Appendix # 1: Imagination in a Market Society

In a market society, things are first dreamt then they are produced sold and bought. That things are first dreamt is not obscure nor is it particular to the market organization. As thinking organisms, humans by their nature imagine the design of the objects and institutions they produce before they go about producing them. This first kind of imagination is simply the step of planning that we go through in the process of producing making the things around us. The act of planning out a physical form before going on to produce it is what many see as the characteristic that distinguishes human production from that of animals.[1] But while imagination might be one thing in the individual act of production, as soon as individual men step forth into society, their collective plans take on another form. In an economic setting, men first imagine and second produce a good or a service. But in the market economy, a more elusive act of imagination occurs when a good is made into a commodity - when it is bought and sold. To become a commodity, a good is prepared by the seller as an object that has value. To be bought as a commodity, the good and its promises are accepted by the masses as a valuable entity.

Sometimes the act of thinking about a commodity is as mundane as the promise that a farmer makes about the quality of his grain, or the value a supermarket customer sees in a familiar label on rice. In this type of a transaction, the promises made by a producer and accepted by a consumer concern the use value or utility of the good: the value obtained when the material is put to use or consumed. In the parlance of political economy, these mundane commodities might be defined as those for which use value sets an equilibrium value at which the good is exchanged.[2] Even the transaction of such mundane commodities already requires a complex process of collective thought so baffling that modern thinkers continue to describe it in terms of Adam Smith’s ‘invisible hand.’ Markets for commodities like grains and rice are mundane in that they are relatively well understood by microeconomic models of the costs of supply and the utility of demand. But despite the modern quantification of microeconomics, there remains beneath the theories a mystical quality even in the most simple of markets. Only a true cultural conundrum[3] could sustain an explanation as imaginative as Smith’s ‘invisible hand’ among the scientific aspirants of economics.[4]

Yet no real transaction ever takes place in a microeconomic marketplace. From the perspective of the modern economist, this realization stems from the view of quantitative microeconomics as a set of models that only approximate the real nature of economic phenomena. From the viewpoint of a political economist without the scientific aspirations of the modern economist, this same realization stems precisely from the impossible nature of the mythical ‘invisible hand.’ But for the purposes of this study, it is valuable to differentiate between those ‘mundane’ commodities, which are best considered microeconomic, from other more complicated commodities, which only a delusional scientist or a foolhardy philosopher would think of as mundane. This second type of commodity may be defined as one whose transaction is so dependent on the state of the economy as a whole that its values are nearly independent of the costs of production and the utility of consumption. Whereas cognitive planning is constitutive in the production of all physical things, and all commodities possess a certain mystical quality, it is in the transaction of these complex commodities that the economy comes to rely on the assurances of a distinct collective imagination.[5]

In the modern economy, the practice of investment is so routine that the purchase of stocks and bonds often takes on the language of consumption. In one sense, the notion of consumption is relevant even to commodities that will never be consumed: exchange value allows us to think about commodities as possessing an equivalent utility even if they have no material use. Investments have a finite monetary value set by risk and potential gain that can be transferred in the consumption of any other commodity in the market. Modern economists have developed a suite of theoretical mechanisms that quantify confidence and uncertainty in the same way that one might quantify the use value of a sack of rice. These tools are useful to professional economist because they allow him to speak about complex commodities with the same language as Gregory Mankiw when he describes the economics of guns and butter in Principles of Economics.

Since the actual value of an investment can arise only when it is exchanged for mundane goods with actual utility, we might call economists expectations about the value a statistical value: it is the result mathematical calculations that quantify each uncertainty to produce an estimation of the utility the investment can purchase. Although the calculation of a statistical value requires its own sort of imaginative process, mathematical logic gives endows the process of estimation with a certain confidence. But while the investment can stand on its own with a certain statistical value, when it is thought of in relation to all other investments its value melts into the collective imagination. Taken as a whole, confidence in the market value stands not upon real utility or mathematical rigor but drifts like a dream in society.

[1] This notion of the imagination implicit in the productive process comes from Marx’s Capital Volume 1, Chapter 7 Section 1: “A spider conducts operations that resemble those of a weaver, and a bee puts to shame many an architect in the construction of her cells. But what distinguishes the worst architect from the best of bees is this, that the architect raises his structure in imagination before he erects it in reality. At the end of every labor-process, we get a result that already existed in the imagination of the laborer at its commencement.” Available online at http://www.marxists.org/archive/ marx/works/1867-c1/ch07.htm

[2] Use value and exchange value have a long history in the various traditions of Political Economy. In this context, use value is in line with the 19^th century definitions of Marx or Ricardo and also 20^th century conceptions of utility.

[3] For an indulgence in the mystification of what I call mundane commodities, one need look no further than Marx’s essay on Commodity Fetishism in Capital Volume 1. However, as we will see later on in this section, Commodity Fetishism is really quite a different notion from that which I am developing in this piece.

[4] For the manifesto of the modern aspirant scientist, read Milton Friedman’s “The Methodology of Positive Economics,” in Essays in Positive Economics ed. Milton Friedman, 1953.

[5] While the distinction between mundane and complex commodities is made in order to develop a theory of imagined confidence, it is maintained as an arbitrary division. Any good can take on this second more abstract form because any market can be the subject of speculation. There is no such thing as the mundane commodity. However, the values of many commodities are dominated by the microeconomic forces of supply and demand and are only rarely subject to more abstract forces of speculation.

Defending the Rhode Island 'Experiment' - Part 1

Capitalism and social control in the Eighteenth Century

Jeff Knowles

Preface:
Here comes your sailor, child of Rhode Island, to decry “the people” ashore. He is a resident of the State, but the son of two immigrant sailors who settled there after decades of serving the rich on expensive yachts on the Atlantic. He purports to know the logic of that very system he lives and breaths. And yet he claims no independence from that he observes. His history is the transition from child of the Atlantic to student at an institution founded by the very men he implicates in this piece.

‘I was told once that colonial sailors would refuse to learn to swim. If they fell into a stormy sea, those sailors would rather submit quietly to a watery grave than struggle aimlessly for survival. But would not most men rather live quietly then question the roots of their worlds? Those social mechanisms, the social the locks and keys that keep us confined in who we are, they will never be escaped unless we plunge into the sea, battle it wave for wave, and emerge letting whatever can be, be.’


Introduction: an ideology of “freedom” and exclusion


In the summer of 1739, some of the people living in Newport Rhode Island gathered at the Baptist Church to hear their minister, John Callender, speak about the “Civil and Religious Affairs of the Colony.” In an unwavering history, the Reverend told of Roger Williams and Anne Hutchinson and how they settled a colony predicated on religious freedom. And with a scholarly confidence, Callender assured his congregation that Rhode Island was the home of a liberty so remarkable that “I do not know if there was ever before, such an instance as the settlement of this Colony and this Island.” While Callender made great claims about freedom in Rhode Island, to understand what these words meant at the time, we must know more about Callender and the congregation he was speaking to. Although we do not know exactly who was in attendance at church that summer, it is clear that Callender’s audience did not constitute “the people” of Newport, if that larger entity has ever existed. On the other hand, Eighteenth Century Newport played host to a pluralism of religious and ethnic groups who each called the city home. In addition to the Baptist Church, there were at least five other places of worship in Newport, each catering to a subpopulation of residents. What is more, these institutions represented a wide selection of religions and a resident of colonial Newport might have attended Trinity Church, Tarro Synagogue, the Quaker Meeting House, or in later years, the African American Unionist Church.

Thus the people of Newport included Anglicans, Baptists, Quakers, African Christians and people of other religious identities. As Callender discussed in this “Century Sermon,” which he later published as An Historical Discourse on the Civil and Religious Affairs of the Colony of Rhode Island, the colony was also home to a number of ethnic groups including European whites, free blacks, enslaved blacks, Native Americans, and immigrants rich and poor from throughout the Atlantic Ocean. In telling of the Colony’s founding, Callender argued that freedom was characteristic of Rhode Island compared with other places in the Colonial Atlantic. In Callender’s words, Rhode Island was an “experiment” with a novel system of government, which in contrast to past societies entailed an “unprecedented” degree of individual freedom through a secular state. In this way, Callender suggested that the colony had its roots in a “Liberty of Conscience.” But Callender also contends that this religious freedom was possible only because the people of Rhode Island submitted to a “civil government,” which depended on their major “consent” and “obedience.”

Even while embracing freedom of spiritual practice, Callender lamented that a secular state brought the demise of the social rules that originated from the laws of the church and the “Spirit of God.” While Callender considered “wicked [any] attempt to force men to worship god in a way they do not believe, and the restraining them from worshipping Him in a method they [desire],” he also noted that the end of universal religion left room for social disorder. This second concern is associated with a theoretical realization: the dissolution of universal, state mandated religious practice negates the power of religion to structure social life. In a religiously plural society men and women with divergent religious beliefs must find a secular means of defining acceptable behavior, new ways of evaluating each other’s actions, and at the very least, a new understanding enduring social norms. That Callender recognized these changes indicates that he saw religion as more than the worship of god, but also a route social identity, the communication of standards of behavior, and an assurance of order. And the conclusion that Callender drew from observing this aspect of “the experiment” was that to “flourish, the civil state must be secured by ever so many penal laws, and an inquisition to put them in execution…by civil officers chosen out of every religious society…and who preserve public peace.” To replace the order of religion, Callender thought that society must imbue the civil state with laws that put in code those same standards of behavior that before, were encoded by religious culture and enforced by religious governance.

For a historian interested in extolling the American Experiment, Callender’s work might be taken as an early expression of the Revolutionary American Ideal. Without taking up the national party line however, one might also associate Callender with the American Revolution by identifying in both a shared mode of thought. Originally from England and educated at Harvard College, Callender was likely schooled in the thought of those seminal Liberal thinkers who are frequently attributed as the inspiration for the American Revolution. The Historical Discourse is written in the image of major theoreticians such as John Locke and Thomas Hobbes whose works are the classics of the Liberal Cannon. Indeed it was on the view of Rhode Island as a Liberal society that Callender argued that strict civil codes of conduct were essential to the preservation of order. Whereas earlier forms of social organization included well-defined social roles: priest and believer, lord and vassal, aristocrat and peasant, the ideal Liberal Society could stay ordered as long as it maintained the universal participation of individuals who conformed to the ideal of a Liberal Actor. This ideal had its origin in the fear of disorder: Hobbes and Locke identified a liberal society by contrast with the “state of nature,” the chaotic conditions encountered by some ideal type yet impossible ancestor. From this thought experiment, liberal thinkers speculated that any rational actor would submit to compliance with civil law for protection from chaos and disorder. Reasoning through Social Contract Theory framed the preservation of order as the principle function of civil government.

Callender invoked this social contract argument when he explained that in Rhode Island, “new comers promised to submit themselves in active or passive obedience to all such orders and agreements as shall be made for public good of the body, in an orderly way, by major consent of the inhabitants.” And he suggested that religion has no place in a Liberal government: “to prevent our religious difference from being carried into civil affairs, let them never make factions in government.” These types of beliefs place Callender in line with better-known ideologists in early America because both embrace the tenants of Classical Liberalism. In his role as minister of a church, Callender directed his thoughts to his congregation; but when he published his work as An Historical Discourse, Callender thought he was talking to “the people of Rhode Island.” With this in mind, the modern observer might take Callender’s “people of Rhode Island” as the same “the people” who would be declared independent 35 years later.

But to truly understand what Callender’s words meant to people in Rhode Island, we must return to the question of his audience. To begin, any modern observer would be quick to point out that “the people” to whom Callender spoke did not include everyone present in Eighteenth century Rhode Island. Following work in the last two hundred years of American Historiography, one can make the immediate observation that entire categories of people were excluded from life in the Liberal society by categories of difference constructed out of traits primordial to their being. African slavery and Native persecution are fundamental tenants of American history and Rhode Island was exceptional only in breadth of its exploitation. The traffic of African Slaves was so widespread in Rhode Island that it is best considered to be an industry: it was a source of wealth for the rich and also a source of subsistence for the poor. Further, Rhode Island, like other European Settlements in North America, depended in its existence on the displacement of those native to the land. Yet these forms exploitation were maintained through social mechanisms that were celebrated, not hidden, by those who perpetrated the oppression. Men like Callender truly believed that Blacks and Native Americans were innately different from white Colonists and that their inferiority precluded them from a place in the new Liberal society. Expressed in the same breaths as the praise of liberty, racial oppression was no secret. The perception of racial and ethnic difference was so engrained that oppression seemed normal.

However, ethnic subjugation and racial enslavement were not the only forms of exclusion in Eighteenth Century Rhode Island. Beneath the religious pluralism Callender claimed in his discourse, there was actually a pluralism of oppressions. Yet unlike the racial carefully structured logic transformed the very freedoms granted to some members of the community were the pillars of a system that excluded others who did not fit the mold. While Callender spoke of universalism, he was simultaneously taking part of a mission to restrict the fruits of the new society to a privileged few. In fact, Callender was a member of a highly exclusive group of the most powerful merchants in Newport who regularly met in a club they called the “Philosophers Society,” or sometimes the “Society for the Promotion of Knowledge and Virtue.” And while they discussed the virtues Liberalism, this tightly knit group of merchants promoted a style of living whose virtue they defined in contrast to the “intemperance, idleness and…indigence” of a lower class that was not welcome in the new society.

In a community whose oldest families had immigrated just 100 years before, leaders imagined a strong local identity and spread paranoia about anything foreign. Callender and his association of philosophers told the people that the greatest threat to their well being was an invasion by the transient poor, the lazy vagrants, and the drunken sailors who “infected” other cities. In town meetings and in the Newport Mercury, residents were told to fear strangers. And to protect local residents from this perceived threat, town leaders implemented strict laws against immigration and a legal process by which unsavory locals could be “warned out” – exiled from the town – or “bound out” – sold into servitude. Advocating a particular way of life was not enough to maintain control of social norms: non-conformers had to be legally banned from entering the towns.

But a problem in the merchants’ view of their colony was that despite their perception, Rhode Island was a community of immigrants and sailors. Localism was imagined because the community was never a stable group of locals, but remained in constant flux. From the 1740’s through the revolutionary war, half of the population in Newport had moved to the town within ten years, which indicates that only half of the community resided in the city for a long term. Many of the merchants were themselves recent immigrants from elsewhere in the Atlantic. And despite their distaste for the ideal type “drunken sailor,” the city was in fact dependent on the sea for the crucial function of facilitating maritime trade in the Atlantic Economy. The ruling class in this port town were the owners and captains of ships, travelers from better established economies, or aristocrats with family wealth and business ties. The owners of ships also owned factories ashore, and the elite group was so tightly put together that the economic well being of all of the residents in Newport and Providence was dependent on the actions of a small group of men. This new structure of control brought many apparent contradictions in the lives of Rhode Islanders at the time: merchants were at once philosophical and oppressive towards the lower class in society, women enjoyed a new type of economic freedom but were also exploited in new ways, free blacks lived in unusual liberty for the period but the colony also took a central role in the production of black slave labor as a commoditized good.

Further, simultaneous with the boon of maritime trade, sailors from Newport also took part in what Markus Rediker describes as a Atlantic wide class war with ship Captains and Owners. Rediker argues that Atlantic merchants perceived themselves as fighting a moral battle with intemperate sailors and other groups of indignant or lazy poor who threatened economic success and moral conventions. In opposition, the working sailors who provided the labor power for the maritime trade flaunted the morals and standards of behavior that were promoted by leaders ashore. But Rediker does not explore is the ideological basis of the merchant’s thought, nor does he identify the ideological apparatuses through which they acted. Consequently, he does not study the means by which the merchants battled their “many-headed hydra.” This study is the attempt to construct a more cohesive understanding of Callender’s audience, and how some people were kept out of Newport while others were let in. A byproduct of this study might be the inclusion of a class of people in the colonial period into a history that they helped to create. But “bringing agency” to this class is not my goal and is a methodology rather than a motive. The various oppressed groups in colonial Rhode Island were not conscious of their historical actions, and they consisted of diverse people who rarely came together as one. One of the reasons that the various proletariats in Rhode Island stayed separate was that each lived different struggles with the particular de facto aristocrats in its economy.

I study just a few of these groups, but in so doing, I hope to identify an exclusion that was implicit in the “freedom” of early Rhode Island that made “liberty” contingent on the acceptance of Liberal mode of life. Sailors and other transients in Rhode Island cities and towns were expected to live up to a strict moral standard codified in legislative law, and kept on the boarders of local society by means of a capitalist exploitation. Even though locals were taught to perceive it as a foreign threat, the Atlantic Proletariat was inseparable from the poor classes who lived for years at a time in Newport and Providence without ever establishing the kind of economic roots necessary for a secure place in the society.


In some ways, Rhode Island did pioneer a democratic system that would later be expanded to encompass the union of states. But more importantly, Rhode Island served as an early experiment with a type of civil society, techniques of social control, and standards of communicating expectations of behavior that would persist in the Nation after it declared itself independent of European Hierarchy. And though many of the specific exploitations explored here in 18th Century Rhode Island are no longer prevalent in the American economy, it is impossible to separate freedom and liberty as they exist in America today from the exclusion that was its genesis in 18th Century Rhode Island. Whenever a modern observer references the traits of liberty and freedom expressed in American history, whenever a politician stands on a marble stage and calls upon the ideal founding father, he or she is playing into the system exclusion that made those liberties and freedoms possible. We can not call upon past American Ideals without also waking “nightmares of [our] past.”

Slavery and Capitalism at Sea

Race, it seems, is a topic of new light in recent American discussions. Some reading that I was doing recently suggested some important implications for the subject as a whole. In an enlightened account, Emma Christopher writes Slave Ship Sailors and Their Captive Cargoes as an analysis of race and class aboard the ships helped to synthesize racial divisions in Northern America. An historiographical argument, the book is a persuasive demonstration of the complexity and introversion of the relationships forged out of necessity on the 18th Century Atlantic. While her's is an impressive story of the dynamics of racial politics in miniature, Christopher does not sufficiently reject race as a means of analysis.

The economic structures of the era made slave ships selective towards men with an inclination towards brutality, perversion and pain. Not only the lowest of the low on the economic ladder of society, slave ship sailors were also likely to be socially deviant. Like in any horrid enterprise, the utility obtained by the slave ship sailor was not that by his captain. On the contrary, Slave sailors frequently came out of their transatlantic trips worse off then they went into them. Some of the men on these ships were literally slaves, chartered from their owners. As Christopher shows in the text, the sailor was in many cases the man "who had no other option."

Yet there was likely another trend in the capitalism of slavery. Those men who were the most willing to accept the conditions of slavery had a selective pressure towards employment in the trade. Yet who were these men who would be willing to endure the lowest of the low, but men whose liberty was already consumed by the western economic condition. After all, slavery is only the most extreme example of a long list of human offenses that really goes back as long as human history. Surely Christopher subscribes to the notion that, as she hints many times in the book, the emergence of "Freedom" in American society was in some ways a result of the nation's entanglement with the biggest unfreedom. Here we can get beyond the normative question of about the ethics of slavery.

I challenge you to find two people who would argue on that point. What rather we should ask is a question of the norms - in contrast with the normative values - in society at the time. In many ways, the slave ship sailors were the victims of social structures of oppression. Be they white, black or Queequeg, sailors were classed as an inferior group throughout the world. The men were renegades, but they were also castaways. Castaways of a global capitalist development. Slave ship sailors were like the abused children who go on to violate future generations. They were the product of the wrong of man; it is no wonder that they were particularly good at it.

We find in Christopher the interesting observation that the slave ship sailor was often treated like a slave. But what needs to be asked is whether these men were pathologically altered by the abuse. The horrid conditions on ship must have been enough to make sane men mad. So if a slave ship sailor were of any pathological character, it seems little of a stretch to say that the conditions at sea could push him over the edge into full insanity. Like any large group of people, the sailors had to have among them some insanity. This is a statistical truth. But i argue that the profession itself may have attracted people who were willing to endure abuse from above as long as they could reciprocate it on people below.

We already know that ships and the sea attracted those of unstable inclination. Who said it better than Ishmael when he tells us that "whenever I find myself growing grim about the mouth; whenever it is a damp drizzly November in my soul; whenever I find myself involuntarily pausing before coffin warehouses and bringing up the rear of every funeral that i meet; and especially when my hypos gets such an upper hand of me that it requires a strong moral principle to prevent me from stepping in the street and knocking people's hats off - then I account it high time to get to sea as soon as I can."

Clearly Melville's version of the ocean is the kind of place that makes men go insane. But on page one, we find the direct notion that men go to sea precisely because they are insane. Next to a slave ship, Ahab's Pequot seems like a bastion of level headedness and social ethic. The sheer conditions on slavers were so foul that they must have made men crazy. But the men themselves must have been somehow tolerant of the horror.

Just like Ishmael seeks the truly insane to comfort his depression, many of these men were in a subtle way seeking the ultimate unfreedom to overshadow their own oppression. But I hold both of these are the same. The insanity and the slavery, the economic structures of control and the sailors fetish for whip and shackle, these were all part of a unified social structure that in this particular case, put the most unstable at the helm of an economic construction of the category of race.

It is little mystery that slave ship sailors divided their consciousness so between their attachment to black members of their crew, and their participation in the oppression of African slaves. Their place in the capitalist system made them both strangely resistant to and the ultimate product of the capitalist ideology.

Slave ship sailors seldom made free contracts to set away to sea. Rather, they frequently came to their start in the industry by waking up to its stench when it roused them of a hangover. As Christopher notes in the book, many slave sailors were crimped onto their first voyage by gangs of pimps and gamblers who sold the men to the captains of ships. At times, black men from all corners of the Atlantic made up to 1/5th of the slave ship crews. But even men whose skin color did not preclude them from the pursuit of liberty and happiness, these white sailors were also slaves to their profession. Their captains were also captains of a capitalist industry devoted to oppression.

But to stay competitive, a slave ship captain knew he had to pick his crew wisely. Just like Ahab knew that the best way to maintain control over his men was allow his own madness to its self consume them, slave ship captains chose to make their ships ripe with perversion. Christopher notes that even in an epoch that normalized abuses that would be prosecuted today, an even in an industry whose brutality was ritual, slave ships stood out as uniquely disturbing. As hoards of captured Africans suffered in the hold below, the sailors on deck remained in a cacophony of exploitation. Murders were common, rape was rampant, and each man lived in such a fear of his comrades that it surpassed the exhaustion of life at sea.

One prevalent trend that Christopher observes in the history is that slave ship sailors had no intrinsic reason to believe themselves different from the blacks in their crew. But these men, selected for their perversion and brewed into insanity, were convinced to draw a line where none existed before.

These were the men who chose "race" as a discourse in America. Slave ship sailors were the victims as well as the ultimate perpetrates of oppression. These men were socialized to be monstrosities by an ideology of domination. It is little wonder that these men, oppressed by the perversions of a Capitalist society, were themselves perverse. But why do we today subscribe to a category developed as an ideological project and implemented by men on a course of insanity. Slave ships may have only been a microcosm of early American society, but even if "race" had origins other than the sea, it is nonetheless a construct of mania.

The madness has corrupted American history, and I do not deny that it is still at work today. Many take this as reason to reinforce the importance of racial discourse in modern society. But why do we continue to subscribe an insane designation that descends from the very oppression we wish to overcome?

Capitalist Jack and The Adventures in Fiscal Control

Rumor has it that a capitalist beast has broken out of prison and is wreaking havoc on wall street, and as Mr Obama reminds us, Mainstreet too. Well, I don't know a Mainstreet. I guess i have decided that maybe the shady corners are the set for me. I don't wanna act in the middle of a crowd. I run off there from time to time, when sun sets for a cold winter, and freezing white caps freeze to ice upon my soul. Then one day, my life changed for ever.

I read a four and three quarters hand report, that was 72.3% honest, 22.5% exaggeration, and 5.2% blatant lies. It was from a man who just hopped a train up from new york. I don't know whether he paid the ticket. A fellow can do it these days. Even the Conductor is so exhausted from Capitalist oppression that if you time it just right, you can hop from seat to seat and avoid him. I mean the man works on a long train, so it is conceivable that if you start out just a few in front of him, you can make it most half way up the coast before he gits from one end of the train to the other. And if a fellow been broke. If he has been robbed by humanity. If a fellow lives a life of a scavenger, making non but tacit decisions, he is left with the worst kind of oppression, even if he has been promised a free contract. Forgive me, I have traveled off the course again.

I really don't think my words an get his story across. Why a sane man might think me gone around the bend if i were to write a thing like that. And if a Christian Dude heard me, he might think me sent here by the devil. He might even wish i were aborted. I mean, this crab surely would cut at this man's ankles, and I think he'd be so far in the ass of his fundamentalist ideology, that the thing would cut right through the bone.

Well like I said, the man didn't speak too well. He could barley write, spell and couldn't rightful count neither. But as much as you might think it the work of a psychotic, the man is no less a part of our sinking souls. So I best show you his picture.

Tough Time for...Neoclassical Economics?

The New York Times reports "Tough Times for Big Economies" ; across a variety of economic systems, it seems that large, unregulated market economies are unstable in ways that traditional economists seem to argue that they never should be.

On a practical level, economic advisers who would normally shun nearly all forms of government intervention, are facing the fact that they are going to have to make serious, structural investments across many sectors of the economy. The American government is planning to spend in the region of 700 Billion Dollars to buy out failed credit and investment firms. The Chinese government has just announced a plan to invest over 500 Billion dollars in their economy. Further, it seems that many other big governments are going to have to increase spending and regulation in their economic systems.

On a theoretical level, facts are not supporting models of micro and macro economic behavior. American Economists, most of whom believe in some variant of the Chicago School, are now reconciling an investment that supersedes every argument they have made about deregulation in the last 60 years. How can one argue that health care, welfare, or rent control are inherently flawed and at the same time support a bailout that trumps gross private spending those sectors?

Modern teaching in economics argues that in order to avoid the dreaded "dead weight loss", deregulation should be applied indiscriminately to all aspects of modern economic life. Their take on International Relations for example, relies on the assumption that free trade, the market mechanism of ir, can bring nothing but good. Read the standard text of all introductory economics classes, Mankiw's "Principles of Economics", and you will find a 150 page argument that free trade is an absolute necessity in economic life. Not only does Mankiw suggest that free trade is unavoidable, which may be true in a globalizing society, he also predefines it as good. This is an example of a larger rule that governs the way many economists operate: if an economic model is mathematically satisfying, it must also be normative enlightening.

Its going to be interesting if the prevalent economists in our financial, government and academic institutions continue to have such esteem for the free market on a micro economic level even as they spend in unprecedented levels on the economy writ large.

Crisis: institutions and communication

To my comrades and me, the recent Financial Crisis has brought such chaos that the stability of society as a whole seems suddenly in question. In a wave of fear, confusion and lies, the value of stock in once prestigious financial institutions has plummeted, promises from banks long considered beyond reliable have defaulted, and the words of authority hitherto taken for granted have been proven false. To a group of college students already critical of modern western capitalist thinking, this crisis in New York and in Washington has adopted the long heralded image of revolution. With the strongest economic powers, the owners of the very capital that powers production, seeming to collapse upon their own foundations, traditional thinking has fallen apart.

While I do not realistically claim that the modern capitalist system is headed for an inevitable decline, I suggest that a new paradigm in social analysis might help to explain phenomena that classical economics fails to notice. It is my belief that the cause of instability like the current Financial Crisis lies not in any single policy decision, bureaucratic loophole, or business model. Each of these might explain the behavior of a single actor in the economic system. Laws, policies and plans can certainly change segments of our system. However, as modern means of communication, organization and commerce take an increasing precedence in our economic and social lives, the actions of single institutions are decreasing in relevance. The impact of electronic technology has made the relations of production and consumption so complex that these become sort of null terms: any attempt to break the system into production and consumption seems into actors fails at the onset. As our relations of production and consumption have grown in complexity, the old divisions – the divisions of labor and the divisions of consumer – turn upon themselves.

In a system so complex and interconnected that it cannot be separated into pieces, it is only the routes of communication – the language, voice and reasoning that informs economic decision making – that can lead to a cohesive description of current events. What is necessary is a communicative theory of economics, politics and society. What we need to do is measure the exchange of information, explain actions by the connections between their actors, and listen to the general tune of modern life. In the age of networks and global communication, we are uniquely able to connect with the human element of society. As communicators, we are all on an equal footing. The traditional power structures that separated rich from poor, elite from the masses, and even man from state collapse when we are all speakers.

Though the ultimate objectification, modern network life has given a net by which we can elevate ourselves above the material world. Only through an understanding of communication can we seize our liberation.