any means obvious and probably ought to be spelled out explicitly given what is at stake). This idea is referred to in the founding documents as the precautionary principle and Robin Hahnel has recently given a very nice, concise discussion of it in his latest book Of the People, By the People (and also in Green Economics) :

“WHEREAS the natural environment provides valuable services both as the source of resources and as sinks to process wastes,

WHEREAS the regenerative capacity of different components of the natural environment and ecosystems contained therein are limited,

WHEREAS ecosystems are complex, contain self-reinforcing feedback dynamics that can accelerate their decline, and often have thresholds that are difficult to pinpoint,

WHEREAS passing important environmental thresholds can be irreversible,

WE, the present generation, now understand that while striving to meet our economic needs fairly, democratically and efficiently, we must not impair the ability of future generations to meet their particular needs and continue to progress.

IN PARTICULAR, WE, the present generation, understand that inter-generational equity requires leaving future generations conditions at least as favourable as those we enjoy. These conditions include what have been commonly called produced,human and natural capital, ecosystem sink services and technical knowledge.

SINCE the degree to which different kinds of capital and sink services can or cannot be substituted for one another is uncertain, and SINCE some changes are irreversible, WE, the present generation, also understand that inter-generational equity requires us to apply the precautionary principle with regard to what is an adequate for some favourable part of overall conditions that we allow to deteriorate.

THEREFORE, the burden of proof must lie with those among us who argue that a natural resource or sink service that we permit to deteriorate on our watch, is fully and adequately substituted for by some other component of the inheritance we bequeath our heirs.”


Finally, the notion that “we do not inherit the planet from our ancestors, we borrow it from our children” also has particular relevance to international relations, given the ongoing and perhaps escalating danger of nuclear war. We are still to answer the question that Albert Einstein and Bertrand Russel put to us in 1955:

“Shall we put an end to the human race; or shall mankind renounce war?”

Given that the United States (with the help of my country, I should add) has recently announced, via its invasion of Iraq, that without a credible nuclear deterrant you run the risk of being bombed back to the stone age, there is the very real danger of an escalating nuclear arms race in the Middle East and the above question being given the wrong answer. It isn’t just me worrying about this either – the late Robert McNamara (who of all people had some insight into the dangers of nuclear war!) was worried too, writing back in 2005 that :

“If the United States continues its current nuclear stance, over time, substantial proliferation of nuclear weapons will almost surely follow. Some, or all, of such nations as Egypt, Japan, Saudi Arabia, Syria, and Taiwan will very likely initiate nuclear weapons programs, increasing both the risk of use of the weapons and the diversion of weapons and fissile materials into the hands of rogue states or terrorists.”


So all in all we have three foundational “ethical values”: Mill’s notion of individual freedom and our right to self-actualization, the idea of planetary stewardship embodied in the ecological “precautionary principle” (as well as some notion of international/inter-generational equity/solidarity) and our notion of economic justice as remuneration for effort and sacrifice, not property or output. I’d see everything else in our founding documents as basically elaborations upon those three founding ethical principles. Necessary elaborations – I don’t mean to imply otherwise – I just think it’s nice to develop a sense of where our full body of commitments are coming from and useful for when we are trying to briefly explain the core of IOPS to somebody new. If you disagree with me, think I missed something important, or have a different notion of the ethics underlying IOPS, go ahead and say so in the comments below! Hopefully you’ll be able to go deeper than I have here.

I’d like to end by giving my more personal take on IOPS. What do I see as its ultimate aim? I’d say the point is to try and get closer to a world in which everyone is empowered develop their potentialities as human beings, where everyone is able to most fully realise their gifts, where each of is is able to become the best version of ourselves.

Taking this as the ultimate goal of an ideal society, I judge 21st century capitalism to be a fundamentally anti-human system, and would go as far as to call it an insult to human dignity. To me it seems that the extent to which we realise the best versions of ourselves is more in spite of this system than because of it. I refuse to believe that it is the pinnacle of humanity’s socio-economic development, as commentators like Francis Fukuyama have (in)famously implied. My refusal to accept that “all is for the best in the best of all possible worlds” is grounded in what Erich Fromm called faith in mankind:

“The faith in others has its culmination in the faith in mankind. In the western world this faith was expressed in religious term in the Judeo-Christian religion, and in secular language it has found its strongest expression in the progressive political and social ideas of the last 150 years. Like the faith in the child it is based on the idea that the potentialities of man are such that given the proper conditions they will be capable of building a social order governed by the principles of equality, justice and love. Man has not yet achieved the building of such an order, and therefore the conviction that he can requires faith. But like all rational faith this, too, is not wishful thinking but based upon the evidence of past achievements of the human race and on the inner experience of each individual, on his own experience of reason and love.”

The present social order is governed more by inequality, injustice and hate (or at least, by fear and greed, as Robin Hahnel likes to say of capitalism). Building a society governed by equality, justice and love where we each and all become the best versions of ourselves will require a great deal of productive striving to actualise, and it is my hope that IOPS will give some significant help here, once it is made clearer that this is what it seeks to do.

Money and Ecology

•December 23, 2012 • 1 Comment

“Debts are subject to the laws of mathematics rather than physics. Unlike wealth, which is subject to the laws of thermodynamics, debts do not rot with old age and are not consumed in the process of living. On the contrary, they grow at so much per cent per annum, by the well-known mathematical laws of simple and compound interest … It is this underlying confusion between wealth and debt which has made such a tragedy of the scientific era.”

–- Frederick Soddy, in Wealth, Virtual Wealth and Debt (1926).

What is debt and what is wealth? To a creditor, debts represent claims upon future wealth. While these claims can grow without limit, the payment of them is ultimately limited by what the biosphere provisions for the human economy – as John Ruskin once remarked “there is no wealth but life.” The economy is a sub-system of the biosphere, which ultimately derives its wealth from the abundant “organised” energy of the sun. This is indicated in my picture of “spaceship Earth” below (I explain what “entropy” is and its relevance to life on Earth here):


As supporters of groups like Positive Money well know, society currently issues its money as interest bearing debt to private banks. This has a very important implication for society as a whole: it means that, in order for us to enjoy permission to consume the goods and services of today (which is what money gives us after all – it is a claim upon social goods and services) we must produce more goods and services tomorrow (more future wealth) so as to repay today’s incurred debts. It seems to me that there can never be such thing as a sufficiency economy – no such thing as reaching “enough” and stopping – as long as money is created in this manner. Instead, our economy must produce tomorrow for permission to consume today.

Whilst debts, being mere accounting entries, can accumulate without limit, as Soddy pointed out wealth cannot: its generation is subject to the laws of thermodynamics. This implies a fundamental and broadening incompatibility between on the one hand a financial system founded upon unlimited creation of private debts and on the other hand a finite biosphere. Geologist M. King Hubbert (of the famous “Hubbert Peak” for oil extraction rates) made essentially this point back in 1981:

“The world’s present industrial civilization is handicapped by the coexistence of two universal, overlapping, and incompatible intellectual systems: the accumulated knowledge of the last four centuries of the properties and interrelationships of matter and energy; and the associated monetary culture which has evolved from folkways of prehistoric origin.

“The first of these two systems has been responsible for the spectacular rise, principally during the last two centuries, of the present industrial system and is essential for its continuance. The second, an inheritance from the pre-scientific past, operates by rules of its own having little in common with those of the matter-energy system. Nevertheless, the monetary system, by means of a loose coupling, exercises a general control over the matter-energy system upon which it is superimposed.

“Despite their inherent incompatibilities, these two systems during the last two centuries have had one fundamental characteristic in common, namely, exponential growth, which has made a reasonably stable coexistence possible. But, for various reasons, it is impossible for the matter-energy system to sustain exponential growth for more than a few tens of doublings, and this phase is by now almost over. The monetary system has no such constraints, and, according to one of its most fundamental rules, it must continue to grow by compound interest.”

But what is the relationship, if any, between economic growth and natural wealth extraction? I first note in passing that, under the current monetary system (and more broadly, one might argue, under capitalism itself, which is characterised by ongoing capital accumulation) economic growth is non-negotiable. As Barack Obama recently remarked:

“All of us are going to have to work together in an effective way to figure out how we balance the imperative of economic growth with very real concerns about the effect we’re having on our planet. And ultimately I think this can be solved with technology.”

Take note of the priority here: economic growth is an “imperative” – meaning absolutely necessary, unavoidable, non-negotiable – whilst threats to the ongoing survival of human civilization (exacerbated by ongoing economic growth) are merely “very real concerns”, which can be waved away with appeals to “technology”. Such prioritizing amongst world leaders, whilst it might look insane to an impartial alien observer of Earth, is perfectly understandable within an economic system which must grow tomorrow in order to subsist today.

But for how much longer can (or should) economic growth continue? As Prof. Tim Garrett shows empirically on his website, there is a simple linear relationship between global (monetary) wealth and global energy consumption, summarised in the plot below:


As I’ve argued elsewhere on more theoretical grounds, we cannot expect economic growth to become decoupled from increased energy demands and environmental impacts. In my opinion, this is why the Cop18 talks and similar conferences before them have failed. World leaders recognize that to meaningfully reduce carbon emissions implies a parting with economic growth which, under present monetary systems, would entail the swift collapse of their nation’s economy. I believe that so long as we continue to create permission to consume today – money – alongside the obligation to produce tomorrow – debt – they will remain correct in this surmise ( I should point out here that it is still perfectly possible to have a growth economy under full reserve banking – just no longer mandatory. So any growth enthusiasts reading this need not withdraw their support for monetary reform on that basis).

Arguably, it will furthermore be necessary to move beyond a capitalist system of production – thought that is a more debatable and less immediately pressing proposition, and also one beyond Positive Money’s remit to pass judgment upon. Once again, it is perfectly possible to have a capitalist economy under full reserve banking and so fans of capitalism can consistently support it – as plenty do. My own personal intuition, for what it’s worth, says that given mounting social and ecological constraints it will be necessary to increasingly phase out “capitalism” as a system, moving away from autocratic management of production for shareholder profits and towards democratic management of production for stakeholder needs.

Note the word “needs”, in contrast to the perpetually manufactured “wants” of the present economy. Capitalist production is both incentivised and coerced towards this behavior and also towards various hugely wasteful and inefficient forms of “planned obsolescence”; both entailing social and ecological costs a planet home to 7 billion people can no longer afford to pay for. We ought instead, I think, to have a system that is at least structurally capable of deciding that “enough is enough” and simply enjoying the material fruits of its past labours, while continuing to develop morally and intellectually. This is the economic future that John Stuart Mill looked forward to in his book Principles of Political Economy  and later John Maynard Keynes in his essay Economic Possibilities for our Grandchildren.

We currently bump up against or exceed the limits of planetary wealth extraction and waste absorption in several sectors, as the picture below summarises:


Plot of planetary boundaries according to table 1 of the paper “A safe operating space for humanity”. Nature 461, 472-475 | doi:10.1038/461472a

Martin Wolf, chief editor of the financial times, recently noted that the financial system has become a parasite upon the wider economy, commenting that:

“An out-of-control financial sector is eating out the modern market economy from inside, just as a the larva of the spider wasp eats out the host in which it has been laid.”

But more broadly, I would argue that the economic system itself has become a parasite upon the ecological systems that support it, and looks increasingly in danger of killing the host. As senior NASA climate scientist James Hansen has written in Storms of my Grandchildren:

“If we burn all the fossil fuels, the ice sheets almost surely will melt entirely, with the final sea level rise about 75 meters (250 feet), with most of that possibly occurring within a time scale of centuries. Methane hydrates are likely to be more extensive and vulnerable now than they were in the early Cenozoic. It is difficult to imagine how the methane clathrates could survive, once the ocean has had time to warm. In that event a PETM-like warming could be added on top of the fossil fuel warming.

After the ice is gone, would Earth proceed to the Venus syndrome, a runaway greenhouse effect that would destroy all life on the planet, perhaps permanently? While that is difficult to say based on present information, I’ve come to conclude that if we burn all reserves of oil, gas, and coal, there is a substantial chance we will initiate the runaway greenhouse. If we also burn the tar sands and tar shale, I believe the Venus syndrome is a dead certainty.”

A new symbiosis of economy and ecology is thus required, if our grandchildren are to enjoy any sort of humane future. The alternative of ongoing parasitism could imply a grim downward spiral into police states, resource wars, potential nuclear conflicts – an increasingly desperate, violent, authoritarian struggle for survival in which many of the liberal political gains of the past several centuries would likely be lost and any hopes of advancing beyond these gains forgotten entirely.

To avoid this grim sketch of a possible future, we must cease eating the flesh of our children to cross the desert today – as one Buddhist sutra puts it. We must move beyond a monetary system which demands tomorrow’s production to enjoy today’s goods and services. And this entails, I believe and have argued here, the sorts of reforms that Positive Money is proposing. Whilst many changes above and beyond reformed global monetary systems are likely needed, I struggle to imagine a livable ecology emerging in the absence of such reforms. I see them as the first step and foundation towards building a sane, humanitarian and ecologically sound alternative to the present madness.

The Real Adam Smith

•December 19, 2012 • 4 Comments


“The real Adam Smith – you know, the one who wrote Wealth of Nations. Not the one you worship before, but the one who wrote it.” — Noam Chomsky (in response to a question)

Adam Smith is regarded by many people today, on both the “left” and “right” of politics, as some sort of foaming-at-the-mouth free market arch-capitalist. They might find it interesting to read Wealth of Nations.

Yes, arguments for markets are made, but within some sort of historical context that tends to be forgotten. What also tends to be forgotten, pretty much entirely, are the underlying ethical reasons why Adam Smith advocated some of the more familiar conclusions he came to in Wealth of Nations. I’ll argue here that he desired to use markets as a system that would help ordinary people to raise themselves out of poverty. He also desired state interventions to support them in this goal. Reading the book carefully, one discovers that, in modern political parlance, his attitudes were essentially social democratic and anti-corporate. He would presumably be appalled by today’s neo-liberal capitalism. See if you agree with me after finishing this post – I’ll be quoting him extensively to back up my position. So let’s get started!

Most people are familiar with the opening passages about pin manufacturing, where Adam Smith writes that:

“The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labour. …

To take an example, therefore, from a very trifling manufacture; but one in which the division of labour has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business (which the division of labour has rendered a distinct trade), nor acquainted with the use of the machinery employed in it (to the invention of which the same division of labour has probably given occasion), could scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty. But in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them.

I have seen a small manufactory of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations.” bk 1, ch 1

Popular over-familiarity with passages such as the above lead the later classical economist Jean-Baptiste Say to remark that:

“A man, whose whole life is devoted to the execution of a single operation, will most assuredly acquire the faculty of executing it better and quicker than others; but he will, at the same time, be rendered less fit for every other occupation, corporeal or intellectual; his other faculties will be gradually blunted or extinguished; and the man, as an individual, will degenerate in consequence. To have never done any thing but make the eighteenth part of a pin, is a sorry account for a human being to give of his existence.”

Adam Smith would agree entirely, as we’ll see later. But what of the conditions of labour anyway? In a later chapter on this subject, he is pretty clear that the workers are in a much weaker bargaining position than the masters, and so something like trade unions might be expected to develop in attempts to secure basic worker’s rights. He writes that:

“What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little as possible. The former are disposed to combine in order to raise, the latter in order to lower the wages of labour.

It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms. The masters, being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, a merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long run the workman may be as necessary to his master as his master is to him; but the necessity is not so immediate.

We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy, till the moment of execution, and when the workmen yield, as they sometimes do, without resistance, though severely felt by them, they are never heard of by other people. Such combinations, however, are frequently resisted by a contrary defensive combination of the workmen; who sometimes too, without any provocation of this kind, combine of their own accord to raise the price of their labour.” bk, 1 ch 8

A little later he goes on to argue for economic growth on the grounds that, by increasing the demand and hence wages for labour, it will improve the living conditions of the labouring classes:

“It deserves to be remarked, perhaps, that it is in the progressive state, while the society is advancing to the further acquisition, rather than when it has acquired its full complement of riches, that the condition of the labouring poor, of the great body of the people, seems to be the happiest and the most comfortable. It is hard in the stationary, and miserable in the declining state. The progressive state is in reality the cheerful and the hearty state to all the different orders of the society. The stationary is dull; the declining, melancholy.” bk 1, ch 8

He later concludes chapter 9 with this further comment on the class struggle:

“Our merchants and master-manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.”  bk 1, ch 9

Adam Smith had a big influence upon Karl Marx and introduces in the first book of Wealth of Nations many of the concepts that Marx went on to employ extensively in his critiques of capitalism. For example, it is Adam Smith who introduces the idea of use and exchange value:

“The word value, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called “value in use”; the other, “value in exchange.” The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.” bk 1, ch 5

He also expresses a similar idea to Marx about “value” manifesting itself as a social opportuinity cost:

“The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What everything is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. What is bought with money or with goods is purchased by labour as much as what we acquire by the toil of our own body. That money or those goods indeed save us this toil. They contain the value of a certain quantity of labour which we exchange for what is supposed at the time to contain the value of an equal quantity. Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command.” bk 1, ch 5

However in contrast to Marx he goes on to say that human labour is not the sole source of surplus value, writing for example in the second book that:

“No equal capital puts into motion a greater quantity of productive labour than that of the farmer. Not only his labouring servants, but his labouring cattle, are productive labourers. In agriculture, too, nature labours along with man; and though her labour costs no expense, its produce has its value, as well as that of the most expensive workmen. The most important operations of agriculture seem intended not so much to increase, though they do that too, as to direct the fertility of nature towards the production of the plants most profitable to man. A field overgrown with briars and brambles may frequently produce as great a quantity of vegetables as the best cultivated vineyard or corn field. Planting and tillage frequently regulate more than they animate the active fertility of nature; and after all their labour, a great part of the work always remains to be done by her. The labourers and labouring cattle, therefore, employed in agriculture, not only occasion, like the workmen in manufactures, the reproduction of a value equal to their own consumption, or to the capital which employs them, together with its owners’ profits; but of a much greater value.” bk 2, ch 5

[my highlights indicate the sources of surplus value additional to human labour which Adam Smith postulates]

Adam Smith presently comes to his general argument for markets. Markets are advocated on the grounds that they will lead to greater equality of conditions amongst, and less exploitation of, the labouring classes:

“The whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighbourhood, be either perfectly equal or continually tending to equality. If in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of other employments. This at least would be the case in a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to choose what occupation he thought proper, and to change it as often as he thought proper. Every man’s interest would prompt him to seek the advantageous, and to shun the disadvantageous employment.” bk 1, ch 10

So, no restrictions by governments upon immigration then – at least not if we are taking Adam Smith’s preconditions under which markets can be advocated at all seriously. He, like David Ricardo after him, assumes the free movement of labour and the relative immobility of capital as conditions under which markets will operate – but in today’s “free markets” one finds the assumption is reversed. The famous “invisible hand” phrase appears only once in Wealth of Nations (in bk 4, ch 2) and if you look at the context refers to a (flawed, it turned out) argument that a preference for domestic investment of capital would save England’s economy from the ravages of what today is called “globalisation”. So the “invisible hand” was employed in the context of an argument against today’s global neo- “liberal” economic system.


In the second book Adam Smith considers the management of stock. He helpfully divides stock into capital stock and subsistence stock, writing that:

“When the stock which a man possesses is no more than sufficient to maintain him for a few days or a few weeks, he seldom thinks of deriving any revenue from it. He consumes it as sparingly as he can, and endeavours by his labour to acquire something which may supply its place before it be consumed altogether. His revenue is, in this case, derived from his labour only. This is the state of the greater part of the labouring poor in all countries.

But when he possesses stock sufficient to maintain him for months or years, he naturally endeavours to derive a revenue from the greater part of it; reserving only so much for his immediate consumption as may maintain him till this revenue begins to come in. His whole stock, therefore, is distinguished into two parts. That part which, he expects, is to afford him this revenue, is called his capital. The other is that which supplies his immediate consumption.” bk 2, ch 1

He then goes on to analyse the banking system of his day in relation to the management of stock, making the second book of more historical than contemporary interest. While considering a moderate rate of interest on money lent as a just compensation for risk (an argument that doesn’t really work today, since banks don’t lend money…) he also advocates anti-usury laws:

“The legal rate [of interest], it is to be observed, though it ought to be somewhat above, ought not to be much above the lowest market rate. If the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten per cent, the greater part of the money which was to be lent would be lent to prodigals and projectors, who alone would be willing to give this high interest. Sober people, who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it.

Where the legal rate of interest, on the contrary, is fixed but a very little above the lowest market rate, sober people are universally preferred, as borrowers, to prodigals and projectors. The person who lends money gets nearly as much interest from the former as he dares to take from the latter, and his money is much safer in the hands of the one set of people than in those of the other. A great part of the capital of the country is thus thrown into the hands in which it is most likely to be employed with advantage.” bk 2, ch 4

The above passage is just one example of how Adam Smith was not in favour of deregulated markets as a point of principle, but rather considered each case on its individual merits and where necessary sought to use government regulation to tweak the incentive structure of markets so as to better serve the public good.

He also in this book gives a nice description of how the fractional reserve banking system functioned in his day, on the gold standard, writing:

“A particular banker lends among his customers his own promissory notes, to the extent, we shall suppose, of a hundred thousand pounds. As those notes serve all the purposes of money, his debtors pay him the same interest as if he had lent them so much money. This interest is the source of his gain. Though some of those notes are continually coming back upon him for payment, part of them continue to circulate for months and years together. Though he has generally in circulation, therefore, notes to the extent of a hundred thousand pounds, twenty thousand pounds in gold and silver may frequently be a sufficient provision for answering occasional demands. By this operation, therefore, twenty thousand pounds in gold and silver perform all the functions which a hundred thousand could otherwise have performed. The same exchanges may be made, the same quantity of consumable goods may be circulated and distributed to their proper consumers, by means of his promissory notes, to the value of a hundred thousand pounds, as by an equal value of gold and silver money. Eighty thousand pounds of gold and silver, therefore, can, in this manner, be spared from the circulation of the country; and if different operations of the same kind should, at the same time, be carried on by many different banks and bankers, the whole circulation may thus be conducted with a fifth part only of the gold and silver which would otherwise have been requisite.” bk 2, ch 2

But our modern banking system works nothing like the above description and so much of the subsequent analysis in this book doesn’t carry over to today’s economy.


The third (quite short) book considers the foundations of the 18th century mercantile system, which replaced feudalism to set the stage for the industrial revolution. Adam Smith begins with a description of how the town and country trade their subsistence stock and manufactured commodities respectively, to their mutual benefit:

“The country supplies the town with the means of subsistence and the materials of manufacture. The town repays this supply by sending back a part of the manufactured produce to the inhabitants of the country. The town, in which there neither is nor can be any reproduction of substances, may very properly be said to gain its whole wealth and subsistence from the country. We must not, however, upon this account, imagine that the gain of the town is the loss of the country. The gains of both are mutual and reciprocal, and the division of labour is in this, as in all other cases, advantageous to all the different persons employed in the various occupations into which it is subdivided. The inhabitants of the country purchase of the town a greater quantity of manufactured goods, with the produce of a much smaller quantity of their own labour, than they must have employed had they attempted to prepare them themselves. The town affords a market for the surplus produce of the country, or what is over and above the maintenance of the cultivators, and it is there that the inhabitants of the country exchange it for something else which is in demand among them.” bk 3, ch 1

After a discussion of the developments after the fall of Rome leading to the market systems described above, he concludes this book with a brief sketch of how the feudal system gradually “withered away”, as a Marxist might say:

“But what all the violence of the feudal institutions could never have effected, the silent and insensible operation of foreign commerce and manufactures gradually brought about. These gradually furnished the great proprietors with something for which they could exchange the whole surplus produce of their lands, and which they could consume themselves without sharing it either with tenants or retainers. All for ourselves and nothing for other people, seems, in every age of the world, to have been the vile maxim of the masters of mankind. As soon, therefore, as they could find a method of consuming the whole value of their rents themselves, they had no disposition to share them with any other persons. For a pair of diamond buckles, perhaps, or for something as frivolous and useless, they exchanged the maintenance, or what is the same thing, the price of the maintenance of a thousand men for a year, and with it the whole weight and authority which it could give them. The buckles, however, were to be all their own, and no other human creature was to have any share of them; whereas in the more ancient method of expense they must have shared with at least a thousand people. With the judges that were to determine the preference this difference was perfectly decisive; and thus, for the gratification of the most childish, the meanest, and the most sordid of all vanities, they gradually bartered their whole power and authority. …

Having sold their birthright, not like Esau for a mess of pottage in time of hunger and necessity, but in the wantonness of plenty, for trinkets and baubles, fitter to be the playthings of children than the serious pursuits of men, they became as insignificant as any substantial burgher or tradesman in a city. A regular government was established in the country as well as in the city, nobody having sufficient power to disturb its operations in the one any more than in the other. …

A revolution of the greatest importance to the public happiness was in this manner brought about by two different orders of people who had not the least intention to serve the public. To gratify the most childish vanity was the sole motive of the great proprietors. The merchants and artificers, much less ridiculous, acted merely from a view to their own interest, and in pursuit of their own pedlar principle of turning a penny wherever a penny was to be got. Neither of them had either knowledge or foresight of that great revolution which the folly of the one, and the industry of the other, was gradually bringing about. It is thus that through the greater part of Europe the commerce and manufactures of cities, instead of being the effect, have been the cause and occasion of the improvement and cultivation of the country.” bk3, ch4


In the fourth book Adam Smith considers the systems of political economy of his day. His contempt for “the merchants and manufacturers” becomes quite clear in this book. As already stated, the goal he has in mind is greater equality of conditions, which markets can seek to provide thorough satisfying the needs of the general population. He considers this goal self-evident, writing that:

“Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.” bk 4, ch 8

He is generally opposed to restrictions (“duties”) upon imports and subsidies (“bounties”) for exports, preferring the price to find its “natural level”. For example:

“Bounties upon the exportation of any homemade commodity are liable, first to that general objection which may be made to all the different expedients of the mercantile system; the objection of forcing some part of the industry of the country into a channel less advantageous than that in which it would run of its own accord: and, secondly, to the particular objection of forcing it, not only into a channel that is less advantageous, but into one that is actually disadvantageous; the trade which cannot be carried on but by means of a bounty being necessarily a losing trade.” bk 4, ch 5

He goes on to describe how the “merchants and master manufacturers” will exploit a corrupt political process to ensure the production of their own commodities are generously subsidised, amongst other benefits, writing that:

“This monopoly [of the merchants and manufacturers] has so much increased the number of some particular tribes of them that, like an overgrown standing army, they have become formidable to the government, and upon many occasions intimidate the legislature. The Member of Parliament who supports every proposal for strengthening this monopoly is sure to acquire not only the reputation of understanding trade, but great popularity and influence with an order of men whose numbers and wealth render them of great importance. If he opposes them, on the contrary, and still more if he has authority enough to be able to thwart them, neither the most acknowledged probity, nor the highest rank, nor the greatest public services can protect him from the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.” bk 4, ch 2

Comments which have considerable contemporary relevance, given the plutocracy’s almost total capture of our political and economic systems, using their sponsoring of political campaigns and private armies of corporate lobbyists. To pick one of the more grievous examples: today highly subsidised crops from US and European agribusiness are routinely dumped upon developing markets, leading (in combination with financial speculation – i.e. “betting on food”) to wild fluctuations in the price of food and the destruction of efficient domestic farmers’ markets. Hardly a trivial matter, as the suicides of 200,000 Indian farmers and counting will attest to. If corporate control of the global food system concerns you, check out Vandana Shiva’s work and the World Development Movement’s food sovereignty campaign.

Global food prices Jan 2011

Adam Smith instead desires international trade, like the national market, to serve as a mutually beneficial means of realising greater equality of conditions between all traders by lifting the poorer nations out of poverty, writing that:

“By uniting, in some measure, the most distant parts of the world, by enabling them to relieve one another’s wants, to increase one another’s enjoyments, and to encourage one another’s industry, their general tendency would seem to be beneficial. To the natives however, both of the East and West Indies, all the commercial benefits which can have resulted from those events have been sunk and lost in the dreadful misfortunes which they have occasioned.

These misfortunes, however, seem to have arisen rather from accident than from anything in the nature of those events themselves. At the particular time when these discoveries were made, the superiority of force happened to be so great on the side of the Europeans that they were enabled to commit with impunity every sort of injustice in those remote countries. Hereafter, perhaps, the natives of those countries may grow stronger, or those of Europe may grow weaker, and the inhabitants of all the different quarters of the world may arrive at that equality of courage and force which, by inspiring mutual fear, can alone overawe the injustice of independent nations into some sort of respect for the rights of one another. But nothing seems more likely to establish this equality of force than that mutual communication of knowledge and of all sorts of improvements which an extensive commerce from all countries to all countries naturally, or rather necessarily, carries along with it.” bk 4, ch 7

Given these desires for peaceful, mutually beneficial international trade, he also spoke out against the “savage injustice of the Europeans” in the Americas; lamenting, I presume, the destruction of Aztec civilisation and its magnificent cities like Tenochtitlán, writing earlier in book 4 that:

“By opening a new and inexhaustible market to all the commodities of Europe, it [the discovery of the Americas] gave occasion to new divisions of labour and improvements of art, which in the narrow circle of the ancient commerce, could never have taken place for want of a market to take off the greater part of their produce. The productive powers of labour were improved, and its produce increased in all the different countries of Europe, and together with it the real revenue and wealth of the inhabitants. The commodities of Europe were almost all new to America, and many of those of America were new to Europe. A new set of exchanges, therefore, began to take place which had never been thought of before, and which should naturally have proved as advantageous to the new, as it certainly did to the old continent. The savage injustice of the Europeans rendered an event, which ought to have been beneficial to all, ruinous and destructive to several of those unfortunate countries.” bk 4, ch 1

He goes on to conclude that “the mercantile system” (and what we today call “neoliberalism”) allows the “merchants and manufacturers” to pervert legislation towards their “sole end and purpose” – production for profit – and away from the legitimate “sole end and purpose” of production – to satisfy human needs:

“It cannot be very difficult to determine who have been the contrivers of this whole mercantile system; not the consumers, we may believe, whose interest has been entirely neglected; but the producers, whose interests has been so carefully attended to; and among this later class our merchants and manufactures have been by far the principal architects. In the mercantile regulations, which have been taken notice of in this chapter, the interest of our manufacturers has been most peculiarly attended to; and the interest, not so much of the consumers, as that of some other sets of producers, has been sacrificed to it.” bk 4, ch 8

God alone knows what he would make of today’s neo- “liberal” capitalist system.


In the fifth and final book, he comes on to the subject of the extent to which the government should intervene in the affairs of the market system to secure ethical aims for society. Here his “social democratic” outlook becomes quite clear. Recall that in the opening chapter of the book he lauds the increases in production brought about by the division of labour. But recall also that Adam Smith advocates prospering markets on the grounds that they equalise conditions of labour to reduce exploitation, and improve the circumstances of “the great body of the people”  – he has compassion for the labouring classes and desires to improve their general welfare. He now comes to sketch out how he sees the division of labour as likely to proceed and how it will be necessary for governments to intervene to prevent human capacities being entirely corrupted, in the manner Say suggested earlier:

“In some cases the state of the society necessarily places the greater part of individuals in such situations as naturally form in them, without any attention of government, almost all the abilities and virtues which that state requires, or perhaps can admit of. In other cases the state of the society does not place the part of individuals in such situations, and some attention of government is necessary in order to prevent the almost entire corruption and degeneracy of the great body of the people.

In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations, frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become.

The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging, and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard with abhorrence the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilised society this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it.bk 5, ch 1

On these grounds he advocates state intervention to provide a program of education for the labouring classes, because:

“They have little time to spare for education. Their parents can scarce afford to maintain them even in infancy. As soon as they are able to work they must apply to some trade by which they can earn their subsistence. That trade, too, is generally so simple and uniform as to give little exercise to the understanding, while, at the same time, their labour is both so constant and so severe, that it leaves them little leisure and less inclination to apply to, or even to think of, anything else.

But though the common people cannot, in any civilized society, be so well instructed as people of some rank and fortune, the most essential parts of education, however, to read, write, and account, can be acquired at so early a period of life that the greater part even of those who are to be bred to the lowest occupations have time to acquire them before they can be employed in those occupations. For a very small expense the public can facilitate, can encourage, and can even impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education.”

The public can facilitate this acquisition by establishing in every parish or district a little school, where children may be taught for a reward so moderate that even a common labourer may afford it; the master being partly, but not wholly, paid by the public, because, if he was wholly, or even principally, paid by it, he would soon learn to neglect his business. In Scotland the establishment of such parish schools has taught almost the whole common people to read, and a very great proportion of them to write and account.” bk 5, ch 1

As well as “little schools”, he also advocates that the state encourage the development of the arts:

“The state, by encouraging, that is by giving entire liberty to all those who for their own interest would attempt without scandal or indecency, to amuse and divert the people by painting, poetry, music, dancing; by all sorts of dramatic representations and exhibitions, would easily dissipate, in the greater part of them, that melancholy and gloomy humour which is almost always the nurse of popular superstition and enthusiasm. Public diversions have always been the objects of dread and hatred to all the fanatical promoters of those popular frenzies. The gaiety and good humour which those diversions inspire were altogether inconsistent with that temper of mind which was fittest for their purpose, or which they could best work upon. Dramatic representations, besides, frequently exposing their artifices to public ridicule, and sometimes even to public execration, were upon that account, more than all other diversions, the objects of their peculiar abhorrence.” bk 5, ch 1

He also comments (at the end of book 4) that, as well as the protection of its citizens, the state has:

“the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expence to any individual, or small number of individuals, though it may frequently do much more than repay it to a great society. The proper performance of those several duties of the sovereign necessarily supposes a certain expence; and this expence again necessarily requires a certain revenue to support it.” bk 4, ch 10

I live in the UK and presume on these grounds that he would advocate supporting the NHS were he writing today. Consider that the US-style private healthcare system we are being press-ganged into (against the strong wishes of the electorate – thought such plans are not made in their interests…) would probably have about twice the per-capita costs of the present state healthcare system.

So finally, how is all this to be paid for? Adam Smith advocates some forms of taxation and discourage others. About taxation in general he comments that:

“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities.” bk 5, ch 2

He thus advocates taxation on luxuries, for example a kind of “mansions tax” on the grounds that the rich can better afford to pay it:

“The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion” bk 5, ch 2

He discourages taxes upon the profits of stock, on the grounds firstly that:

“The revenue or profit arising from stock naturally divides itself into two parts; that which pays the interest, and which belongs to the owner of the stock, and that surplus part which is over and above what is necessary for paying the interest.

This latter part of profit is evidently a subject not taxable directly. It is the compensation, and in most cases it is no more than a very moderate compensation, for the risk and trouble of employing the stock. The employer must have this compensation, otherwise he cannot, consistently with his own interest, continue the employment. If he was taxed directly, therefore, in proportion to the whole profit, he would be obliged either to raise the rate of his profit, or to charge the tax upon the interest of money; that is, to pay less interest. If he raised the rate of his profit in proportion to the tax, the whole tax, though it might be advanced by him, would be finally paid by one or other of two different sets of people, according to the different ways in which he might employ the stock of which he had the management.” bk 5, ch 2

and secondly that:

“The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country.  He would be apt to abandon the country in which he was exposed to a vexatious inquisition, in order to be assessed to a burdensome tax, and would remove his stock to some other country where he could, either carry on his business, or enjoy his fortune more at his ease.  By removing his stock he would put an end to all the industry which it had maintained in the country which he left.” bk 5, ch 2

Familiar arguments (tax corporations more and they’ll just charge us more / move abroad, taking jobs with them) and often made today by multi-national corporations or their apologists in university economics departments; but it is important to bear in mind the historical context in which Adam Smith makes them. He probably has in mind here the interests of shopkeepers and craftspeople – the equivalent of today’s struggling small-business man – and not those of the “merchants and manufacturers” of whom we have seen he is extremely critical, particularly of their designs to manipulate the legislative process towards their own ends of production for profit, as today’s multi-national corporations obviously do. As Noam Chomsky put it in his lecture Prospects For Democracy:

“He [Adam Smith] was describing a world very different from ours; so much so that the descriptions and the explanations really don’t carry over very well – but the ideas do. He lived too early to see the modern, autocratic structures of state-capitalism  and he didn’t anticipate their development. But he was already at that period very much opposed to joint-stock companies – what we nowadays call corporations – and he was particularly opposed to them if, as he feared might happen, they would become personified and made permanent; that is they would gain the status of immortal persons, in effect, with all the rights of persons – except immortal. And that in fact is exactly what happened in the nineteenth century.”

For example, Adam Smith expresses strong objections to “exclusive privileges” being granted to joint-stock companies – such as what we today would call “limited liability” and “delegated management” – writing that:

“In a private copartnery, each partner is bound for the debts contracted by the company to the whole extent of his fortune. In a joint stock company, on the contrary, each partner is bound only to the extent of his share.

The trade of a joint stock company is always managed by a court of directors. This court, indeed, is frequently subject, in many respects, to the control of a general court of proprietors. But the greater part of those proprietors seldom pretend to understand anything of the business of the company, and when the spirit of faction happens not to prevail among them, give themselves no trouble about it, but receive contentedly such half-yearly or yearly dividend as the directors think proper to make to them. This total exemption from trouble and from risk, beyond a limited sum, encourages many people to become adventurers in joint stock companies, who would, upon no account, hazard their fortunes in any private copartnery. …

The directors of such companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.”

bk5, ch 1 [my highlights emphasise his implied criticisms of today’s “limited liability” and “deferred management”, respectively]

Should his earlier arguments against the taxation of trade be applied to today’s personified transnational corporation then? Probably not – and think about it in pragmatic terms as well: why would a profitable modern multi-nationals like Starbucks move abroad, surrendering an entire national market (in a glutted global market, no less) to its competitors? The argument makes no sense. They can well afford to pay tax and so they should pay it at the very least, as Adam Smith says, “in proportion to their respective abilities” and perhaps “something more than in that proportion” – either of which implies quite a lot more tax than they currently pay! If, for the time being, we have to suffer a world in which corporations are “people”, I say they should pay taxes like people – neo- “liberal” apologists cannot have it both ways!

In conclusion then, I think that one should very much bear in mind that Wealth of Nation was first published in 1776, long before anything like the modern corporation with its diverse array of legal protections (such as “legal personality”, “perpetual lifetime”, “delegated management” and “limited liability”) existed. As such, when you hear Adam Smith’s arguments for shopkeepers and craftsmen applied uncritically to the modern corporation, reach for you wallet. Hopefully the passages quoted go some way to supporting my initial assertions – whilst also sketching the broad scope and ethical aims of the book – and may help towards reclaiming the legacy an influential liberal thinker from a good deal of intellectual distortion recently brought to bear by ideologues of neo- “liberalism”.

Get Rid of Tyranny

•December 15, 2012 • 2 Comments


I was stood outside Starbucks last week as part of nationwide actions by UK Uncut to protest their avoidance of three years worth of UK corporation tax. According to a recent Reuters special report:

“The Seattle-based group, with a market capitalization of $40 billion, is the second-largest restaurant or cafe chain globally after McDonald’s. Accounts filed by its UK subsidiary show that since it opened in the UK in 1998 the company has racked up over 3 billion pounds ($4.8 billion) in coffee sales, and opened 735 outlets but paid only 8.6 million pounds in income taxes, largely due because the taxman disallowed some deductions.

Over the past three years, Starbucks has reported no profit, and paid no income tax, on sales of 1.2 billion pounds in the UK. McDonald’s, by comparison, had a tax bill of over 80 million pounds on 3.6 billion pounds of UK sales. Kentucky Fried Chicken, part of Yum Brands Inc., the no. 3 global restaurant or cafe chain by market capitalization, incurred taxes of 36 million pounds on 1.1 billion pounds in UK sales, according to the accounts of their UK units.”

It makes both moral and economic sense for a corporation to pay a rate of tax at the very least least equal to the average its citizens pay and probably somewhat more. As protestor Zara Martin put it (responding to Starbucks’ attempt to save face by recently paying £20m – a fraction of the corporation tax it would expect to pay without exploiting various legal loopholes) :  “I think the £20m over two years is a bit rubbish. It’s like, wow thanks Starbucks, but actually why don’t you just pay your full tax like everyone else has to?”. None other than Adam Smith presumably would have agreed, writing in Wealth of Nations (book 5, chapter 2) that:

“The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities.

and furthermore that:

“It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”

But I think we can and should go a lot further than this. I understand people’s anger of late being directed towards “greedy banks” and “greedy corporations”. But they are sort of missing the point by stating their grievances in those terms. Nobody, in my view, has voiced this more eloquently that Noam Chomsky at the end of his lecture on “Free Market Fantasies”. My motivation for writing this brief post was principally to include the quotation below, to try and reintroduce into public debates some ideas which were once understood clearly, but have since been eroded by decades of pro-corporate propaganda. So without further ado, here is the quotation from Prof. Chomsky in full – please think carefully about what he is saying.

“Talk about corporate greed and everything is really crucially beside the point, in my view, and really should be recognised as a very big regression from what working people, and a lot of others, understood very well a century ago.

Talk about corporate greed is nonsense. Corporations are greedy by their nature. They’re nothing else – they are instruments for interfering with markets to maximise profit, and wealth and market control. You can’t make them more or less greedy; I mean maybe you can sort of force them, but it’s like taking a totalitarian state and saying “Be less brutal!” Well yeah, maybe you can get a totalitarian state to be less brutal, but that’s not the point – the point is not to get a tyranny to be less brutal, but to get rid of it.

Now 150 years ago, that was understood. If you read the labour press – there was a very lively labour press, right around here [Massachusetts] ; Lowell and Lawrence and places like that, around the mid nineteenth century, run by artisans and what they called factory girls; young women from the farms who were working there – they weren’t asking the autocracy to be less brutal, they were saying get rid of it.

And in fact that makes perfect sense; these are human institutions, there’s nothing graven in stone about them. They [corporations] were created early in this century with their present powers, they come from the same intellectual roots as the other modern forms of totalitarianism – namely Stalinism and Fascism – and they have no more legitimacy than they do.

I mean yeah, let’s try and make the autocracy less brutal if that’s the short term possibility – but we should have the sophistication of, say, factory girls in Lowell 150 years ago and recognise that this is just degrading and intolerable and that, as they put it “those who work in the mills should own them ” And on to everything else, and that’s democracy – if you don’t have that, you don’t have democracy.”

The Two Marxes

•December 11, 2012 • 2 Comments


“As far as logic goes, there are ‘two Marxes’, the Marx of the ‘labour value’ approach, and the Marx of the ‘capital theory’ approach.”

–- Arun Bose

After some recent exchanges over at IOPS, I decided to read some more about Marxism and the “labour theory of value”. I’ve been going through some of the early chapter of Das Kapital. It seems that Marx uses the word “value” in three basic ways (unfortunately the three aren’t always clearly distinguished – and Marx throws the word “value” around the pages of Kapital like confetti, leaving the reader to puzzle out its specific meaning from the context. This makes the book a lot harder to read than it otherwise might be – for me at least!)

Anyway, Marx’s three “values” are, roughly speaking:

1. Use value: the qualitative, subjective utility of an object to a particular individual in a particular context. For example: the use value of a fur coat is low in a desert, whereas the use value of a parasol is high. Or vice-versa in a tundra.

2. Exchange value: the quantitative amount of one commodity (C) that can be exchanged for another, according to an equation like x lots of commodity A = y lots of commodity B. This can be specified in terms of an abstract unit of account like a dollar. Money (M) can then serve as what Marx calls “the universal equivalent” [to commodities] – as the “means of exchange” in the exchange sequence C – M – C . Frederick Soddy has succinctly defined the role of money in an economy operating under the division of labour principle as “money is the nothing you get for something before you can get anything.”

3. “Value”: An unqualified “value” is used by Marx (and other economists) to denote, (roughly speaking) that property (or those properties) of an object which determine its exchange value.

Now clearly exchange value, in the above sense, is an emergent property – you need a society in order to have exchanges. We can’t really talk about an “intrinsic value” (where recall that value is the property (or properties) of a commodity accounting for its exchange value). Rather, “value” for Marx is a little like the concept of a “hole” in a semiconductor (a “hole” being an under-density of electrons, which we can treat as a “particle” moving against a uniform background of electrons, with “hole” properties of positive charge and a negative mass). Clearly you need a material and electrons for there to be a hole in them! There is no hole without the semiconductor and the properties of the hole (its charge, velocity and so forth) depend upon the material properties of the particular semiconductor. It’s the same with “value”: the exchange values of commodities will depend upon the particular social properties of the human economy in which exchanges are embedded.

The question then is: what actually determines exchange value? Marx’s answer was that this is set by the amount of human labour that goes into producing the commodities for exchange. According to the labour theory of value (which if we are really doing “scientific socialism” ought to be called the labour hypothesis of value, but never mind…), the value (in the sense of definition #3.) of a commodity is equal to the social opportunity cost of producing it. Social opportunity cost being the amount of time it takes to produce something versus something else: so if it takes (on average in society) x hours to make commodity A and y hours to make commodity B then A has a social opportunity cost of x/y times that of B. There is only so much you can do in an economy after all – the “aggregate social opportunity cost” will be finite and so you need ways of deciding how much of this or that thing you should do as a society – that’s economics, in a nutshell (“oikonomia” means “household management” and does not mean “terrifying mathematical hieroglyphics”!)

Where I disagree with Marx is here: I don’t think his assumption that social opportunity cost equates to exchange value – that “labour power” is the factor determining exchange value of commodities and hence the “surplus value” of profits – is legitimate. Rather, I think any number of factors in a complex society could contribute to determining exchange values. Some of these might or might not be:

– Relative scarcity or abundance of raw materials of production.

– Relative efficiency or inefficiency of machinery.

– Economies of scale.

– Various “free lunches” provided by nature (or “ecosystem services” in bean-counter-speak) the ultimate source of which is the abundant available energy from the sun, photo-synthesized by plants and consumed by animals as food (if you’re interested in how sunlight might be the basis for of a “theory of value” of sorts, I’ve written about that here).

– Social contrivances like advertising and fashion, which psychologically manipulate people into buying different relative amounts of commodities than otherwise.

– Lack of consumer purchasing power, forcing people to buy cheap, mass-produced, poor durability goods over the more expensive more durable goods they would otherwise prefer.

– Related to the above two points, a bias towards various kinds of “planned obsolescence” and the re (and re) selling of basically the same commodities.

– Market externalities, such that public goods are over-priced and hence under-produced, whist private goods are under-priced and hence over-produced.

– Parasitic rents on land and the “rent” (interest) on our money supply by private banks when they extend “loans”.

– Passing costs on to future generations e.g. climate change, tuition fees bubble, $1000+Tn dollar global derivatives debt bubbles nobody understands etc. etc.

– Vulture/disaster capitalism – carving up efficient public services for short-run private profit, carving up whole countries via “shock doctrine” etc. etc.

– Intellectual property of various kinds.

– And so on, and on and on…

None of the private profitability of the above seem to me to necessarily have anything very much to do with their social opportunity costs. All could work for “Moneybags” (Marx’s recurrent caricature of a capitalist) as sources of the “surplus value” which Marx attributed uniquely to “alienated labour”. Any one of them might generate commodities, with various exchange values in capitalist markets far in excess of the use value(s) required for their production; or failing that might manage to pass the production costs on to third parties (society in general, less developed counties, the future etc.), thus generating profits by “cutting corners” (without necessarily lowering wages).

For Marx, labour was a unique commodity, in the sense that its use (by a capitalist) could generate commodities with a greater exchange value than the use value (a subsistence wage) paid to the worker for its use. Marx is quite clear on this point in chapters 6 and 7 of Capital:

“The value of labour-power resolves itself into the value of a definite quantity of the means of subsistence. It therefore varies with the value of these means or with the quantity of labour requisite for their production. Some of the means of subsistence, such as food and fuel, are consumed daily, and a fresh supply must be provided daily. Others such as clothes and furniture last for longer periods and require to be replaced only at longer intervals. One article must be bought or paid for daily, another weekly, another quarterly, and so on. But in whatever way the sum total of these outlays may be spread over the year, they must be covered by the average income, taking one day with another.” Capital, Vol I, Ch 6

“We now know how the value paid by the purchaser to the possessor of this peculiar commodity, labour-power, is determined. The use-value which the former gets in exchange, manifests itself only in the actual utilisation, in the consumption of the labour-power. The money-owner buys everything necessary for this purpose, such as raw material, in the market, and pays for it at its full value. The consumption of labour-power is at one and the same time the production of commodities and of surplus-value.” Capital, Vol I, Ch 6

“The owner of the money has paid the value of a day’s labour-power; his, therefore, is the use of it for a day; a day’s labour belongs to him. The circumstance, that on the one hand the daily sustenance of labour-power costs only half a day’s labour, while on the other hand the very same labour-power can work during a whole day, that consequently the value which its use during one day creates, is double what he pays for that use, this circumstance is, without doubt, a piece of good luck for the buyer, but by no means an injury to the seller.” Capital, Vol I, Ch 7

I agree with Marx that workers are thus exploited and that labour is a source of surplus value – just not that it is the (i.e. the only) source of surplus value. In fact, any input to production (for example machinery, fossil fuels, etc.) may have the property that its use generates commodities of greater exchange values that the use value paid to produce them (costs like maintaining machinery, drilling oil, etc.) In physics terms, “work” is just force integrated over distance and machines can push weights around just as well as muscles can. Terms like EROEI (“energy return on energy invested”) can quantify such forms of “surplus value” realised as energy. But Marx doesn’t think so, writing that:

“It is known by experience how long on the average a machine of a particular kind will last. Suppose its use-value in the labour-process to last only six days. Then, on the average, it loses each day one-sixth of its use-value, and therefore parts with one-sixth of its value to the daily product. The wear and tear of all instruments, their daily loss of use-value, and the corresponding quantity of value they part with to the product, are accordingly calculated upon this basis. It is thus strikingly clear, that means of production never transfer more value to the product than they themselves lose during the labour-process by the destruction of their own use-value.” Capital, Vol I, Ch 8

Marx may find this “strikingly clear”, but I don’t. Notice how he simply asserts it to be the case that the use-value of productive machinery equals, but does not exceed, the exchange values of the commodities it helps produce – he doesn’t appear to prove this point at all. If there is a “proof” then it rests on his assertion that the exchange value a capitalist pays on the open market for machinery is set solely by the social opportunity cost of making the machinery and that the machine will part with precisely this much use value (and not a penny more!) over the course of its productive lifetime – assertions with which I disagree and have already listed possible exceptions to further up.

If some or all of that list of possible exceptions to Marx’s labour “theory” of value (though Marx himself didn’t call it such, to be fair…) is valid there follow some important implications for Marx’s conclusions as to the “final crisis of capitalism” leading to a historically inevitable socialist revolution. Very roughly, the idea was that competition between capitalists would drive increases in productive efficiency and hence increased investment in machine commodities (which Marx called “constant capital”, c) versus the labour commodity (which Marx called “variable capital”, v) in the capital exchange process M – C – M’ that Marx argued defined capital-ism. Here M’ is an amount of money larger than M and M’ minus M is the profit (or “surplus value”, s) the capitalist gets in selling the commodities  C = c + v + s  produced using an initial capital investment  M = c + v. The surplus, Marx asserts, is added entirely by labour during production.

Increases of machinery relative to labour in the production process would then, if labour is assumed as the only source of surplus value, tend to lead to a falling rate of profit. To maintain profits, capitalists would therefore be forced to reduce the wages of labour, thus provoking a socialist revolution when the latter fell to or below base subsistence rates. Well, that was what Marx’s hypothesis implied would happen. But if an assumption is invalid then the conclusion on which it is based doesn’t follow. Here I agree with Steve Keen (Debunking Economics, chapter 17) that:

“The tendency of the rate of profit to fall was predicated on the propositions that (a) , over time the capital-to-labour ratio would rise, and that (b), this would cause the rate of profit to fall. But (b) was dependent on labour being the only source of surplus value, so that a rising capital to labour ratio would mean a falling rate of profit. If surplus could instead be garnered from any input to production, not just labour [see my list for suggestions], then an increase in the capital-to-labour ratio would have no necessary implications for the rate of profit: it could rise, fall, or stay the same.”

The “iron laws” of “scientific socialism” (again, not Marx’s term…) might appear to have rusted somewhat, but just because an assumption upon which Marx’s conclusion rests is invalid doesn’t mean we need to jettison his whole analytic framework and conceptual toolbox. Marx employed and developed concepts like “use value” “exchange value” “surplus value”, “opportunity cost” (although he didn’t call it that), “commodity exchange” (represented as C – M – C) and “capital accumulation” (represented as M – C – M’) which remain useful for thinking about capitalism today. But I think we should go beyond the labour theory of value upon which Marx built his conclusions and include the many inventive (or devious, if you prefer!) new ways capitalism has found of generating surplus value – which Marx would presumably take great interest in were he alive today.

I think Marx was right about capitalism at some point suffering a final breakdown, but that he identified the wrong ultimate limiting factor to ongoing capital accumulation. For Marx, finite total labour time was the limiting factor, whereas it appears to us today that the limiting factor(s) will be ecological ones – limits to our shared (and finite) biosphere’s capacity to absorb global capitalism’s waste products (carbon, nitrogen, etc.) and shrug off its impacts upon ecosystems (rainforests, coral reefs, etc.).  Never forget that the human economy is a sub-system of the biosphere –  hence the ongoing survival of the former is predicated upon the good health of the latter. This implies hard limits to economic impacts on ecology, some of which have already been surpassed (and even hard limits to GDP growth, in my opinion).

Having said that, the essence of Marx’s thought can be retained, in spite of some of his errors in analysis. We can even take Marx at his word here – as he wrote in his PhD thesis on Hegel:

“It is conceivable that a philosopher should be guilty of this or that inconsistency of this or that compromise; he may himself be conscious of it. But what he is not conscious of is that in the last analysis this apparent compromise is made possible by a deficiency of his principles or an inadequate grasp of them. If a philosopher really has compromised it is the job of his followers to use the inner core of his thoughts to illuminate his own superficial expression of it. In this way what is a progress in conscience is a progress in knowledge. This does not involve putting the conscience of the philosopher under suspicion, but rather construing the essential characteristics of his views, giving them a definite form and meaning, and thus at the same time going beyond them.”

I’ll end on another physics analogy: professional physicists the world over make use of Maxwell’s famous equations of elecro-dynamics every day. Here they are:


How did Maxwell come up with them though? As Richard Feynman explains in his Lectures on Physics, Volume II:

“It was not yet customary in Maxwell’s time to think in terms of abstract fields. Maxwell discussed his ideas in terms of a model in which the vacuum was like an elastic solid [the aether]. There was much reluctance to accept his theory, first because of the model, and second because there was at first no experimental justification.

Today, we understand better that what counts are the equations themselves and not the model used to get them. We may only question whether the equations are true or false. This is answered by doing experiments, and untold numbers of experiments have confirmed Maxwell’s equations. If we take away the scaffolding he used to build it, Maxwell’s edifice stands on its own. He brought together all of he laws of electricity and magnetism and made one complete and beautiful theory.”

Perhaps Marx’s “labour theory of value” is a little like Maxwell’s “luminiferous aether” here? The labour “theory” of value spurred Marx to formulate insights and concepts still useful today, but the idea itself is perhaps best forgotten, just as a scaffold can be left behind in favour of the edifice it served to build.

Equality of Opportunity is Not Enough

•December 3, 2012 • 3 Comments


When exactly did equality become a dirty word? Or at least, become so laden with suspicions of its harbouring some lurking despotism? It seems for a long time that greater material equality was regarded as a natural, almost irrefutable, demand for any progressive social movement to make – “Liberté, égalité, fraternité” was the slogan of the French Revolution, for example. Adam Smith regarded the desire for equal material conditions as a natural desire of mankind, which only legal coercion founded upon violence could suppress, stating in his Lectures on Jurisprudence that:

“Laws and government may be considered in this and indeed in every case as a combination of the rich to oppress the poor, and to preserve to themselves the inequality of the goods which would otherwise be soon destroyed by the attacks of the poor, who if not hindered by the government would soon reduce the others to an equality with themselves by open violence.”

and in Wealth of Nations that:

“Wherever there is great property there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions. It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate continually held up to chastise it. The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days’ labour, civil government is not so necessary.”

Similar ideas were expressed by James Madison during the Federal Convention of 1787. Madison warned that “Democratic communities may be unsteady, and be led to action by the impulse of the moment” and so the United States government should be set up so as to “protect the minority of the opulent against the majority”; with this benevolent elite acting as “friends to guard them [the majority] against the turbulency and weakness of unruly passions.” Here is a fuller quotation, from the Yale Law School’s website:

“Democratic communities may be unsteady, and be led to action by the impulse of the moment. -Like individuals, they may be sensible of their own weakness, and may desire the counsels and checks of friends to guard them against the turbulency and weakness of unruly passions. Such are the various pursuits of this life, that in all civilized countries, the interest of a community will be divided. There will be debtors and creditors, and an unequal possession of property, and hence arises different views and different objects in government. This indeed is the ground-work of aristocracy; and we find it blended in every government, both ancient and modern. Even where titles have survived property, we discover the noble beggar haughty and assuming.

The man who is possessed of wealth, who lolls on his sofa, or rolls in his carriage, cannot judge of the wants or feelings of the day laborer. The government we mean to erect is intended to last for ages. The landed interest, at present, is prevalent; but in process of time, when we approximate to the states and kingdoms of Europe; when the number of landholders shall be comparatively small, through the various means of trade and manufactures, will not the landed interest be overbalanced in future elections, and unless wisely provided against, what will become of your government? In England, at this day, if elections were open to all classes of people, the property of the landed proprietors would be insecure. An agrarian law would soon take place. If these observations be just, our government ought to secure the permanent interests of the country against innovation. Landholders ought to have a share in the government, to support these invaluable interests, and to balance and check the other. They ought to be so constituted as to protect the minority of the opulent against the majority. The senate, therefore, ought to be this body; and to answer these purposes, they ought to have permanency and stability. Various have been the propositions; but my opinion is, the longer they continue in office, the better will these views be answered.”

In view of the above quotation, the fact that the U.S. political process today is largely unresponsive to local popular demands and largely captured by big corporations and big finance is not very surprising – Madison states quite bluntly that the U.S. Senate ought to act as a buffer between popular agitations and elite privilege, and it continues to serve as such today (try googling for example “US senate blocks…” and see what you can turn up).

I sometimes wonder what has become of our “unruly passions”. Have we really bought into the propaganda of the elite to such an extent that we accept their paper-thin rationalisations for the existing distribution of property and power? (a.k.a. neo- “liberal” economic theory). Do we really think that without a (rigged) social “game” of winner-takes-all competition no one will have incentives to innovate, to develop and actualise their innate potential? Does that sound like you, or your friends? John Stuart Mill, hero of many contemporary neo- “liberals” and “free”-market “libertarians” (who have presumably never read him), dismissed such elitist notions with contempt in his Chapters on Socialism:

“It may be said that of this hard lot no one has any reason to complain, because it befalls those only who are outstripped by others, from inferiority of energy or of prudence. This, even were it true, would be a very small alleviation of the evil. If some Nero or Domitian were to require a hundred persons to run a race for their lives, on the condition that the fifty or twenty who came in hindmost should be put to death, it would not be any diminution of the injustice that the strongest or nimblest would, except through some untoward accident, be certain to escape. The misery and the crime would be that any were put to death at all.

So in the economy of society; if there be any who suffer physical privation or moral degradation, whose bodily necessities are either not satisfied of satisfied in a manner which only brutish creatures can be content with, this, though not necessarily the crime of society, is pro tanto a failure of the social arrangements. And to assert as a mitigation of the evil that those who thus suffer are the weaker members of the community morally or physically, is to add insult to misfortune. Is weakness a justification of suffering? Is it not, on the contrary, an irresistible claim upon every human being for protection against suffering? If the mind and feelings of the prosperous were in a right state, would they accept their prosperity if for the sake of it even one person near them was, for any other cause than voluntary fault, excluded from obtaining a desirable existence?”

There seems to me to be no moral or pragmatic argument for disproportionately rewarding the winners of a genetic lottery (those lucky enough to possess some marketable talent) never mind those lucky enough to inherit a fortune (which can probably be traced back to some violent conquest or other anyway, though that is besides the point here). And if we are talking incentives, why not incentivise the one factor people actually control, their personal effort towards their self-development and the satisfaction of societal needs?

Also, isn’t it supremely unjust to punish those relatively lacking innate gifts twice over? First they are punished by nature herself in terms of a limitation placed upon what they might ultimately accomplish as individuals, however hard they try, and secondly, as if to compound the first injustice, they are punished by a society which rewards them far less than what their more talented (i.e. luckier) contemporaries can gain from similar efforts. A point that Mill also made, this time in his Principles of Political Economy:

“The proportioning of remuneration to work done, is really just only in so far as the more or less of the work is a matter of choice [i.e. of effort]: when it depends on natural differences of strength or capacity, this principle itself is an injustice: it is giving to those who have; assigning most to those already favoured by nature.”

To give a more contemporary spin on all this, the authors of The Spirit Level have recently amassed a quite extensive body of statistical evidence suggesting that more materially equal societies are better in practically any way you care to measure. Returning to Adam Smith’s initial observations this makes immediate intuitive sense – if the foundation of unequal material conditions is ultimately violence, one would expect more equal societies to be freer and more pleasant places to live in. The findings of Wilkinson and Pickett seems to suggest they in fact are. For example:


So much for equality of opportunity – what about a more through-going equality?  The rough equality of material wealth – equality of outcome, as some people call it – should not be confused with such ridiculous ideas as “trying to make everyone equal” (Consider for example that many of us might support the equality of the sexes, but few would attempt an action so ridiculous as trying to make men and women’s bodies the same! Or consider that we might oppose racism, but few would regard a “solution” such as making everyone’s skin the same colour as anything less that insulting).

People are obviously not equal in the sense that we all have different appearances, personalities and innate talents. In a more rational society, of the sort I would prefer to live in, this would be a source of celebration rather than insecurity (as is sadly the case in the present society, which pits us in competition against those in possession of similar talents to our own). Competition is fine on the sports field, say, but it shouldn’t be the basis for determining the material conditions, and hence in large measure the dignity, under which I or my family should live. Rather, people should be empowered, through greater equality of material conditions, to truly develop their individual capacities – individualism in its true sense, as Oscar Wilde has expressed beautifully in The Soul of Man Under Socialism:

“For the recognition of private property has really harmed Individualism, and obscured it, by confusing a man with what he possesses. It has led Individualism entirely astray. It has made gain not growth its aim. So that man thought that the important thing was to have, and did not know that the important thing is to be. The true perfection of man lies not in what man has, but in what man is.

Private property has crushed true Individualism, and set up an Individualism that is false. It has debarred one part of the community [the poor] from being individual by starving them. It has debarred the other part of the community [the rich] from being individual by putting them on the wrong road [materialism], and encumbering them.”

One way to put all this is the idea that human beings are equal in dignity, so society should ensure everyone the opportunity to lead equally dignified lives. I do believe that equality (of dignity) and freedom are inseparable. If instead I can capture vast amounts of social wealth as a result of some dubious claims to moral and/or intellectual superiority over my fellow human beings (and of course plenty of people with guns and lawbooks who buy into my delusions and are prepared to back them up…) then I am placed in a position to command and coerce others. I then cease to relate to these others as fellow human beings, as equals – they become instead tools, mere extensions of my will. And then, what is the death of one or one million of them to me? Merely like cutting my hair or fingernails. Inequality of dignity is the foundation for despotism, while equality of dignity is the foundation for freedom. And equality of opportunity? A perverse race, organised for the amusement of emperors, in which the losers suffer all manner of indignities.

On the giving and receiving of gifts

•August 1, 2012 • 2 Comments

By what principles can you organise social relations? In particular, how shall we remunerate people for their personal roles within our society? The book Parecon: Life After Capitalism favours remunerating people for efforts to produce a socially valued product. Now, I agree with this norm in many contexts. But I think there are contexts in which it breaks down and needs to be superseded by another principle.

In Parecon: LAC one such context is already identified – if somebody is unable to work due to some factor outside of their control (an illness, say) then the principle of compassion takes over – this person receives a share in the social product without having to put into it – because they can’t. I wonder if there are other contexts in which the usual parecon norm should be superseded by something else.

I’m thinking here about certain kinds of creative work – those which aren’t “useful” in the sense of feeding people, maintaining infrastructure, enjoying popularity etc. It’s easy to asses the social value of something “useful” and therefore reward people’s efforts towards it – “useful” is fairly objective. But what about something not “useful” in that objective sense?

What’s the use of a Beethoven symphony? Or Einstein’s theory of General Relativity? Perhaps Beethoven was popular, Einstein was understood. Is that the point though? Was that where the value of what they did lay? What if Beethoven had been unpopular in his lifetime, Einstein misunderstood in his? Could a parecon council have then remunerated each for producing a socially valued product? I guess not. Perhaps another superseding principle is needed in such cases – a kind of compassion practiced towards people of real genius?

I’ll consider theoretical science here rather than art, as it’s what I know better. If you want art considered instead, read this. What about it then? Isn’t science always “useful”? Only “useful”? Perhaps you want to say that General Relativity has helped with calculating the timings of GPS communication signals. Okay, but that is wholly missing the point of it, I feel. People that think science is merely “useful” don’t understand what it truly is, in my view. “We are a way for the Cosmos to know itself” is how Carl Sagan put it. Richard Feynman put it like this in his set of lectures The Meaning Of It All:

Yet science is still not thoroughly appreciated. To give an example, I read Faraday’s Chemical History of a Candle, a set of six Christmas lectures for children. The point of Faraday’s lectures was that no matter what you look at, if you look at it closely enough, you are involved in the entire universe. And so he got, by looking at every feature of the candle, into combustion, chemistry, etc. But the introduction of the book, in describing Faraday’s life and some of his discoveries, explained that he had discovered that the amount of electricity necessary to perform electrolysis of chemical substances is proportional to the number of atoms which are separated divided by the valence. It further explained that the principles he discovered are used today in chrome plating and the anodic coloring of aluminum, as well as in dozens of other industrial applications. I do not like that statement.

Here is what Faraday said about his own discovery: “The atoms of matter are in some ways endowed or associated with electrical powers, to which they owe their most striking qualities, amongst them their mutual chemical affinity.” He had discovered that the thing that determined how the atoms went together, the thing that determined the combinations of iron and oxygen which make iron oxide is that some of them are electrically plus and some of them are electrically minus, and they attract each other in definite proportions. He also discovered that electricity comes in units, in atoms. Both were important discoveries, but most exciting was that this was one of the most dramatic moments in the history of science, one of those rare moments when two great fields come together and are unified. He suddenly found that two apparently different things were different aspects of the same thing. Electricity was being studied, and chemistry was being studied. Suddenly they were two aspects of the same thing—chemical changes with the results of electrical forces. And they are still understood that way. So to say merely that the principles are used in chrome plating is inexcusable.

To say merely that General Relativity has been “useful” for GPS satellites is inexcusable. So, how are we to say what is to be remunerated, when it comes to theoretical physics, say? What is its social value? I think this is a question for posterity alone. Only the balance of infinite time can weigh the worth of Faraday’s or Einstein’s gifts to humanity with any degree of accuracy. How could any democratic council do so?

General Relativity – what is its social value?

That is why I think revolutionary creative work needs to operate under another principle entirely, one superseding remuneration for socially valuable output – because nobody can say what this is when it comes to that work. It’s up to the infinite future to say. Also, to the extent that the gifted tailor their gifts towards “utility” – meaning what is popularly acceptable or socially demanded – they pervert and squander them, because as Oscar Wilde put it (about art, but the same applies to science I think) :

“A work of art is the unique result of a unique temperament. Its beauty comes from the fact that the author is what he is [with science: from the fact that nature is what she is]. It has nothing to do with the fact that other people want what they want. Indeed, the moment that an artist takes notice of what other people want, and tries to supply the demand, he ceases to be an artist, and becomes a dull or an amusing craftsman, an honest or a dishonest tradesman. He has no further claim to be considered as an artist.”

I used the words “gifts to humanity” earlier quite deliberately. In a “gift economy”, of the sort anthropologists describe, the principle of social organisation is, roughly speaking:

From each according to their abilities, to each according to their needs.

In his book Debt the First 5000 Years, social anthropologist David Graeber introduces the above principle in the fifth chapter of his book, terming it “communism”. He says that:

“All of us act like communists a good deal of the time. None of us acts like a communist consistently. “Communist society” – in the sense of a society organised exclusively on that single principle – could never exist. But all social systems, even economic systems like capitalism, have always been built on top of a bedrock of actually-existing communism …

Almost everybody follows this principle if they collaborating on some common project. If someone fixing a broken water pipe says, “Hand me the wrench” his co-worker will not, generally speaking, say “And what do I get out of it?” – even if they are working for Exxon Mobil, Burger King or Goldman Sachs.”

The book is great! Think about reading it 🙂

In small-scale egalitarian communities, networks of mutual aid can develop that practice the above “from each… to each…” principle to a remarkable extent. In such a “gift economy” person A’s “needs” might be satisfied by requesting person B’s “abilities”, in the knowledge that a similar favor might be asked of person A by person B in future. One couldn’t, as David Graeber says above, organise an entire society on that basis. But within that entire society (economically organised under parecon principles perhaps?) there could be pockets that are largely operating in this way.

I think perhaps any sub-economy trading in and producing revolutionary creative ideas should be organised as a gift economy within a wider participatory economy. (I should remark in passing that I find the idea of “intellectual property” ridiculous – anyone thinking you can or should try to “own” an idea, with a view to turn it into profit, has perhaps never had one of very much value, or doesn’t understand very clearly how ideas work and where they come from. I think ideas belong with “the commons”, they are part of a collective human spirit. Parecon doesn’t make this mistake though – property, presumably including the intellectual sort, is “owned” in common – by no-one and by everyone).

If somebody happens to receive a precious gift from nature – say the all-consuming compulsion to reveal a part of that nature to society – then society at large should set them up in the capacity to perfect their gift. If instead it ties them to producing something “socially useful” – something society currently wants – then society will squander their gift, because what they are trying to give society is something that it ultimately needs. The new social need they exist to satisfy is something challenging and genuinely revolutionary. It is not wanted though, because its need  is not yet apparent. Its need will only be apparent after being weighed in the balance of infinite time.

The irony is that parecon might create a post-revolutionary economy in which truly revolutionary work becomes difficult or impossible. This is exactly the problem that the theoretical physicist Shevek has in Ursula Le Guin’s wonderful novel The Dispossessed. He wanted to give his world Anarres a gift, the General Temporal Theory. But Anarres did not want his gift (despite needing it) –  it didn’t understand and hence could not evaluate it. And so Shevek is not able to give his gift to Anarres. He has to go elsewhere, to the authoritarian planet of Urras. I would worry that if parecon can’t make exceptions for those like Shevek it will be repeating one of the most awful crimes of the present system – its squandering of human potential. It is galling to consider the wasting of human gifts under the social system we presently endure. Let us not repeat this in a revolutionary new social system. Even at the price of a few free-loaders and layabouts – “nuchnibs” in Le Guin’s novel.

As individuals we don’t always know what is best for us and the same is true of societies. I make this not as an argument for authoritarianism – no Philosopher King can or should be empowered to say what society needs in its stead – but as an argument for the communistic principle of the “gift economy” to be applied to the few who are gifted (or cursed, some might say!) with the capacity to produce revolutionary creative work. For these gifted few – a Faraday, an Einstein, or a Shevek – we must give them a home on our world. For them: From each, to each. From society to them: we should have the capacity to provide for their basic needs. From them to society:  they might then manage to give society “useless” and priceless gifts.




A while after writing this I put a sort of “potted version” of the above ideas to Michael Albert on the IOPS website. Now I’m not at all convinced that what I wrote makes sense! I think I ought to have read and thought more about the allocation method in parecon (called “participatory planning”) before writing this post – so expect a post on that at some point! Anyway, here are Michael’s replies to my queries:


Hi Michael, about this:

“If advocates of from each to each said in some cases of consuming and even producing, the norm they favor may make sense and work okay – sure, I would agree – and then we could ask, what are those cases? And for that matter, from each to each advocates could then argue, or not, for why parecon gets some cases wrong.”

I was wondering if you thought what we might call “revolutionary creative work” could fall into that bracket – something that parecon remuneration might get wrong? Am I right in thinking you’re a fan of Ursula le Guin’s novel The Dispossessed? (there were quotes from it in Parecon: LAC). This problem is one of the major themes of that book – Shevek (and his “intellectual nuchnib” musician and playwright friends) have a lot of problems getting their society to support them in the work they do, work which doesn’t have an obvious or immediate social benefit, and is resisted by their society – because truly revolutionary work is challenging of society and hence difficult for it to initially accept or value.

Do you think maybe parecon remuneration could have a similar “blind spot” here? Do you think “from each to each” might better apply to supporting certain sub-sections of the economy – like say composers, playwrights or theoretical physicists? In these exceptional cases, might society make some gift of food and shelter and work materials to these “revolutionary creatives”, in the hope that they could return society something much more valuable, in the long run? Otherwise there might be the danger, as in Le Guin’s book, that “revolutionary creatives” are forced to simply pander to what the workers’ councils seem to want from them, squander their gifts, and revolutionary creative work gets sidelined, and people like Shevek have to go to Urras.



> I was wondering if you thought what we might call “revolutionary creative work” could fall into that bracket – something that parecon remuneration might get wrong? Am I right in thinking you’re a fan of Ursula le Guin’s novel The Dispossessed? (there were quotes from it in Parecon: LAC).

Yes, I liked the novel, now many decades old…

> This problem is one of the major themes of that book – Shevek (and his “intellectual nuchnib” musician and playwright friends) have a lot of problems getting their society to support them in the work they do, work which doesn’t have an obvious or immediate social benefit, and is resisted by their society – because truly revolutionary work is challenging of society and hence difficult for it to initially accept or value.

I don’t accept this as remotely likely in a parecon. So, what are we actually talking about? Some people want to work, for their income, on criticizing social relations and proposing alternatives, say. If a participatory society says we simply do not need or want such critical thinking and proposing to happen, so we don’t want institutions that do this type work, and people who get income for it – then, yes, there would be no place to be employed doing this. The population would be saying, it is not socially valued labor – you can do it – but you are doing activity that is like digging ditches and then filling them up…worthless.

Sometimes artists say, that will happen to art – people will say, don’t need it. Or science. Or, journalism, or, very close to that, critical commentary, and so on. There is no reason at all to expect even that our current population, much less the population of a participatory society, would have such shortsighted, and vapid views…

> Do you think maybe parecon remuneration could have a similar “blind spot” here?

No. But here is a case where it arises, in a sense. There is a music production council. You are a worker in it. The council has, via the plan, an apportionment of social product for its work – for its workers. You propose to create music that is so high pitched (or arcane) that your peers say, no, you can’t do that, and take some of the councils available income for workers, for doing it. No one wants that. It would suggest to society that our workers council is a bunch of nitwits – or whatever. So now you are stuck – you have to work in ways your peers, as a group, acknowledge to be socially valued. You can’t do what you want. And you may even be right. Maybe they are all wrong…and your product would turn out, in five years, to be great. You can keep pressing, you can find another workplace, you can try to form one – there are many options.

> Do you think “from each to each” might better apply to supporting certain sub-sections of the economy – like say composers, playwrights or theoretical physicists?

No. If society really feels this is junk activity – like my playing baseball and asking for income for it, or my painting – because society thinks music, plays, and research are junk – then so be it. People will have to do these things voluntarily, also working so they get an income.

> In these exceptional cases, might society make some gift of food and shelter and work materials to these “revolutionary creatives”, in the hope that they could return society something much more valuable, in the long run?

Well that is in fact exactly what society would do – but it is not a gift – it is an assessment that these creative people are doing something that needs and should be done, for a host of reasons…

> Otherwise there might be the danger, as in Le Guin’s book, that “revolutionary creatives” are forced to simply pander to what the workers’ councils seem to want from them, squander their gifts, and revolutionary creative work gets sidelined, and people like Shevek have to go to Urras.

There is an incredible level of classism – call it artism, or brilliancism, if you like – in this worry. The poor “uncreatives” – see what I mean – are too neanderthal to recognize the obvious value of art, science, etc. Even in our current society, where most of the population is robbed of confidence and knowledge in many ways, this would not happen. But in a participatory society – with balanced job complexes – so the composers, etc., have incomes like others, conditions like others, and so on – and where others have all the relevant information, honestly, not a chance.

So – what you are seeking – that society recognize the value of science, art, engineering, sports, or whatever and ensure the incomes of worthy practitioners of these, even when their work sometimes doesn’t pan out – is precisely what a parecon would do… very naturally, to everyone’s benefit and no one’s loss.


“There is an incredible level of classism – call it artism, or brilliancism, if you like – in this worry.”

Okay, I probably deserved that one, the wording RE “creatives” was clumsy. I didn’t mean to imply that I think “ordinary people” can’t appreciate the value of an activity like science or art, I really don’t think that. I just think it’s hard for anyone to objectively evaluate the social worth of a specific piece of art or a scientific research project, say (I’m researching particle physics myself these days and find it pretty hard even to understand what some of my colleagues are doing! I think something like baseball is easier here – do people want to watch you play or not? is fairy objective)

But it’s probably a non-problem after all – people only need to be persuaded of the general value of an activity, not the specific value of its products. I could anticipate somebody genuinely good falling through the cracks from time to time in a parecon (surely no system is perfect?), but there are always other options, like you say – do it in your spare time, proselytize it some more, or perhaps make your own workplace with similarly minded folks (in The Dispossessed Shevek and his friends started the “Syndicate of Initiative” for example – the name suggests they might have suffered from “brilliancism” also 😉 )

So the answer helped, thanks.



The public passes judgement, so to speak, in the large, not the details. The latter occurs in the council, or team.

For example, take physics department….your field. It is part of the whole physics community. Society allots resources to physics, inside the community is where the allotment to options within physics are made…then inside units like universities, teams, etc.

Same for the symphony, say – it doesn’t propose we want to work on such and such a piece for next month – and the public says yes or no. Rather the symphony does its thing, internally deciding its activity, approaches, etc. – within the overarching commitments of resources which is what planning arrives at.


Sounds good! I guess when a lot of people first hear “remuneration for effort at socially valued work” their first reaction might be to worry about how “social value” is going to be measured and by whom. With my example of theoretical physics, it might take decades for the social benefits of some speculative research project to pan out, if indeed they ever do. But you’ve reassured me than this isn’t really a problem in a parecon, since the physics (or whatever…) community will just be encouraging good physics, without seeking to micromanage everyone or solicit approval for every specific project from non-physicists. That’s just applying self-management to physics, I suppose? Thanks 🙂


The transition is from banks and political and corporate elites deciding the overarching budgets, in accord with amassing profits and maintaining the conditions of doing so, to the broad population deciding overarching budgets in accord with needs and capacities and full social and ecological implications….and then, more proximately, from local owners or administrators deciding choices within the overarching budget that will lead to its continuation as well as utilize and maintain their own status to the workers in each field deciding proximate choices, again in accord with needs and desires and maintaining the overall support from society…

Saving the Soul of Man: Individualism, Old and New

•July 6, 2012 • 1 Comment

I recently read Oscar Wilde’s fine 1891 essay The Soul of Man Under Socialism and would heartily recommend it (especially to my brothers and sisters in the United States!) as an excellent way to allay any fears that “socialism” inevitably means the sacrifice of the individual upon some collectivist alter of “the greater good”.

Rather, Wilde argues that libertarian forms of socialism offer the best way to realise the full potentialities of all individuals living in society. This he calls the new individualism, to contrast it with the old individualism of classical economics’ “rational hedonism” : the self-maximization of individual utility by an atomised “homus economicus” for whom “there is no such thing as society” (Margaret Thatcher) because society is merely “the sum of the interests of the several members who compose it” (Jeremy Bentham).

Oscar Wilde, photographed by Napoleon Sarony in 1882

First the “old” individualism then. The legacy of classical liberalism and the enlightenment, in my view, was to challenge the State’s co-option of the individual to serve its ends. This had traditionally been justified according to the divine right of kings – the King being God’s sanctioned representative on Earth, whose lineage should perhaps, at least in principle, be traced back to King Saul of the Israelites. The point being that you don’t argue with God, so you don’t argue with the right of the King to rule. You shut up and accept your designated place within feudal society, perhaps hoping for recompense in some presumed afterlife – George Orwell’s “Sugarcandy Mountain” perhaps?

The enlightenment subjected the doctrine of the divine right of kings to the full light of reason and found it wanting. Intellectual and popular agitations culminated in the French revolution and the concept of the individual as mere pawn in the King’s game of divine rule was finally consigned to the dustbin of history. The idea that the individual could be an end in himself was ready to take root, and so the enlightenment set itself the task of establishing its seed in the soil of classical liberalism and classical political economy.

This idea of the individual man as an end in himself is set out quite early and quite beautifully in Wilhelm Von Humboldt’s classic essay The Limits of State Action:

“…man never regards what he possesses as so much his own, as what he does; and the labourer who tends a garden is perhaps in a truer sense its owner, than the listless voluptuary who enjoys its fruits…In view of this consideration, it seems as if all peasants and craftsman might be elevated into artists; that is, men who love their labour for its own sake, improve it by their own plastic genius and inventive skill, and thereby cultivate their intellect, ennoble their character, and exalt and refine their pleasures. And so humanity would be ennobled by the very things which now, though beautiful in themselves, so often serve to degrade it…

[in contrast] Whatever does not spring from a man’s free choice, or is only the result of instruction and guidance, does not enter into his very being, but remains alien to his true nature; he does not perform it with truly human energies, but merely with mechanical exactness…”

The individual’s free development was to be safeguarded via the institution of private property, which was to secure the producer (and not the King or feudal nobility) the full rights to what was produced. Keep in mind the aim: the cultivation of free self-perfecting individuals. Private property was intended by the likes of Humboldt, Adam Smith and John Stuart Mill, amongst many others, as a mere means to this end, not as an end in itself. For example Mill writes in his book  Principles of Political Economy that:

“The laws of property have never yet conformed to the principles on which the justification of private property rests. They have made property of things which never ought to be property, and absolute property where only a qualified property ought to exist. They have not held the balance fairly between human beings, but have heaped impediments upon some, to give advantage to others; they have purposely fostered inequalities, and prevented all from starting fair in the race. …

Private property, in every defense made of it, is supposed to mean the guarantee to individuals of the fruits of their own labour and abstinence. The guarantee to them of the fruits of the labour and abstinence of others, transmitted to them without any merit or exertion of their own, is not of the essence of the institution, but a mere incidental consequence, which, when it reaches a certain height, does not promote, but conflicts with, the ends which render private property legitimate.”

Mills’ “ends which render private property legitimate” are of course the cultivation of free individuals and not mere feudal serfs (or indeed “wage slaves”) carrying out their appointed duties with a “mechanical exactness” devoid of “truly human energies”.

Such was the expressed intent of  “the old individualism”. We now fast-forward several decades to Wilde’s essay on “the new individualism”, written with the benefit of hindsight. Did a reformed institution of private property succeed in realising its (alleged) aims? Wilde thinks not. More, he thinks that in making private property and the market into Mammonite gods to replace the divine authority of the King, the liberal ideal of cultivating the free individual went completely astray:

“For the recognition of private property has really harmed Individualism, and obscured it, by confusing a man with what he possesses. It has led Individualism entirely astray. It has made gain not growth its aim. So that man thought that the important thing was to have, and did not know that the important thing is to be. The true perfection of man lies not in what man has, but in what man is.

Private property has crushed true Individualism, and set up an Individualism that is false. It has debarred one part of the community [the poor] from being individual by starving them. It has debarred the other part of the community [the rich] from being individual by putting them on the wrong road [materialism], and encumbering them.”

This “true perfection of man” Wilde terms the new individualism and for him socialism – the abolition of private ownership of productive property –  is the way of realizing it. The poor are no longer to be starved and the rich are no longer to spoil themselves through gluttony. Necessary though drudgeorous work is to be automated and performed by machines, thus freeing every individual for self-cultivation:

“At present machinery competes against man. Under proper conditions machinery will serve man. There is no doubt at all that this is the future of machinery, and just as trees grow while the country gentleman is asleep, while humanity will be amusing itself, or enjoying cultivating leisure – which, and not labour, is the aim of man – or making beautiful things, or reading beautiful things, or simply contemplating the world with admiration and delight, machinery will be doing all the  necessary and unpleasant work.”

How sad we live in a world where economic growth continues unabated and the question of whether it should be channeled into ever more production or the freeing of time for contemplation and the development of the individual cannot be asked – market systems seem incapable of suffering such a question to be asked. Bertrand Russell captured the absurdity of this situation wittily in his essay In Praise of Idleness:

“Suppose that, at a given moment, a certain number of people are engaged in the manufacture of pins. They make as many pins as the world needs, working (say) eight hours a day. Someone makes an invention by which the same number of men can make twice as many pins: pins are already so cheap that hardly any more will be bought at a lower price.

In a sensible world, everybody concerned in the manufacturing of pins would take to working four hours instead of eight, and everything else would go on as before. But in the actual world this would be thought demoralizing. The men still work eight hours, there are too many pins, some employers go bankrupt, and half the men previously concerned in making pins are thrown out of work. There is, in the end, just as much leisure as on the other plan, but half the men are totally idle while half are still overworked. In this way, it is insured that the unavoidable leisure shall cause misery all round instead of being a universal source of happiness. Can anything more insane be imagined?”

Whether machines will really be able to do “all the necessary and unpleasant work” remains an open question, but they could surely do a great deal more of it than they do today – where recall that there is an army of reserve workers who have little choice but to do this work, on pain of impoverishment and misery should they refuse – and hence the reigning oligarchy has little interest in lessening their burden through automation (if anything their inclination is the opposite – an exhausted and hence mentally debased workforce is less likely to offer them any resistance). Were humanity instead to apply itself to the task of automating drudgery in earnest, who knows how far it could be taken? Perhaps as far as is desired, or else any remaining “necessary and unpleasant work” could be fairly shared.

In order that we may produce beautiful things as well as necessary things – roses as well as bread –  Wilde’s socialism is necessarily a libertarian socialism. Wilde characterizes the individual realizing his latent potentialities most perfectly as “the artist”. His “artist” is not to be subject to the forces of supply and demand governing the production of necessities under socialism, because:

“A work of art is the unique result of a unique temperament. Its beauty comes from the fact that the author is what he is. It has nothing to do with the fact that other people want what they want. Indeed, the moment that an artist takes notice of what other people want, and tries to supply the demand, he ceases to be an artist, and becomes a dull or an amusing craftsman, an honest or a dishonest tradesman. He has no further claim to be considered as an artist. Art is the most intense mode of Individualism that the world has known. I am inclined to say that it is the only real mode of Individualism that the world has known.”

Rather, “the artist” must be let alone, left free to develop his latent potentialities, left ungoverned, because all authority is equally fatal to individualism/art:

“People sometimes inquire what form of government is most suitable for an artist to live under. To this question there is only one answer. The form of government that is most suitable to the artist is no government at all. Authority over him and his art is ridiculous. It has been stated that under despotisms artists have produced lovely work. This is not quite so. Artists have visited despots, not as subjects to be tyrannised over, but as wandering wonder-makers, as fascinating vagrant personalities, to be entertained and charmed and suffered to be at peace, and allowed to create. There is this to be said in favour of the despot, that he, being an individual, may have culture, while the mob, being a monster, has none. One who is an Emperor and King may stoop down to pick up a brush for a painter, but when the democracy stoops down it is merely to throw mud. And yet the democracy have not so far to stoop as the emperor. In fact, when they want to throw mud they have not to stoop at all. But there is no necessity to separate the monarch from the mob; all authority is equally bad.”

Hence if we desire true art then artists must be let alone to do such as they individually please. Is this then a selfish individualism? Wilde tackles that objection with aplomb:

“A man is called selfish if he lives in the manner that seems to him most suitable for the full realisation of his own personality; if, in fact, the primary aim of his life is self-development. But this is the way in which everyone should live. Selfishness is not living as one wishes to live, it is asking others to live as one wishes to live. And unselfishness is letting other people’s lives alone, not interfering with them. Selfishness always aims at creating around it an absolute uniformity of type. Unselfishness recognises infinite variety of type as a delightful thing, accepts it, acquiesces in it, enjoys it.

It is not selfish to think for oneself. A man who does not think for himself does not think at all. It is grossly selfish to require of ones neighbour that he should think in the same way, and hold the same opinions. Why should he? If he can think, he will probably think differently. If he cannot think, it is monstrous to require thought of any kind from him. A red rose is not selfish because it wants to be a red rose. It would be horribly selfish if it wanted all the other flowers in the garden to be both red and roses. Under Individualism people will be quite natural and absolutely unselfish, and will know the meanings of the words, and realise them in their free, beautiful lives.”

A red rose. Libertarian Socialism (a.k.a. anarchism) should cultivate our roses (in all colours!) as well as baking our bread, because “man cannot live by bread alone”.

One often hears (old) individualism criticised on the grounds of its selfishness, and with significant justification I feel. For example, in his excellent recent book The World We Have: A Buddhist Approach to Peace and Ecology, Buddhist Monk Thich Nhat Hanh writes:

“In modern life people think their bodies belong to them and they can do what they want to themselves. “We have the right to live our lives”, they say. The law supports such a deceleration; that is one of the manifestations of individualism. But according to the teachings of the Buddha, your body is not yours. Your body belongs to your ancestors, your parents, and future generations. It also belongs to society and to the other living beings. All of them have come together – the trees, the clouds, the soil, everything – to bring about the presence of this body. Our bodies are like the Earth. And there is the Bodhisattva Earth Holder, holding everything together.

Nhat Hanh calls this concept “inter-being”. We “inter-are” with our ancestors and our descendants. I think of people’s lives as being like a stone thrown into a pond. The stone is seen to disappear, but the ripples carry on afterwards. The pond is changed forever – the effects of the ripples play out over its surface forever. What is you and what is other people? Everything we are and do has been influenced by the “ripples” of other “stones”. We carry the lives of our ancestors within us through their influences upon our own thoughts and actions. Did they ever really die? Shall we? No, we shall all live on through our children and their children.

How long we shall all live on together depends upon our actions today – it may not be much longer if our “inter-being” remains unrecognized by most of us. A selfishly individualistic culture whose fruits are nuclear weapons and ecocide is a serious danger to our survival and as Nhat Hanh writes:

“The only alternative to co-existence is co non-existence”

So I agree with Nhat Hahn’s condemnation of “the old individualism” as well as with Wilde’s celebration of “the new individualism”. I think we can agree with both. Notice that Nhat Hahn criticizes one manifestation of individualism and not the manifestation of it per se. I interpret what is being criticised as Adam Smith’s vile maxim of the masters of mankind: “All for ourselves and nothing for other people”. I think that such a selfish individualism does not really deserve to be called individualism, because it aims at accomplishing individual fulfillment through denying it to others. It is trying to demand all flowers in “my” garden be red roses (and moreover all belong to me, not to themselves).

That, sadly, was the outcome of the classical liberal project of private property and “free” markets. As anarchist historian Rudolf Rocker lamented  some decades after Wilde’s essay, in his book Anarcho-Syndicalism: Theory and Practice:

“Democracy with its motto of equality of all citizens before the law, and Liberalism with its right of man over his own person, both were wrecked on the realities of capitalist economy. As long as millions of human beings in every country have to sell their labour to a small minority of owners, and sink into the most wretched misery if they can find no buyers, the so-called equality before the law remains merely a pious fraud, since the laws are made by those who find themselves in possession of the social wealth. But in the same way there can be no talk of a right over one’s own person, for that right ends when one is compelled to submit to the economic dictation of another if one does not want to starve.”

In contrast to the “old individualism” of the classical liberal democracies, Wilde’s “new individualism”, yet to be born from a libertarian socialism, seeks not to deny society, solidarity and “inter-being” but to employ our understanding of them to help every member of society cultivate their diverse individuality. I think it is an individualism appropriate to our 21st century civilisation. Perhaps it is also the form of individualism needed to save that civilisation from an untimely death? When we have become so many lemmings marching towards a cliff, it takes a staunch individualist to head the opposite way. But upon watching them pass, perhaps others may pause for thought and decide to follow? Therein lies my hope for humanity.

From Participatory Society to One World Consciouness

•June 24, 2012 • 1 Comment

The participatory society (parsoc) vision is outlined here. For those wondering what I mean by one world consciousness and why we need it, I’ll let astronomer Carl Sagan explain:

“As the ancient myth makers knew we’re children equally of the earth and the sky. In our tenure on this planet we’ve accumulated dangerous evolutionary baggage, propensities for aggression and ritual, submission to leaders, hostility to outsiders, all of which puts our survival in some doubt. But we’ve also acquired compassion for others, love for our children, a desire to learn from history and experience and a great soaring passionate intelligence, the clear tools for our continued survival and prosperity. Which aspects of our nature will prevail is uncertain, particularly when our visions and prospects are bound to one small part of the small planet Earth.

But up there in the Cosmos an inescapable perspective awaits. National boundaries are not evident when we view the Earth from space. Fanatical ethnic or religious or national identifications are a little difficult to support when we see our Earth as a fragile blue crescent fading to become an inconspicuous point of light against the bastion and the citadel of the stars. There are not yet obvious signs of extraterrestrial intelligence and this makes us wonder whether civilisations like ours rush inevitably headlong into self-destruction.”

The parsoc vision has focused in on the question “What might a society which does not structurally exploit people be like?”. The International Organisation for a Participatory Society (IOPS) incorporates aspects of parsoc’s “four-spheres” framework shown below:

I think IOPS needs to incorporate more than the above. I see IOPS as a broader “anti-authoritarian” movement. “Anti-authoritarian” to me denotes three related stances. It denotes opposition to domestic exploitation, in the form of a state-capitalist system (an “anti-capitalist” stance). It denotes opposition to the exploitation of foreign nations, in the form of wars of aggression over the planet’s finite and diminishing resources (an “anti-imperialist” stance). Lastly, it denotes opposition to the exploitation of the totality of human and non-human life on Earth (an “anti-ecocide” stance).

To extend parsoc’s “four-spheres” framework to incorporate these vital international and ecological aspects, I propose something like the following picture, to illustrate the commitment to furthering revolutionary one world consciousness I feel IOPS should embody:

Please note: the fact that some spheres of IOPS are drawn inside other spheres does not denote the outermost spheres as being “more important” than the innermost ones. It denotes the outermost spheres as being “more fundamental” than the innermost ones. For example, the low entropy (“organised”) energy from the sun is “more fundamental” to my life than my family are. I would immediately die without the sun. I would not immediately die without my family. The sun is therefore “more fundamental”. Which is “more important” though? I find this question meaningless.

If I say “international relations are more fundamental than parsoc” what might that mean? It means that a participatory society might well be impossible in a world torn apart by wars over resources, a world where nations become threats to be defended against, rather than our fellow human beings. As Martin Buber put it:

“One cannot in the nature of things expect a little tree that has been turned into a club to put forth leaves.”

If I say “ecology is more fundamental than international relations” what might that mean? It means that peaceful relations between nations might well be impossible if ecosystems have collapsed and human beings are fighting for survival in a world that cannot any longer sustain them. As Yann Martel put it in Life of Pi:

“When your own life is threatened, your sense of empathy is blunted by a terrible, selfish hunger for survival.”

Such fears lend a sense of urgency to the radical ecology movement (a.k.a. “dark green” environmentalism). Human societies (and especially peaceful, participatory ones!) fundamentally depend upon a well-functioning biosphere. The biosphere, however, can manage perfectly well without human beings (as it has done for billions of years). If we take many more liberties with Earth’s ecosystems, we may discover too late that the preconditions for humane existence are no longer in place. As Paul Street has recently commented:

“When I cite data on environmental collapse and argue that ecology is the top issue of our time, I sometimes get accused of advocating a politics of triage – a politics of putting forward only what I think is the single most urgent problem and thereby unduly neglecting other issues that rightly concern us on the left. But if livable ecology is a save-able triage patient – and I think it is – than it’s a triage patient of a very odd sort in that if it dies so do all other patients in the emergency room. There’s more that could be said on this analogy.”

So ecology is “more fundamental” than international relations, which in turn are “more fundamental” than parsoc’s “four spheres” of economy, polity, community and kinship. But none of these is “more important” than any of the others.

Perhaps theoretical physicist Richard Feynman can help clarify this further:

We have a way of discussing the world, when we talk of it at various hierarchies, or levels. Now I do not mean to be very precise, dividing the world into definite levels, but I will indicate, by describing a set of ideas, what I mean by hierarchies of ideas.

For example, at one end we have the fundamental laws of physics. Then we invent other terms for concepts which are approximate, which have, we believe, their ultimate explanation in terms of the fundamental laws. For instance, “heat”. Heat is supposed to be jiggling, and the word for a hot thing is just the word for a mass of atoms which are jiggling. But for a while, if we are talking about heat, we sometimes forget about the atoms jiggling- just as when we talk about the glacier we do not always think of the hexagonal ice and the snowflakes which originally fell. Another example of the same thing is a salt crystal. Looked at fundamentally it is a lot of protons, neutrons, and electrons; but we have this concept of “salt crystal”, which carries a whole pattern already of fundamental interactions. An idea like pressure is the same.

Now if we go higher up from this, in another level we have properties of substances- like “refractive index”, how light is bent when it goes through something; or “surface tension”, the fact that water tends to pull itself together, both of which are described by numbers. I remind you that we have to go through several laws down to find out that it is the pull of the atoms, and so on. But we still say “surface tension”, and do not always worry, when discussing surface tension, about the inner workings.

On, up in the hierarchy. With the water we have waves, and we have a thing like a storm, the word “storm” which represents an enormous mass of phenomena, or a “sun spot”, or “star”, which is an accumulation of things. And it is not worthwhile always to think of it way back. In fact we cannot, because the higher up we go the more steps we have in between, each one of which is a little weak. We have not thought them all through yet.

As we go up in this hierarchy of complexity, we get to things like muscle twitch, or nerve impulse, which is an enormously complicated thing in the physical world, involving an organization of matter in a very elaborate complexity. Then come things like “frog”. And then we go on, and we come to words and concepts like “man”, and “history”, or “political expediency”, and so forth, a series of concepts which we use to understand things at an ever higher level. And going on, we come to things like evil, and beauty, and hope…

Which end is nearer to God, if I may use a religious metaphor, beauty and hope, or the fundamental laws? I think that the right way, of course, is to say that what we have to look at is the whole structural interconnection of the thing; and that all the sciences, and not just the sciences but all the efforts of intellectual kinds, are an endeavor to see the connections of the hierarchies, to connect beauty to history, to connect history to man’s psychology, man’s psychology to the working of the brain, the brain to the neural impulse, the neural impulse to the chemistry, and so forth, up and down, both ways. And today we cannot, and it is no use making believe that we can, draw carefully a line all the way from one end of this thing to the other, because we have only just begun to see that there is this relative hierarchy.

And I do not think either end is nearer to God. To stand at either end, and to walk off that end of the pier only, hoping that out in that direction is the complete understanding, is a mistake. And to stand with evil and beauty and hope, or to stand with the fundamental laws, hoping that way to get a deep understanding of the whole world, with that aspect alone, is a mistake. It is not sensible for the ones who specialize at the other end, to have such disregard for each other. (They don’t actually, but people say they do.) The great mass of workers in between, connecting one step to another, are improving all the time our understanding of the world, both from working at the ends and working in the middle, and in that way we are gradually understanding this tremendous world of interconnecting hierarchies.

Ecology is the most fundamental element in the realisation of the IOPS vision, as I would have it. But it is no “nearer to God” than internationalism, economy, polity, community or kinship are. They are all equally important.

I’d love to hear what you think of my picture 🙂