Wednesday, January 15, 2014

The reactionary effect of Marxism

Who make up the one group that humanities and social science academics typically feel entitled to analyse and pontificate about without actually studying them in any serious sense? Without talking to them, following them around, examining their letters, documents and memoirs, or reading the work of anyone who has.

That would be business folk.

(And it is slightly scary how many economists only don't fall into this category because they have read Ronald Coase's seminal 1937 article The Nature of the Firm [pdf].)

I was reminded of this recently when I started reading Charles Tilly's Coercion, Capital and European States: AD 990 - 1992, which has become the modern classic analysis of European state formation. I can see good reasons why -- the book is clearly written, asks excellent questions, shows a nice sense of the diversity of European state development, seeks to balance economic and political analysis.

Doing the pander
Alas, I can also see bad reasons why it has been an academic success -- it panders to the apparently endless desire of humanities academics in particular to sneer at commerce and business folk. Such pandering can and has propelled far more mediocre efforts to academic prominence. A nice Australian example being Michael Pusey's Economic Rationalism in Canberra: A Nation-building State Changes Its Mind whose content and academic success in Australia is a triumph of pandering over understanding. (Economic rationalism is not a term used much nowadays, but Gregory Whitwell -- author of the excellent The Treasury Line -- provides a nice discussion of its meanings here.)

Reviews of Pusey's opus by Fred Argy (in Economic Papers), Richard Blandy (in The Australian Quarterly) and John Stone (in Quadrant) covered the failings of Pusey's analysis (using the term loosely) fairly thoroughly. A data-rich explanation of the shift in Oz public policy is provided here (pdf), including a side-swipe at Pusey; though the combination of Howard-Costello tax reforms and RBA stabilisation policy led to better outcomes than the paper implies.

An upside of Pusey's efforts is that it did help inspire William Coleman's magisterial Economics and Its Enemies: Two Centuries of Anti-Economics.

Capital capers
Tilly seeks to create an analytical paralleling of capital and coercion. The former being the realm of "exploitation" and the latter of "domination".


So the more capital, the more "exploitation"? So an American worker is more "exploited" than a landless peasant on a latifundium in a capital-starved agrarian society? Do people who write this stuff -- and those who buy into it -- listen to themselves?

That increasing the level of capital in a society increases the return to labour -- since it increases the scarcity of labour compared to capital -- would seem to imply (in Tilly's analytical framework) that workers are the more exploited the more prosperous they are.  At which point one can only agree with Andre the Giant's Fezzik [Inigo Montoya]-- that word, I do not think it means what you think it means.

One also wonders where, in this analytical universe, one puts slavery, serfdom and other forms of human bondage -- the point of which is precisely that they are the operation of coercive domination to deny labour its scarcity returns above that necessary for subsistence.

Furthermore, in Tilly's analytical universe, capital does not get created, it "accumulates". Capital -- the accumulated scum of economic exploitation.
Of course, if one uses the language of capital being created, then business folk become creators and, clearly, we can't have that!

Nor see commerce as a realm of consent, because that might generate a rather disturbing contrast with the realm of coercion. Though perhaps not as disturbing as all that -- one can talk of gains from order as well as gains from trade. And Tilly's analysis of the path of state formation does include a very important role for implicit or explicit social bargaining, while he never loses sight of the fact that the state is, at its core, always a coercive structure.
Tilly defines capital thusly:
Let us think of capital generously, including any tangible mobile resources, and enforceable claims on such resources. Capitalists, then, are people who specialise in the accumulation, purchase and sale of capital. They occupy the realm of exploitation, where the relations of production and exchange yield surpluses, and capitalists capture them (p.17).
Perhaps factories are also capital, even though they are not terribly mobile? And, if they are not capital, what are they?

Risky business
But leave that aside; Tilly buys into the perennial notion of surpluses as just being "yielded" by the processes of "production and exchange". Yet a driving factor in commerce is that there are no guarantees of such "surpluses". The risk of loss is a real one and much commercial activity is structured to deal with it; to deal with risks in general. A huge part of the story of the Commercial Revolution in Europe is precisely the secular drop in risks -- particularly as reflected in interest rates. A drop in risk levels from the interaction between technology and institutional change that is at the heart of the Commercial Revolution and which made the creation of capital strikingly easier over time.

European global dominance starts with the Commercial Revolution, though it was pushed along by the Scientific Revolution and sealed by the Industrial Revolution. Until, of course, the patterns thereof started to be exported elsewhere and the further consequences of the Industrial Revolution began to undermine imperial rule.

That Tilly does not really "get" commerce is particularly clear when he discusses the interaction between capital and cities -- he sees the development of cities as coming from the accumulation and concentration of capital, thereby paralleling the development of states from the accumulation and concentration of coercion. Since, in his analytical framework, capital "accumulates" rather than being created, the notion of cities as being good places to transact is obscured. By contrast, medieval lords were well aware that providing protection and ease of transaction could promote a new city as a node of trade and commerce -- the medieval notion of a (new) borough was strikingly similar to the modern notion of enterprise zone.  At times, capital in Tilly's analysis seems perilously close to an exogenous force that drives social phenomena.

Status games
In all this, Tilly is just part of the at least 2,500 year tradition of clerics, clerisies and intellectuals dating back at least to PlatoAristotle and Kong Qiu despising commerce and merchants as vulgar and amoral. Though the tradition went into something of a regression from the mid C17th to the mid C19th -- from John to John; from John Locke to John Stuart Mill (plus a nod to the great C19th populariser of liberal political thought, Herbert Spencer). (A review of a book on this tradition is here [pdf].)

But the tradition resurged with a vengeance with the intellectual popularity of Marxism. To the extent that most academic writing about economics and commerce which is not explicitly based on various forms of economics is largely derivative from Marxism. An analysis which gets in the way of understanding actual commerce and the importance of gains from trade (why do people keep coming back?), transaction costs and risk management.

In its status-driven antipathy to business folk and commerce, Marxism has proved to be quite reactionary. Though, that is hardly the only way it turned out to be so. That Leninism (or derivatives thereof) proved to be the only effective way to politically operationalise Marxism led to elite politics of the most ruthless and entitled kind. With its reintroduction of slavery (in the labour camps), serfdom (the ban on leaving a workplace without its permission -- the essence of serfdom) and extremely controlling and hierarchical politics, Leninism was much more a very nasty throwback to the monumentalist labour service autocracies of Pharaonic Egypt or the Khmer Empire than to anything that can plausibly labelled "progressive".

Nor were Leninist states modernising in anything except the most banally technological sense. The essence of modernity is about expanding possibilities -- very much what Leninist states have not been about. Which is why they are mostly no longer with us. They may have been the political embodiment of high modernism, but actual modernity has proved to be too much for them. Apart from the bizarre North Korean dynastic theocracy -- the most atavistic of the lot -- the remaining notionally Leninist states are in the process of living the Eastern European joke. (What is socialism? The hardest and most difficult road from capitalism to capitalism.)

Honouring the divine ruling family
In reinvigorating the long tradition of status-driven sneering at commerce and merchants, Marxism proved to be deeply reactionary. Indeed, pervasively reactionary.

But dressing up old ideas in allegedly "cutting edge" language and declaring them progressive has continued to be a fun game for intellectuals. Consider post-moderism -- indeterminacy of meaning was a hot topic for Socrates and the boys. As it was in medieval discussions of the problems of translation. (One Orthodox theologian is supposed to have joked that he could not translate the doctrine of the Trinity from Greek to Latin without committing several heresies.)

They might also consider how "progressive" al-Ghazali's embracing of what we would now call Humean scepticism proved to be for Islamic science.

I understand the enduring status-appeal of sneering at commerce and merchants. But watching a first class mind trip over its analytical framework -- as in Tilly's Coercion, Capital and European States -- remains an unfortunate sight.

[Cross-posted at Skepticlawyer.]

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