Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

Neither Communist nor Capitalist, I am a Socialist.

by ManfromMiddletown Fri Mar 23rd, 2007 at 09:56:58 AM EST

This is something I wrote for my political economy class.    It was when I was writing this, that I realized that I enjoy writing and talking about political economy far more than nationalism.  Ceterus paribus this is where I see my academic career headed.  Earlier I tried to distill this further into seperate diaries.  Like cognac, at some point further distillation deprives the thing of its essence.

At the heart of the matter is the recognition that the social order is antecedent to the economic order, and that the preferences of formal rationality , of which utility maximizing economic behavior is a deriative, only have meaning understood in the context of the substantive rationality, the social order which is internalized as right and wrong, in which they are embedded.  Capitalism and Communism both fail because they seek to disembedd formal rationality from its substantive context.  The backyard furnaces of the Great Leap Forward and climate change denial derive from the same madness, the disembbeding of formal rationality from its substantive context.  I'll let you read the rest, and judge for yourself.

The Normative Implications of Market Ontology

Few subjects in the study of human societies are as contentious and timeless as the proper division on the life of a nation between the public and private spheres. In examining the proper role of the state in the economy as seen by Smith, Weber, Schumpeter, and Polanyi, first it is necessary to outline the ontological basis upon which these authors base their understanding of the economy. The most pertinent implication of the ontological basis of the authors' arguments is that it may grant what are fundamentally normative arguments the appearance of a foundation in empirical reality.  In the words of a recent article commenting on the impact of contemporary undergraduate economic education on policy preferences, writer Christopher Hayes observed that "normative arguments became positive ones." 1   The resurgence of neo-classical thinking in the wake of the post-war economic slowdown and later collapse of communism represent a shift away from what had been till that time a trend towards consensus on greater state involvement in the economy to mitigate the social impact of market capitalism.

The Anglo-American embrace of the "self-regulating market" in this period and the wider dissemination of the precepts of market liberalism best demonstrated by the Washington Consensus  are largely based upon a Smithian ontology at odds with the Keynesian paradigm dominant in the immediate post war period.  Consistent with the ontological understanding provided by Adam Smith in The Wealth of Nations, the Washington Consensus 2 rejects state intervention in the national economy, arguing for lazziez-faire state policy in order to allow individuals to maximize their utility.  Smith sees the ontological basis of the market economy in what he calls "the propensity in human nature to exchange" and the division of labor derived as a consequence. 3  In Smith's understanding of human behavior man by nature seeks to maximize utility, and it is through the aggregation of individual utility maximizing behavior that human economies develop.  The ontological basis of economic behavior and institutions as enunciated by Smith is endogenous, deriving from individuals acting of their own volition.

    This ontological understanding, that economic organization derives from the aggregation of individuals acting to maximize their utility, grants the unregulated functioning of the market democratic legitimacy.  As democratic regimes are legitimated because they function through the aggregation of preferences freely expressed with ballots, so does the market. And in several important aspects the market supercedes the election as a measure of public preference, making it a more liberal institution through which to order society than an election. First, measures of public preference captured through the use of egalitarian elections incompletely capture the preferences of a population because they represent a punctuated estimation where the market allows public preference to be expressed on a near real-time basis.   Second, where elections as measures of the aggregated preferences of a population account only for dichotomous preference, markets are able to account for intensity of preference through the price mechanism rendering a far more transparent estimation of the true preferences of a given population.  Third, where the election bind minorities to the will of majority, markets as the product of voluntary exchanges between legally equal parties, allow individuals to be free of external coercion as exercised by the democratic state.

In accepting the ontology presented by Smith, the measurement of public preference through democratic elections becomes illiberal, at least in reference to the superior mechanism provided by the market, thus state intervention in the economy represents unnecessary coercion.  Because the basis of the market in Smith's understanding is the aggregation of individual preferences, the construction and maintenance of economic institutions is endogenous, and "self regulating."  Exogenous interventions by the state interfere with the operation of the market decreasing the economic output of a population, inhibiting the liberty of individuals, and making them less well off.  Expanding upon the notion of the endogenous organization of economic life, inherent in Smith's ontology is the assumption that man in a state of nature would organize economic life solely around his acquisitive nature. That more is better than less, ceterus paribus; man will prefer economic institutions that provide him more material possessions rather than less.

Smith operates on the assumption of the liberal organization of collective institutions that all men are of equal stature and possess equivalent information, and it is in this that Smith concedes to state intervention in order to ensure the children of the common man are granted rudimentary education.4  Intervention by the liberal state is only justified in cases where the foundations of liberal order are imperiled. Under the free operation of the market, the autonomous and egalitarian intercourse of individuals allows them self-determination more so than under market regulating institutions created under the guise of the democratic state. Personal liberty is instrumental rather than intrinsic, thus Smith's final objection to state intervention, that the labor of the state is unproductive and must be supported by revenue.5  

    The conception of personal liberty, and the consequent perfection of the liberal order, as instrumental rather than intrinsic lays the foundation upon which the perceived illiberality of the state is constructed.  State intervention in the economy is illiberal not only because it inhibits the natural tendency to exchange, diminishing the total output of a nation, making all less well off. Also, because capital and labor employed under the aegis of the state is unproductive, the revenue needed to support state institutions must detract again from the total wealth of a nation. Thus, the expense of state intervention is not only the opportunity cost incurred by the restriction of the natural propensity to exchange, but also the revenue subtracted from the wealth of the nation in order to sustain the state. By subtracting from the wealth of the nation, the extraction of revenue by the state detracts from the utility of citizens, this when personal liberty is seen as instrumental the extraction of state revenue is by default illiberal. When personal liberty is instrumental, the diminution of the state results in the increase of personal liberty.  The ideal liberal state is that which intervenes least in the endogenous, democratic operation of the marketplace, imposing the least demand for revenue, constituting something akin to feudal corvee obligations as labor is believed the basis of value, upon its citizens.  Inherent to the ontology of Smith is the belief that the construction of economic institutions, and progress, is inherently the result of endogenous action.

    While taking issue with the social sustainability of the unregulated market system, Schumpeter accepts as a first principle the endogenous construction of economic systems.  Schumpeter identifies capitalism as an evolutionary phenomenon defined by the process of creative destruction, the fundamental impulse of which is driven by endogenous innovation as found in the application of new methods, markets, and materials to the underlying natural structure of the market. 6  Schumpeter takes issue with the operation of the capitalist system not on economic, but rather on social grounds.  While not seeing exogenous social constructions as running through the capitalist system, Schumpeter does see that capitalism is sufficient to increase the total output of a population, thereby increasing liberty as this is defined in instrumental terms, but unable to overcome the exogenous collapse of protective institutions.  The death of capitalism results not from economic incapacity, instead resulting from exogenous social revolution derived from the social consequences of economic dislocation.7  

Schumpeter is a reluctant socialist, believing that in order to preserve the core of capitalism, i.e. the process of creative destruction, it is necessary to ensure that it not generate within concurrent social process such antagonism as to cause its destruction.  To allude to a biological parallel, in order to survive the human body must process glucose to generate the energy essential to life through a process of creative destruction however the excessive consumption of glucose causes the other organs of the body harm.  As the body is exposed to excessive levels of glucose, it self regulates through the production of insulin, this corrective response, if excessive, makes impossible the processing of glucose, causing the slow shutdown of body functions.  In extreme cases, death ensues.

It is in order to prevent this sort of autonomic response that Schumpeter argues not only for state intervention in the national, but also the integration of various aspects of economic life into the machinery of the democratic state.  Where Schumpeter willingly accepts that economic life is constructed endogenously with the autonomy of utility maximizing rational actors constrained only by market imperfections and imperfect information, he calls into question the classical model of democracy whereby the electoral action is seen to represent the same manner of preference revelation as in the market.  The inference that Schumpeter draws from the modeling of electoral action in democracies as being constituted more transparently of the act of delegation rather than preference revelation is that democratic practice falls far short of the classical democratic ideal. 8  

Electoral action in representative democracies is not constructed from the aggregation of fully actualized preferences of the constituent members of a population, rather electoral life is constructed as a competition for leadership in which individuals delegate their authority to those they believe will grant them the greatest personal gain.  In this sense the essence of justice in a political system is not the liberal ideal of personal freedom to choose but the more mundane realization of personal gain by whatever means that may come. Thus, through the conceptualization of personal freedom in instrumental rather than intrinsic terms, the ideal of classical liberal democracy yields to benevolent technocracy.  Personal freedom constructed in instrumental terms is concerned less with agent than outcome, so long as individuals are able to maximize utility they are perceived as free.  State intervention in the economy is necessary to save the soul of capitalism, the process of creative destruction.  According to Schumpeter, while preferences are formed endogenously to the individual, it is possible for the execution of individual preferences in the economy to occur exogenously to mechanisms operating at the individual level.  Where Smith and Schumpeter accept that the market economy is the result of endogenous action, the development of the market economy resulting from the structural "propensity to exchange" and utility maximizing effectively creating a single equilibrium that is determinative, Weber contests this presentation.

In describing the "economic sociology" outlined by Weber in his Theory of Social and Economic Organization, Talcott Parsons writes that Weber believed that multiple equilibria are possible in the construction of social institution, and further than human institutions are inherently instable. 9    Weber studies institutions in order that he might through a comparative method distinguish social phenomena that are fundamentally invariable, which are in a sense structures, from such variations as exist in the empirical world, these being constituted as institutions.  Where the ontology of Smith and Schumpeter operated from the first principle that the market as an institution derives from a structural tendencies to exchange and the rational action of utility seeking individuals, Weber sees underlying social institutions, not structures, as the causal mechanism behind the rise of the market economy.  In Weber's understanding, the rise of the market economy results not from the propensity of exchange, but rather from the exaltation of the money unit, facilitating the social adoption of formal rationality. 10  

Weber disputes the presumption that individual economic action results from the utility maximizing behavior of individuals, believing that individual preferences are to some degree socially constructed by the prevailing values of a society.  Further markets as human institutions are constructed exogenously to individuals, resulting not from the democratic aggregation of individual preferences, but rather from the subjugation of substantive rationality to formal rationality due to the exogenous influence of the development of capital accounting. Weber distinguishes between formal rationality and substantive rationality by identifying formal rationality as that which is calculable either in money or in kind, while substantive rationality is constituted of non-calculable values, such as social justice or equality. 11  Weber holds that there is no original economic state of nature, thus negating the notion created by Smith and Schumpeter that political control over the economy, as in intervention by the state in the operation of the market, constitutes the illiberal imposition of coercive institutions over the liberal state of nature.

Quite the opposite of imperiling the liberal ideals of equality and justice exemplified in democratic order, state intervention in order to prevent the destruction of substantive rationality though the overzealous application of formal rationality to social life maintains the liberal order.  As the ontology presented by Weber views the formation of the capitalist system as exogenous to the individual, built upon the exaltation of the money unit of account and ascendance of formal rationality in human life, the intervention of the state on economic life while impeding liberty as cast by formal rationality, preserves liberty as presented in substantive rationality.  The capitalist order as constructed in the reductionist logic of the unencumbered marketplace, thus does not rise to the ideal of democracy through endogenous aggregation of interest, rather being constructed exogenously the market imposes its sparse logic upon individuals, rendering the richness of human life into simple money units of account.  Polanyi builds upon the ontology of exogenous construction of the economy, expanding upon the rigorous theoretical analysis of Weber through the use analytic historical narrative to build an empirical case against ontology of endogenous construction as presented by Smith.

Polanyi depicts the conflict between state and market as an Oedipal struggle in which the contemporary conception of the market, empirically resulting from the marriage of state and society, has through exogenous passage of time and the creation of an ontology of endogenous construction lost knowledge of its true lineage.  Denied the knowledge of its patrimony, the market seeks to overthrow its father, the state, and take its own mother, society, in unnatural matrimony.  Confronting the construction myth presented in the ontology of Smith et al in which the market naturally arises from a "propensity to exchange", Polanyi traces the origin of the Industrial Revolution and modern capitalism to the triumph of the formal rationality of the enclosures over the substantive rationality of feudal order presented in the commons. 12  This is the great transformation, the subjugation of substantive rationality to the demands of formal rationality, the diminution of the intrinsic value of man and nature to their instrumental value in the market economy.   Thus, the market is transformed from the salvation of the liberal ideal of personal freedom and the value of the individual, to its destroyer.  

Far from the market representing an economic state of nature, in which the principle of self interest dominates, Polanyi in studying pre-modern economic orders finds two foundational principles: reciprocity and redistribution. 13  Nonexistent is the endogenous construction of economic life deriving from the aggregation of individuals seeking to maximize their personal utility.  Rather, the self-interested formal rationality presented by Smith et al as the ontological basis upon which human economies are sustained, is subjugated in a state of nature to substantive concerns in order that society might survive. The market does not represent an approximation of man in a state of nature, it represents the overthrow of the natural order resulting from the exaltation of the money unit of account to the detriment of the substantive state of society.  In the state of nature, substantive concerns triumph over those of formal rationality, thus the intervention of the state in the economy does not represent the unnatural imposition of coercive order over the liberal nature of man.  

Dealing more specifically with the reason for which state intervention in order to maintain the substantive state of society, Polanyi takes issue with the notion of the "self regulating market", attributing to the Welsh utopian Robert Owen the discovery that the market, left to its own devices, would create enduring evils in society. 14  The ontological foundation of the endogenous construction of the economy, and its subsequent integration into the ideology of liberalism is called into question.  In the ontology of exogenous market construction cast by Weber and Polanyi, the aggregation of individuals acting to maximize their utility does not result in the maximization of societal utility. The reason for this lies in the recognition that even in the case that capitalism can be shown to maximize formal utility, the triumph of formal rationality in the self regulating market requires the commodification of so that humanity is valued instrumentally rejecting the intrinsic value of the individual.  Chronicling the impact of the Speenhamland and related legislation, Polanyi notes that the effect of the commodification of labor is detrimental to the substantive reality of society, impacting those who labor for wages in ways that are fundamentally illiberal, denying their individual value. 15  Economic liberalism, as typified by the triumph of formal rationality, by necessity destroys political liberalism, as typified by the triumph of substantive rationalism.   In order for liberal democracy to be saved, the liberal market must be subject to state intervention so that the intrinsic value of the individual may be maintained.  

To conclude, while the differing ontologies of the endogenous and exogenous construction of economic institutions are presented as empirical theory, they carry, as Hayes noted, normative implications embedded within them.  Thus, the application of these differing ontologies to contemporary discussion of the proper role of the state within the market carries normative implications.  By accepting the formal rationality presented as the basis of liberalism by those who adopt an endogenous ontology of the market, the substantive rationality of society is rejected. In disposing of substantive rationality as an antecedent to formal rationality, we relinquish the intrinsic value of the individual, whether conceived spiritually as a soul or as a secular notion of humanity, to the dustbin of history.  Such it is that the contemporary dominance of the ontology of endogenous market construction imperils the liberal order.  Historically, societies have either adapted protective mechanisms by which the substantive reality of human life is maintained, or the intrinsic value of the individual having been stripped away, they fall to illiberal orders.  In order to maintain the liberal state, the state must intervene in the economy, so that the substantive basis of society thus saved, the fruits of formal rationality may enrich human life.


  1.  See Hayes (2006).  This article greatly influenced my own approach to the assigned writings
  2.  See Williamson (1990).  10 in total, the policy prescriptions suggested by Williamson aim to reduce the role of the state in Latin American economies, with the notable exception of educational and healthcare spending.
  3.  See Smith, Book 1, Chapter  II.

  4.  See Smith, pgs 990-991.

  5.  See Smith, Book 2, Chapter III.

  6.  See Schumpeter, pgs. 82-83.

  7.  See Schumpeter, pg. 61.

  8.  See Schumpeter, Chapter XXIII.

  9.  See Weber, pgs. 27-28.

  10.  See Weber Chapter II, in particular pgs. 164-176.

  11.  See Weber pgs. 170-171.

  12.  See Polanyi, Chapter 3.

  13.  See Polanyi, Chapter 4, in particular pgs. 49-55.

  14.  See Polanyi. Chapter 11.

  15.  See Polanyi, Chapters 7 & 8.


Hayes, Christopher. (2006) "What We Learn When We Learn Economics" In These Times.(Nov.) Accessed online: http://www.inthesetimes.com/article/2897/ on Feb. 11, 2007.

Polanyi, Karl.  (2001) The Great Transformation. (Boston: Beacon Press)

Schumpeter, Joseph A. (1950) Capitalism, Socialism, and Democracy.  (New York: Harper

Smith, Adam. (2003) The Wealth of Nations. (New York: Bantam Books)

Weber, Max. (1947) The Theory of Social and Economic Organization. (London: William
Hodge and Company Limited)

Williamson, John (1990), "What Washington Means by Policy Reform", in J. Williamson, ed.,
Latin American Adjustment: How Much Has Happened? (Washington: Institute for
International Economics)

and the prophet Marley delivers the final word.

Your life is worth much more than gold.

I think that's true in a general sense too, life is worth much more than gold.

I'm going to be out for a while, so it's not that I'm not   paying attention to the comments.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Fri Mar 23rd, 2007 at 10:12:53 AM EST
By accepting the formal rationality presented as the basis of liberalism by those who adopt an endogenous ontology of the market, the substantive rationality of society is rejected.

Obvious Quote of the Year: "There is no such thing as society" (attributed to Margaret Thatcher who, I think, attributed it to Hayek?)

That's a very good, well-presented summary, MfM. I'm not an expert on any of these thinkers, and knew little of Schumpeter and even less of Polanyi, so I learned a lot.

The review amazes me somewhat. Not only is there the realisation of the naïve assumptions of Smith about "the state of nature", there's the much more astounding realisation that today's free-market pundits as we come across them in the think-tanks and press, base their propaganda on the same lines. It is in fact Enlightenment thinking about the individual and the state of nature, tying in with the "noble savage" to the extent that both theories attempt to imagine humanity in the absolute, a clean slate, no past, no constraints due to history or existing hierarchy or myth. It's the sort of Enlightenment thinking that Phelps (setting aside any other Enlightenment thinking about man in society) seems to believe was miraculously preserved in the New World while it degenerated in (continental) Europe.

It's tempting to mock, but there's no doubt strong myth-medicine in the notion of the individual in the state of nature creating maximum utility by the exercise of a simple predisposition to wish to acquire. Er, I just wrote something silly, because it's clearly very strong myth-medicine, or it wouldn't still be working! kcurie? Help!

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Mar 23rd, 2007 at 12:48:58 PM EST
Now I think Cameron is a bit of a prat, but this response of his to Thatcher's "Society" quote of his - which presumably came from his speech-writers - I do agree with:

"There is such a thing as Society - but it's not the State".

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 23rd, 2007 at 01:12:03 PM EST
[ Parent ]
It's a glib soundbite, but what does it mean?

It's self-evident that the State is not society. But in what way does the State have an existence separate from society, in what way is it not a part of society?

All Cameron does is appeal to prejudice, and avoid asking a more important question: is the State operating correctly, is it doing the right thing?

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Mar 23rd, 2007 at 03:49:11 PM EST
[ Parent ]
But in what way does the State have an existence separate from society, in what way is it not a part of society?

That's what undemocratic, unrepresentative states are.

And in the UK, the upper-class old boy network that Cameron is part of controls the state but is not society. He's a hypocrite.

"It's the statue, man, The Statue."

by Migeru (migeru at eurotrib dot com) on Fri Mar 23rd, 2007 at 03:52:04 PM EST
[ Parent ]
That's a critique (perhaps justified) of the British State as the tool of entrenched hierarchical interests, but it doesn't show how the State is not part of society. "Upper class, "old boy", "network", are all socially descriptive terms.

Of course, Cameron's a hypocrite. So was Thatcher.

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Mar 23rd, 2007 at 04:09:05 PM EST
[ Parent ]
It can't have an existence separate from society, because it works within society.  Cameron's correct that the state, itself, cannot be seen as society.  The state isn't what defines the British people.  It may act on their behalf on this, that and the other issue, but it's not the sole producer of collective action, and societies should be defined, in many ways, by the sum of their parts, collective and individual.

I don't see how he's appealing to prejudice in that statement, though, aside from the traditional conservative and libertarian prejudice against government intervention.  Thatcher was trying to say that there exists no such thing as the collective, which is, of course, ridiculous.  (Had she been correct, there would exist no national identity, and the English are, by no stretch of the imagination, lacking in that area.)  Cameron's response was to say that she was wrong on the collective, but right, to one degree or another, about the government being the agent for the collective.  On that, I think he's quite correct.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sat Mar 24th, 2007 at 10:31:22 AM EST
[ Parent ]
All that said, I think we at EuroTrib tend to examine these sort of issues a hell of a lot deeper than the David Camerons of the world.  To him, it was, in all likelihood, just a throwaway statement designed to appeal to the British equivalent of American suburbanistas.

Be nice to America. Or we'll bring democracy to your country.
by Drew J Jones (pedobear@pennstatefootball.com) on Sat Mar 24th, 2007 at 10:34:41 AM EST
[ Parent ]
Bloody hell, MfM, that's a bit difficult for a Bear of Little Brain like me, but I'm going to have a go.

One of the points that leaps to mind is that we have created institutions - in the form of corporate bodies or "legal persons" - with collective rights, but without the collective responsibilities analogous to the individual responsibilities which individual "natural persons" have.

More to come once the icepack on my forehead does its work....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Mar 23rd, 2007 at 12:57:25 PM EST
Bloody hell, MfM, that's a bit difficult for a Bear of Little Brain like me, but I'm going to have a go.

I believe the proper response is thus.

Aye, and the real mindfuck comes when you realize the extent to which the modern capitalist system depends on collective institutions in order to perpetuate itself.  

As you mention, the corporation as a modern institution is essentially a means by which Capital is insured against social losses exceeding the capitlization of a given firm.  Think through the implications of social insurance for errant capital at the same time that neo-liberals dismantle the protections of the social state for Labor.  Why is it that society must bear the burden for the burden of financial responsility (or lack thereof) of Wall Street, the City of London, and their ilk at the same time that men and women who wish nothing more than to raise their children in peace are confronted with the threat of starvation to induce their contribution to the market through work?  

Liberal, dismebedded, economies (UK, US, etc.) are marked by the production of capital through socially insured shareholding (i.e. shares are widely held by a large number of investors who without the social insurance of incorporation against loss would not invest.)

Social, embedded, economies (France, Germany, Spain, etc) are marked by the holding of capital by large institutions.  Finance banks, which seek long term gains.  Bank driven economies are far less driven by pure formal rationality.  They recognize that in the long term the failure to cinclude social costs into the market will destroy the market.  They operate my reform rather than revolution.  

Consider the difference betwen Britain during the "Winter of Discontent" and Germany.  While American workers are more docile than their British counterparts presently, historically American workers were more driven to anarcho-syndicalism and miltant behavior than Europeans.  Irresponsible Capital generates a dramatic response.

Today, the Anglo-American economies are saved because we receive foreign investment in treasuries and assets, preventing a collapse in consumption as the dollar and to a lesser extent the pound would need to fall to balance the current account deficit.  So employment and the social consequences of disemployment created through a collapse of consumption is sustained by financial methods that can not be sustained in perpuity.  Some day the floor will fall out.  The collapse of the yen carry trade in March scared the shit out of everyone because it looked like that day had come.

When it does, the result will be unemployment and other economic dislocation in the US and other liberal economies that will change the world we live in.  Because economic dislocation will generate protective forces in society.  There's nothing like the reason that we all fall down apart, to make men stand together.  Paul Krugman hinted at this last month at an Economic Policy Insitute event in Washigton, he didn't look happy about it.  (Transcript  or   Video)

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Fri Mar 23rd, 2007 at 01:48:51 PM EST
[ Parent ]
where and when did this monstrous idea that stakeholders' rights trump social fabric get spawned?

it's a faustian pact on a global scale, and whoever invented it should denounced as as the author of the biggest weapon of mass destruction ever conceived.

it's like a killer gas, choking all that's good about being a human denizen of this once-fair planet.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun Mar 25th, 2007 at 06:46:53 AM EST
Current capitalism started in the middle ages for long-range commerce. The financier bringing capital shared half of the profits with the actual seafaring captain. This commercial relationship gained mindshare as the bourgeoisie gained power during the Renaissance ; and the old Feodal arrangement between lord and serf disappeared as that bourgeoisie invested in land during the 17th and 18th century.

It's that class that gained power during the 19th century, and its ideal of absolute private property which implies absolute rights of stockholders is still ruling us.

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sun Mar 25th, 2007 at 07:05:36 AM EST
[ Parent ]
The venture model you mention goes back probably as far as Babylonian times.

Current capitalism is about absolute property rights: period.

I believe that a new - indefinite ("evergreen lease" comes close) - form of partnership-based property right is currently emerging because it actually works better than existing conflicted "absolute" rights such as Freehold/ Leasehold and Equity/Debt.

The proof of the pudding is in the eating of course, so I'm just out there doing it, and on here annoying 20%, confusing 70% and hopefully ringing a few bells with the other 10%!

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun Mar 25th, 2007 at 07:20:24 AM EST
[ Parent ]
I'm increasingly convinced that "liberalism" is an elaborate philosophical edifice whose only purpose is to defend the idea of inalienable property rights.

Liberty is a worthy ideal, but it has been hijacked.

"It's the statue, man, The Statue."

by Migeru (migeru at eurotrib dot com) on Sun Mar 25th, 2007 at 07:34:52 AM EST
[ Parent ]
that reminds me...

goes to dig in e-archives...

voila!   http://www.eurotrib.com/story/2007/3/25/8656/35506#3

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun Mar 25th, 2007 at 11:25:12 AM EST
[ Parent ]
Bingo, but don't tell the people over on Kos that or they'll have a hernia, and denounce you as a conservative who wants to interfere with their rights.  That rights without resources have little meaning isn't obvious to them.  It threatens them.  

Negative liberty is sacrosanct, while positive liberty is heresy. Individuals have the freedom from coercion, but they do not have the freedom to live with human dignity unless they posses the means to achieve.  In other words, God bless you Charles Darwin, though Anglo-American elities embrace the cross publicly, their economics are pure survival of the fittest.

Now if wealth is the result of structural forces (class, race, nationality, culture, ie a philosophy of exogenous market construction), rather than coming from individual merit in which the individual behaving rationally accumulates wealth (ie a philosophy of endogenous market construction, the market is a sort of democracy), then the "liberal" economic ideal is anything but.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sun Mar 25th, 2007 at 11:32:22 AM EST
[ Parent ]
The principle of private property has never yet had a fair trial in any country; and less so, perhaps, in this country than in some others. The social arrangements of modern Europe commenced from a distribution of property which was the result, not of just partition, or acquisition by industry, but of conquest and violence: and notwithstanding what industry has been doing for many centuries to modify the work of force, the system still retains many and large traces of its origin. 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. That all should indeed start on perfectly equal terms, is inconsistent with any law of private property: but if as much pains as has been taken to aggravate the inequality of chances arising from the natural working of the principle, had been taken to temper that inequality be every means not subversive to the principle itself; if the tendency of legislation had been to favour the diffusion, instead of the concentration, of wealth--to encourage the subdivision of the large masses, instead of striving to keep them together; the principle of individual property would have been found to have no necessary connexion with the physical and social evils almost all Socialist writers assume to be inseparable from it.
— John Stuart Mill, Principles of Political Economy
The principle of private property has had 150 years of fair trial sonce this was written, and it has shown itself to be toxic.

"It's the statue, man, The Statue."
by Migeru (migeru at eurotrib dot com) on Sun Mar 25th, 2007 at 05:00:10 PM EST
[ Parent ]
so are there any politicians of note who make noises about fixing this?

it would seem to have voter identification possibilities as a platform plank.


i guess communism was about dismantling ownership, socialism is about remantling it...

as a middle way between the scylla of free markets and the charybdis of state welfare.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun Mar 25th, 2007 at 07:58:08 AM EST
[ Parent ]
The current western european venture model was actually created in the Middle Ages ; it had disappeared with the Roman Empire before that, at least in Europe.

In the high middle ages, such agreements would have been condemned as usury (as they have been in the Muslim world). It should be pointed out that those rents are definitely not a 'natural' solution to the problems of investment and economical progress. Venture capital and commerce have never been a basic block of society before 18th century Britain, as Polanyi said.

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Sun Mar 25th, 2007 at 01:48:36 PM EST
[ Parent ]
It's all about being embeddeded.

Observation of premodern societies shows that in order for them to function, economic life was embedded withing a social context.  Thus, the current state, where markets are disembedded, is an abberation.  The key to understanding the differences between the "varieties of capitalism" present crossnationality, is the extent to which civil society has been able to maintain the embeddedness of econoimc instiutions in the wake of modernization.

And I'll give my consent to any government that does not deny a man a living wage-Billy Bragg

by ManfromMiddletown (manfrommiddletown at lycos dot com) on Sun Mar 25th, 2007 at 02:11:08 PM EST
[ Parent ]

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