The politics of physiocracy: Quesnay and China

             Physiocrats are not much read today. This is unfortunate because many of their views have present-day relevance. Their writings were often intentionally murky and paradoxical, expressed in a form that is seldom used today, in maxims and short and at times enigmatic, sentences and in the famous Tableau economique whose overall idea is clear but details baffling. To economists today, they bring, on the one hand, common neoclassical views on freedom of trade, free circulation of labor, capital and goods (across regional lines within a single nation-state and between the countries), freedom of contract between workers and capitalists, single tax, and progressive taxation of wealth. On the other hand, they are (I think) often misunderstood to have thought that agriculture is inherently more productive than manufacturing. A much more reasonable explanation of their  position is to point out that only in agriculture did an income source, the land rent, exist that could have been taxed without “creating injury” to production. It is only in that sense ---tax-yielding—that agriculture was seen as more “productive” than manufacturing. (Incidentally, similar misapprehensions exist today when manufacturing jobs are considered inherently “better”” than jobs in services.)

The part of the physiocratic doctrine which is even less studied than economics is their politics. They were defenders of absolute monarchy of a special kind. The imperial China to which Quesnay (in response to Montesquieu’s critique of China in “The Spirits of the Laws”) dedicated an entire monograph of more than 100 pages, was their ideal kingdom.

Physiocrats’ rationale is similar to that of the Chinese legalist tradition. For physiocrats it went as follows. Once the natural laws (“la loi naturelle” or even “physiocracy”, the term apparently invented by Quesnay who liked to play with Greek neologisms) that consist in personal freedom, private property and security of person, are discovered, there is not much more that a society needs to do but enforce them. It needs only two things: (1) a body of educated people who are selected according to merit and who understand the body of laws and might improve and refine it, and (2) an absolute sovereign  whose role is to make sure that the laws are enforced. Most of the time, and ideally all the time, sovereign does nothing since the laws, if followed, establish that perfect equilibrium between the private and the public interest. The sovereign is at the same time the most and the least powerful person in the state. He is the most powerful because he alone can put an end to the rot if it happens that the laws are transgressed; but since the likelihood of transgression is small –given that the laws are the most rational possible—sovereign most of the time has nothing to do.

Quesnay found the then Chinese system, as known as that time in Europe, to be the closest approximation to that ideal. Unlike the French aristocracy of blood that was the body of people who interposed themselves between the sovereign and the people, the Chinese mandarinate was selected on merit. It designed the most perfect laws because it consisted of the most talented people. It goes without saying that physiocrats saw themselves in that role: as a replacement for a decadent, ignorant and indolent aristocracy.  The “absolute” rule can still remain, but now it would be based on right principles and use of the right people.

As Quesnay says at the introduction on his treatise on China entitled “Despotism of China”, the term “despotism” has two meanings. The first is unchecked or absolute power within the law and used to make sure the laws are respected, the second is unchecked and arbitrary personal rule. Under the first title, despotism is fully legal (since based on the enforcement of legality) and legitimate, under the second, illegitimate:

Despot means MASTER or LORD: this title can therefore be applied to sovereigns who exercise absolute power regulated by laws, and to sovereigns who have usurped arbitrary power which they exercise for good or evil over nations whose government not is not regulated by fundamental laws. There are therefore legitimate despots and arbitrary and illegitimate despots.

 Democracy, defined as the selection of rulers by the ruled, has no place in the physiocratic system. It is entirely redundant. It is not clear what its role would be (had they ever envisaged it): perhaps only to mess up the perfect principles of the natural law.

The relevance of physiocrats’ thought is obvious when we consider today’s Chinese system. Formally speaking, it is similar to the system Quesnay described. An absolute sovereign is selected from within the ruling group, and the legitimacy of his rule is reflected in the excellence of the laws and the quality of the body of people who implement these laws. The quality of the social system is therefore judged by its performance. The key part of that performance -and physiocrats were in this the precursors of what we consider today a “normal view”—is how fast economic abundance is increasing for the majority of the population. If people are getting steadily richer, there is little or nothing to change in the laws. And therefore nothing for the mandarinate or sovereign to do.

The system is, like any person, judged based on its performance, not on the technical ways its rulers have been selected, how strong is the state, or any other “extraneous” objective. It is the rule “for the people.”

The three German fears

I spent an extremely hectic and intellectually stimulating week in Berlin. Despite my reasonable following of German politics (nobody interested in Europe can afford to ignore German politics) I was unprepared for the extent of the malaise that appeared in almost every conversation. During that week, I gave a talk on my new book “Visions of Inequality”, had a presentation on global inequality and a panel discussion with the Confederation of German Trade Unions, and participated at the opening of a website on wealth inequality in Germany. I thus met people from different walks of life: academics, trade unionists and people close to the ruling SPD, researchers of inequality, several journalists who interviewed me, and even several politicians who gave talks at various occasions. But neither in their public talks nor in private conversations, could I fail to observe a large dose of pessimism.

What were the topics that fueled the pessimism? Here is an approximate list: inflation and dearness of energy, economic stagnation (near zero growth), the rise of the extreme right, political paralysis, loss of exports to China, decline of German car technology, high wealth inequality, imperfect assimilation of foreign-born population, inefficiency of German railways, dark streets in Berlin (saving of energy), full political dependence on the US. One could go on depending on the person I talked to, chance movements of conversation, and the daily mood.

To a foreign observer who might have disembarked into Germany not knowing much, that pessimism seems exaggerated. On the positive side of the current ledger one could list the overall wealth of the country, acceptance of more than 1 million Syrian refugees and almost as many from Ukraine, and full employment. Yet the negative tones dominate.

I think that the pessimistic mood dominates not only because of the current wars in Ukraine and in Israel/Palestine, and general uncertainty that has enveloped the world, and Europe in particular, but because of the resonance of current concerns with the events from one hundred years ago in Germany. It seemed to me that the current events played on three important German fears: runaway inflation, wrecking of democracy, and the rise of antisemitism. All three are grounded in the Weimar period, and like a person who has been once poisoned, the fear of a similar outcome is not assessed by the actual strength of the current “poison” but by past memories.

The fear of inflation that largely destroyed the credibility of the Weimar republic is well known. It has been behind extremely cautious German monetary and fiscal policies ever since the end of the World War II. The difference between the inflation of 1921-23 that attained at its peak the monthly rate of 30,000 percent, and the current single-digit annual inflation is enormous. Yet, the present inflation is driven by the rise in the prices of staples like energy and food. Its impact—however small in numbers—seems disproportionate. It affects poorer segments of the population much more than the rich.

This in turn raises, more acutely than before, the issue of wealth inequality and redistribution. Despite many years of social-democratic rule and an extensive welfare state, German wealth inequality is very high. According to SOEP household survey, 39 percent of the German population has zero (or quasi zero) net financial wealth, and almost 90 percent of the population rather negligible net financial, or non-housing, wealth (reflected in the fact that their monthly income from property is under 100 euros per person). This makes German wealth inequality (depending on the metric one uses) equal or even greater than the very high US wealth inequality.  A feeling that many large fortunes are hidden or enjoy tax shelters thanks to different European schemes and tax competition between the EU countries, adds to the feeling of unfairness.

The second fear is that of fragility of democracy. That fear too seems, on the face of numbers, vastly exaggerated. But the full establishment of the Alternativ für Deutschland as a stable parliamentary party with about 10% of the vote, and not a passing fad like the Republicans in the past, serves as a reminders of a non-negligible chance of a sharp movement to the right, or of the right’s indirect influence on the coalition governments (of whatever hue they may be). There is of course no direct denial of democratic way of government by the AfD, nor (it would seem) any likelihood of them coming to power as a dominant member of a coalition, but the inchoate fear that one detects is more like a concern of a gradual erosion of democracy along the lines of what has happened in Hungary and perhaps in Poland. Both the form and some essential features of democracy may be retained but other essential features may be gradually diluted.  

The third fear is, in a way, the most irrational but does not seem to me absent. Germany’s strong, and perhaps excessive, support for Israel in the current war in the Middle East has its obvious roots in the Shoah and the atonement for those crimes which the German public opinion and politicians have since the establishment of the Federal Republic put on a level of an almost core principle, equal to democratic governance and judiciary independence. The irony is that an excessive zeal in atonement might lead to the unquestionable acceptance of policies that lead to crimes committed against civilian populations. Germany thus faces an almost Greek-like drama: the desire to correct for past misdeeds may lead to the acceptance of current misdeeds.

The three fears displayed in the already gloomy atmosphere of the European global economic decline, unremitting immigration pressures from the South that Europe is unable to accommodate (as shown by the closing of frontiers in Nordic countries), its energy dependence, and absence of a distinct political voice, made me look at the unusually dark streets in Berlin—and indeed at well-lit and cheerful clubs and restaurants—with a somewhat greater foreboding than they deserve. 

 

 

 

 

 

There is no exit for dictators

             In an interesting paper he tweeted yesterday, Kaushik Basu discusses, using a mathematical model, an old problem: how rulers once they are in power cannot leave it even if they wish to do so, because their road to power, and in power, is littered with corpses that will all (metaphorically) ask revenge if the ruler were to step down. Furthermore, since the number of misdeeds and of rulers’ real or imagined enemies multiplies with each additional period in power, they need to resort to increasingly greater oppression to stay in power. Thus, even the originally well-meaning or tolerant rulers become, with the duration of their rule, tyrants.  Basu is aware of the millennial nature of the problem; he cites Shakespeare’s Macbeth.  He could have also cited Tacitus’ description of Tiberius’ descent into murderous suspiciousness and folly.

             Basu terms this issue “temporal inconsistency” because his assumption is that the ruler would like at one point to leave and spend the rest of his life in affluence and leisure. (I write in “his” life because all individuals listed in Basu’s paper are men, and he strangely resort to the use of “she” and “her” in the mathematical part of the paper.) This assumption of a ruler who wants to retire is unrealistic, and I will explain why below, But before I do so, I need to note that there is no inconsistency in the ruler’s or dictator’s behavior in each individual period. (Basu acknowledges this in the latter part of the paper by stating that fully rational maximizing behavior in each individual period may still lead to on overall suboptimal outcome.). Assume that the ruler plays an annual game where he wonders: am I better off if I retire now or if I commit another crime which would make my retirement next year more difficult but my rule this year safer? The answer is simple: he is better off committing another crime in the expectation that this would make his overthrow less likely. He replays that game every year and every year he reaches the same conclusion.  Thus, the ruler’s decisions are not at all irrational or even inconsistent.

            From Machiavelli’s point of the art of statecraft it would be equally wrong to fault the ruler. According to Machiavelli, the role of the ruler is to rule like the role of a baker is to bake. In order to rule he must unavoidably commit misdeeds or crimes because it is the nature of politics and human society. But he should not use unnecessary force; in other words, crimes must be acknowledged by the ruler intimately as such and their use must be kept to the minimum necessary to stay in power. And indeed most rulers do believe that they are doing just that.

            But why is the very assumption of a ruler who wants to retire generally wrong? (I know that there are some examples of rulers who have chosen the road of retirement but they are extremely rare: the reason why we speak of Sulla is precisely because he was unusual in choosing retirement and powerlessness after having committed many misdeeds.) The assumption is wrong because rulers’ objective is not a comfortable life on a yacht in the Pacific—the example Basu gives in the end of the paper—but raw power and enforcement of an ideology.

            When power as such becomes the objective, as it is among all politicians, and autocratic rulers especially, there is no amount of worldly goods that could substitute for power. Rulers cannot be cajoled (as Basu seems to believe) into leaving power. And this is not just because of the possible punishment that may await them in retirement, but because they crave, and they need, the exercise of, power. Svetlana Alliluyeva writes in her memoirs that her father lived only for politics and was interested only in politics. And indeed whoever has read memoirs of Stalin’s comrades or Stalin’s biographies could not be but struck with the emptiness –in the normal human sense—of the life that Stalin led at the peak of his power. It was the life of interminable meetings, long hours of reading, quasi solitary dinners with a few scared companions, monotonous banquets; a dry life devoid of both humanity and affluence. There is nothing you can offer to Stalin to make him leave power even if you can guarantee that he would live for the rest of his life safe in luxury.

            The same applies to ideologues. Or perhaps even more so because ideologues believe that they are on a unique mission to save their nation or the world, and obviously then being in power is a necessary condition for such a salvation. Take Hitler as the easiest and strongest example. He believed from a relatively young age that the Providence has selected him to save Germany and make it powerful again. Thinking that offering him, say in 1938 or 1942, a retirement in the Austrian Alps, or an endless Wagner festival in his beloved Linz, in exchange for stepping down is so ludicrous that can produce only derision and laughter.

            Basu’s concluding sentence that giving rulers an escape route through  luxurious retirement might make many “Individuals with no interest in power and tyranny…strive to become tyrants for no other reason but to get that castle in the Pacific Island” although said probably in jest and with the intend to provide a paradox, is simply wrong. Rulers do not want to go to the Pacific islands.

            Dictators often evolve during their rule, moving more toward the power-hungry tyrants and ideologues than they were in the beginning of their reign, even regardless of the amount of crimes they might have committed. Here Putin comes to mind. He came to power by giving the impression to be ready to do the oligarchs’ bidding, to be hard-working and meticulous, pro-western, and in love of comfort and affluence. Gradually however he evolved: first, by dropping the oligarchs who brought him to power, and then by changing ideologically to see himself as a savior of Russia. If that is supposed to be his role, he obviously has no choice but to stay in power because everybody else, in his view, would drive the country to ruin.

            We thus come to the conclusion that there is absolutely nothing that can be offered to dictators to leave power;  thinking that there is something shows a misunderstanding of what motivates people in politics. It also shows a naivete of other economists (not Basu as he explicitly rejects it) who hold that all human activities are driven by the search for material profit and comfort.

            Basu’s suggestion that there should be globally-enforced term-limits is not only impossible to implement but shows a misunderstanding of politics. Regarding the practical impossibility of its implementation one need only mention that such a rule would never pass through any international organization, but that even if that were to happen, there would be many ways to avoid observing the rule while formally adhering to it. Putin, at first, side-stepped the issue of term limits by taking the position of prime minister while effectively still remaining in charge; Havel got rid of term limits because he argued that being president of Czechoslovakia was different than being president of the Czech republic. Djukanovic, the Montenegrin leader, ruled for more than three decades by switching between the positions of president and prime minister. Erdogan did the same by changing the system from parliamentary to presidential. There is, in effect, no way technically to implement the notion of a global term-limit even if somehow, miraculously, the world were to come to believe in them.

            And more importantly there is nothing that can be offered to dictators to make them step down. They have to continue to rule until they either die peacefully in their beds and after death became either vilified or celebrated (or at times, both), or until they are overthrown, or meet an assassin’s bullet. Once on the top, there is no exit. They have become prisoners like many others they have thrown in jail. 

On general futility of political discussions with people

             Over the years I have had political and ideological discussions with at least three groups of people and have concluded that these discussions are, almost entirely, futile in making people either see things differently, or acknowledge that others may see things differently, or -God forbid-- change their opinions however slightly. That of course opens the question how people come to hold certain political and ideological positions—since at some level they must be influenced by views of others: their parents, family, and even random interlocuters. I do not have a good explanation for that. I think that reading, watching, listening and thinking does lead people to form and then to change opinions but I am very sceptical that direct discussion does it. The former methods are indirect: one reads an author and finds him convincing; but if one has a discussion with somebody acknowledging that that person has produced valid arguments appears to diminish him compared to the other person, and one’s intellectual vanity does not wish to accept that. Hence, I think, discussions almost never lead toward some genuinely-felt greater similarity of opinions. They just leave the participants where they were before. Or worse, lead them further apart.

For the participants who are more passionate or involved in the discussion, such an outcome is more frustrating. They therefore dispense a much greater amount of intellectual, mental and ultimately physical energy in trying to convince the other side—without success. They thus spend hours reviewing the arguments made, look for possibly better ways they should have presented their case, explore the weaknesses of the opponents as if any of that would make any difference. They waste their time and energy.

The three groups of people with whom I had chance (or misfortune) to have discussions and found impossible to move even a millimeter away from their held beliefs were Stalinists, nationalists and liberals. But their way to discuss things was different from each other. They were all equally unyielding in their views, but adopted somewhat different tactics.

Stalinists whom I had the “privilege” to discuss chronologically the first introduced me to the type of discussion tactic that were used by the other two groups too. To any strong argument from the interlocutor they would produce either a denial (such and such event never occurred; there is no evidence; it was somebody else’s propaganda etc.), or they would accept that the uncomfortable fact occurred, but will justify it by an even greater perfidy of the other side. As I mentioned, I would see exactly the same arguments used by nationalists and liberals too. One advantage that Stalinists had compared to the other two groups (and that is the advantage of which I became aware much later on) is that they respected the knowledge of communist history. So, if you attacked them, they would produce the denial and petrify arguments, but would respect your knowledge. They might even ask you about the fact they did not know. Communism thus functioned entirely like a religion. Christians have been at each other throats since the religion was founded: but the knowledge of finer theological or historical points was respected by the different sects even when they disagreed on almost everything else.

Political discussions with nationalists can, I think, best be described as throwing pebbles against an immense rock. You can throw as many pebbles as you wish, the rock will not be hurt nor moved. Like Stalinists they use denial and perfidy of others commonly, but perfidy of others now spreads to everybody under the sun except their favored nationality. In that sense, perfidy was much more widespread than for Stalinists since perfidy included n-1 national groups in the world. Moreover, if you bring two opposite nationalists together, since they both believe that n-1 groups are all equally at fault, the conclusion is that it suffices to have only two of them to prove that the entire world is evil. Thus one quickly establishes the conclusion that in nationalists’ worldview it is ultimately the human nature that is evil since no nation can be exempt from it and the individual characteristics do not matter as they are determined by one’s ethnicity or race.

The third immovable group are liberals. They tend to be more sophisticated and more knowledgeable but this does not make them more intellectually honest. Actually, one could say the reverse because they handle sophistry with exquisite skills.  Gree rhetorician Aelius Aristide’s comment from 1,900 years ago regarding Cynics applies to them: “They deceive like flatterers, handle insults like superior men, combining the two most opposite and repugnant vices: vileness and insolence.” They also use denial and perfidy of others as arguments, but they find them “served alone” to be too crude. That’s where sophistry kicks in. To any incontrovertible uncomfortable fact they do not produce just a denial, but shift the discussion on  secondary or tertiary matters of marginal relevance to the topic discussed. That produces huge frustration in the interlocutor. It is akin to playing a soccer game which one is winning 3-0,  but the other side refuses to acknowledge the defeat arguing that what really counts is the number of shots on goal, or free kicks or any other marginal statistics which is in their favor.  All attempts to drive the discussion back to the original topic, and to the argument to which they have no valid counterpoint fail in the face of this intransigent tactic which consistently shifts the realm of the discussion elsewhere. Since liberals are more sophisticated than the other two groups they also use “rope-a-dope” tactic where, faced with uncomfortable truth, they do not reply to the argument but just shrug it off as irrelevant: “everyone knows that things are like that”. This again has a very negative effect on the interlocutor as it seems to present him as a very naïve person who takes the ideological stance of liberals seriously. In reality, they say, even if not loudly and clearly, flexibility is all: we may do things one way one day, and entirely differently the next day, but ideologically we shall always claim to be unswervingly loyal to our beliefs.

I have not had much occasion to discuss issues with true conservatives (who may not be vulgar nationalists) nor with the new generation of woke liberals, so I cannot tell how their tactics may differ from the ones that I mentioned.

I have thus come to the conclusion that if one believes in a certain point of view and yet has a limited amount of mental energy, it is entirely wasteful to use it in trying to convince others in direct discussions. It is much more effective to write and read and listen than to have Socratic or any other dialogues. They, I think, lead nowhere.