Equality based on exclusion

             The ideological history of the idea of equality (“Equality: The History of an Elusive Idea”) is an ambitious, erudite and well-written book by Darrin M. McMahon. In eleven chronological chapters McMahon shows how societies as diverse as hunter-gatherers, Greeks and Romans, early and medieval Western Christians, French revolutionaries etc. and ultimately the partisans of identity politics have thought of equality. (Not inequality, the term that has, as McMahon reminds us, become ubiquitous, but equality.) Not all chapters are equal though. In my opinion, the best are on the American and French revolutions, and the concluding chapter on US civil rights movements and today’s politics of identity. The concluding chapter is indeed about the United States only, and as it stands for today’s world in general, it could be thought as somewhat reductonist. However, the two big themes faced by the American society in the past half-century, the rights of Black population or “people of color” and identity politics, transcend US limits, as the French riots attest for the former and Putin’s vociferous attacks on sexually-based identities on the latter.

            The motif of the book is, I think, best expressed in the phraseology of (not popular, but recently much more quoted) Carl Schmitt: every ideology of equality among the “brothers” or “peers” is predicated on the exclusion of others from that equality. This is a fundamental contradiction in the idea of equality as we know it historically. Athens and Sparta insisted on equality among their citizens, but excluded enslaved people, metecs (resident foreigners) and women. It was an equality that, at most, encompassed a third of the population. Christians, like all monotheistic co-religionaires excluded from the application of their equality members of other religions. The American revolutionaries wrote that all men are created equal, but they really meant men only, and defined that equality in the opposition to the enslaved people. In percentage terms, the reach of the American equality was not greater than the Athenian. The French revolutionaries were more universal in their approach, but gave only a grudging recognition of equality to the colonized. Marxism is keen on equality among proletarians, but excludes “bourgeoisie”, and in its Maoist variant during the Cultural Revolution, created the most radical reversal by openly discriminating people from the “bad” social classes, and promoting (including in the access to education) those from the formally oppressed classes.

            As this review shows, equality went together with exclusion. Often, the more equality among one group was emphasized, the stronger was the implied chasm with the excluded. Before I move to discuss two, in my opinion, most interesting issues raised by McMahon, let me mention that McMahon’s several comments on Marxism’s lack of concern with equality (as opposed to its interest in abolition of classes) is not a controversial point. McMahon at times seems to believe so, but his interpretation is accurate, non-controversial, and shared by most who have read Marx and Engels. Similarly, I think that few people who know Fascist ideology would be surprised by its emphasis on national equality. It was supposed to solve the class conflict, to unify national labor and national capital, to divide one nation from another, and thus its within-national calls to equality are not surprising.

            The two most interesting aspects, in my opinion, are identity politics and (what is missing in McMahon’s book almost entirely) the contrast between national and global equality. But are present-day issues.

            Identify politics in McMahon telling comes at the heels of the civil rights movement in the United States. That movement too, in its extreme version propagated by Stokely Carmichael, Malcolm X and “Black Power”, as they outflanked Martin Luther King, could be seen within the same motif as the rest of the ideologies discussed in the book: the Whites were now excluded from the application of the equality principle, thus creating a reverse racism or (in Sartre’s words) “anti-racial racism”. But the civil rights movement also opened the gap with Black women who saw some of the movement’s leaders as imbued with machismo and “male chauvinism”. White women themselves have had a historically fraught relationship with Blacks’ emancipation; as McMahon mentions, Susan B. Anthony thought it was much more important that (White) women be enfranchised than that the rights be extended to Blacks. But men/women, Blacks/Whites are not homogeneous among themselves once sexual differences are brought into the play. Thus, somewhat paradoxically, the movement for equality not only led to the fragmentation of society into many groups, working at times at cross-purposes, but to the emphasis on differences. “To insist at difference as the very meaning of equality [is] in the long-run of egalitarian reflection a novel claim”, as McMahon discreetly observes. The struggle for equality that does not underscore some fundamental equality, or even sameness, among people but rather their differences is not common, to say the least. One can paper over this by arguing that all current movements just ask for recognition of specificity and equal treatment. But at what point does the insistence on differences, and even incommunicability of experiences, becomes exactly what we have seen before: insistence on equality within by creating an ever-greater divide from the rest?

            My second comment has to do with what is, with a few exceptions, absent in McMahon’s book. It is the change in perspective when one moves from claims for national to claims for global equality. McMahon mentions how the two were linked in the US civil rights movement, and how the New International Economic Order tried (and failed) to equalize the power of rich and poor nations. But it might have been worth discussing a bit more the change in perspective brought about by globalization. Consider equality of opportunity. There is probably no ideology today that would be against equality of opportunity within a nation-state. But extend that call for equality of opportunity to the global level and the problems immediately arise. If the “same” persons in Sweden and Zimbabwe face entirely different life prospects (in terms of income, wealth accumulation, housing, life expectancy etc.), and if the main reason for this lack of equality is the difference in mean incomes between the nations, there are two obvious ways to remedy this state of affairs: transfer more money from rich to poor countries (a global welfarist approach as envisaged by Gunnar Myrdal) or open borders to migration. Neither enjoys a majoritarian support in rich countries. It then becomes interesting to ask on what grounds people who often strongly support equality of opportunity, exclude from its application people who do not reside in their country? We see there the same mechanism as many times in history: the greater the desire for equality amongst the peers, the greater the need to exclude others. It then becomes fully understandable why  countries with the most developed welfare states (Sweden, Denmark Norway, the Netherlands) are the most notable examples of the ideological U-turn on international migration.

            I have taken the last topic to show how McMahon motif plays well in contemporary situations even in cases where ideologically the issue has not been fully developed. McMahon’s (or Carl Schmitt’s) approach thus shows its obvious advantages, but it also leads us to a less upbeat conclusion: unlike the oft-quoted “long arc of  history" that allegedly bends toward “justice” (meaning equality), the outcome may be greater equalities in some areas and the creation of greater chasms between people in other areas. This is what history seems to teach us.

The new colonialism, or how some countries have lost self-respect

 There is a news items today that, in simply reaffirming in an extreme form what was happening in the past thirty years, struck me. The Prime Ministers of the Netherlands and Luxembourg, presumably on behalf of the European Union, visited Serbia (before going to Kosovo) for less than 24 hours. They were received with the highest state-level honors, which by themselves were over-the-top because neither of them is the head of state. In addition, during their super short  visit to Belgrade, they found enough time to have separate meetings with the representatives of the Serbian opposition (sitting in the Parliament in Belgrade) who are currently demonstrating in the streets, asking, in my opinion, quite legitimately for government’s much more serious crackdown on violence and crime.

Notice how Prime Ministers of Western countries checking things out with the domestic opposition seems like a normal news item. But then, let’s unroll it. There is an official state-to-state visit, and the representatives of the visiting state believe it was necessary to consult also the domestic opposition. The first problem is whether it is appropriate to mix up state-to-state visit with the rest of politics. When countries’ dignitaries visit each other, they do not necessarily imply thereby that they agree with everything their hosts believe, nor that they support the government which receives them. They are there to talk about mutual economic and political interests with whatever government is in control of that particular piece of land. When the new and different government comes, they would be equally happy to speak with it. This is a simple and normal rule of international politics.

Let’s go further. If it is okay for the Dutch and Luxembourgeois Prime Ministers to talk to the Serbian opposition (while being there for twelve hours), would it be acceptable if, in a return visit, the Serbian President met with the Dutch and Luxembourgois oppositions? If you believe that there is no reason for that because the Dutch and Luxembourgois opposition is not currently protesting in the streets, could we then wonder if, on his next trip to France, the President of Serbia could ask to meet with the “discontents” who are currently, very obviously, protesting in the cities of France? Or with the opponents of the pension reform? Or were he ever to visit the UK, could he alternatively meet with the parliamentary and extra-parliamentary supporters of the Brexiters and of the Remainers?

The idea of the Serbian president asking officially to meet with the French or even Luxembourgeois opposition strikes one as so fanciful that it laughable. It is a joke. It would indeed be treated as such, were it ever raised as a possibility. But like every joke, it tells us something about the real world. It is that the relations between the states have become utterly unequal. Unlike in the period 1960-1990 when the Third World and non-aligned countries were strong and there was at least formally a recognition of equality of states, and in the diplomatic sphere, acceptance of that formal equality, we have moved to the medieval style of inter-state relations where power only matters--even in its ceremonial aspects. No hiding of inequality, but rather its display: prostrate yourself or kiss the edges of my purple robe!

Inequality of power between the states is openly flaunted, and many people, having become used to it during the past thirty years. take is as normal. Because they have lost self-respect.

 

Athenian dialogues on global income inequality

 Glaucon (G). Good day, Adeimantus. I have a good news for you. Perhaps you have already heard that global inequality measured by the differences in real incomes between people has decreased significantly during the past 30 years and this is the first such big decline since the Industrial Revolution.

Adeimantus (A). Good day to you too, Glaucon. I am extremely happy that this is happening. This simply proves that capitalism works and that the critiques of neoliberal policies were and are wrong.

G. But you know, Adeimantus, that most of the decline in global inequality is due to China and that China did not exactly follow neoliberal policies over that period. Moreover you have criticized China's policies of state capitalism many times.

A. Yes, I am against Chinese policies and I think they are wrong policies.

G. How can they be wrong, Adeimantus, when you just cheered the decrease in global inequality which was achieved mostly thanks to China?

A. Difficult question, but let us go back to the discussion of global inequality.

G. Wait a minute, Adeimantus. If China’s policies are so successful should not other countries copy them?

A. No, Glaucon my friend, because I know China: China is going to exploit other countries through unfavorable loans. They would not be able to repay them and will get into the vicious circle of underdevelopment.

G. But, Adeimantus, was not the same argument made many times before by the left wing critics of Western loans and which you also many times, here in the markets of Athens, vehemently rejected?

A. Let me say that I think that the situation is different today. I will give you a precise answer later. But let’s go back to the convergence. I am glad that the world is converging but it seems to me that you, Glaucon, are not at all concerned that the lower parts of income distributions of the rich countries have been going down in the global rankings.

G. Sure, Adeimantus. Them going down in the global pecking order is part and parcel of convergence. If you do have convergence that means that some people who used to have income lower than yours will now have income higher than yours, and will thus get ahead of you. So, my dear Adeimantus, you cannot be in favor of global convergence and also in favor of keeping the same people on the top. It is mathematically impossible. If convergence is good then this global reshuffling in incomes is also good.

A. But politically how am I going to explain that the entire distribution of my country is no longer number one, that we are not among the top decile or even top quintile? That creates lots of problems for us domestically because the middle classes feel much poorer, relative to the rest of the world, even if their real incomes may still go up. One of the famous writers produced by the island of Britannia, Paul Collier, pines in his book “The future of capitalism” for the time when the British worker could stride the world, standing tall and proud because he was richer than many other people.

G. If he was richer than many other people that means that many other people were poorer than him and these people probably did not like that situation. So now they like the idea of catching up and actually perhaps even being a bit richer than Paul’s Britanian worker. Moreover why should the Britanian or any other worker remain in that top position forever?

A. Because it is very difficult for us to explain it to the population.

G. I understand that, my dear Adeimantus. But this is your political problem. This is not a problem that somebody who cares about global equality and global social mobility is concerned with. From the global point of view, we must treat everybody the same. But let me ask you this: you are, I know that, in favor of social mobility in your own country. You want everybody to have the same chance to succeed. Why should not be there social mobility at the level of the world?  What is different there for you to feel bad about social mobility and reshuffling of income positions in the world? If so, should you then be arguing that similar reshuffling must not take place at the national level either? Should you not argue that all people who used to be rich remain rich? If rich countries have to stay at the same positions in the world, why should not rich families stay at the same position within countries?

A. The ships are coming at noon. I have to bid you farewell now. Let’s continue this discussion tomorrow.

Here comes Thrasymachus (T).

T. Hello, Glaucon. I am a bit upset wit you. You have made a big deal of that fact that global inequality measured in relative terms (my income as a fraction of yours) has gone down. But I do not care about that. If we look at the absolute differences in income between people they have gone up.

G. Yes, Thrasymachus, there is no doubt that you are right but this is the case whenever overall real income and real income of individual people increase. Differences in absolute terms go up even if relative differences stay the same or go down. This is like when you take a balloon and draw by pencil different points on the balloon, and then blow the balloon up: what happens? While the relative distances remain the same (or in the case of convergence even go down) the absolute distances between the points on a bigger balloon become greater. But this is okay because the balloon (the world GDP) is greater.

T. But maybe I am a stubborn guy and I just care about the absolute distances and not about relative distances.

G. OK, Thrasymachus, but then you have to be consistent: absolute distances for example in the US in 1860 were severalfold less than absolute distances today. The reason is simply that US GDP per capita was less than one-tenth of its level today and when you look at the distance between any given percentile in the income distribution versus another then and compare those distances to what they are today, they were then very small. (And I am using here incomes that are all corrected for the difference in the price levels and are expressed in current dollars.) But you would not be saying, Thrasymachus, would you, that inequality in a much poorer America with 13% of its population in slavery was much, much lower than inequality today? Would you defend that?

T: Probably not, but let’s go to the global level. Your convergence is mostly driven by China. So other countries have not really converged on Western incomes and Africa certainly did not.

G. Yes, this is a good point. China is really driving the convergence and Africa is remaining equally poor or even the distance between Africa and the rich world is increasing.

T. So I am right to claim that the neoliberal order has actually increased inequality between the countries and people and you get reduced inequality only if China is included. Thus the gap between the core and the periphery is just getting worse.  

G. This is not exactly true Thrasymachus because even if China is excluded the global inequality does go down although by significantly less. But then if you expel China from the “developing world” or the periphery because it has become rich, are you not permanently changing your definition of the periphery? Whoever is successful get “expelled” from the periphery, and by that logic there could almost never be a convergence because there would be always some poor countries that would not converge. If India converges tomorrow, you would exclude it too; if Indonesia and Vietnam, and then Bangladesh, come next you would drop them too. So you can never have convergence by definition since every country that converges will be kicked out of your comparison.

T. Glaucon, you make many arguments full of bad sophistry, but although I cannot rebut you know, I will think a bit and come with a decisive proof that what you say cannot be right.

State capitalism one hundred years ago and today

 A few days ago I re-read the book of Lenin's final years’ speeches and letters. The book covers the years 1922 and 1923 (Lenin died in January 1924). I grabbed the book simply because I saw it on my shelf and having read it probably twenty years ago I could not remember exactly what was there, and thought, as I was proof-reading the section on inequality in socialism in my forthcoming “Visions of inequality”, that there could be something in the Lenin book that might be relevant for my chapter. In reality, there was nothing.

But there were several topics that have not lost their relevance even 100 years later. There are at least two that are very relevant today: Lenin's views on the New Economic Policy (NEP) and state capitalism, and his views on the nationality problem during the process of the creation of the Union of Soviet Socialist Republics. (Even the name was still debated: Lenin writes of the Union of Soviet Republics of Europe and Asia.) I will discuss the first topic only.

In a very long speech (which takes 50 closely printed pages) to the 11th Congress of Russian Communist Party in 1922 Lenin summarizes the results of the first 18 months of the New Economic Policy. (I also use his speeches to the Comintern Congress in 1922 and to the Moscow Soviet the same year.)  He presents NEP as a necessary retreat from the construction of socialism. Why was the retreat needed? First, In order to restore the links with the small-holding peasantry who during the War Communism curtailed their output as there was nothing to exchange it for (as the industrial production plummeted), and second, to learn how to manage the economy. “Learn from capitalists” could have been the key slogan of the NEP.

Lenin argues that Communists, having studied ideology and the technique of political struggle, simply do not know how to manage the economy: “Communists do not know how to run the economy… they are inferior to the ordinary capitalist salesmen who have received their training in… big firms” (p. 35); “we must organize things in such a way as to make possible the customary operation of capitalist economy...because this is essential for the people”  (p. 41). It was not part of Communists’ tool-kit. They have gained political power but they do not know how to use it to make the economy work. They are utterly bureaucratic and thus they mismanage the economy. (Lenin has a ten-page “excursus” on how complicated it was to buy canned food when hunger reigned in Moscow because different Soviet bureaucratic bodies could not agree among themselves. Finally the issue came to the Politburo and it was decided there. Lenin exclaims: “But Kamenev [the Politburo member} cannot be dragged into every transaction, dragged into the business of buying canned food from a French citizen”, p. 57).  

But he fails to recognize, and perhaps it was difficult to recognize at that time, that the problem was not just learning how to manage large enterprises but that there was a problem of incentives. It was not that the Communists were necessarily worse in management skills than capitalists. The problem was that the incentive structure is very different for a bureaucrat or a manager who runs a large state-owned company from the incentive structure faced by an individual capitalist.

For Lenin, however, the problem lied in lack of knowledge of management: he would have loved MBAs and mentions as a very positive development, the creation of a similar institute in Moscow and the role of the journal Ekonomicheskaya Zhizh as somewhat of a Soviet Forbes (in today’s terms, obviously). The problem, Lenin believed, could be remedied by working alongside capitalists in the so-called mixed enterprises created by the state, and Russian and foreign capitalists (14 of them existed at the time of Lenin’s 1922 speech) and by imitating capitalists’ skills.

NEP is a learning experience; once Communist cadres have learned how to do business, and run the economy, NEP can be shut down (“state capitalism is capitalism that we shall be able to restrain, and the limits of which we shall be able to fix”, p. 40). The justification of the NEP is thus that while it is a retreat from the ideals of socialism it is a temporary retreat and after its objectives have been achieved, future advances will be much more powerful because better organized and sustainable. And the country would be richer.

In that context, Lenin discusses state capitalism. He makes a  distinction between (a) state capitalism under capitalist conditions, and (b) state capitalism under socialist conditions. He rejects the view that the two of them are the same, and he criticizes Bukharin who wrote that the term “state capitalism” under socialism is a logical absurdity. In Lenin’s view (a) is when the state, ruled by the capitalist class, takes over some of the private-sector functions while the substantial part of the economy remains capitalist. And there is (b), state capitalism where the state is controlled by the Party and the proletariat, and allows capitalists to function in order to boost productivity and to learn management skills from them. So state capitalism under socialism, according to Lenin, is entirely different, in the political sense, from state capitalism under capitalism. The political power is not vested in the hands of the capitalist elite and this enables Communist rulers whenever they decide to do so to curtail capitalists’ involvement in the economy. The power remains solidly with the party.

This last point is very relevant for the understanding of the Chinese approach to state capitalism today. As I have argued before, we can see the current Chinese state capitalism as a protracted NEP that began in 1978 and continues until today. But Lenin seems to overlook the possibility that with a very long NEP the economic and political power will  gradually seep from under the Party and the very nature of the state would change. Those who have money will dictate things as in capitalist countries. The state may not be able to control them and the commanding heights of the economy may change ownership. This happened under Jiang Zemin and Hu Jintao: the development of state capitalism under socialist conditions led to the increasing influence of rich people and capitalists, including their inclusion in most of the party organs, and through the idea of “The Three Represents”, it gave a pretense of ideological acceptability to such evolution. The change in the elite composition, evident in a study done by Li Yang, Filip Novokmet and myself, is another product of such policies. The social structure of the Chinese elite had enormously evolved between the late 1980s and 2013 (when our study ends).  While the private sector was marginal among the elite (the top 5 percent) in 1988, twenty-five year later almost one-third of the people in the elite were private businessmen (owners of small enterprises and large scale capitalists). If one includes professionals who are employed in the private sector, a bit over one-half of the elite is private-sector dependent.  

It is in this context that one can look at Xi Jinping’s policies: as an attempt at the reassertion of the power of the state vs. the capitalist sector and the rich. Or to use Lenin’s distinction between the two, as an attempt to move from state capitalism to state capitalism. It is an adjustment in the political power between the two sectors: the state, ruled by a bureaucratic stratum, and the rich.  It represents the analog of the populist reaction in the Western democracies: the feeling that the business elite has become too powerful,  has no discernible interest in the problems of ordinary people, and has to be reined in. We can thus see Xi Jinping as both a heir to Lenin’s New Economic Policy and in much more contemporary terms as a populist response to the excesses of the new rich. 

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 20^th century was dominated by the discussion of free trade vs. protectionism in the Wealth of Nations. The second, from the early to the mid 20^th 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.

“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.

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 19^th and early 20^th  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 19^th and early 20^th 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.