Monday, June 5, 2023

America’s Adam Smith: A review of Glory M. Liu’s “Adam Smith’s America”

         This is an excellent book. The objective of Glory Liu is to describe how the reception of Adam Smith in America has changed over the past two hundred years, and, using Adam Smith to some extent as a foil, to describe the changes in the intellectual climate and even in political economy over that period. That Adam Smith is an ideal person, in whose “reception” and in whose discussion, will be reflected broader intellectual trends is obvious. Smith’s work is well known, respected by his admirers and detractors, and covers vast areas going from moral philosophy and jurisprudence to political economy and even astronomy.  It is thus an ideal object to refract political and ideological trends.

One could divide the reception of Smith in America into three eras. The first that lasted from Independence until the early 20th century was dominated by the discussion of free trade vs. protectionism in the Wealth of Nations. The second, from the early to the mid 20th century by the debate on the roles played in Smith’s overall work by sympathy vs. self-interest. The third, which continues, was dominated by the disagreement over the roles of the price system (free market) and government. As these antinomies illustrate, the broadness of Smith’s oeuvre allowed a sensible discussion of all the themes, and made each of the six positions defensible.

In fact, it could be said that whenever there was an important economic issue in America on which two sides were formed, Smith always played an important part in debate because each side could, some with justification, bring Smith’s views to their support. This may be due to some internal inconsistencies in Smith (especially if one includes The Theory of Moral Sentiments and Lectures on Jurisprudence too, and not only The Wealth of Nations), but the more important reason is that Smith’s work always had a pragmatic and eclectic character. Absence of dogmatism allowed him to take nuanced positions and then these different nuances provided the matériel with which the two sides attacked each other. For example, even in the case of free trade that Smith, according to all readings, strongly championed, he nevertheless extolled the Act of Navigation. Why? “As defence, however, is of much more importance than opulence, the act of navigation is, perhaps, the wisest of all the commercial regulations of England” (WoN, Ch 2).

Liu fails, in my opinion, to acknowledge sufficiently that there never was nor there will be a “real” or “true” Smith: our readings of Smith will always be colored by what is the issue at hand, by our interests, location and time (as the book indeed shows). Moreover, the way that people come to Smith, precisely because his work is so vast and he influenced many, are diverse. I came to Smith through Marx. That particular channel played no role in the American intellectual discourse but illustrates the spread of Smith’s influence. My original Smith was the one of the stadial theory of development, labor theory of value, definition of the three key classes in capitalism, their conflict over the distribution of the net product, and the dumbing effect of the division of labor. Do these themes remind you of somebody else? They do. Is this the entire Smith? No. But this is nevertheless the Smith that was, at one point of time and location, of interest.

Similarly, the Smith argued about in the early decades of the US Republic was the one of free trade. Although there was a ritualistic invocation of Smith’s name by many Founding Fathers (there are in the book the quotes from Jefferson, Hamilton, Adams etc.), his policy prescriptions were ignored. The young Republic, under Hamilton’s impulse,  went for protectionism. As Liu shows, it was Friedrich List, whose ideas developed while he lived in the United States, that was much more influential. Even in terms of textbooks, Smith’s Wealth of Nations was eclipsed by the translation of Jean Baptiste Say’s Treatise (first published in French in 1803; American translation in 1821).

There are ironies aplenty in the use of Smith during that period. The strongest supporters of free trade were, as is well known, the Southerners. They liked Smith’s stance on free trade, but disliked his condemnation of slavery. The very opposite was true for Northern intellectuals and industrialists. Moreover, once we take free trade/protections, and slavery/abolitionism as political positions, we have four quadrants that will be filled by various people. Some, in the North, might agree on abolitionism, but disagree on trade. As we see here clearly, every side took from Smith what it found convenient, and  questioned, or even simply ignored what it did not like.

This becomes very clear in chapters 5 and 6 that are in my opinion the best, and that deal with the first and second Chicago school. The Chicago school disregarded entirely Smith’s political philosophy, considered the TMS an inferior work and decided the ignore the whole second era of the discussion of Smith in America that revolved around the contrast between the advocacy of sympathy in the TMS and an equally strong advocacy of self-interest in the WoN. The Chicago school took only the economic part. The older Chicago school (Frank Knight and Jacob Viner), more sensibly saw Smith not only as a partisan of laissez-faire but also ready to accept a limited role for government: “economics must be political economy” as the chapter title says, quoting Frank Knight.  

The second, and to us better known and influential, Chicago school (George Stigler and Milton Friedman) continued with the reductionism of Smith. Not only was he shorn of moral philosophy, his work was now shorn of political economy as well. It became price theory. The emphasis turned entirely to the informational role of prices, the invisible hand, and (the ”granite” of) self-interest. Liu rightly emphasizes a very narrow and reductionist view of Smith taken by the Chicago school. But going back to my previous question: was this wrong? The answer is “No”. Was this the entire Smith? The answer again is “No”.  Chicago’s “filleting” of Smith may be disagreed with, but Chicago did not invent a new Smith. It took key elements that were there, jettisoned the rest, and created a Smith that it needed for its purposes. I do not think that it is an illegitimate approach—simply because every ideological movement, when it needs to “cloth” itself in earlier writers and to appropriate some of their aura, must do it.

All three elements of the Chicago school that I mentioned here are extremely important and are present in Smith. But many others, perhaps equally important, are present too, and they can be, no less legitimately, taken and defended. The (slight) weakness of the book is, as I mentioned, that it does not fully accept this point of view, and does not realize that every description of reception of an influential author will always be a story of intellectual development in that location and place. The mirage of “recapturing” the real Adam Smith does float in the book, especially in the beginning and the end.  

The most recent (post-Chicago) period is dominated by Irving Kristol and Gertrude Himmelfarb’s “reintegration” of Smith, where TMS (that was earlier supposed to support a more benign, even socialistic, interpretation of Smith) has now been repurposed for “bourgeois” virtues. The conservative reinterpretation reunified the “two Smiths” but again at a cost of significant simplification, and possibly misinterpretation. The discussion in the last Chapter (“Turning Smith Back on the Present”) includes also discussion of some, in my opinion, silly issues (namely whether Smith really thought that the metaphor of the invisible hand was important or not), and strangely does not mention Amartya Sen’s important contribution to a different reading of the TMS (and even its superiority to the contractarian theories like Rawls’s).

Regarding the style, I would have one minor complaint. Liu does not always wear her formidable scholarship lightly: the book is, at times, swamped by quotations that are only tenuously related to the subject-matter. Finally, the reader, or at least this reader, may get annoyed by the excessive use of “[sic]”. There is no need to “sic” differences in spelling between the English of Smith’s time and ours. The use of “sic” often tends to convey the feeling of the author’s superiority both with respect to the author  he or she is citing, and with respect to the readers (who may not be, in the author’s view, sufficiently aware of the problem). It must be used sparingly.

Thursday, June 1, 2023

“Succession” and the end of the illusion of ethical capitalism

 What “Succession” serves us is the end of the illusion of ethical capitalism. The issues are the same as they appeared in the beginnings of the commercial society, and were discussed by Bernard Mandeville and Adam Smith. The question was the following: can the unchecked use of what are conventionally considered vices, namely passions for power and wealth, be reconciled with the existence of an ethical society? Can a society that places the acquisition of wealth on the pedestal, considers it the most desirable social attribute, and regards the rich as worthy of emulation, be ethical?

It is important to make here the distinction between an ethical society and a society where the acquisition of wealth takes place within the legal rules. According to Hayek, speaking of “just” incomes does not make sense (nor should ethics be at all involved in the judgment of how market incomes are earned); what matters alone is whether the rules of the game have been obeyed. But it does not mean that acquiring incomes while following the rules of the game is sufficient to make a society moral.

Adam Smith, while criticizing what I called in “The Visions of Inequality” the “really existing capitalism” and the way that the wealth is made through enslavement of people, plunder, monopoly, or raw exercise of politics still held the possibility open—in the background—that a commercial society could be ethical. To be ethical it must minimize the use of, and the ability to use, power. Power comes either through politically-mediated ability to impose one's preferences or through the ability to order others, for pay, to do what we wish. The use of power can be brought to minimum if there is full competition so that actors cannot influence prices and conditions under which they sell their goods. This rules out monopolies, oligopolies and economic power derived from politics  But in addition to the output markets, it is also important to minimize the exercise of power within the companies. The companies, especially when they are large, are hierarchical. When they are hierarchical the power of those on the low levels becomes small and the power of those on the top proportionately increases.

Adam Smith’s “capitalistic ideal” that would, I think, combine efficiency and agency would be realized in small companies, either family-owned or with few employees, enabling the voice of the employees to be heard, and reducing the power of the owners of capital, while competing on a level playing field with hundreds of alike companies. The power would be dispersed and the power of everyone would be kept in check by the similar power of others. Such a society would never allow the “masters” to become powerful enough to dictate political decisions. It would be thus politically equal too.

The problem is that the current capitalist societies are anything but such small-scale “ethical capitalism.” Our world, on the contrary, is a world of large corporations, monopolies, cutthroat competition among such corporations as well as within the corporations themselves, where workers have no right to make any decisions and influence the process of production, and are thus alienated from it. It is the world of extreme commodification and hierarchical relations. Hierarchical relations within companies and hierarchical differences in power between the companies enable the richest to assume a political role which makes the society resemble a plutocracy.  

The value of “Succession” is that it shows us clearly that world, without committing a mistake of introducing extremely immoral actors that break the law. The strength of the script lies in that all the players work within the confines of legality without –for all that—being either ethical or sympathetic. Everybody follows self-interest only, exhibiting in the process large amounts of self-love, and being a stranger to any moral considerations. Other than the need to stay within the law, or perhaps more accurately, not to be found out to have broken the law, everything is permitted.

Everybody lives in the world of moral grayness. Moral grayness is so pervasive that it is impossible to distinguish among the characters those who exhibit darker hues of moral turpitude from those who might show some lighter nuances. This behavior is not limited to the professional life but percolates into the family life. In “Succession” this is  obvious from the very beginning because the issue is who will among the children succeed the father, and thus most of the action takes place inside the family. Parents and children behave with respect to each other the same way as they behave towards everybody else: their employees, suppliers or investors. The commercialization and amoral behavior have invaded the family life to such an extent that there is no longer any difference between the family and the rest of the world.  There is just unanimous moral greyness between the characters, and between professional and private lives.

This absence of behavioral difference between the two spheres (the private and the professional) is something that would have surprised Adam Smith. For his two big works “The Theory of Moral Sentiments” and “The Wealth of Nations” were written to apply to two different spheres of our existence. TMS deals with our relations within the family, with friends and others who are relatively close to us, to what one may call the “organic community”; WoN is supposed to apply to our relations within the Great Society, that is with respect to, and in the intercourse with, everybody else. But in “Succession” the two areas are no longer divided, they are both parts of the same commodified world, and the same rules of amorality hold whether we are talking of families and friends or people whom we have met once in our life. The main characters are remarkably egalitarian in their treatment of people.  You are as likely to please Shiv, Rom, and Kendall if you are their closest cousin or if they have met you for the first time ever. The greyness envelopes all.

The incompatibility of a fully commercialized society with an ethical society is a problem for those who, evidence to the contrary, believe that capitalism can be successful and at the same time ethical and who deceive themselves by inventing “stakeholder capitalism”, “responsible business”, “ethically-produced coffee or textiles”, and the like. “Succession” disabuses them of these notions. Rather cruelly. The similarity of behavior that we observe on screen and in real life, and the moral bleakness of the characters, upsets this naïve view.  In order to preserve the fantasy of successful and ethical capitalism a very superficial discussion of the series in The New York Times, ignores all the issues mentioned here and puts the accent on an entirely incidental feature, namely that the company over whose ownership the children fight is a media company that influences people through biased news. This however has nothing to do with the main storyline which is the story of ethics and capitalism. Exactly the same situation would have existed had the company been selling electricity like Enron,  been involved in “packaged” mortgages like hundreds of companies during the 2008 meltdown, was laundering money like the Credit Suisse, was mistreating workers like Amazon, or used its monopoly power like Microsoft. So whatever the company Logan Roy and his children had, had nothing to do with the main message  of “Succession”. The main message was to disabuse us of the notion that an advanced commodified society that for its success depends on “disabling” conventional moral norms may be ethical. Or could be made ethical if we were willing to tweak a thing or two. “Succession” says: you cannot have both.

Thursday, May 4, 2023

Capitalism unchained

 Krishnan Nayar makes three key points in his recently published Liberal Capitalist Democracy: The God that Failed. First, he argues that bourgeois revolutions frequently failed to lead to democracy, a view strongly embedded in the Anglo-American Whiggish history and in simplified Marxism. Rather they provoked aristocratic reaction and the authoritarian economic developments which in many respects were more successful than those of bourgeois democracy. In other words, democracy does not come with capitalism and, as we shall see, capitalism often destroys it.  The authoritarian modernizers  (Nayar studies four: post-1848 Germany, Louis Napoleon’s France, Bismarck’s Germany, and Stolypin’s  Russia) enjoyed wide support among the bourgeoisie who, fearful for its property, preferred to take the side of the reforming aristocracy than to throw in its lot with the proletariat. This indeed was one of the disappointments that surprised Marx and Engels in 1848-51, when they noticed that the propertied classes sided with Louis Bonaparte rather than with the Parisian workers.  

Second, Nayar argues that the unbridled Darwinian capitalism always leads to social instability and anomie, and that social instability empowers right-wing parties. He thus argues that Hitler's rise to power was made possible, or was even caused,  by the 1928-32 Depression, and not as some historians think  by either the fear of communism or bad tactics of the Communist Party which instead of allying itself with Social Democrats fought them.


Third, and for the present time perhaps the most interesting, Nayar argues that the success of Western capitalism in the period 1945-1980 cannot be explained without taking into account the pressure that came on capitalism both from the existence of the Soviet Union as an alternative model of society, and from strong left-wing parties linked with trade unions in major European countries. In that sense the period of les trente glorieuses which is now considered as the most successful period of capitalism ever occurred against the normal capitalist tendencies. It was an anomaly. It would not have happened  without socialist pressure and fear of riots, nationalizations, and, yes, defenestrations. But with the rise of neoliberal economics after 1980 capitalism gladly went back to its original 19th and early 20th  century versions which regularly produce social instability and strife.


The lesson to be taken from Nayar is in some ways simple. Capitalism, if it's not embedded in society and does not accept limits  on what can be commodified, has to go through recurrent slumps and prosperities.  But these two cannot be seen just as a plus and a minus that cancel each other out. Their  political effects are very different. And this is where Nayar takes to task many economists who saw the 1920s Depression as a cleansing period of capitalism eventually bound to result in a boom. The point is that here we deal with real people and not mere numbers: many are unwilling to wait until the boom  comes; they may not even be around for its Coming. Thus they vote for radical solutions or go out in the street. This is something that is often forgotten by economists who treat individuals’ incomes over the long-term as a mathematical summation without realizing that the political effects of the minuses are very  different from those of the pluses.


If we look at the three main theses in Nayar’ s  book none of them is new. But they are when strung together and placed in their historical context.  The authoritarian modernizations have of course been a subject of many books some of which, like Barrington Moore’s classic, are cited here. The rise of fascism was, and is, increasingly linked with austerity policies as was recently done by Mark Blyth’s Austerity: History of a Dangerous Idea and Clara Mattei’s The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism. Nayar may perhaps be overstating his case by claiming that many historians such Ian Kershaw and Joachim Fest tend to ignore the economic causes of the rise of Nazism because they take capitalist economy as given. This could be true for some contemporary observers like Churchill as well as Keynes who seems to have been oblivious to the political effects of the crisis until comparatively late, but more serious historians do acknowledge a huge impact of depression. It is indeed hard not to do so when Germany's GDP declined by one-fifth, and more than one-quarter of its labor force were unemployed.


However there is a more subtle argument in Nayar which deals with the position of the Communist and Social Democratic parties in Germany. Unlike many historians who blame Stalin for the decision to direct  KPD’s animus  not towards fascists but towards those whom Stalin called “social fascists”,  meaning SPD, Nayar thinks that the collaboration between the two parties was impossible given their different constituencies and positions within the Weimar system. SPD was strongly embedded in the Weimar system. It participated in the austerity policies, supported spending cuts and the balanced budget, and was involved in the decision not to extend unemployment benefits which triggered yet another fall of government and the elections that finally brought Nazis to power (thanks of course too to the behind-the-scene machinations of von Papen and Hindenburg’s son).  KPD, on the other hand, had its ranks swelled by the unemployed, that is, by the same people whom Social Democrat were driving into the street. It was impossible for the two parties to collaborate, whatever Stalin wanted or not. For sure, the lack of cooperation opened the way for Hitler but without knowing the future which of course no participant in the political life can know, there is simply no way that the two large left-wing parties could ever join forces.


Nayar’s third point about the indirect support that the communist regimes and the left-wing parties provided to capitalism and capitalists, by pushing them to reform the system and realize that without much stronger social policies,  they risk being overwhelmed by communist parties, is also a point that is increasingly recognized. Here is the link to a very important empirical paper by André Albaquerque Sant’Anna that documents that the welfare policies were more strongly developed in countries where either socialist or communist parties were stronger or the threat of the Soviet Union was greater. Nayar quotes a number of British politicians and intellectuals who make the same point even if sometimes unaware of doing it. He rightly criticizes Tony Judt, who, bizarrely, refused to accept it.  


The Soviet experience and its international importance did not play a role only in Western Europe; it did not play the role only in Italy which had at one point one-third of its voting population support the Communist Party, or in France where the share of the communists oscillated around 20%, but also played an important role elsewhere, including in the beginnings of the Dutch planning or Indian five-year plans. So there is I think no serious contest on the matter. Nayar might pick on some historians who are singularly blind to reality but the reasonable view is that the (much embellished) Soviet experience did have a strong impact, indirectly promoting policies which would never have happened otherwise and would have been discarded by the capitalist class out-of-hand.


In that part of the book Nayar is scathing about the disconnect of the so-called Marxist intellectuals with reality in their own countries and the world. He rightly ascribes that disconnect to inability to accept that capitalism has been, even if reluctantly, accepted by the majority of the population including by majority of workers, that real incomes had been rising, and that the typical communist party’s role which saw itself as leading the working class in an  antagonistic relationship with bourgeoisie was simply obsolete. Consequently, Marxist intellectuals became what Nayar calls “intellectual playboys” without any discernible impact on politics. To us today they appear, and they probably were at the time, laughable. Had they been really interested in Marxism, and not in philosophizing for a few, had they been interested in the topics that preoccupied Marx, Engels, Lenin, Trotsky, Kautsky etc., and that had to do with the development of capitalism and lives of normal people, they would have noticed changes that had occurred between 1945 and 1980.  The size of the working class had declined, real incomes have risen, the power of trade unions was vanishing, large companies no longer exerted the role which they had in the past, and perhaps most importantly the technological change became very different from the technological progress that was known in the 19th and early 20th century. All these developments simply escaped the attention of the (quasi) Marxist set mentioned by Nayar: Sartre, Althusser, Marcuse. (To be fair, Nayar’s selection is itself narrow, perhaps too much influenced by the Londonese (my coinage) and Parisian salons. There were many on the left who saw these developments, but it is true they were less popular among the juventud rebelde of the 1960s and 1970s than the people mentioned here.)


They missed the change in capitalism, but capitalists anyway did not pay much attention to them. Neoliberalism felt emboldened by the internal dynamics that marginalized the working class and then by the precipitous fall of the Soviet Union and communism. Once capitalism was without a rival, it promptly went back to its past policies, manifesting many of its worst features that were forgotten during the trente gloirieuses. Marx, with his critique of capitalism, now became much more our contemporary than the myriad of other philosophers, Garton Ash, Ignatieff, Fukuyama e tutti quanti, who oblivious of history’s lessons celebrated the triumph of capitalism in no less unrealistic prose than Sartre and Marcuse reviled it forty years ago.


The question which is on everybody’s mind after having read Nayar’s book is, What next? Because if capitalism continues along the current trajectory that Nayar believes almost preordained, it must again produce instability and rejection. And that would—again--play into the hands of right- wing movements. We may replay a century later the same story that we have seen in the 1920’s Europe. History seldom repeats itself word-by-word or drum-by-drum:  we are not going to see the black shirts or different-color uniformed movements which inundated Europe in the ‘twenties but we might see, as we already do, parties with roots in nationalist or quasi fascist movements coming back to power and undoing globalization, fighting immigrants, celebrating nationalism, cutting  access to welfare benefits to those who are not “native” enough. Is it fascism? Its light variety?  This is the melancholy conclusion that can be made based on this sweeping study of western political and economic developments in the past two centuries.


The book is impressive in the amount of detail it marshals, in Nayar’s erudition and his eye for the unusual and the absurd, and his take-no-prisoner style. However, there are also limits: the book deals only with West European countries, and only a select few of them (UK, France, Germany), and just in one segment with Russian pre revolutionary developments. It is also true that the selection of intellectuals that are targeted by Nayar’s often acerbic, and in some cases savage or funny, commentary is limited to the relatively small group of French and British intellectuals, sprinkled, for a good measure,  by a few Americans. The European intellectual scene was much broader than the people who were mentioned in the book. The book also does not deal with the rest of the world: Africa and the anti-colonial struggle are not present at all; Latin America is entirely absent; India is just mentioned in a few sentences; China is non-existent except for the Korean war. So, it is a book that in its geographical, as well as ideological, scope, and the selection of the people whom Nayar excoriates, is limited. Nevertheless, taking these limits into account it deals in a very persuasive manner with a critically important period in western political history and makes us rather fearful of the future.


Thursday, April 13, 2023

The chronicle of the revolutions foretold?

 For almost two decades, Peter Turchin has been involved, with many colleagues and co-authors, in an epochal project: to figure out, using quantifiable evidence, what are the forces that lead to the rise, and more importantly, to the decline of nations, political turbulence and decay, and revolutions. This has resulted in the creation of an enormous database (CrisisDB) covering multitude of nations and empires over centuries, and several volumes of Turchin’s writings (e.g., Secular Cycles (with Sergey Nefedov), War and Peace and War; I have read the former, not the latter).

End Times is Turchin’s attempt to break what he has learned from the complex work in the field (that he calls), Cliodynamics, to the broader public. It is a work of “haute vulgarisation” even if the adjective “haute” is sometimes inapplicable since, in his attempt to reach the broadest possible audience, Turchin has at times stylistically gone much too low assuming almost no prior knowledge amongst his readers. But this is a question of style.

What is the substance? To simplify, in my turn:  Turchin’s model of decay has one variable: inequality in income or wealth. That variable which is often adduced as a source of political discord is given a very concrete meaning by Turchin. (Here, I have to mention the often uncomfortable personal experience when people keen to praise my work on inequality would claim that it is important because high inequality leads to social conflict, yet without either them or me being able to pinpoint exactly how it does it. Now, Peter Turchin comes with an explanation).

Rising inequality means by definition that the median-income person will fall further behind the mean-income person, and increasingly behind the top 10% or the top 1 percent. The median-income person could be, as in today’s United States (a county to whose analysis most of the book is dedicated), an insufficiently credentialed manufacturing or service sector worker; or it could be a semi-skilled laborer in the 19th century Great Britain, or a small landholder in the 1830s France and 1850s Russia.  Thus, precise occupation or class does not matter: income position does. 

What happens on the top of income distribution? Increased inequality means, again by definition, that people at the top are getting richer compared to the rest, or put differently, that the advantage of being in the top decile or top percentile is increasing. This, as every economist knows, implies that the “demand” for such top slots will go up. If the elite (the top decile or the top percentile) is composed, as in today’s US, of executives, investment bankers, corporate lawyers there will be an increasing attempt to study the most lucrative fields and to adopt the type of behavior (including the beliefs) most likely to lead to joining the elite. If more people do so than there are numbers of elite positions, a game of empty chairs follows. Not everyone among the aspiring elite will make it. The split in the elite, created by the disappointed would-be elite fighting for top positions, comes next.  

In conditions where (a) the distance between the median and the top goes up (what Turchin calls “immiseration” although it is important to note that this is a relative immiseration; i.e., the median-income person can in real terms become better off), and (b) there is elite overproduction, a pre-revolutionary situation ensues.  Immiseration is not enough. To produce a breakdown, we have to have different elites fighting each other, with one of them enlisting the support of the “people” (or others) in order to win.

Even passing knowledge of the backgrounds of the most important revolutions in the modern era shows that Turchin’s simple model provides a good fit. Take the French revolution: stagnation of income and recurrent famines occurred simultaneously with a divided elite (aristocracy and part of the clergy against the rising city merchant class); in Russia in 1917, it was one part of aristocracy against another which lost its landholdings and wealth after the abolition of serfdom and could not compensate it with well-paying state jobs. (The statistic of the number of revolutionaries who were themselves, or their families, the impoverished nobles is striking.) Or take the 1979 Iranian revolution: the sidelined clergy against the bourgeois elite, which, like in the Russian case, produced through its offspring the future revolutionaries.

The model fits well—almost too well—the current American reality. The median person is the “deplorable” (to quote Hillary Clinton), a populist (to quote the mainstream media), a Hillbilly (to quote J. D. Vance) or one of the candidates for the deaths of despair (to quote Anne Case and Angus Deaton). The disaffected, disenchanted American lower middle class has been studied extensively after Trump came to power. The current elite, whom Turchin dissects in an almost forensic manner, is composed of CEOs and board directors, large investors, corporate lawyers, “policy-planning network”, and top elected officials (p. 203), that is, of all those who have money and who use it to gain voice and power. (Not unexpectedly, Turchin argues that the United States is a plutocracy that uses the tools of the general right to vote as a way to legitimize its power).

But that elite is not monolithic. An aspiring elite (“credential precariat”) has been constituted. It has failed so far to reach the top and has ideologically defined itself in opposition to immigration, globalization, “woke” ideology. Turchin argues that this aspiring or would-be elite is in the process of taking over the Republican party and thus creating a political tool for an effective intra-elite competition. This is, of course, resented by the ruling elite that enjoyed an extraordinary good run between 1980 and 2008 as its view of the world (neoliberal capitalism, “credentialism”, and identity politics) became espoused by both mainstream parties. Turchin regards the present political struggle in the US as the ruling class trying (desperately) to fend off an assault on its ideology and, more importantly, on its economic position, by an aspiring elite that is enlisting the support of the disaffected middle class.

It seems to be a battle of epic proportions. Many of the pre-revolutionary signs are there: dysfunctional political system, strong interparty splits, lack of political representation for the outsiders. Turchin approvingly quotes the seminal empirical work by Amory Gethin, Clara Martinez Toledano and Thomas Piketty arguing that in all Western democracies, the left-wing or social-democratic parties have become parties of the educated credential elites, while the working and middle classes have lost their influence and even representation.   

Turchin is agnostic—as one should be—regarding what the outcome of the American political crisis will be. The American political system has shown itself to be extraordinary flexible and able to withstand serious shocks. In some ways, one could even think that Trump’s various conscious and unconscious “subversions” redounded precisely to the advantage of the system because they showed system’s resilience even when the President tried to “overthrow” it. But on the other hand, deep incomprehension and lack of interest in the other side’s view is precisely one of these characteristics of pre-revolutionary times and the US has plenty of evidence of this.  

Turchin’s model applies to China (not discussed in the book) probably as well as to America. The relative immiseration of the median class has gone on for the past forty years. Indeed, it went hand-in-hand with its phenomenal increase in material well-being, to the clip of almost 10% per year, and is thus less noticeable. At the top end of the distribution, the political/administrative class that has historically ruled China is opposed, still very cautiously, by the rising capitalist/merchant class.  In a paper by Yang, Novokmet and Milanovic, we have documented and analyzed probably the most radical change —short of a revolution—in the composition of the elite ever. That has occurred in China between 1988 and 2013. Economic growth has displaced the administrative class in favor of those linked with the private sector (capitalists).

Turchin’s model of internal breakdown thus acquires a geopolitical dimension.  The struggle for global supremacy between the US and China can then be visualized as the question of whose political system will crack first. If China’s does, it will have to scale down its foreign ambitions, and accept the role of a subaltern power (to the United States) even in Asia. If the American political system collapses first, the US would move toward isolationism and would have to acquiesce into Chinese rising power in Asia, thus losing controlling power in the most dynamic part of the world.

Will Turchin’s model’s predictions turn out to be correct? We do not know, but I think, it is important to focus on the logic of the mechanism proposed by Turchin and to see the next couple of decades as a period of difficulties rather than to think, as some people who popularized Turchin’s views did in the Summer of 2020, that social processes can be predicted with a precision of movement of celestial bodies.

Turchin’s is a fascinating thesis worth reading about, and then either witnessing the chronicle how it unfolds, or perhaps participating in bringing about the outcome or staving it off —because Turchin does show that there the cases when the elite foresight and well-understood self-interest enabled it to ride off the times of troubles.  




Sunday, March 5, 2023

On charisma and greyness under communism

Several years ago in a conversation about politics and history,  a friend asked me something about the durability of Tito’s regime in Yugoslavia (35 years). I cannot remember what was my answer, but I remember that he summarized it by saying that Tito must have been a charismatic leader. That statement struck me as odd. My friend lived in Argentina for a decade or more, and I thought that perhaps it came naturally to him to associate the long rule and popularity of leaders to their “charisma”.  Yet, as far as Tito was concerned,  no one could claim that he was a charismatic leader. Towards the end of his life, he was quite popular, liked by most, even adored by many—but “charismatic”: never.

That led me to think about the absence of charismatic figures among the second generation of communist leaders. For sure, communists had some charismatic leaders: Trotsky, partly Lenin, and surely Fidel Castro (but not Raul) come to mind. Even Mao—although I would like to treat him separately. But nobody else. Stalin was certainly not a charismatic leaders. Nor were the leaders whom I remember well from my youth: Todor Zhivkov, János Kádár, Gustav Husak, Walter Ulbricht, Władysław Gomułka were the greyest shade of grey. There is no crowd where they would stand out. Rather, they seem to have cultivated the desire for greyness and “averageness”. Others were not much better. Khrushchev was mercurial and often unpredictable, but not charismatic. And Brezhnev. Kosygin, Andropov, Chernenko were of the same grey-greyness variety. Jaruzelski stood out a bit, but this was because he was an unusually-looking communist leader: a military man with dark glasses. He looked more like an East European Pinochet than a communist leader. Ceauşescu was more known because of his independent foreign policies and crazy domestic policies, but he too was far from charismatic—as we can easily ascertain by watching his much replayed last speech at the Victoria square in Bucharest.

An easy answer to this absence of charisma or individuality is to point out that all post-revolutionary communist leaders were men of the “apparat”: skillful in bureaucratic machinations and back-room maneuvering.  They did not need to appeal to the population, run in elections, gather votes. And bureaucratic organizations prefer greyish technocrats like Kosygin and Kadar, or just grey  people in general with no individuality (like the rest of the characters  mentioned  above).  Reading recently David Halberstam’s “The best and the brightest”, I thought: was not McNamara, the man of the system, the same greyish-grey?; even if he was in certain intellectual ways probably more impressive than some on this list of communist “apparatchiks”.

Nonetheless, this bureaucratic explanation is neither sufficient not fully convincing. I think that there was another ideological explanation. When a friend mentioned Tito’s presumed charisma, I felt like correcting him, by saying that for communists charisma was never an ideologically desired property. No true communist leader would explain his popularity or longevity by “charisma”. “Charisma” and individual popularity were bourgeois inventions, good for class-based societies. Communist leaders were tools, playthings of history; individuals who just embodied the historical Geist. Thus ideally, and I think that this is a correct ideological frame within which to place their “greyness”, they as persons did not matter. What mattered was being on the right side of History and doing what the Party commanded. Every individualism, and even more so every flamboyant individualism, was suspicious. (My cousin who was a perfect Party man, scrupulously honest and dedicated, would never answer any personal questions directly: asked what are his plans regarding  his work and life, he would invariably –and honestly—reply: “I have none. It will be as the comrades decide.”)

The submission of individuality meant of course no place for charisma. This seems at first strange because some of these leaders—Stalin in particular, but also Tito, Enver Hoxha and Mao—enjoyed and encouraged a cult of personality but without claiming any charisma. History spoke through them.

Communist ideology was, fundamentally, an ideology of ordinary, working-class men and women. It was an ideology of masses. It thus frowned upon all displays of individualism and even favored an esthetic of ordinariness, of utilitarianism, of non-standing out in the crowd. Greyness of the leaders was exactly how ideologically the leaders should be: not any different from you and me, dressed in grey or brown, wearing dark shoes with thick soles, speaking softly, boringly and for a long time in a mixture of Marxist and economistic jargon that would put most listeners to sleep.  

The point was to be “the average man”.

There was a distinct communist aesthetic of greyness and drabness, derived from the ideology of “averageness” and levelling, where what may be judged as colorless and dull was precisely what was sought. Every aesthetic is deeply subjective. There is no reason to believe that an aesthetic of grey, dusty colors is inferior to the aesthetic of a rainbow. What is often ridiculed or criticized as lack of elegance or aesthetics in leaders, clothing, apartment buildings, and perhaps art in general is the application of foreign (to communist ideology) aesthetic criteria. The conventional ugliness of communist constructions was not a defect. It was something that was desired. It was an alternative aesthetic where nothing  would ever stand out. The grey leaders were beautiful—on their own terms.

Monday, February 27, 2023

Capitalists, the state and globalization

             “The tendency to create the world market is directly given in a concept of capital itself. Every limit appears as a barrier to be overcome…In accord with this tendency, capital drives beyond national barriers and prejudices as much as beyond nature worship, as well as all traditional, confined, complacent…reproductions of old ways of life. It is destructive towards all of this, and constantly revolutionizes it, tearing down all the barriers which hem in the development of the forces of production, the expansion of needs…” etc. (Grundrisse).

            This is how Karl Marx saw globalization as an inseparable part of capitalists’ interests and drive.  Nothing has changed in 180 years since the passage was written to make us believe that the behavior and the incentives of capitalists are different today. So is the continuation of “high globalization” that began with the opening of China and the fall of communism in the Soviet Union and Eastern Europe, simply a natural and unstoppable process of capitalism  breaking barriers of space, technology and habits in search of profit? In our own time capitalism has expanded not only geographically but also by creating new activities and new markets from renting our flats to being paid for influencing other people’s buying decisions or selling one’s name as a trademark. How can we then understand that the quintessential capitalist country like the United States might decide to opt out of globalization or at least to restrict its further advance?

We can explain it, I think, only by bringing two other “players” in addition to the one highlighted by Marx. First, we can bring in the state assuming that the state is to some extent  an autonomous actor, and  that what it does is not entirely determined by capitalists’ interests. It is a topic which has been discussed  for over a century and on which no consensus has been reached. But if the state does have sufficient autonomy of action then it can override, in some cases, the interests of capitalists.

The second possibility is to allow for the split within the capitalist class. Alongside what we may call “the cosmopolitan capitalists” who have profited handsomely from globalization through outsourcing of production, there may be what we might call “the military capitalists”, i.e. that part of the capitalist class directly linked with the “security” sector, procurement of weapons and replacement of technologically suspicious imports from unfriendly countries. The removal of every Kaspersky anti-virus protection software and every Chinese-made CCTV camera benefits somebody who would produce a substitute. They do have incentive to support a more bellicose policy and thus to question globalization.

But military capitalists labor under two important handicaps. They are very unusual capitalists in the sense that their profits depend on state expenditures which in turn require high taxes.  So in principle they have to be in favor of high taxation in order to fund  government expenses on defense. They might benefit on balance, but the preference for high spending and taxes puts them at odds with other capitalists. The second problem is that by restraining globalization they work against a force responsible for lower increase in nominal wages, namely cheaper wage goods imported from Asia. For perhaps that the greatest contribution of China and the rest of Asia was not the direct one (higher profits from investments), but the indirect one: allowing Western real wages to rise, albeit modestly, but shifting the distribution in favor of capital. This is what has happened over the last thirty years in the US and other advanced economies and goes under the rubric of the decoupling between productivity and real wage growth: it is just another way to say that the labor share has gone down. The labor share has gone down without reducing real wage thanks to the fact that wage goods themselves have become cheaper. This was a huge boon to both cosmopolitan and military capitalists. If  globalization is overturned, that benefit will evaporate: nominal wage would have to go up even if the real wage is constant, and the profit share in GDP will be reduced.

Thus military capitalists face two problems: they need to argue for higher taxation and implicitly in favor of reduction of capital incomes. Neither is popular. However the success cannot be ruled out. An alliance may be formed between the military capitalists and the hawkish part of the semi-autonomous state. They may be wiling to accept such “costs” if they enable the US to curb  China’s rise. The pure geopolitics would dominate economic interest. Historical experience helps such an alliance too: US has won all big wars (the First, the Second, and the Cold) and every time its victory has led it to the peak of geopolitical and economic power. Why should not that happen again?

 This is how we should regard the future of globalization, at least from the point of view of the western calculation: as a  trade-off between unconstrained geopolitical power and higher real domestic incomes. The economic arguments as well as the usual (and at times perhaps facile) assumption that the state does what capitalists want it to do overwhelmingly point in favor of continued globalization. Yet the “bellic alliance” may be just sufficiently strong to keep the other side in check, if not to entirely overturn globalization and shift the country towards autarky.