Tag Archives: Smith

Thinking of the Shadow. Conceptions of Cruelty in the History of Western Thought

Conference proceedings (double non-blind peer review), , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

As regards thinking of the shadow, I can contribute to the present discussion qua intellectual historian who, together with the theologian Michael Trice, has reconstructed in recent years the understanding of a particular manifestation of the shadow in the long life of Western philosophy: cruelty. Between 1998, when I started investigating Judith Shklar’s and Richard Rorty’s liberalism of fear, and 2017, when I completed a volume of collected essays of mine to be published by Northwest Passage Books under the title Philosophy of Cruelty, I devoted considerable time and attention to retrieving, mapping and reflecting upon the conceptions of cruelty developed in the history of Western thought. What follows here is a concise overview of the five most common and/or most articulate conceptions that I have identified in the course of my studies, and repeats almost verbatim what I state in the aforementioned collection of essays of mine. Longer and more detailed analyses can be retrieved in my older publications on this subject. Please note also that my research is intentionally limited to explicit uses of the terms “cruelty” and “cruel” in the languages accessible to me.  Extending it to cognates such as “violence” or “aggressiveness” would make the project unmanageable.

Cruelty as Vice

Cruelty has been regarded very often as a quintessentially human vice affecting specific individuals. This conception of cruelty is characteristic of ancient and medieval philosophers, whose approach to ethics typically centres upon the notion of personal character rather than upon the notion of rightful or good actions and norms—the latter being predominant amongst modern and contemporary thinkers. Also, this former conception of cruelty takes a chief interest in observing what consequences cruelty has for the perpetrator, rather than for its victims, as commonplace instead for modern and contemporary approaches to cruelty. In particular, ancient and medieval philosophers suggested that cruelty is a vice affecting persons involved in punitive contexts, e.g. courtrooms, schools, armies and households. In De Clementia, Seneca claims that “cruel are those who have a reason for punishing, but do not have moderation in it”.[1] Besides, he claims that, as concerns the person who “finds pleasure in torture, we may say is not cruelty, but savagery – we may even call it madness; for there are various kinds of madness, and none is more unmistakable than that which reaches the point of murdering and mutilating men.”[2] “Cruelty” is thus defined as “harshness of mind in exacting punishment”, rather than unrestrained lust for blood.[3] As a vice, ‘”cruelty” is said to be “an evil thing befitting least of all a man”,[4] and it can take private forms (e.g. family feuds) as well as public forms (e.g. tyranny, insofar as “[t]yrants”, unlike kings resorting to cruelty “for a reason and by necessity[,…] take delight in cruelty”).[5] Cruelty is the opposite of clemency, yet “it is as much a cruelty to pardon all as to pardon none.”[6] Clemency, according to Seneca, does not mean indiscriminate forgiveness, but rather a balanced blend of moderation and justice.

As famously discussed by Aristotle, our vices are said to spring from a lack of balance within the human soul; to exceed in forgiveness is as conducive to vice as to exceed in harshness. Aquinas’ Summa Theologica echoes Seneca’s position and combines it with Aristotle’s ethics:

Cruelty apparently takes its name from “cruditas”[rawness]. Now just as things when cooked and prepared are wont to have an agreeable and sweet savour, so when raw they have a disagreeable and bitter taste. Now it has been stated… that clemency denotes a certain smoothness or sweetness of soul, whereby one is inclined to mitigate punishment. Hence cruelty is directly opposed to clemency.[7]

Also for the doctor angelicus [angelic doctor] of the Catholic Church is “cruelty… hardness of the heart in exacting punishment”,[8] hence a form of “human wickedness”; whereas “savagery and brutality” are a form of “bestiality”.[9] Cruelty contains an element of rational deliberation, which “savagery” and “brutality” do not possess: these, in fact, “take their names from a likeness to wild beasts… deriving pleasure from a man’s torture.”[10] Cruelty is therefore something evil that we do intentionally and which corrupts our character by exceeding in what would be otherwise acceptable; but it is also something that we can do something else about, for all vices can be remedied by proper self-correction. As Aristotle and the medieval pedagogues used to teach, whatever the initial endowment of inclinations and talents in our character, each of us is responsible for the kind of person she becomes.

Cruelty as Sadism

The distinction drawn by Seneca and Aquinas between cruelty and bestiality, epitomised by sadistic pleasure, seems to vanish with several modern thinkers, who actually take sadism as the paramount, if not the sole, example of cruelty. This is a second, fairly common conception of cruelty, according to which cruelty turns into something worse than a vice, indeed something devilish or extreme. To some, cruelty becomes so extreme a tendency that it transforms into a sheer figment of our imagination, i.e. some kind of philosophical or literary ‘ghost’. Thomas Hobbes, for instance, argues that “Contempt, or little sense of the calamity of others, is that which men call cruelty; proceeding from security of their own fortune. For, that any man should take pleasure in other men’s great harms, without other end of his own, I do not conceive it possible.”[11] Bishop Joseph Butler, on his part, states that “[t]he utmost possible depravity, which we can in imagination conceive, is that of disinterested cruelty.”[12] David Hume, on this point, affirms: “Absolute, unprovoked, disinterested malice has never, perhaps, had place in any human breast”.[13]

The element of rational deliberation that Seneca and Aquinas observed in cruelty is adamantly underplayed in this second conception of cruelty, as Thomas Hobbes’ understanding reveals once more:

Revenge without respect to the example and profit to come is a triumph, or glorying in the hurt of another, tending to no end (for the end is always somewhat to come); and glorying to no end is vain-glory, and contrary to reason; and to hurt without reason tendeth to the introduction of war, which is against the law of nature, and is commonly styled by the name of cruelty.[14]

Rather than a vice, for which a person must take responsibility, cruelty morphs into a malady of the soul, the result of a poor, incompetent or broken mind, which reduces the humanity of its carrier and makes her closer to wild animals. Perhaps, this malady can be cured, or at least confined by appropriate measures of social hygiene. After all, animals can be tamed and trained; though sometimes they are put in cages or butchered. And the cruel human person, now likened to the beast, can be treated instrumentally, like commonly practised with horses and pigs; all this, naturally, being the case for the greater good of the commonwealth to which she and her victims belong.

Cruelty as Avoidable Harm

The idea of cruelty as something sick, if not even something sickening, colours also the work of the French Renaissance sceptic Michel de Montaigne. In his Essays, Montaigne observes that “cowardice is the mother of cruelty”[15] and states:

I cruelly hate cruelty, both by nature and by judgment, as the extreme of all vices. But this is to such a point of softness that I do not see a chicken’s neck wrung without distress, and I cannot bear to hear the scream of a hare in the teeth of my dogs… Even the executions of the law, however reasonable that may be, I cannot witness with a steady gaze.[16]

As for wars, it is worth repeating that Montaigne remarks: “I could hardly be convinced, until I saw it, that there were souls so monstrous that they would commit murder for the mere pleasure of it… For that is the uttermost point that cruelty can attain.”[17] The conceptions of cruelty as vice and sadism are accounted for in Montaigne’s reflections, but they are also subtly advanced to a broader condemnation of cruelty as harm to be avoided: capital punishment might be reformed, hunting abandoned, and wars prevented. In this perspective, his contribution to the understanding of cruelty in Western history is momentous, just as momentous were his Essays for the West’s intellectuals in the three centuries following their publication, and it connects the modern conceptions with the ancient one. Moreover, Montaigne is the first Western intellectual to devote an entire essay to the topic of cruelty—a stark sign of how genuine was his hatred for cruelty. “Montaignesque” is therefore the third conception of cruelty to be presented, i.e. cruelty as harm to be avoided.

The champions of the European Enlightenment are probably the most vocal and best-remembered members of this approach. Montesquieu, for example, labels as “cruel… torture” and gruesome “punishments”, legal servitude for insolvent debtors and colonial occupation.[18] In his essays On Tolerance, Voltaire describes as eminently cruel all wars of religion, whilst in Candide he condemns as such rape, corporal punishment and mutilation, even when lawfully administered in the name of justice.[19] Adam Smith, champion of the Scottish Enlightenment, ascribes the attribute “cruel” to infanticide,[20] personal vendetta,[21] economic monopolies,[22] burdensome taxes of succession or of passage of property,[23] the suffering of the “race of labourers” in periods of economic recession,[24] and mercy to the guilty.[25] In Italy, Pietro Verri argues that “[r]eason can show [what] is unjust, extremely dangerous, and immensely cruel”—and reason led him to condemn “torture” as “cruel”.[26] Cesare Beccaria, the most influential penal reformer of all times and both a friend and a student of Verri’s, condemns torture as cruel too, whilst also noting: “man is only cruel in proportion to his interest to be so, to his hatred or to his fear.”[27] Hence, it ought to be a duty for the legislator to “[c]ause men to fear the laws and the laws alone. Salutary is the fear of the law, but fatal and fertile in crime is the fear of one man of another. Men as slaves are more sensual, more immoral, more cruel than free men”.[28] For Jean-Antoine-Nicolas, Marquis de Condorcet, instead, “cruel” is the institutional neglect of “the progress of education”, for it constitutes nothing but the shameful misdeed of “abandoning men to the authority of ignorance, which is always unjust and cruel”.[29] Even the non-instrumental Enlightenment thinker par excellence, Immanuel Kant, does espouse the spirit of reformation of his age, and calls “most cruel” the institution of “slavery” exercised in the “Sugar Islands” by Dutch landowners,[30] whereas merely “cruel” are the “duels” fought in the name of “military honour”, which, like “Maternal Infanticide”, lead to cases of “Homicide” as distinguished from “Murder”.[31]

19th– and 20th-century political and legal reformers followed in the footsteps of the ‘enlighteners’ of the 18th century. Amongst them are also Judith Shklar and Richard Rorty. Judith Shklar, who was a Montaigne scholar, defines cruelty in two ways. The former reads: “Cruelty is… the wilful inflicting of physical pain on a weaker being in order to cause anguish and fear… [it is] horrible… [it] repels instantly because it is ‘ugly’… and disfigures human character”. The latter reads: “Cruelty is the deliberate infliction of physical, and secondarily emotional, pain upon a weaker person or group by stronger ones in order to achieve some end, tangible or intangible, of the latter.” Judith Shklar believes that cruelty, to a meaningful extent, can be controlled by appropriate doses of liberalism, which is itself in many ways a child of the 18th century: “the first right is to be protected against the fear of cruelty. People have rights as a shield against this greatest of human vices. This is the evil, the threat to be avoided at all costs. Justice itself is only a web of legal arrangements required to keep cruelty in check.”[32] Good laws and good political arrangements can reduce the pain that we impose upon/suffer from weaker/stronger creatures like us. That is the hope animating the American and the French Revolutions, as well as many of the emancipatory struggles fought during the following two centuries. Still, additional cruelties can be retrieved—and rejected—in other areas too. Giacomo Leopardi, for one, aims at a different target. He associates cruelty with the rewards and punishments awaiting us post mortem [after death], which he claims to be nothing but the sorrowful fictional creations of tragically misguided philosophies and religions. Whether “healthy or sick”, these creations are, in his view, signs of “cowardice” and mere “childish illusions” that were developed in the face of “the absence of any hope, …the desert of life, …men’s infelicity[,]… and destiny’s cruelty”.[33] Though living as such is cruel in and for itself, even crueller it is to live in fear of the priest’s gloomy superstitions or the philosopher’s hollow concepts.

Tom Regan sketches a fascinating taxonomy of cruelty, which he derives from yet another area that seems engulfed with cruelty: the human treatment of animals. As Regan writes:

People can rightly be judged cruel either for what they do or for what they fail to do, and either for what they feel or for what they fail to feel. The central case of cruelty appears to be the case where, in Locke’s apt phrase, one takes ‘a seeming kind of Pleasure’ in causing another to suffer. Sadistic torturers provide perhaps the clearest example of cruelty in this sense: they are cruel not just because they cause suffering (so do dentists and doctors, for example) but because they enjoy doing so. Let us term this sadistic cruelty… Not all cruel people are cruel in this sense. Some cruel people do not feel pleasure in making others suffer. Indeed they seem not to feel anything. Their cruelty is manifested by a lack of what is judged appropriate feeling, as pity or mercy, for the plight of the individual whose suffering they cause, rather than pleasure in causing it… The sense of cruelty that involves indifference to, rather than enjoyment of, suffering caused to others we shall call brutal cruelty…Cruelty admits of at least four possible classifications: (1) active sadistic cruelty; (2) passive sadistic cruelty; (3) active brutal cruelty; (4) passive brutal cruelty.[34]

Whichever class of cruelty we encounter in life, Regan believes that we must try to eliminate it. In particular, he focuses on (3) and (4), i.e. the types of cruelty that seem to characterise the human-animal relationship in contemporary societies. Persons are not only cruel to other persons: as long as pain is taken to be a relevant ethical factor, then also animals can become victims, and maybe even perpetrators (though Regan does not explore this avenue).

Cruelty as Paradox

As inheritors of the projects initiated in the 18th century, we can find Shklar’s and Regan’s definitions rather appealing. However, how many types of cruelty and cruel areas of behaviour can be actually tackled? How many revolutions, with their load of gunpowder and dynamite, should be fought? If three centuries of worldwide-expanding liberalism, culminated with Francis Fukuyama’s post-Cold-War proclamation of “the end of history”, have not eliminated it, what reasonable expectations can be entertained vis-à-vis the future?[35] Few are the philosophers who have pondered upon the paradoxical character of cruelty—a fourth conception that can also be retrieved in the history of Western thought. Cruelty persists within our lives and societies despite its being commonly denounced as something extremely negative and, above all, despite the recurring attempts to promote social progress and reform existing institutions. Judith Shklar herself admits that “cruelty is baffling because we can live neither with nor without it” and this is probably the reason why:

Philosophers rarely talk about cruelty… I suspect that we talk around cruelty because we do not want to talk about it… What we do seem to talk about incessantly is hypocrisy, and not because it hides cowardice, cruelty, or other horrors, but because failures of honesty and of sincerity upset us enormously, and they are vices which we can attack directly and easily. They are easier to bear, and seem less intractable.[36]

Philip P. Hallie marks a notable exception to the commonplace avoidance of the subject denounced by Judith Shklar. Firstly, Hallie defines “cruelty” as “the infliction of ruin, whatever the motives”[37] or, in two alternative versions, “the activity of hurting sentient beings”[38] and “the slow crushing and grinding of a human being by other human beings”.[39] He then distinguishes the instances of “cruelty upon humans” between those “fatal cruelties” that are due to nature and the far from uncommon “human violent cruelty” that is due to our fellow human beings.[40] To the latter he adds “implicit” or “indirect” cruelties, i.e. cruelties arising from “indifference or distraction” rather than from evident “intention to hurt”.[41] Thus understood, human cruelty can be further divided into “sadistic” and “practical”: whereas the latter refers to forms of instrumental cruelty, the former is “self-gratifying”.[42] By way of this articulate taxonomy, richer than Tom Regan’s itself, Hallie attempts to encompass and map the vast, polymorphous universe of cruelty, whose intricate nature explains perhaps its little permeability to philosophical analysis. Secondly, Hallie cuts the Gordian knot of cruelty’s intrinsic complexity by referring to it as a paradox, candidly and straightforwardly—in a book’s very title. Why simplifying something that cannot be simplified? Why misrepresenting it, in the attempt to represent it clearly? Hallie has in mind five particular cases of paradoxical cruelty:

  1. Cruelty brought about without any open “intention to hurt”, but in the name of altruism, happiness, justice, etc.[43] “Substantial maiming” can derive from “wanting the best and doing the worst”.[44]
  2. Cruelty caused by genuine “intention to hurt”, but aimed at educating and therefore avoiding worse cruelties, e.g. “in terrorem” [terrifying] literary techniques.[45] As 20th-century French literary scholar André Dinar also observes: “The cruel authors cauterise the wounds that can be healed and mark with hot irons the incurable ones, so to expose their horror”.[46]
  3. “The fascinosum [lure] of cruelty”,[47] as well as its ability to titillate “sexual pleasure”,[48] higher “awareness”,[49] the liberation of sensual “imagination”[50] and “masochistic pleasure”,[51] are all pursued willingly and proactively, very often, by fully conscious persons.
  4. Cruelty implied by the “growth” or maturing of any individual through painful “individualisation” for the sake of “human authenticity”.[52] No person becomes mature, well-rounded and responsible without facing a significant amount and variety of pain in her life, and without learning how to face probable, if not inevitable, later doses of the same bitter medicine.
  5. “Responsive” cruelty enacted in retaliation to “provocative” cruelty,[53]g. penal chastisements and just wars, although “mitigation” is recommended.[54]

Being a devout Christian, Hallie has no desire to promote cruelty. Quite the contrary, his work on this topic begins as an effort to reduce it. Nevertheless, as he deepens his understanding of it, Hallie comes to recognise that not all cruelty ought to be avoided, for its disappearance would be more harmful than its persistence. This is particularly true of the painful processes of growth and maturation, as well as of artistic disclosure of sorrowful truths or extreme sexual elation. Moreover, in an implicit reminder of Beccaria’s own wisdom, Hallie admits that cruelty may be a necessary evil in the public sphere. As baffling as this may be, cruelty seems to find rather easily assorted justifications for enduring in many aspects of life.

Cruelty as Good

Some philosophers have stepped beyond the sole acknowledgment of cruelty’s paradoxical character and entertained plainly the seemingly contradictory notion that it might be good. This is the fifth and last conception of cruelty, which comprises two main groups of thinkers.

In the first group are included those thinkers who have argued that cruelty does not need to have intrinsic value (or disvalue), but instrumental value alone and, as such, that cruelty may be capable of fulfilling a positive function. For instance, cruelty can be a tool to promote the common good. Niccolò Machiavelli is among them. According to him:

Every prince ought to desire to be considered clement and not cruel. Nevertheless he ought to take care not to misuse this clemency. Cesare Borgia was considered cruel; notwithstanding, his cruelty reconciled the Romagna, unified it, and restored it to peace and loyalty. And if this be rightly considered, he will be seen to have been much more merciful than the Florentine people, who, to avoid a reputation for cruelty, permitted Pistoia to be destroyed [by the rioting between the Cancellieri and Panciatichi factions in 1502 and 1503].[55]

Jacques Derrida states something analogous when he writes in recent years: “Politics can only domesticate [cruelty], differ and defer it, learn to negotiate, compromise indirectly but without illusion with it… the cruelty drive is irreducible.”[56] Instead of combating cruelty at all costs, one ought to learn how to draw as much good as possible from it. After all, the initiation of social life makes itself use of cruelty: why should its continuation be devoid of it? This is what Gilles Deleuze and Félix Guattari seem to suggest, for example. The acquisition and continuation of the shared semiotic abilities that allow for human communities to develop is never devoid of cruelty. Schooling and socialisation are no free meal: “Cruelty is the movement of culture that is realized in bodies and inscribed on them, belabouring them.”[57] Sharing a similar awareness, Clément Rosset explores the instrumental role of cruelty in the private sphere, rather than the public one, and writes provokingly: “Joy is necessarily cruel”.[58] According to him, “[c]ruelty is not… pleasure in cultivating suffering but… a refusal of complacency toward an object, whatever it may be.”[59] Now, “the ‘cruelty’ of the real… is the intrinsically painful and tragic nature of reality.”[60] For instance:

[T]he cruelty of love (like that of reality) resides in the paradox or the contradiction which consists in loving without loving, affirming as lasting that which is ephemeral – paradox of which the most rudimentary vision would be to say that something simultaneously exists and does not exist. The essence of love is to claim to love forever but in reality to love only for a time. So the truth of love does not correspond to the experience of love.[61]

For Rosset, the answer to cruelty’s paradox lays in the nature of reality, which is ultimately cruel. Rosset’s thought could then be regarded as belonging legitimately to the fourth conception of cruelty as well, i.e. cruelty as paradox. In truth, the distinction between the fourth and the fifth conceptions is not clear-cut, and the same can be said of the distinctions between the other conceptions previously presented (especially between the first and the third, and the second and the third). These distinctions are mostly a matter of different conceptual emphasis, rather than of mutual incompatibility; and as we emphasise the fifth conception, it can be stated that, to a relevant extent, persons are shaped by cruelty and are bound to encounter it also and above all if they wish to derive a modicum of satisfaction from their mortal existence. The only way to live well, for Rosset, who was a Schopenhauer scholar, involves learning to embrace the suffering that life unavoidably unloads upon us. In the field of drama, Antonin Artaud echoes and expands Rosset’s tragic awareness: “Death is cruelty, resurrection is cruelty, transfiguration is cruelty… Everything that acts is a cruelty.”[62] To be is to be cruel—there is no way out of cruelty, which, however, must be conceived anew: “Cruelty is not just a matter of either sadism or bloodshed, at least not in any exclusive way… [It] must be taken in a broad sense, and not in the rapacious physical sense that is customarily given to it.”[63] Although never as clear as Rosset on what this novel understanding of cruelty may be like, Artaud developed a new set of shock- and scandal-filled stage techniques and communication devices, i.e. his Theatre of Cruelty, which was aimed at eliciting higher levels of personal awareness in the audience: “All this culminates in consciousness and torment, and in consciousness in torment”.[64]

In the second group are included those thinkers that have argued that cruelty might be intrinsically valuable, maybe even a virtue, which enriches our lives in a unique way and allows for the full realization of our nature. The most ‘in-famous’ example in this sense is that of the Marquis de Sade, who argues: “Cruelty is imprinted within the animals… that can read the laws of Nature much more energetically than we do; [cruelty] is more strongly enacted by Nature among the savages than it is among civilized men: it would be absurd to establish that it is a kind of depravity”.[65] Sade, who approves also of more refined forms of cruelty (i.e. the civilised libertine’s), infers from the naturalness and unavoidability of cruelty a reversed Rousseauvianism:

Remove your laws, your punishments, your customs, and cruelty will not have dangerous effects any longer… it is inside the civilized domain that it turns into a danger, as those capable of it are almost always absent, either because they lack the force, or because they lack the means to respond to the offences; in the uncivilized domain, instead, if it is imposed over the strong, then he shall be able to react to it, and if it is imposed over the weak, it will not be else than conceding to the strong according to the laws of nature, and this will not be inappropriate at all.[66]

Equally notorious is the case of Friedrich Nietzsche, whom the reader has already met repeatedly in this book. Idealising and idolising primeval societies, barbaric bravery and warrior mores, Nietzsche wishes to:

[E]mpathise with those tremendous eras of “morality of custom” which precede “world history” as the actual and decisive eras of history which determined the character of mankind: the eras in which suffering counted as virtue, cruelty counted as virtue, dissembling counted as virtue, revenge counted as virtue, denial of reason counted as virtue, while on the other hand well-being was accounted a danger, desire for knowledge was accounted a danger, peace was accounted a danger, pity was accounted a danger, being pitied was accounted an affront, work was accounted an affront, madness was accounted godliness, and change was accounted immoral and pregnant with disaster![67]

If Sade reverses Rousseau’s bon sauvage [noble savage (the term was never used by him, but is commonly associated with him)], Nietzsche reverses Seneca’s treatment of cruelty as vice. For Nietzsche, cruelty used to be a virtue in prehistoric or barbaric times, it is a fixed element in the human make-up, and it survives in countless rarefied forms today:

Cruelty is what constitutes the painful sensuality of tragedy. And what pleases us in so-called tragic pity as well as in everything sublime, up to the highest and most delicate of metaphysical tremblings, derives its sweetness exclusively from the intervening component of cruelty. Consider the Roman in the arena, Christ in the rapture of the cross, the Spaniard at the sight of the stake or the bullfight, the present-day Japanese flocking to tragedies, the Parisian suburban laborer who is homesick for bloody revolutions, the Wagnerienne who unfastens her will and lets Tristan und Isolde “wash over her” – what they all enjoy and crave with a mysterious thirst to pour down their throats is “cruelty,” the spiced drink of the great Circe.[68]

Given all this, as Nietzsche concludes, cruelty should be recovered in an honest and healthy way, for human beings are cruelty-prone animals that live in the mundane world, not the God-like, spiritualised, ‘fallen’ and heaven-seeking creatures of which religion and philosophy have pointlessly blared about for centuries. Just like all other animals, so do human beings have bodies, selfish selves, and ‘knightly’ instincts calling for competition, predation and domination. Humans are born to race against one another and the most deserving ones, in the end, ought to survive and lead. Any departure from this natural logic is a concession to degeneration and, essentially, an unhealthily indirect manifestation of repressed cruelty, which cannot but harm our species by letting slaves dominate over masters, priests over knights, and ignorant masses over cultured elites. Instead of understanding and embracing the cruel but actual reality of the world, which is the only place where true existential meaning can be found, the degenerate pursue mystification and escapism. Exemplarily, the loathed magician/pope of Nietzsche’s grand and initially ill-received philosophical allegory, i.e. his 1883–91 Thus Spoke Zarathustra: A Book for All and None, discovers this hard truth in his delirium, as he realises that his own pantheon of abstract instruments of power (angels, demons, God, etc.) is the utmost and most cruel betrayal of any chance for real fulfilment. Nothing of what he has been preaching during his life, in order to lead his flock, is true and truly valuable: “In vain! / Pierce further! / Cruellest spike! / No dog – your game just am I, / Cruellest hunter! /…/ Speak finally! / You shrouded in the lightning! Unknown! Speak! /…/ Surrender to me, / Cruellest enemy, / – Yourself!”[69]

Concluding Remarks

This brief overview of the five most common and/or most articulate conceptions of cruelty that can be retrieved in the history of Western thought shows already how diverse the interpretations of this term can be. Cruelty, like many other concepts that we employ regularly in our language, whether in ordinary or technical discourses, is inherently contested, i.e. it allows for a variety of readings, usages and applications. As Michael Polanyi used to argue in the 20th century, it is important for concepts to be adequately ambiguous, insofar as they are meant to grasp a plethora of subsidiary details that we are only tacitly aware of, and of some of which we may become aware by subsequent processes of analysis, elucidation, comparison, critique, reflection, study, etc. These processes may even lead to a breakdown in the applicability of the concept, which is then abandoned in lieu of alternative ones. This abandonment does not mean that the concept is mistaken or useless. Quite the opposite, a concept is correct and useful insofar as we successfully interact with other persons by referring to it, that is, by referring to phenomena by means of it. As a concept in both ordinary and philosophical language, cruelty is no exception to the way in which several conceptions can be produced of any such item, and an array of diverse realisations about human affairs can be unpacked from it by reflecting upon it—in this case, by thinking of the shadow.

 

Endnotes

[1] Lucius A. Seneca, De Clementia, translated by John W. Basore, London: Heinemann, 1928–35[55 AD], II.iv.1–4. Whenever possible, given the great variety of editions over the centuries of Latin classics, I use the standard referencing system for such sources.

[2] Ibid.

[3] Ibid.

[4] Ibid. I.xxiv.1–xxv.2.

[5] Ibid. I.xii.1–4.

[6] Ibid. I.ii.2–iii.3.

[7] Thomas Aquinas, Summa Theologica, translated by Fathers of the English Dominican Province, 1920[ca. 1268], <http://www.newadvent.org/summa/>, part II of part II, question 159, art. 1. I utilise here the standard scholarly referencing system for Aquinas’ Summa.

[8] Ibid.

[9] Ibid., art. 2.

[10] Ibid.

[11] Thomas Hobbes, Leviathan, London: Andrew Crooke, 1651, <http://socserv2.socsci.mcmaster.ca/econ/ugcm/3ll3/hobbes/Leviathan.pdf>, part I, chapter VI.

[12] As cited in British Moralists 1650–1800, edited by D.D. Raphael, Indianapolis: Hackett, 1991, vol. 1, 334–5.

[13] As cited in ibid., vol. 2, 72.

[14] Thomas Hobbes, Leviathan, part I, chapter XV.

[15] Michel de Montaigne, The Complete Essays, translated by Donald Frame, Stanford: Stanford University Press, 1998[1580], II, 27.  Given the great variety of editions of Montaigne’s essays, I do not refer to page numbers and use the standard scholarly system instead, i.e. book and essay number.

[16] Ibid., II, 11.

[17] Ibid.

[18] Montesquieu, The Spirit of the Laws, translated by Thomas Nugent, New York: Cosimo, 2011[1748], book VI, chapter, 12; book XV, chapters 1, 7 & 15; book XXVI, chapter 22.

[19] Cf. Voltaire, Oeuvres complètes de Voltaire, edited by Louis Moland, Paris: Garnier, 1877[1769].

[20] Adam Smith, The Theory of Moral Sentiments, 6th edition, London: A. Millar, 1790, <http://www.econlib.org/library/Smith/smMS.html>, part V, chapter I, §25.

[21] Ibid., part VI, chapter III, §12.

[22] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, edited by Edwin Cannan, Indianapolis:  The Online Library of Liberty, 1901[1776], <http://www.econlib.org/library/Smith/smWN.html>, book IV, chapter 8, §17.

[23] Ibid., book V, chapter 2, §§116 & 125.

[24] Ibid., book I, chapter 11, §263.

[25] Ibid., book II, chapter I, §27.

[26] Pietro Verri, Osservazioni sulla tortura, Rome: Newton, 18 (translation mine).

[27] Cesare Beccaria, Crimes and Punishments, translated by James Anson Farrer, London: Chatto & Windus: 1880[1764], 140–1.

[28] Ibid., 243.

[29] Condorcet, Esquisse d’un tableau historique des progrès de l’esprit humain, Xème & IIème époque, 2004[1793–4], <http://www.eliohs.unifi.it/testi/700/condorcet/index.html> (translation mine).

[30] Immanuel Kant, Zum ewigen Frieden. Ein philosophischer Entwurf, part II, chapter 2, §3 (translation mine).

[31] Immanuel Kant, Philosophy of Law. An Exposition of the Fundamental Principles of Jurisprudence as Science of Right, translated by W. Hastie, Edinburgh: T. & T. Clark, 1887[1796], part II, section I, chapter 49, art. E.

[32] Judith Shklar, Ordinary Vices, Cambridge: Belknap, 1984, 237.

[33] Giacomo Leopardi, Operette morali, “Dialogo di Tristano e di un amico”, <http://www.leopardi.it/operette_morali.php>, (translation mine).

[34] Tom Regan, The Case for Animal Rights, Berkeley: University of California Press, 1983, 197–8 (emphases removed).

[35] Francis Fukuyama, The End of History and the Last Man, New York: The Free Press, 1992.

[36] Judith Shklar, Ordinary Vices, 3, 7 & 44.

[37] Philip P. Hallie, The Paradox of Cruelty, Middletown: Wesleyan University Press, 1969, 14.

[38] Encyclopaedia of Ethics (edited by Lawrence C. Becker, New York: Garland, 1992), s.v. “Cruelty”, by Philip P. Hallie, 229–31, 229.

[39] Philip P. Hallie, Lest Innocent Blood Be Shed: The Story of the Village of Le Chambon, and How Goodness Happened There, New York: Harper & Row, 1985[1979], 2.

[40] Philip P. Hallie, The Paradox of Cruelty, 5–6.

[41] Ibid., 13–4 & 29–31.

[42] Ibid., 22–4.

[43] Ibid., 15–20.

[44] Ibid.

[45] Ibid., 20–2.

[46] André Dinar, Les auteurs cruels, Paris: Mercure de France, 1972[1942], 7.

[47] Philip P. Hallie, The Paradox of Cruelty, 70–5.

[48] Ibid., 41 & 46.

[49] Ibid., 43.

[50] Ibid., 42 & 50.

[51] Ibid., 48.

[52] Ibid., 55–8 & 60–2.

[53] Ibid., 33.

[54] Ibid., 79–82.

[55] Niccolò Machiavelli, The Prince, translated by W.K. Marriott, 1908[1515], <http://www.constitution.org/mac/prince00.htm>, chapter XVII.

[56] Jacques Derrida, Without Alibi, translated by Peggy Kamuf, Stanford: Stanford University Press, 2002[2000], 252.

[57] Gilles Deleuze and Félix Guattari, Anti-Oedipus, translated by Robert Hurley, Mark Seem and Helen R. Lane, New York: The Viking Press, 1977[1972], 144.

[58] Clément Rosset, Joyful Cruelty: Toward a Philosophy of the Real, translated by David F. Bell, New York: Oxford University Press, 1993[1988], 17.

[59] Ibid., 17–20.

[60] Ibid., 76.

[61] Ibid., 98 (emphases removed).

[62] Antonin Artaud, The Theater and its Double, translated by Mary Caroline Richards, New York: Grove Press, 1958[1938], 101–3 & 85.

[63] Ibid., 102.

[64] Ibid., 114 (emphasis removed).

[65] Sade, La Philosophie dans le boudoir ou Les Instituteurs immoraux, Paris: Larousse, 1966[1795], 139 (translation mine).

[66] Ibid., 140–1 (translation mine).

[67] Friedrich Nietzsche, Daybreak, translated by R.J. Hollingdale, Cambridge: Cambridge University Press, 1997[1881], §18.

[68] Friedrich Nietzsche, Beyond Good and Evil, translated by Judith Norman, Cambridge: Cambridge University Press, 2002[1886], §229.

[69] Friedrich Nietzsche, Thus Spake Zarathustra, translated by Thomas Common, 1891[1883–91], part IV, §65, section 1 (generally known and translated as Thus Spoke Zarathustra).

Thomas Piketty – The Adam Smith of the Twenty-First Century?

Conference proceedings (triple non-blind peer review), , , , , , ,

 

The essential achievement of Capital in Twenty-First Century is that it represents a revival of political economy, in the classical sense, on a global scale.

In Piketty’s book, economics is initially regarded as a social science and, in the end, as a moral, philosophical and political science. Here, we are placed in the tradition of Aristotle, Thomas Aquinas, Adam Smith and Karl Marx. In this manner, Piketty utilizes an economic perspective and reconstructs the unity in the practical sciences, at the same time as he recognizes that each of the different human sciences has its special perspective.

Piketty’s book could be regarded as a revival of Adam Smith’s main work, The Wealth of Nations (1776) in which the modern political economy was grounded. Later on, economics became an independent and specialized social science that lost its relation to the other social sciences. This has especially been the case in the period after the Second World War, when economics increasingly became an exercise in mathematical calculation, a mathematical modeling technique that totally lost its connection to the other social sciences. During the same period, the global economy has been developed on an unprecedented scale. Consequently, it has become difficult to discuss global society within the perspective that signified the classical political economy.

On one hand, we had the dominating economy, where it was possible to make some mathematical calculation about specific economic topics without any relation to a broader social scientific, political, and moral understanding of the significance of the economy for society and its environments.

On the other hand, we had the social sciences, sociology, political sciences, law, humanities, historical sciences and, finally, the moral sciences in their broadest sense. These sciences could criticize the economically driven uniform creations of global society, but they were not able to substitute the economic perspective and therefore, in the end, their impact was relatively limited.

Consequently, economics had become the triumphant sovereign perspective for understanding the transformation of modern global society. Given this background, it cannot be underestimated that Piketty reintroduces the classical political economic perspective in economics and on today’s global society. This is the essential significance of Piketty’s book. It has created anew a platform for a discussion of essential topics of classical political economy.

In this context, it should be emphasized that the global perspective is the central perspective in Piketty’s book. He recognizes that the economy has transformed the world into a global world. It is from this perspective that he tries to understand the transformation of the nation states in the world. By so doing, Piketty gives an articulate understanding of how the economy may be able to transform global society in the twenty-first century. In this context, the long historical perspective from the past to the future becomes essential. Piketty’s description could be called a historical analysis of the transformation of modern society from the origins of capitalism in the 18th century until the global perspective of the 21st century.

In the following, we would like to present some of the essential topics of Capital in Twenty-First Century, and in conclusion pose some questions for a further discussion of Piketty’s book.

 

 

I.The Fundamental Arguments in Piketty’s Capital in Twenty-First Century

 

Part 1: Income Capital and Inequality

In the introduction and part One of Capital in Twenty-First Century, Piketty poses some of the fundamental questions of political economy: What is capital? How is the wealth in the world distributed? Has wealth increased so that there is more equality or is the situation of wealth the same in the world? Piketty looks at the relation between income and capital, and argues that capital still has paramount significance for income today and that this implies reproduction of inequality. Therefore, according to Piketty, it is still capital and not work that is the basis for income in society.

Piketty gives the following important definition of capital: ”The first fundamental law of capitalism is ? = r x ?, where r is the return on capital. This links the capital stock to the flow of income from capital. The capital/income ratio ? is related in a simple way to the share of income from national income, denoted ?. The formula is ? = r x ?. For example if ? = 600% and r = 5%, then ? = r x ? = 30 %. “The return on capital is the central law of capitalism. Return on capital is a broader notion than the rate of profit and the rate of interest while incorporating them both” (Piketty 2014: 52)

For example, the housing market in Paris shows how an old relation between ownership, rent, and capital is still reproduced. It was also like this in the 20th-century and 19th-century novels that just took the capital income on real estate or other capitals for granted. We can see this in the novels of Balzac or Jane Austen. The author makes many references to the description of money and wealth of characters in novels. He argues that this helps us to understand the perception of wealth and inequality, but it also shows the changes from the 19th to the 20th century, because Jane Austin and Balzac can easily use money to describe the wealth of their characters in the sense that Austin’s characters earn approximately 1,000 pounds when they are rich, and 30 pounds on average a year just to live. Balzac talks about 10,000-20,000 francs on average to live well (Piketty 2014: 105 f.). This reference to literature to understand economics is an important contribution to the creation of a methodology of economics beyond the exclusive formal references to mathematics.

In the book, the growing inequality in the world is analyzed in terms of world regions. If we compare the numbers of population with input-output of capital/production in different parts of the world, we cannot really document a convergence of equality between the parts of the world even if the number of people and total output in Europe and America has decreased. Due to the increase of population in Asia and Africa, inequality between the regions still becomes bigger (Piketty 2014: 60-61).

Piketty says: “To sum up, global inequality ranges from regions in which the per capita income is on the order of 150-250 Euros per month (Sub-Saharan Africa, India) to regions where it is as high as 2,500 Euros to 3,000 Euros per month (Western Europe, North America, Japan) that is ten to twenty times higher. The global average, which is roughly equal to the Chinese average, is around 600-800 Euro per month.” (Piketty 2014: 64)

But these figures have to be corrected with regard to differences in purchasing power and exchange rates in different regions. So there may be important regional differences to take into account. We still see a situation where the rich countries have a higher income of their domestic product because they invest more abroad, and own more than their domestic product abroad. This is particularly true of Africa where foreign investors akin to the old colonial days still own more than 20% of the country’s capital producing units. So the rich countries earn money on capital ownership in the poor countries.

One possible conclusion from this is the following: That the rich countries still own a large part of the poor countries could be regarded both as good and bad. It can facilitate access to the international economy and growth, but it can also be a danger to development and self-determination, in consideration of marginal utility theory, meaning that the poor countries do not equally get access to their goods like the rich countries, who get increased wealth but do not need it as much as the poor countries.

The book discusses the law of cumulative growth. There is a close link between demographic growth and economic growth. Capital ownership structure has a close influence on this relation: “The central thesis of this book is that an apparent small gap between return on capital and rate of growth can in the long run have powerful and destabilizing effects on the structure and dynamics of social inequality. In a sense everything follows from the laws of cumulative growth and cumulative returns” (Piketty 2014: 77).

According to the law of cumulative growth in demography, we were 600,000,000 in year 1700, now we are 7 billons, and if this continues with cumulative growth dependent on life expectancy and birth rate in year 2300, we may be 70 billion. The accumulation of people in the developing world, and the stagnation of people in the developed world will lead to greater inequality due to the inequality of capital income in the developed and the developing world. The people in the regions with little demographic growth will become richer because of their increased capital income. On the other hand there is no doubt that growth has been extremely important for the developing countries. We have now moved from a life expectancy of 40 in the 18th Century to 80 in the 21st century, and today it has become normal to have access to health care and cultural goods. But can we sustain this kind of growth?

When we look at growth in the 20th century we see that rapid growth only happened in Europe in the glorious period between 1945 and 1970. This was due to the fact that Europe was far behind the US and could reach the US quickly during that period. After that period, growth has been slower, close to an average of 1.5 % annually. In fact, liberalization policies in the 1980s did not change this, and there is no evidence that state intervention really caused harm to growth. However, it is difficult to foresee growth and we cannot predict how growth will increase in the future and growth may also decrease in the 21st century.

Piketty talks about the “double bell curve of global growth”: “To recapitulate, global growth over the past three centuries can be pictured as a bell curve with a very high peak. In regard to both population growth and per capita output, the pace gradually accelerated over the course of the eighteenth and nineteenth centuries, and especially the twentieth, and is now most likely returning to much lower levels for the reminder of the twenty-first century” (Piketty: 2014: 99).

 

 

Part 2: The Economic Dynamics of Inequality

In part two of Capital in Twenty-First Century, the dynamics of capital/income ratio over time are analyzed. Piketty argues that the present state of inequality in the 21st century in Europe is just a return to the situation of the 19th century, which was interrupted by the public policies following the Second World War. Starting with the references to Balzac and Jane Austen, where the unequal distribution of wealth in 19th-century society is clear, Piketty analyzes the distribution of wealth in western societies today. He shows that a small group of people owns virtually most of the wealth, while millions of people have a very limited relation to capital. Piketty shows that the richest 10 % owns 60 % of the wealth, while the remaining 90 % owns very little and of only 40 % of the wealth (Piketty 2014: 259). They own so little that capital for them is a very abstract concept. The growth of the middle class in the 20th century was the social invention that contributed to hide these differences in wealth from view and, possibly, from memory.

 

 

Part 3: What was the Justification of Inequality?

In the third part of Capital in Twenty-First Century, Piketty questions the justification of this inequality. We can call it a hyper-patrimonial society, that is, a society based on inherited wealth. This was the case in Europe. In the US there was hyper-meritocratic society, a society of super-managers, but this distinction does not hold. Piketty does not only make the mathematical measures of inequality by Gini and Pareto, but he also uses real examples from life to illustrate inequality. However, if we look at the numbers, the fall in inequality in the 20th century is due to the collapse of rentiers and high income from capital, at least this is the case in France (Piketty 2014: 274). But, we have gone from a society of rentiers to a society of managers (Piketty 2014: 278), where the managers today are the ones with the high income. After ’68, a minimum wage was introduced in France and this increased equality, but from the 1980s this trend did not continue so strongly and from the 1990s super-salaries was introduced to top managers. In the US, the numbers of rentiers in the beginning of the 20th century were lower than in Europe, but they existed. The US were even more egalitarian than France between the 1950s and 1980s. However, since then inequality has exploded and contributed to the instability of the US economy and led to the financial crisis. The highly paid superstar managers in the US have recently contributed to the increase of inequality.

How should we understand wage difference and inequality? Education plays a key role. In particular, minimal wages are important to avoid inequality in combination with investment in education. But the race between technology and wages cannot explain the increase of top-income in the US since the 1980s.

In the beginning of the 20th century, inequality in Europe was bigger than in the US, even in the Scandinavian countries, including Denmark. The top incomes in Germany increased during the Nazi-period 1933-1938, and later in the 1950s. We can also document rising inequality in salaries in the developing world, particularly in China, after the changes to a capitalist system in the 1980s.

Piketty has also studied inequality of capital ownership. In France a tax on estate and gifts was established in 1791, and this gives us a historical picture of wealth distribution since that time. In fact, we can document hyper concentration of wealth during the Belle Epoque in France, and we can also document hyper-concentration of wealth in Europe in the 19th century, particularly in societies prior to the First World War. The society of rentiers flourished during “la belle époque”. It seems that the return on capital is greater than the growth rates in such “inheritance societies”.

Inequality remains very big: “To recap: the inequality r > g (return on capital is bigger than growth) is a contingent historical proposition, which is true in some periods and political contexts and not true in others. From a strictly logical point of view it is perfectly possible to imagine a society in which the growth rate is greater than the return on capital – even in the absence of state intervention” (Piketty 2014: 358). This is a historical relation that changes in different historical periods. The fundamental inequality r > g can explain the failure of the French revolution (Piketty 2014: 365). The concentration of wealth today, though markedly lower than in 1900-1910, remains extremely high (Piketty 2014: 375), and taxation may not change this fact.

Piketty says: “To sum up: the fact that wealth is noticeably less concentrated in Europe today than it was then in the Belle Epoque is largely a consequence of accidental events (the shocks of 1914-1945) and specific institutions such as taxation of capital and its income. If those institutions were ultimately destroyed, there would be a risk of seeing inequalities of wealth close to those observed in the past or, under certain conditions, even higher. Nothing is certain: inequality can move in either direction. Hence I must now look at the dynamics of inheritance and at the global dynamics of wealth. One conclusion is already quite clear, however: it is an illusion to think that something about the nature of modern growth or the laws of the market economy ensures that inequality of wealth will decrease and harmonious stability will be achieved” (Piketty 2014: 376).

Piketty studies capital accumulation in the long run. Referring to Balzac he asks whether study and hard work or marriage with a rich person or inheritance leads to wealth. He looks at the annual flow of inheritances in the long run, and he can document that “the inheritance flow accounts for 20-25% of annual income every year in the nineteenth century with a slight upward trend toward the end of the century” (Piketty 2014: 379). From 1910 until 1920 it diminished, and from 1920 until 1980 it was rather low (from 10% to 4% to 7%). From the 1980s it began to rise again, and in the year 2010 it seems to be 12% (Piketty 2014: 380). The baby boomers had very little inheritance, but the children born in the 1970s and 1980s have already inherited. For them the decision to buy a house may have been dependent on this (Piketty 2014: 381).

Decreasing mortality rates do not necessarily influence the transmission of gifts as inheritance. Inheritance is also realized through the transmission of gifts. Inheritance occurs later in aging societies but is still very important. In the aging society there is a growing importance of inheritance and gifts are given approximately ten years before the death of the donor. Gradual increase of gift giving between generations contributes to enforce this trend (Piketty 2014: 393). In an aging society people also inherit a larger amount. If we look at the distribution of inherited wealth since 1790, we can see that 25 % of income comes from heritage while 75 % from work. But this is very unequally distributed. This explains the young man Rastignac’s dilemma, that is, rich people were a very little group so it is difficult to find a rich girl, so it may be better to work to get a decent salary (to be or not to be!).

Inheritance represents one quarter of total lifetime resources of cohorts born in 1970 or later. So we are moving towards the society of petits rentiers (Piketty 2014: 418). The fact of living of money from the past will increase. This is the case with the movie Dirty Sexy Money. In France today we see the reemergence of inherited wealth – and not only wealth achieved by hard work, education or merit. This is the case even though the words rents and rentiers took on very pejorative connotations in the 20th century. In the book the concepts are used in their descriptive sense. Capitalism remains a society of rentiers even though it has become more democratic. The return of inherited wealth seems to be a global phenomenon. This is the case not only in Europe and the United States, but globally as well. We can see this among others with the increase in global billionaires.

The wealthiest 0.1 % on the planet, some 4-5 million out of an adult population of 4-5 billion apparently possess fortunes in the order of 10 million Euros on average, nearly 200 times of the average global wealth. The wealthiest 45 million possess 3 million euros on average (Piketty 2014: 438). Liliane Bettencourt, the heiress of L’Oreal had a fortune that increased from 2 billion to 25 billion dollars from 1990 to 2010. This was a little less than Bill Gates and more than Steve Jobs (Piketty 2014: 440). However, the entrepreneurial argument cannot justify such differences in wealth. Is the inequality of the fortunes justified? Moreover, Piketty discusses the Sovereign Funds of the Oil states like Norway, Abu Dhabi, Saudi Arabia and other gulf states. What about all the people who worked very hard in the businesses? Maybe we need a progressive fiscal tax on capital!

 

 

Part 4: Regulation of Capital in Twenty-First Century

In part four of the book, Piketty deals with this question about regulation of capital in the Twenty-First Century. Can we imagine political institutions that contribute to the regulation of these issues?

Piketty thinks that a progressive tax on capital is the way to solve the challenges of the 21st century. Piketty argues for greater state intervention in the economy. He looks at different solutions to inequality problems in relation to university systems, pension systems, tax systems etc. Then he argues that we need to rethink the progressive income tax and introduce a global tax on capital in chapters 14 and 15 of the book. It is argued that estates must be more heavily taxed than income.

Piketty argues that it was war, not democracy that gave us progressive taxation. We need to rethink income tax in a more egalitarian way in the globalized economy. However, a global tax on capital is a utopian idea. It is difficult to impose a tax on global wealth. A simpler solution could be automatic transmission of banking information.

There is a contributive and intensive justification for capital tax. The three types of tax on income, on capital, and on inheritance complement each other.

Piketty proposes also a European wealth tax enforced by European institutions and the European central bank. A tax on capital is a better and less totalitarian solution than a centrally planned economy. Piketty says: “To sum up: the capital tax is a new idea, which needs to be adapted to the globalized patrimonial capitalism of the twenty-first century. The designers of the tax must consider what tax schedule is appropriate, how the value of taxable assets should be assessed, and how information about asset ownership should be supplied automatically by banks and shared internationally so that the tax authorities need not rely on taxpayers to declare their own asset holdings” (Piketty 2014: 534).

The tax on private capital is the most efficient solution to reduce public debts. This is a way to solve the problems of the current crisis in many states. It is presupposed that this would be the solution for the European Union.

 

 

II. Some Essential Questions for a Further Discussion of Capital in Twenty-First Century

Instead of moving towards a society of equal chances and resources, we face a society with increased inequality. In this sense, Piketty’s book represents an important challenge to mainstream ethics and political philosophy.

However, we can still point to a number of important questions that remain after this discussion of Piketty’s work. In particular, it would be possible to address the following questions to Piketty’s work:

1. Are Marx and Piketty right when they argue that capital will be the basis for income rather than work in the long run, or do they forget that value-creation through work will still makes work very important?

2. How should we evaluate the dangers to democracy of increased individual wealth? Should we argue that this is not only a challenge to equality, but also to political freedom and social cohesion in democratic societies?

3. Does the law of accumulative growth work? The belief in the existence of such an economic law seems to be the fundamental presupposition of the work of Piketty.

4. How should we evaluate the use of literary examples in Piketty? They seem to be very important. But can we give them an essential significance for economic theory?

5. Is Piketty right in saying that, due to capital ownership, the developing world is still owned by the developed world?

6. Is it really true that we live in a hyper-patrimonial society where richness and wealth are based on inheritance and rentiers after all? It seems that this is the case, and that it is an illusion to believe that we live in a kind of democracy with equal conditions for everyone – given for example the fact that most students at Harvard have parents who belong to the richest 2% in the US.

7. What should we say about the idea that it was accidental that there was equality in the 20th century due to the world wars. How do we ensure equality in the future, without wars?

8. What about Piketty’s analysis that we live in a society where people get 25% of their life income from inheritance, and that this will also be the case in an aging society because even though inheritance will only come later, it will still be a general part of society’s function? Is that not contradictory to the idea that older people today want to spend their money rather than to give it to their children? Maybe Piketty underestimates the egoism of the ‘68 generation?

9. Is the idea of a global tax on capital income the way to proceed? If it is only possible at the EU-level, what does it mean for the national tax systems?

10. What will happen if we do not have such a tax in the future – will we, as Piketty suggests, experience further increase of inequality throughout the world?

These questions do not exclude the significance of Piketty’s research. As mentioned in the introduction, the essential achievement of Piketty’s book is that this book represents a revival of political economy, scaled for global society, in the classical sense. Economics is placed as a social science and a humanistic science, and in the end as a moral and political science. In this manner Piketty utilizes an economic perspective and reconstructs the unity in the practical sciences. At the same time as he recognizes that each of the different human sciences has its special perspective.

Piketty’s reconstruction could be called a historical analysis of the transformation of modern society from the origin of capitalism in the 18th century till the global perspective in the twenty-first century. In conclusion, Piketty revives the political-economic project of Adam Smith and Piketty’s work has already had an impact comparable to that of Adam Smith during the 1770s. Therefore, it would be fair to see Piketty as the Adam Smith of the Twenty-First Century.

 

Reference Piketty, Thomas (2014), Capital in the Twenty-First Century, The Belknap Press of Harvard University Press, Cambridge, Massachusetts and London.

 

 

The Hopeful Liberal. Reflections on Free Markets, Science and Ethics

Conference proceedings (triple non-blind peer review), , , , , , , ,

[T]he idea of a self-regulating market implied a stark utopia. Such an institution could not exist for any length of time without annihilating the human and natural substance of society

(Polanyi, 1944: 3)

Introduction

The international economic crisis following the 2008 collapse of Lehman Brothers unleashed a flood of fiat money by selectively prodigal central banks that have seen fit to plunge the world into a recession in order to keep over-indebted private banks afloat (cf. Hudson, 2012). Also, it unleashed an outburst of academic literature on the crisis itself, its causes, its effects, and its possible solutions. With this literature, a modicum of doubt has re-entered the mainstream of public discourse on topics such as globalisation, capitalism and the free market, to the point that even corporate newspapers have reported renowned liberals’ and conservatives’ statements that, until few years ago, would have been associated with leftist ‘radicals’ and ignored by mainstream media:

 

  1. “The doctrine of the dictatorship of the market is dead” (Nicolas Sarkozy, former French president, 2008);[1]
  2. “We need…  humaneness…  rules…  and abandoning the idea of… massive pro?ts” (MIT Nobel-prize winning economist Paul Samuelson, 2008);
  3. “The dictatorship of the [credit] spread… nullifies… universal suffrage… [for] those who hold economic power… have every decisional power” (former liberal MP and current head of Italy’s securities and exchange commission [CONSOB] Giuseppe Vegas, 2012);
  4. “There emerge… in civil Europe the first signs of a new type of fascism: financial fascism, white fascism“ (Italy’s liberal MP and former finance minister Giulio Tremonti, 2012).

 

Aims and methodology

International crises and their dramatic outcomes notwithstanding, certain long-lived, deeply rooted beliefs are hard to die. Thus we keep hearing leading politicians and revered economic advisors who call for a return to growth and assert that structural reforms are imperative so that market confidence may be re-established and increased competitiveness achieved, without ever pondering upon the fact that these aims are precisely those that guided the global economy before the crisis. Could it ever be that endless growth, market confidence or competitiveness are misguided aims for the world’s economies?

In these reflections of mine, I wish to address one of these resilient beliefs. Specifically, in the traditional philosophical way initiated by Socrates, I shall assess some logical knots arising from a hypothesis, that is, the commonplace liberal notion that the so-called “free market” possesses a unique capacity to generate prosperity.

This hypothesis is highly generic, diversely instantiated and potentially vague. Nevertheless, it pervades the whole spectrum of the liberal conceptions of the economy, such as Adam Smith’s “invisible hand”, whereby the individual’s pursuit of self-interest results often into collective wellbeing (1776, IV.ii.9), or the textbook category of “market imperfections”, according to which explaining is needed when the outcomes of market transactions are not optimal (e.g. Sloman, 2006). There exists an extensive literature for each of these conceptions, which I could address in a book, but not in a short piece like the present one. Rather, I shall select one representative liberal formulation of the hypothesis at issue and deal with those logical knots that I deem most likely to be of interest to a scholarly audience.

 

Rhonheimer’s formulation

The formulation that I now refer to is a recent book chapter written by the Swiss liberal thinker Martin Rhonheimer (2012),[2] who claims that the “free market” is “a necessary condition” of human prosperity (9; emphasis in the original). In his eloquent account of Eucken’s ordoliberalism and the related critique of laissez-faire liberalism, Rhonheimer offers in support of his claim:

 

(A) one elucidation; and

(B) one generic token of empirical proof.

  

(A) The elucidation is that no central planner would be able to coordinate all economic activities as efficiently as the “free market”, in which individual agents pursue their own particular self-interest and, by so doing, unintentionally produce prosperity, in accordance with Smith’s principle of the “invisible hand” (9-10). Though not all conditions for prosperity may arise this way, none would arise without it. The “free market” is a necessary condition for prosperity, albeit not a sufficient one, which is what more trenchant laissez-faire liberals believe. States must also be involved, according to ordoliberalism and many other streaks of liberalism, to secure fair market transactions, enforce beneficial rules, correct market distortions, and redress socially and morally harmful market outcomes. However, to think that “central planning and state regulation… through several government-run agencies” could ever achieve any prosperity without the “free market” is discarded at once (5).

 

(B) The generic token of empirical proof is that “history teaches” all this: “a capitalist economy based on a free market, entrepreneurial activity, and free trade without tariff barriers is more realistic and in the long run beneficial for everybody” (24). In this respect, the unrealised failure of Roosevelt’s New Deal and a passing reference to Soviet Union are the two cases of “socialism” that the author utilises to give strength to his point (4-7).

  

The critique

1. Indemonstrable necessity

Rhonheimer’s elucidation, though very commonly heard, is not much of an empirical proof. At best, it is an enthymeme, i.e. a rhetorical proof. To make it stick more convincingly, it would require itself many empirical proofs for adequate scientific substantiation. Yet here emerges a severe and unflinchingly by-passed methodo-logical issue. How can anyone prove a thesis as comprehensive as the one presented in Rhonheimer’s essay and, in general, upheld by the liberal community?

The necessary character of any economic system cannot be determined in a scientific way, for we have only one planet, one humankind and one very short historical span at our disposal for any empirical verification and/or falsification of the “free market” and, for that matter, of “socialism”. Apart from mere logical possibility, which cannot exclude a plurality of ways to prosperity, it should be observed that for any claim of such a necessary character to be ascertained, we should investigate a set of entirely alternative and separate systems over a certain period of time, probably a very long one, so as to determine that only the ones operating upon the “free market” produce prosperity, whatever this may be like. Unfortunately, to this day, such a test has been impossible to perform.

Moreover, focussing onto the “market” versus “socialist” dichotomy can be misleading, for it shifts the gaze away from what is undeniably necessary for the meaningful survival of our species, i.e. the continued satisfaction of human needs across generational time. That is the prime end, whatever additional feature we may wish to add to the notion of prosperity. Economies are the means to attain in primis this prime end.[3]

As the past is concerned, we know that some civilisations have made it this far. In this connection, we might think of prehistoric, ancient and medieval Earth, let us say before the age of European exploration, as a plausible set of sufficiently separate and alternative economic systems to conduct a comparative study. Yet, apart from the fact that hardly any of the known ones would count as a free-market system, we know far too little, if anything, about most of them to make any valid scientific comparison, whatever notion of prosperity we may wish to employ (cf. Boldizzoni, 2011). If we look at what history has produced until now, we may be in a better position to determine which system has been the most ruthless, hence the one that has imposed itself over the others. However, that would be a banal and, I suspect, rather degrading notion of superiority, not to consider the very thin or quite absent link that such a superiority may have to human needs or prosperity (cf. Castoriadis, 1997).

As the present is concerned, there may be alternative but no separate systems, given that even the most isolated indigenous communities in the world are being affected by the environmental changes produced by the advanced economies of the planet (e.g. Itkadmin. 2007).

As the future is concerned, unless we deny the ability of humankind to change creatively its collective organisation, which has varied enormously throughout the known history of our species, we cannot even begin to fathom what awaits our descendants: a Star-Trek-like society without money, need and greed; or a Mad-Max-like post-atomic age of barbarism? But this is the territory of science-fiction, not of science.

 

2. Lack of prosperity

If we follow Rhonheimer’s representative formulation and understand prosperity as “consumption, that is, the satisfaction of the needs of all the persons living in a determinate territory” (19; emphasis in the original), we quite simply lack information about most human communities in most parts of the world throughout most of human history. Presently, the past is closed to us; and so is the future, for we cannot predict what will happen on our planet tomorrow, not to mention in two years or two centuries.

As the history of today’s world is concerned i.e. the so-called ‘global market’, which is usually claimed to be an imperfect instantiation of the “free market”, we know for sure the following: it fails regularly to satisfy the needs of all the persons living on the planet, as the UN’s annual statistics on death by malnourishment and starvation regularly report. And while failing these persons’ needs, the current imperfect instantiation of the “free market” also caters to artificially instilled wants of others, including the desire for carcinogenic cigarettes and life-shortening junk food. In other words, the global market fails not only to secure planet-wide need-satisfaction, which is what Rhonheimer appears to be taking as genuine consumption, but also to distinguish between, say, the need for bread of the starving paupers and the desire for golden toilets of oil tycoons, so as to prioritise the former above the latter. What sets in motion the “free market” in both theory and practice is money-backed demand, i.e. preferences or wants of market agents endowed with pecuniary means, not the genuine needs of humans or other living beings, whose possession of pecuniary means may be nil. Money, not need, is what determines consumption in today’s world, pace Rhonheimer’s noteworthy equation (cf. McMurtry, 1999).

Revealingly, many liberal economists and, above all, the actual economy treat both bread and golden toilets as marketable ‘goods’. No axiological compass is present for basic distinctions between that which is of real value and that which is not, or that which is good and that which is bad. Neither any economic ‘good’, nor all economic ‘goods’ are good. Some are bad. For example, financial speculation over the price of staples such as rice and wheat may be deemed “rational” and a form of “wealth creation”, but it does increase malnutrition and illnesses. In other terms, the invisible hand seems to possess an invisible brain, which is why ordoliberals à la Rhonheimer, unlike libertarians and radical laissez-faire liberals, have long recognised the importance of at least some State intervention.

 

3. Imperfect imperfections

In connection with the importance of State intervention, Rhonheimer introduces a number of additional qualifications that cause the “free market” to come across as more inefficient than initially stated in the thesis. Albeit a necessary one, this mechanism is not a sufficient condition for prosperity or consumption. It is said that it “frequently” leads to prosperity, i.e. not always (10). It is incapable of providing many “public goods” (14). It is prone to “failures” (13). If the State does not intervene, it generates “cartels” (15). Indeed it possesses “a tendency to destroy itself” (15), given also that it causes major social “problems” such as “inequality” (25).

These qualifications are unlikely to sound surprising to most liberals, for, in varying degrees, the near-totality of them acknowledge that some imperfections do affect the market system. However, it is perplexing to notice that, under their perspective, qualifications of the actual market economies such as the ones listed by Rhonheimer are not seen first of all for what they are, i.e. features of the existing markets. On the contrary, they are seen as exceptions to the implicit rule, which assumes markets to be perfect, even if they are clearly not perfect. Indeed, a few years before his death, liberal economist John Kenneth Galbraith (2004) stated the very talk of “free market” to be nothing but a “fraud” (in the title) aimed at hiding the historical fact of capitalism, that is to say, a much more fitting term to describe Western economies, inside which there has always been a dominant group planning the economy to its own advantage (e.g. merchants, industrialists, absentee owners, managers, financial managers), conspicuous market manipulation (including creating demand by operant conditioning techniques) and extensive conditions of monopoly and oligopoly.

Textbooks often refer to methodological convenience when explaining why economists assume perfect markets. Though understandable, such a prioritisation of methodological convenience over empirical evidence is a grave departure from standard scientific methodology. Galileo may have invited the scientific inquirer to reason ex hypothesi, but he never maintained that contrary evidence should be systematically side-stepped in order not to change the starting hypothesis. In the natural sciences, hypotheses are meant to be tested and revised in light of empirical evidence. Only the formal sciences content themselves with coherent theoretical constructions (cf. Hintikka et al., 1981).

 

4. Vaguer and vaguer referents

The absence of exact instantiations of the clearly unempirical “free market” is only the beginning. If we allow for some State intervention, as Rhonheimer does, what should count then as truly “free market” and “socialist” economies? Where should we draw the line of demarcation?

These two terms are almost omnipresent in both recent political history and scholarship, yet their actual separation is far from obvious. Indeed, from a 19th-century conservative perspective, liberals and socialists were hardly distinguishable from each other, as the political critiques by Pope Pius X or Friedrich Nietzsche exemplify. Furthermore, before the 19th century, most societies in human history had not been market societies. They may have contained some markets (e.g. slave trade in the ancient Mediterranean), but most of their members did not participate in them (cf. Boldizzoni, 2011). As far as we can ascertain, subsistence and reciprocity were their main features, as reflected also in their culture, which kept the analogues of today’s economic rationality as limited secondary instruments to other primary social goals, such as community status, personal honour, or the salvation of each believer’s immortal soul.

Great achievements were possible in these older societies, whether in the arts, philosophy, mathematics, law, engineering or religious life. Such human accomplishments seem to have little to do with “free markets” or the size of a country’s GDP, and perhaps may be unrelated to whatever prosperity the hypothesis at issue implies. Still, it is not aimless to ponder upon the fact that even the great scientific discoveries that led to the technologies whereby 20th-century human populations boomed worldwide, in both self-proclaimed “capitalist” and “socialist” economies, were made in countries with smaller GDPs than today and limited “free markets” (cf. Galbraith, 2004). Moreover, modern societies, in which commercial and financial markets have become much more extensive and influential, have often retained—sometimes up to the present day—significant elements of subsistence and reciprocity (e.g. small-scale farms in Scotland, Poland and India), as well as many development-spurring elements of public ownership and public planning (e.g. Venice’s publicly owned merchant and military fleets; George C. Marshall’s post-WWII ERP; Germany’s, Brazil’s, North Dakota’s and China’s public banks).

Additionally, it should be noted that Ronheimer himself claims that genuine free markets existed worldwide only for a brief period of time, i.e. “between 1850 and 1870”, and that self-proclaimed “free market” post-WWII USA has resembled post-WWI Germany in maintaining the State-centred structures inherited from their war economies, which still allow the State, for example, to bail out bankrupt private firms (21). In short, the issue of identifying genuinely “free-market” and “socialist” economies is not an easy one. Not even post-war USA may count as a decent token of the former type of economy, at least according to Ronheimer, who compares them to the historical champion of cartel-friendly organised capitalism, i.e. Germany (cf. McGowan, 2010).

Any firm, trenchant scientific evaluation of the historical experience of concrete societies seems therefore less and less likely, at least if we take Rhonheimer’s considerations seriously, for we lack clear referents for the key-terms of “market” and “socialist” economies.

 

5. Non-existence

The distance from concrete societies increases further whenever liberals like Rhonheimer assert that the “free market” is an ideal, i.e. something that does not truly exist in reality (I shall not dwell on the contradiction entailed by the claim that he makes about free markets having existed worldwide only for a brief period of time). In other words, it is a purely theoretical construct, an empirical impossibility, for the human being is actually incapable of operating according to it. Perfect markets as such, in whatever Hyperuranus they may be located, are therefore not to be blamed for crises, unemployment or whatever other misfortune may befall upon us. People are. The former are not around. The latter are.

Liberals seem not to notice the troublesome logical implications of such an approach, for not only does it mean that there is no clear empirical evidence that free markets are the one and only way to prosperity, but also that there cannot be any, for they have never been truly present, since they are not suited to “the human condition” (15).

Moreover, liberals do not seem generally to notice that their approach is analogous to that of many 20th-century Marxist zealots who, when confronted with the failures of Eastern Europe’s “real socialism”, argued that their theory was correct, since its practice alone had failed, given various and varying human flaws. In short, no amount of contrary evidence could disprove their stance.

 

6. Unfalsifiability

The Marxist zealots’ case leads us to the most fundamental and most intractable logical knot of the liberal position with regard to the markets’ unique ability to generate prosperity.  If (a) the genuine “free market” cannot be established, for it is a theoretical construct inconsistent with “the human condition”; and if (b) the actual historical experience of what is commonly referred to as the “free market” or “capitalism”, i.e. the history of mostly Western developed countries over the past three centuries, is one of considerably imperfect applications involving significant elements of State intervention and ownership (e.g. post-bellic Germany and USA), why is the market necessarily responsible for wealth and, to some extent, well-being, whereas significant State intervention and ownership are not? Why not the two of them together, on a par? Or why not either of them, depending on the specific circumstances of each particular case, duly investigated by means of close historical, economic, medical, sociological, anthropological, environmental and axiological analyses? Principled comparisons are possible, but they must rest on solid empirical ground. And why should we ignore other factors altogether, such as gifted individuals, fortunate circumstances, scientific discoveries, cheap energy sources, literacy levels, or religious dispositions? Must it be always the markets that save the day?

By his own account and qualifications, Rhonheimer has no real answer to these questions. Quite simply, he states his thesis and uses it to read history so as to be allowed to state it. In other words, Rhonheimer is assuming a priori that the “free market” produces necessarily wealth and, to some extent, wellbeing. By means of that assumption he then proceeds to read human history as its verification—State-led development, recurrent crises, environmental degradation and social tragedies notwithstanding. Verification is open; falsification is not. This is a profound methodological flaw not just in Rhonheimer’s essay, but also in much economic thinking. In fact, it does begin with Adam Smith’s Wealth of Nations and reaches its highest peak in laissez-faire economics, which argues that the “free market” is the necessary and sufficient condition for human prosperity. In all of its forms, it is an example of scientific unfalsifiability, or pseudo-science, for such an assumption, whereby “free markets” are bound to generate prosperity, admits of no counterevidence. Let me explain better how this unfalsifiability is the case:

 

  1. In the first place, insofar as it is assumed that unhindered markets bring about prosperity, if we do not have prosperity now, then we must simply wait and abstain from causing undue hindrance. As Christians and Marxists have long known, eschatology calls for patience; hence the recurrent phrases commonly attached to so-called “market reforms”: “in the long run”, “future generations”, “long-term benefits”, etc.
  2. Secondly, if waiting is not a credible option and we do not have prosperity yet, then we can always blame the government (e.g. ‘corruption’, ‘red tape’) or some dishonest private actors (e.g. ‘crony capitalism’, ‘State capture’ by special interests) for being unfaithful to the actual spirit of “free markets” and therefore causing hindrance. Markets fail not, people do—although one can legitimately wonder what markets may be if not people transacting with one another within a certain normative setting (cf. Barden & Murphy, 2010).
  3. Furthermore, insofar as Smith’s followers and ordoliberals à la Rhonheimer argue as well, though often reluctantly, for the desirability of some, however limited State intervention (e.g. Smith’s progressive taxation, Presbyterian-style education of the youth, public regulation of banks and mentally destructive working conditions; Eucken’s redressing of socially detrimental unfavourable market outcomes), they corner public authorities in a hopeless argumentative position. Given the starting point, growth and prosperity can always be seen as the result of the markets’ enduring degree of freedom—i.e. not of the State’s intervention—while crisis and misery can always be blamed onto the State—i.e. not onto the markets being actually unable to generate growth and prosperity.

 

Operating under such an assumption, markets can never be wrong, whatever environmental or social ills may have arisen. Thus, not only can prejudicial favour for the free market go on unchallenged. Also, if the markets do not deliver the promised bounty, the cure can be said to be only more of the same. Unsurprisingly, this is exactly what happens in Rhonheimer’s essay: “markets”, he writes, are “normally and as a matter of principle the solution” (12; emphasis in the original). And equally unsurprisingly, many leadings statesmen and politicians seek too more of the same (e.g. Italy’s PM Mario Monti, 2012).

 

Conclusion

Rhonheimer’s essay is fallacious, given the self-contradictory confusion that results from insisting upon the markets’ necessary beneficence whilst also piling up observations and qualifications that point precisely to the opposite conclusion. Like all analogous liberal assessments, it is built upon an unfalsifiable hypothesis that makes liberals highly unlikely to:

  

(a) Read historical experience in ways that may render more complex or contradict the original assumption (e.g. Earth-wide ecologic collapse, recurrent crises, continuing unemployment, the wasteful failure of most enterprises and products launched every year, successful development by public planning of industrial production or strategic public subsidies), so as to acknowledge that capitalism à la Galbraith is at work and, though driven by the same principles of the “free market” (e.g. growth, market confidence), it is not necessarily beneficial to societies at large and must be therefore integrated, constrained and/or contrasted by other principles (e.g. sustainability, human rights; cf. Polanyi, 1944)

 

(b) Avoid engaging in pseudo-scientific ad hoc explanations, or de facto exculpations, so as not to revise the original assumption (e.g. people fail markets and not vice versa; the State’s pro-market legislation, liberalisations and privatisations are to blame, for they were erroneous, corrupt or insufficient; State institutions are to blame for financial crashes, because of some minor change in the laws that unleashed an otherwise impossible flood of private greed; Mexican, Korean, Russian, Icelandic…, X culture or human nature itself is not suited for the actual application of the “free market” and therefore leads to its historical failure)

 

(c) Envision different, hybrid, pragmatic, contingent or case-specific solutions to economic problems (e.g. mixed economies; voluntary communes, cooperatives and social enterprises; State ownership of crucial assets qua cost-abating fourth factor of production; Georgist taxation of economic rent from natural resources; constructive cooperation with cartels and oligopolies; ecologically sound rationing in view of gradual retreat from the environment and life-sustaining de-growth)

 

(d) Conceive of possible major alternatives, whether based on past experiences (e.g. monastic communities, the Israeli kibbutzim) or untested and novel ones. Human freedom entails creativity and change that cannot be predicted in advance. (cf. Castoriadis, 1998)

 

(f) Realise clearly that by assuming the markets’ beneficence as necessary, promoting freedom to trade as paramount and reinforcing scepticism vis-à-vis public intervention and regulation, liberals make it more difficult, if not impossible, to discriminate effectively between good and bad growth, good and bad market confidence, good and bad markets, and good and bad goods. Thus, ecologically and biologically destructive economic growth keeps being pursued instead of growth in life-capacity alone; wealthy investors’ desiderata keep being prioritised over the life-needs and related demands of deprived local communities; and cigarettes, junk foods, armaments and speculative assets keep being traded because profitable (cf. McMurtry, 2013).

In nuce, the fictional notion of free markets impinges upon reality by buttressing in theory and fostering in practice unfettered capitalism, which has led to disastrous results on economic, social and environmental levels. Yet none of them is blamed upon free markets, since free markets are already assumed to be the paramount way to prosperity, with all good results numbered as proofs of this assumption and all bad results blinkered out—the self-enclosing frame of mind behind all possible interpretations of past and present experiences. Blame for the disastrous results is, in turn, shifted onto other agents, especially the State, on which the near-totality of free-markets adherents first of all depend and the limited intervention of which, albeit grudgingly, they require. It is then easy to use the State as the scapegoat whenever things do not work out as the doctrine assumes they must. And since things do not work out the way they should, then more free market, hence more unfettered capitalism, can be the only answer within such a closed metaphysical circle, which reduces from the beginning all possible solutions to itself.

Yet there is more. Given how pervasive the hypothesis at iusse has been, it follows that politics, policies and entire academic programmes have been built upon a fundamentally unscientific assumption. I do not object to having unscientific assumptions. Indeed, some of the most important dimensions of human existence are built upon unscientific assumptions, such as intimate love and religious life. I do object to doing so, though, and not admitting it. Were liberal economists to state that they offer an essentially religious interpretation of reality, based upon some successful partial instantiations—analogous to the proofs of reasonability of scholastic theology—and the hope that the markets left largely unhindered may provide us with prosperity, then they would be intellectually honest. They could follow in the steps of Richard Rorty (1998), who advocates political liberalism qua civil religion of democracy. They would be consistent with Friedrich Hayek’s (1992) characterisation of the market order as “transcendent” and analogous to the religious one in assuming that its own unfathomable will, “not mine” i.e. humankind’s, “be done” (72). They would be reminiscent of the likely Providential character of Adam Smith’s (1776, IV.ii.9) “invisible hand” (e.g. Oslington, 2011).

But economic liberals do not. Economics textbooks say nothing of the sort. They assume the free markets’ existence, which is itself empirically doubtful and at best historically limited, assume away any flaw by way of a priori methodological perfection, and ascribe to them the necessary generation of human prosperity, whatever contrary evidence there has been in human experience, such as State-led development (e.g. Communist China), prosperous cartel-intensive economies (e.g. Bismark’s Germany), the collapse of the first age of market globalisation (1870s-1914) and the ensuing Great War and Great Depression, the booming populations of 20th-century socialist nations (e.g. USSR), or the on-going worldwide depletion of natural and human systems upon which “the life and health of the billions [are] supported” (Hayek, 1992: 75). Their reticence and assumption are not only unscientific; they are also unprofessional. In truth, they are a nothing less than a lie. And lying is, under normal circumstances, unethical.

 

 

References

 

Barden, G. & Murphy, T. (2010), Law and Justice in Community, Oxford: Oxford University Press.

 

Baruchello, G. & Johnstone, R.L. (2011), “Rights and Value. Construing the International Covenant on Economic, Social and Cultural Rights as Civil Commons”, Studies in Social Justice, 5(1), 91-125.

 

Boldizzoni, F. (2011), The Poverty of Clio, Princeton: Princeton University Press.

 

Castoriadis, C. (1997), “The ‘Rationality’ of Capitalism”, Figures of the Thinkable, available at http://www.notbored.org/FTPK.pdf

 

Castoriadis, C. (1998), The Imaginary Institution of Society, Cambridge, Mass.: MIT Press.

 

Galbraith, J. K. (2004), The Economics of Innocent Fraud, Boston: Allen Lane.

 

Hayek, F.A. (1992), Collected Works, vol. I, London: Routledge.

 

Hintikka, J. et al. (eds. 1981), Theory Change, Ancient Axiomatics, and Galileo’s Methodology, vol. I, Leiden: Springer.

 

Hudson, M. (2012), The Bubble and Beyond, Dresden: Islet.

 

Itkadmin (2007). Inuit Recommend Changes to Canadian Environmental Protection Act, Inuit Nunangat: Inuit Tapiriit Kanatami.

 

McGowan, L. (2010) The Antitrust Revolution in Europe: Exploring the European Commission’s Cartel Policy, Cheltenham, UK & Northampton, MA, USA: Edward Elgar.

 

McMurtry, J. (1999; 2nd ed. 2013), The Cancer Stage of Capitalism, London: Pluto.

 

Monti, M. (2012, 10 September) “Italy to return to growth in 2013”, Reuters, available at http://www.reuters.com/article/2012/09/10/italy-gdp-idUSL1E8KAH6720120910

 

Oslington,P. (2011), Adam Smith as Theologian, London: Routledge.

Polanyi, K. (2001/1944), The Great Transformation, Boston: Beacon. 

Rhonheimer, M. (2012), “Capitalism, Free Market Economy, and the Common Good: the Role of State Authorities in the Economic Sector”, first chapter in Martin Schlag & Juan Andrés Mercado (eds.), Free Markets and the Culture of Common Good, Dordrecht: Springer.

 

Rorty, R. (1998), Achieving Our Country, Harvard: Harvard University Press.

 

Samuelson, P. (2008), “È’ l’ultimo regalo dell’era  Bush“, La Repubblica, retrieved from http://rassegna.governo.it/testo.asp?d=33912628

 

Sarkozy, N. (2008, 23 October), “Morta ideologia della dittatura dei mercati”, La Repubblica. retrieved from http://www.repubblica.it

 

Sloman, J. (2006), Economics, 6th ed., Upper Saddle River: Prentice Hall.

 

Smith, A. (1776/1904), An Inquiry into the Nature and Causes of the Wealth of Nations available at http://www.econlib.org/library/Smith/smWN.html

 

Tremonti, G. (2012), Uscita di sicurezza, Milan: Rizzoli.

 

Vegas, G. (2012, 14 May), “Vegas: ‘C’e’ il rischio dittatura dello spread’”, Il Sole 24 Ore, retrieved from http://www.ilsole24ore.com/art/finanza-e-mercati/2012-05-14/relazione-consob-vegas-lancia-110722.shtml?uuid=AbXHvNcF

 

 

 


[1] All translations are mine, unless stated otherwise.

[2] I have published a critical essay of this volume in the fourth 2012 issue of Economics, Management and Financial Markets.

[3] On this point, the UN’s Committee on Economic, Social and Cultural Rights has long espoused an aim-driven approach: the specific economic system of each member nation is not important, as long as human rights are protected, respected and fulfilled (cf. Baruchello & Johnstone, 2011).

Jonathan Schlefer, The Assumptions Economists Make (Cambridge, Mass., and London: Belknap Press of Harvard University Press, 2012)

Book review (editorial review), , , , , , ,

 

Indeed, a culture of superficial self-examination is laid bare in Jonathan Schlefer’s monograph The Assumptions Economists Make. Moreover, he provides evidenced accounts of confirmation bias, forgetfulness, denial, indifference and outright ignorance permeating mainstream economic theory and practice. So extensive and consistent is this across both centuries and organisations that it suggests some form of institutionalised mass delusion. Neither a critic of, nor an apologist for capitalism, Schlefer is really an old fashioned seeker of truth and knowledge. He is more interested in how economists think, than in the ‘causes’ of the crisis. In this sense, he is taking a step back to look at how theoretical arguments are made in economics, and how the discipline functions as a crucible for truth. Schlefer is a political scientist who ‘took several graduate-level courses in economics at MIT and Harvard, multivariate calculus and all’. In this way, the Harvard Business School research associate offers us the penetration of an outsider, who is nonetheless both informed and connected.

 

Economists, he says, form simplified assumptions which they use as the foundations for imaginary worlds. These ‘models’ are used to draw practical lessons: the bedrock of policy. Schlefer intends to explain to us their various structures such that we can more fully understand key disputes in economic theory. Since he does this without mathematics, he is surely translating for a non-economist audience. Instead of equations and graphs, Schlefer describes each model using simplistic metaphors and analogies. It is nonetheless complex material that requires work, so this is unlikely to appeal to the majority of the general public.

 

Schlefer focuses on each model through the lens of its assumptions, so he renders its structure objectively, in its advocates’ own terms. Set in their historic social, political, economic and theoretical contexts, their assumptions also indicate how theorists interpret their world. Schlefer uncovers the mode in which they build from this in order to draw conclusions and make policy. He thus critiques the plausibility of their assumptions, their methods of reasoning and the validity of their conclusions. A largely chronological succession of economic models is scrutinised in this way throughout chapters three to fourteen. However, they do not form a comprehensive history of economic theory. Rather Schlefer deconstructs only a selection. Through these he traces the ancestral line of economic thought leading to those current models most pertinent to the crisis. Schlefer thus shines a light not only on individual theorists’ thinking, but also on distinctive styles of reasoning across time. He peppers this chronology with copious references to economic policy and education.

 

Before commencing his central work, he frames it thematically with two quite explosive opening chapters. An almost always unstated assumption he says, indispensable for dominant mainstream theory and free market policies, is that Adam Smith’s ‘invisible hand’ is an authentic mechanism which, if left alone to function, inevitably leads markets to an optimal equilibrium. For some three decades now, Dynamic Stochastic General Equilibrium (DSGE) models have dominated academic, commercial and government circles throughout the West; notably among central banks, which still use them. This is despite the fact that their ‘invisible hand’ foundation has been proven to be not a mechanism, but a mere metaphor. It was generally concluded in the 1970s, Schlefer says, that ‘no mechanism can be shown to lead decentralized markets to equilibrium’. His opening chapter takes us through a century of failed attempts to model the ‘invisible hand’, examining in depth the canonical 1954 Arrow-Debreu model and its dozen preposterous assumptions, on its own terms. How is it possible, Schlefer asks, that a ‘supposedly scientific theory’ can be ‘founded on pure faith’ in a discredited metaphor?

 

His second chapter turns to education, arguing that while the history of economic thought has ‘all but vanished from graduate programs’, the most successful economics textbooks seem little more than ideological propaganda. He shows them consistently excluding facts, contradictions and complications. Those textbooks which do discuss such inconveniences are ignored or, in one shameful episode, withdrawn by university departments following financial pressure from ideologically motivated external donors. Schlefer also shows how textbooks and courses blur the distinction between two-dimensional abstract models and reality. Some students, he says, ‘feel cheated, as if they were watching a magician put on a stage show, the workings for which are hidden out of sight. Others like the stage show better than the messy everyday world’.

 

As Schlefer works through the models, reality’s ‘messiness’ seems to provoke two styles of theorising. It is acknowledged by classical theorists through Keynes to the structuralists and ecologists: economy is bound up with society and technology. This seems to connect with the emerging interest in complexity theory, briefly covered in the final chapter. Conversely, for the early economist-politicians, neo-classical theorists and monetarists, messiness is avoided: economy is an isolated object. Their exclusion of fuzzy interdependencies underpins today’s DSGE models. These assume that economies are autonomous objects, thwarted from reaching their mythological equilibrium by ‘external’ shocks.

 

Schlefer’s fastidious dismantling of each model’s nuts and bolts locates errors in reasoning across the board. However, most of many implausible assumptions, tautologies and examples of circular logic are shown to be among neo-classical models and their descendants. Despite their claims to scientific veracity, Schlefer exposes an unbroken history of convenient invention. Repeatedly, he shows exemplifies how DSGE models are constructed on an historical pedigree of unexplained workings, misrepresentation, obscurantism, bogus or bizarre claims, arbitrary labels, unexplained magical forces, misleading arguments, false conclusions and illegitimate revisions. Proofs against their invented mechanisms are routinely forgotten or ignored, which Schlefer often finds ‘strange’, ‘weird’ or ‘mind-boggling’. Such practices culminate with the ‘shoehorning’ of Keynesianism into neo-classical models to form a basis for DSGE modelling. This assimilation is largely prompted by rational expectations thinking and constructed on the idea that ‘aggregated’ macroeconomic models can truly represent their microeconomic siblings. Schlefer tears it apart.

 

Teeming with jargon and frequently contested, misappropriated or distorted meanings, a non-economist can soon become lost. This demands exceptionally clear writing and here Schlefer could do better. His historical accounts and anecdotal examples are breezy, but his technical material requires intense concentration. This is not helped when model evaluations are interwoven with complex discussions on policy. Separating them would aid clarity. The exclusion of mathematics does make this wonderfully accessible, but Schlefer’s excellent metaphorical descriptions of models might be easier to absorb with just a few simple, non-mathematical illustrations. In-text cross-referencing would help us to link together the dense tangle of concepts. This also needs clear signposting: chapter headings and sub-headings could avoid poetic summation and simply state the subject matter. There is an excellent 670 entry index, but a glossary or even additional index of differently used meanings would be practically useful. In short, this deserves to be a textbook. We are listening, but please slow down and spell this out more carefully.

 

Because what Schlefer says is surely important: the DSGE models, which require ‘incredible’ assumptions and still determine our economic fate, did not predict the crisis precisely because they cannot admit the possibility of a crisis. Moreover, models which did predict it were ignored (and remain so), the ‘Great Moderation’ was and is a myth (it ignores several crashes), and the past thirty years of mainstream academic research was useless when the crisis struck. All this exposes an academic field which is not fit for purpose. Schlefer’s economics is a rogue discipline of mythology and pure faith; a crucible not for truth, but for ideology masquerading as science. He calls for a tighter scientific approach and recommends four simple criteria for making good assumptions including, astonishingly, stating them. As if to confirm Schlefer’s point, mainstream media reviews of this book omit any mention of these issues, as though he never wrote about them. Perhaps Schlefer’s thinking can only be developed outside of economics.

 

References

 

Colander, D., Föllmer, H., Haas, A., Goldberg, M., Juselius, K., Kirman, A., . . . Sloth, B. (2009, February). The Financial Crisis and the Systemic Failure of Academic Economics. Retrieved February 22, 2013, from Kiel Institute for the World Economy: http://www.ifw-members.ifw-kiel.de/publications/the-financial-crisis-and-the-systemic-failure-of-academic-economics/KWP_1489_ColanderetalFinancial%20Crisis.pdf

ECB. (2012, December). Eurosystem Staff Macroeconomic Projections For The Euro Area. Retrieved February 26, 2013, from European Central Bank: http://www.ecb.int/pub/pdf/other/eurosystemstaffprojections201212en.pdf

Rogoff, K. (2013, February 11). Don’t blame the Federal Reserve for not predicting the financial crisis. Retrieved February 22, 2013, from The Guardian: http://www.guardian.co.uk/business/2013/feb/11/federal-reserve-blame-financial-crisis

University of Pennsylvania. (2009, May 13). Why Economists Failed to Predict the Financial Crisis. Retrieved February 22, 2013, from Knowledge@Wharton>: http://knowledge.wharton.upenn.edu/article.cfm?articleid=2234

 

[1] See for example: Colander, et al., (2009); Rogoff, (2013); and University of Pennsylvania, (2009). Schlefer points out that in fact it was forecast, just not by the mainstream; see main text further down.

[2] For example, the European Central Bank and its national Central Bank affiliates continue to produce macroeconomic projections for the Euro Area using procedures and techniques that were set out in 2001. An ECB report of December 2012 states that: “The Eurosystem staff macroeconomic projections are produced jointly by experts from the ECB and the euro area NCBs. …More information on the procedures and techniques used is given in ‘A guide to Eurosystem staff macroeconomic projection exercises’, ECB, June 2001, which is available on the ECB’s website” (ECB, 2012).