And the Nobel Prize for class war goes to…

Wow, what a handy co-incidence. Just as various neo-liberal organisations and governments are urging “austerity” and cuts, the non-Nobel prize is awarded to people who confirm their assumptions. As reported in the Guardian: “One of their conclusions is that more generous unemployment benefits give rise to higher unemployment and longer search times.”

This conclusion was repeated in the New York Times as well: “The work honored Monday also suggests that policies intended to help workers can have unintended consequences. Unemployment benefits, for example, can prolong joblessness by making it less costly to be without work.” The paper then quotes from the university that produced the Chicago School of economics:

“That’s a big controversy in the U.S. recently,” said Robert Shimer, an economics professor at the University of Chicago. “Most of these models suggest that even in a depressed economy, more generous unemployment benefits tend to raise the unemployment rate. Benefits are obviously good for the unemployed, but there are some clear tradeoffs.”

This is in the context of the Republicans stalling attempts to extend unemployment benefits in America. As the same Guardian article usefully notes: “The research is particularly relevant now when looming drastic government spending cuts in Britain will lead to thousands of job losses in the public sector.”

Of course that depends on whether there are jobs out there. With unemployment and other benefits cut, firms are going to experience a reduction in demand and, in such circumstances, would they be hiring? This analysis should be well known, given Keynes pointed it out in 1936! I do find it strange, to say the least, that mainstream economics concludes that what firms best need during a recession is people buying less of their goods. As Proudhon suggested in 1846 when discussing the impact of machines: “Fool! though the workers cost you something, they are your customers: what will you do with your products, when, driven away by you, they shall consume them no longer?”

It will be objected that these economists have written other things. Undoubtedly, but the press concentrated almost exclusively on that aspect of their ideas. That the press has reported this aspect of the non-Nobel Prize winners is unsurprising, as the institution’s press release explicitly drew attention to this “contribution”:

“The Laureates’ models help us understand the ways in which unemployment, job vacancies, and wages are affected by regulation and economic policy. This may refer to benefit levels in unemployment insurance or rules in regard to hiring and firing. One conclusion is that more generous unemployment benefits give rise to higher unemployment and longer search times.”

Ah, well, obviously attempts to help working class people are always counter-productive! Economic science proves it again and again… Proudhon’s words do, though, spring to mind: “Political economy — that is, proprietary despotism — can never be in the wrong: it must be the proletariat”

In its statement, the prize committee proclaimed that “[a]ccording to a classical view of the market, buyers and sellers find one another immediately, without cost, and have perfect information about the prices of all goods and services ... But this is not what happens in the real world.” So to get a non-Nobel prize in (neo-classical) economics you need to recognise some aspect of reality which (neo-classical) has ignored for over 100 years? And, it must be stressed, neo-classical economics has consistently ignored “what happens in the real world” from the start… Why? Well, because classical economics, rooted in production and historical time, was being used by critics of capitalism to expose its exploitative nature. As Marx suggested:

“It was thenceforth no longer a question whether or not this theorem or that was true, but whether it was useful to capital or harmful, expedient or inexpedient, politically dangerous or not. In place of disinterested enquirers there were hired prize fighters; in place of genuine scientific research, the bad conscience and evil intent of the apologist.” (“Afterword to the Second German Edition”, Capital, vol. 1, p. 97)

Unsurprisingly, he characterised this as “vulgar economics.” For Proudhon, “political economy, as taught by Messieurs Say, Rossi, Blanqui, Wolowski, Chevalier, etc., is merely the economics of the propertied, the application of which to society inevitably and organically engenders misery.”

It will, of course, be strenuously denied that economics is “political” and that its development is anything other than the disinterested pursuit of knowledge. That, say, its conclusions have always favoured the boss-class will be put down to co-incidence. That its theory of value, its movement from labour to utility and then from cardinal to ordinal utility, developed as a result of disinterested scientific investigation and the awkward facts that the labour theory of value showed that labour was exploited and cardinal utility justified reformist demands for redistribution of wealth are just, yet again, a co-incidence. That this analysis rooted into rampant individualism had the awkward side effect of making it impossible to construct market-wide demand curves was, and still is, left unmentioned in polite circles.

That neo-classical economics concludes that unions are bad is, again, just a coincidence. Ah, it will be objected, neo-classical economics also concludes that big business is bad too. That shows its neutrality. Well, it would, if economists were as vocal in proclaiming the necessity to break-up big companies as they are in reducing union power. For some strange reason, the necessity to make the labour market adjust to the rigours of the neo-classical model is far more pressing than the need to make business conform. Indeed, the Chicago School (with the likes of Milton Friedman at the front) concluded that the costs associated with “big labour” far outweighed any costs of “big business” (which operated, by wonderful co-incidence, “as if” it were in perfect competition!). This policy was pursued by neo-liberals like Thatcher and Reagan in the 1980s, following the lead of Pinochet’s fascist Chile.

Yet, significantly, economists themselves had shown in 1956 that removing some, but not all, deformations in a real market to make it more in-line with the impossible “perfect” markets of neo-classical economics could make things worse, not better. As mentioned in An Anarchist FAQ, this suggests that smashing unions “in such a less than competitive market would result in the wage being less than the price for which the marginal worker's output can be sold, i.e. workers are exploited by capital. In other words, economics has itself disproved the neoclassical case against trade unions.” And guess what? Since then the link between productivity and wages has been smashed. Up until 1980, wages did, more or less, keep in line but after that productivity kept growing while wages stagnated. This is mentioned (“Increasing productivity and stagnant wages) in the blog which accompanies what looks like a useful book, The Economics Anti-Textbook. The gap helps explain the exploding inequality associated with neo-liberalism, as what did not go to labour went to capital and so accrued into a few hands (“trickle-down economics” really should be labelled “flood-up economics”).

It is, of course, just a coincidence that the Swedes awarded Friedman with the (non-)Nobel prize shortly after Pinochet utilised his ideas in Chile and the West was in need of some means to tame the working class rebellions of the time (the mass unemployment caused by trying to apply Friedman’s nonsensical Monetarist ideology did precisely that). Surprisingly, labour’s share in national income has steadily fallen since 1980 after Friedman’s neo-liberal ideas were imposed – in direct opposition to Friedman’s own claims of 1962. The task of the neo-liberals across the world was aided, without doubt, by the aura of “science” associated with the (non-)Nobel Prizes for the likes of von Hayek and Friedman.

But, of course, this is all a conspiracy theory. It really is just a coincidence that economics is just so boss friendly. It is interesting, though, that if you applied basic economic theory to economics (something economists never seem to do, preferring marriage and a host of other subjects than, say, creating a realistic theory of a real economy) you would predict that a boss-friendly economics would be produced. According to the basic notion of “supply-and-demand”, you would suggest that those with wealth would demand a theory which justified their wealth and its power (preferably one which denied that power, if possible). Thus there is a demand and there would have to be massive market failure to argue that a supply would not be generated. So we would expect that when the labour theory of value was used to attack property, there would be a demand for a theory which did not draw those conclusions and such a theory would be supplied. That this is precisely what happened is just a co-incidence.

Of course, that would never happen in reality to a profession so dedicated to scientifically and dispassionately analysing the real world as economists, whose models so accuracy reflect the facts and dynamics of actual economies. So please ignore my crazy ramblings. It is just a co-incidence (how could it be otherwise?) that many economists support the capitalist system and develop theories which, by remarkable coincidence, “scientifically” confirm their notions. So, for example, that John Bates Clark marginal productivity theory just happened to confirm his previously held faith that capitalism was just – see John F. Henry’s “John Bates Clark and the Marginal Product: an Historical Inquiry into the Origins of Value-Free Economic Theory” (History of Political Economy, vol. 15 No. 3) [PDF -- no automatic free access] – was an accident of history, a fortuitous co-incidence. Economics, rest assured, just appears to be the science of class warfare. Co-incidence is at work here, nothing more. That Leon Walras, one of the founders of neo-classical economics, wrote a book attacking Proudhon is, of course, a co-incidence (while Marxists like to proclaim neo-classical economics was a response to Marx, they have never proven it and implicitly dismiss the influence of the Ricardian socialists and Proudhon). That the fanatically pro-business (sorry, market) “Austrian” school survives thanks to donations from very wealthy individuals is also pure coincidence. After all, it had no impact in the 19th century:

“Economic instruction in the United States is about a hundred years old [this is from 1972]. In its first half century economists were subject to censorship by outsiders. Businessmen and their political and ideological acolytes kept watch on departments of economics and reacted promptly to heresy, the latter being anything that seemed to threaten the sanctity of property, profits, a proper tariff policy and a balanced budget, or that suggested sympathy for unions, public ownership, public regulation or, in any organised way, for the poor.” (John Kenneth Galbraith, The Essential Galbraith, p. 135)

It is just a wonderful co-incidence that a science created within a capitalist environment and taught in institutions dependent on funds from wealthy individuals by people who themselves were/are (usually) wealthy just happens to conclude that property is not theft. It is, rest assured, not self-interest as economists are well aware that homo economicus is just an invention and only applicable for economic models and has absolutely no bearing to reality.  And, rest assured, it is not the internalisation of the class structure of capitalist society that has produced that result. No! After all, if a key concept of economics was proven to be wrong the economists themselves, disinterested seekers of the truth that they are, would be the first to proclaim its falsity and strike it from the textbooks – just look at the fate of marginal productivity theory of capital when Sraffa exposed its flaws sixty-odd years ago…

Well, time to switch off the irony before it runs out of batteries (and, to state the obvious, the links are there for further information – I’m not sure how much readers utilise them, but I try to provide links that will support my claims, are relevant to the issue at hand and/or of interest, I think, to others).

All this is not to suggest that all economists are stuck in neo-classical (and “Austrian”) fantasies. Some have actually contributed to our understanding of the capitalist economy. So who should have won a non-Nobel prize? Well, I’ll concentrate on dead-ones for the time being. I know, the (non-)Nobel Prize for economics is restricted to living people but the chances of someone outside the neo-classical paradigm winning is slim (and, no, Paul Krugman does not count as he is very much a neo-classical economist even if he does push the boundaries in places – compare his textbook with his last book, “Conscience of a Liberal”as I have).

So who should have won a non-Nobel prize? Well, first off, Pierre-Joseph Proudhon for his ground-breaking analysis of property and government, “What is Property”? His conclusion (“Property is Theft!”) remains a clarion call for all those seeking not only to understand capitalism but to end it. Talking of which, I’ve been busy revising the introduction to the Proudhon anthology and making it available in pdf format for ease of reading. I would recommend you read it so you can get a feel why I go on about him so much…

Next up, Karl Marx and his classic “Capital” which developed Proudhon’s ideas on property and exploitation in important new ways (I must stress that Marx has, effectively, already been given it when Phelps got it a few years back for the NAIRU). Although his contribution is marred somewhat by his failure to give his predecessors their due and this is not only Proudhon, but also the Ricardian Socialists – see J. E. King’s “Utopian or Scientific? A Reconsideration of the Ricardian Socialists” (History of Political Economy, vol. 15, no. 3) [PDF -- no automatic free access].

Okay, those two may object to being classed as economists (Harry Cleaver would for Marx!) and rightly so, but they did analysis the economy and fitted some of the pieces of the jigsaw of our understanding of how capitalism works. That is what economics should be, after all! I’ll move on to actual economists…

Next would be Nichola Kaldor, for his refutation of the works of two previous Laureates, Frederic von Hayek and Milton Friedman. This would mark Kaldor’s demolition (twice) of von Hayek’s “Austrian” business cycle theory (what he ostensibly got the prize for) during the 1930s. Kaldor, originally a follower of von Hayek, translated one of his books into English and recognised its limitations. His critique forced von Hayek to rewrite his theory, before Kaldor destroyed that. Unsurprisingly, Kaldor rarely appears in books by “Austrian” economists. He also had the foresight to recognise the nonsense at the heart of Friedman’s Monetarism and, in the process, contribute to the post-Keynesian endogenous theories of the money supply.

Then would be Keynes, for his analysis of why cutting wages would not result in full employment. A much misunderstood thinker, his ideas on uncertainty and effective demand are important contributions to understanding the dynamics of capitalism. Then there is socialist Michal Kalecki who not only came to many of the same conclusions as Keynes but before him, also pointed to the limitations of Keynesian economics with his correct prediction of how full employment would bolster working class power and how “workers would ‘get out of hand’ and the ‘captains of industry’ would be anxious ‘to teach them a lesson.’” Hence the neo-liberal regime we have suffered under for the past 30 years which arose due to the militancy of the working class in the 1960s and 70s.

Next I would suggest a joint aware to both Joan Robinson and Piero Sraffa for their tireless efforts to expose the nonsense that is neo-classical economics and the flaws in marginal productivity theory. Sraffa should also be praised for his contribution in debunking von Hayek in the 1930s, forcing him to admit his theory was based on the interest rate being in equilibrium. Given that modern “Austrians” claim they reject equilibrium analysis this is a handy admission (what else is the “natural” rate of interest?). Also, John Kenneth Galbraith would also be in the running simply because he tried to analysis capitalism as it was, rather than it should be, and his witty comments exposing the hypocrisy of the right (such as the wonderful summation that neo-classical economics can be summed up as the poor don’t work hard enough because they’re paid too much, and the rich don’t work hard enough because they’re not paid enough).

Needless to say, Robinson, Kaldor, Kalecki, Sraffa and Galbraith all could have received the dubious award but for some reason the committee preferred those more enthusiastic about capitalism and the joys of neo-classical economics. In contrast to the (non-)Nobel for economics, may I point to the Revere Award to Economics which was given to three economics who actually know what they are talking about:

“Steve Keen (University of Western Sydney), receiving more than twice as many votes as his nearest rival, has been judged the economist who first and most cogently warned the world of the coming Global Financial Collapse. He and 2nd and 3rd place finishers Nouriel Roubini (New York University) and Dean Baker (Center for Economic and Policy Research) have won the inaugural Revere Award for Economics.  It is named in honour of Paul Revere and his famous ride through the night to warn Americans of the approaching British army.”

Steven Keen wrote the very good “Debunking Economics” book (essential reading, I would say). This award is from the same people who gave the “Dynamite Prize in Economics” to Alan Greenspan (whose aim in life seems to be to make wages flexible down-the-ways), Milton Friedman and Larry Summers as being the economists “most responsible for causing the Global Financial Crisis.” They say this will be “the first – and hopefully last – Dynamite Prize in Economics.” That would be a shame, as giving such awards to people who present seriously unrealistic theories to the world would help ensure that their ideological contributions are less likely to be implemented (although, of course, the vested interests they always seem to bolster would see to it that their “scientific” analysis is utilised, as obviously will happen with the work of the current “Laureates” will be invoked to justify cutting benefits during austerity drives). After all:

“Nassim Nicholas Taleb, author of ‘The Black Swan,’ said investors who lost money in the financial crisis should sue the Swedish Central Bank for awarding the Nobel Prize to economists whose theories he said brought down the global economy.

“‘People are using Sharpe theory that vastly underestimates the risks they’re taking and overexposes them to equities,’ Taleb said. ‘I’m not blaming them for coming up with the idea, but I’m blaming the Nobel for giving them legitimacy. No one would have taken Markowitz seriously without the Nobel stamp.’”

Although, of course, “investors” are hardly the real victims here given that finance capital seems to have bounced back while working class people are suffering higher unemployment and uncertainty, wage cuts and freezes, austerity measures and so forth while they, in the main, did not benefit during the boom they are now expected to pay the costs for.

And that is the big unknown: will people put up with it? I saw some Irish big-wig praising the “resilient” nature of Irish people in having accepted cuts before and would do again after the (predictable and predicted!) impact of those very same cuts caused even more economic woes which, in turn, forced another bailout. Resilient? Well, gullible or servile would be better words! And, yes, I’m well aware that a minority have and are protesting but clearly the majority have put up with it (while, I’m sure, grumbling). I also fear that this will happen here in the UK. France seems more optimistic, with one writer in the Guardian asking “Will the French street call the shots?” One can only hope so! Just as one hopes more people in Ireland and Britain follow their lead.

Interestingly, a right-wing commenter to this article stated “Rather, it's greed that prompted the strikers to take to the street.” And I thought “greed is good”? I have to admit to never understanding why the desire to be free and share the whole world is considered “altruism” while being a wage slave to a boss and not even owning the ground our feet are on is “selfishness.” As Max Stirner suggested: “Instead of owning the world, as he might, he does not own even the paltry point on which he turns around.” These words are particularly poignant and applicable:

“Restless acquisition does not let us take breath, take a calm enjoyment. We do not get the comfort of our possessions . . . Hence it is at any rate helpful that we come to an agreement about human labours that they may not, as under competition, claim all our time and toil.”

That seems all too relevant, as does this insight:

“But should competition some day disappear, because concerted effort will have been acknowledged as more beneficial than isolation, then will not every single individual inside the associations be equally egoistic and out for his own interests?”

But, then, I’m from Glasgow and we have a tradition of combining Stirner and Kropotkin… I remember reading the Sun in a cafe once. The editorial proclaimed its joy at the Labour MP who had made a fortune selling his house. Greed is good! It also denounced workers striking for better wages and conditions. Greed is double-plus ungood! Ah, the stench of hypocrisy…

Which reminds me, certain (right-wing) papers recently denounced “fat cat” union bosses for being “hypocrites” in encouraging their members to strike for better pay. It is nothing of the kind – they would be hypocrites only if they denounced workers for such action. Like, say, the far fatter, and unelected, cats at the heads of companies and the media. Being better-paid and seeking others to become better-paid is not “hypocrisy”, quite the reverse. Still, logic had never got in the way of the right-wing media’s assault on organised labour (and, needless to say, as a union member I argue that union officials should not have higher wages than their members but the right turn this valid point into a general attack on workers organising and fighting).

Our commenter on the Guardian webpage also suggests that “The sooner people realise that there’s no such thing as ‘kindness’, not from divinity nor man, the better it is for society.” And that is why the French are on the streets, because they don’t believe in the “kindness” of their rulers and act accordingly. They recognise that the collective action of “we” can secure the right environment for the “I” to have the time, space and resources to develop themselves as unique individuals. As such, those (like Leninists) who contrast socialism and individualism prove they understand neither – just like those who think libertarian socialism is an oxymoron. As John Most and Emma Goldman once put it, the “system of communism logically excludes any and every relation between master and servant, and means really Anarchism” (this interesting article was re-published in Black Flag no. 228 as our “revolutionary re-print” feature). This, needless to say, relates to anarchist support for socialisation (as started by Proudhon).

Sadly, many people squeezed as they have been by neo-liberalism for some time seem to have embraced the “politics of envy”, or what someone has called “negative solidarity.” They moan when unionised workers take action to defend their wages and conditions, proclaiming that it is not “fair” that these workers have it slightly better. The right have, of course, embraced this with a passion and invoke the “politics of envy” (what they used to attack socialists for) to level down. Thus it is not “fair” that public sector workers have better pensions (the term “gold-plated” is used when, of course, they are no such thing) and so it is best for these people to be ground-down to the level of private sector pensions, for example. I’ve discussed this before (in relation to France) and will do so again, I am sure. The key thing to stress is that helping to weaken any workers’ pay and conditions will contribute a “race to the bottom” and, of course, the old mantra of “I earn a pittance but you don’t see me going on strike” should be turned around: “You earn a pittance because you don’t go on strike.” If it is not “fair” that public sector pensions are better than private ones (assuming it is true) then that is an argument for a struggle to bring the private sector UP, not the public sector down.

That, I hope, should be as obvious as there is power in a union

And I forgot to mention this in my last blog, in relation to Proudhon’s “General Idea of the Revolution.” I was going to mention that I read a “market anarchist” (this term seems to be the preferred re-branding of certain “anarcho”-capitalist s) proclaim that Proudhon was a “market anarchist” because he favoured a market in defence (i.e., private firms hired to enforce property rights). Almost all “anarcho”-capitalists point to Molinari as the creator of their ideology (despite Molinari never calling himself an anarchist) so seeing the self-described socialist Proudhon proclaimed as being one made me puzzled. Unsurprisingly, the evidence was slight (I’m not sure the location), although I do remember it was based on this extract from “General Idea”:

“The secret of this equalizing of the citizen and the State, as well as of the believer and the priest, the plaintiff and the judge, lies in the economic equation which we have hereinbefore made, by the abolition of capitalist interest between the worker and the employer, the farmer and the proprietor. Do away with this last remnant of the ancient slavery by the reciprocity of obligations, and both citizens and communities will have no need of the intervention of the State to carry on their business, take care of their property, build their ports, bridges, quays, canals, roads, establish markets, transact their litigation, instruct, direct, control, censor their agents, perform any acts of supervision or police, any more than they will need its aid in offering their adoration to the Most High, or in judging their criminals and putting it out of their power to do injury, supposing that the removal of motive does not bring the cessation of crime.”

The words “establish markets” and “perform any acts of supervision or police” were highlighted, with the notion of a market for police services (a la Molinari) inferred from them. Now, if Proudhon really advocated a market for police then you think he would have explicitly stated this rather than inflicting the task of extracting this meaning from two unrelated items from a lengthy list to an over-zealous ideologue. Particularly as elsewhere in “General Idea” be proclaims the following:

“Let each household, each factory, each association, each municipality, each district, attend to its own police, and administer carefully its own affairs, and the nation will be policed and administered. What need have we to be watched and ruled, and to pay, year in and year out, 25 millions? Let us abolish prefects, commissioners, and policemen too.”

Which seems to suggest the typical anarchist solution a voluntary militia system, organised by workplace and commune, rather than firms providing private police. If only Proudhon had added “and replace them with private policemen” to the end of the paragraph! Yet, for some reason he did not… I wonder why? Perhaps because he clearly did not advocate such a position? Surely not? He also suggested that “police, judiciary administration, everywhere committed to the hands of the workers” which fits in well with the usual anarchist position rather than the private statist one (it also fits into the usual anarchist arguments on the defence of a free society against counter-revolution too). Suffice to say, Proudhon is so misunderstood already (thanks in part to the likes of Marx) that we really don’t need any more dubious interpretations thank you very much…

And talking of “market advocates”, I’ve been meaning to link to a couple of Steve Keen articles (not that he is such a person, simply because he made a point which is relevant to them). He notes in passing that neo-classical economics, while its “theory of the firm is almost totally irrelevant to how actual firms and markets behave”, it “encourages economists to be ‘revolutionaries’: restructuring industries from the pattern they have evolved into, to the one that the textbook says is the best.” It struck me that this applies to “Austrian” economics as well, with its advocates regularly bemoaning how banks don’t act as their theory says they should. Thus the banks expand credit and drive the interest rate below its equilibrium (sorry, “natural”) rate and so cause the business cycle. Fine, as far as it goes (there are far more factors than just credit expansion) but what else would you expect a capitalist firm to do? They are seeking profits and so expand credit in response to market demand. If any other firm acted to meet market demand then the “Austrians” would praise its entrepreneurship! The emergence of bank notes, fractional reserve banking and credit was a spontaneous process, not planned or imposed by the state. Attempts in the 19th century to regulate banks, to make them have a certain percentage of their money in gold and silver, did not force them to have maximum reserves but minimum ones. No bank was forced to have just 10% reserves and could have had 100% if it so wanted. However, they did not.

Why? Because they are profit seeking companies. So I do find it ironic that the “Austrians” complain that capitalist banks act, well, like capitalists! It is also ironic that they think Murray Rothbard knows more about banking than centuries of actual entrepreneurs and that the procedures that have evolved in an industry takes second place to an academic’s a priori theorising from a few axiom principles. Imposing a 100% commodity money reserve on banks would cause capitalism to implode – which is why it will never happen. It does seem ironic that “market advocates” are so keen to regulate an industry in such a draconian manner – if a government tried that on, say, an industrial capitalist they would be the first to denounce it as “socialism”! Still, basing your fanatical ideological defence of laissez-faire capitalism on the pious hope that capitalist banks will not act like capitalists and that they should be forced by law to act the way that the ideologues wish is just wonderful…

What of real revolutionaries, those seeking a transformation of society? Surely we are going against the evolved structures of industries and so my comments are, well, valid against myself? No, far from it. An anarchist society will not be created by a few anarchist “leaders” following a blueprint developed beforehand by a handful of anarchist thinkers. It will be created by the people in revolt based on their needs, hopes, dreams and desires. It will evolve based on a dynamic interaction of objective circumstances, social activity and social (re-)organisation. As such, it will be an evolved structure as well based on the organisations created by people in revolt and so reflecting the needs of the people involved as well as the new mode of production which is developing within capitalism.

Proudhon put it well in Chapter 1 of “System of Economic Contradictions”, noting how the current system “is inadequate and transitory” but opposing both economists with their eulogising of the current system and the utopian socialists with their detailed blueprints for perfect communities he argued “that labour must be organised, nor that it is organised but that it is being organised.”  His aim was to show the tendencies within society which pointed to a new, free, economic organisation (by exposing the contradictions of capitalism and critiquing it: “to unfold the system of economical contradictions is to lay the foundations of universal association”). As he put it in an important letter of 1849: “Now, read through chapter one of Contradictions Économiques and you will find it formally spelled out that it is incorrect to say that labour is organised or that it is not; that it is forever self-organising.” As with later anarchists, Proudhon was not abstractly comparing existing society to some ideal vision but rather looking at what today pointed to a new form of economy. He was well aware, claims by Marx not withstanding, that economies evolve and, moreover, he looked to the self-activity of working class people are evidence for the evolution from wage-labour to associated-labour (by such means as forming co-operatives, organising credit and such like). As he put it in 1848, “the proof” of his mutualist ideas lay in the “current practice, revolutionary practice” of “those labour associations... which have spontaneously... been formed in Paris and Lyon.”

So, no, we revolutionaries are well aware that a free economy will evolve based on the participation of all, not the a priori dogmas of so-called experts. And I should note that while Lenin based his vision of socialism on the economic institutions created within and by capitalism, anarchists have always based our on the organisations created by working people within but against capitalism – co-operatives, strike committees, workers’ councils, and so forth. It should be basic commonsense that the structure of industry within capitalism has evolved based on capitalist criteria, what capitalists have thought best to secure their profits and power. While we must start any social transformation with the legacy of capitalism we simply cannot utilise this structure and, unsurprisingly, every social revolt has attempted to create new structures. In Russia the most advanced workers sought a federation of factory committees, a vision the Leninist government ignored in favour of utilising the structures created under capitalism (a clear example of how Bolshevik ideology influenced the revolution for the worse). Needless to say, any real revolution will produce its fair share of mistakes and not develop as many ideally would hope but the errors of a free people are always to be preferred to the ideologically correct musings of self-proclaimed vanguards. As Bakunin put it:

“I do not say that the peasants [and workers], freely organised from the bottom up, will miraculously create an ideal organisation, confirming in all respects to our dreams. But I am convinced that what they construct will be living and vibrant, a thousands times better and more just than any existing organisation. Moreover, this . . . organisation, being on the one hand open to revolutionary propaganda . . . , and on the other, not petrified by the intervention of the State . . . will develop and perfect itself through free experimentation as fully as one can reasonably expect in our times.

“With the abolition of the State, the spontaneous self-organisation of popular life . . . will revert to the communes. The development of each commune will take its point of departure the actual condition of its civilisation.” (Bakunin on Anarchism, p. 207)

Back to economics. Steve Keen also discusses money from a Post-Keynesian perspective here. Good stuff. He also notes that it “appears that the ‘Law’ of Diminishing Marginal Productivity doesn’t apply in the real world . . . factories . . . are designed by engineers so that they reach maximum efficiency at very close to maximum capacity. When a factory is first commissioned, it will have oodles of spare capacity — since it is built with the expectation that demand will grow over time.  Therefore unit costs will fall as output rises because the factory becomes more efficient — not less, as economists fantasise.” This is noted in An Anarchist FAQ as part of its general discussion of the impossible world described by neo-classical economics. This “Law” was, unsurprisingly enough, was driven to paint capitalism in a flattering like and was raised just as big business really took off. As Keen suggests:

“In a true science, this gaping gap between theory and reality would lead to the revision of theory — after all, that is what ultimately gave us science in the first place . . . In economics, this same gap had led to economists ignoring the empirical evidence, even when it is brought to their attention.”

And, finally, in an attempt to win hearts and minds in the Tory desert of Scotland, businessman and prominent Tory backer and party candidate in next year’s elections to Holyrood, Ivor Tiefenbrun declared:

“The way Labour work is that they have demonised Thatcher as if she was an evil force.

“It’s only because Scots are so thick that this was swallowed.”

Someone should have told him you say that sort of rubbish and insult the electorate AFTER you get elected... And I have to chuckle at the “as if” bit... she was, no “if” about it.

And I guess I have to start writing on my talk at the London anarchist bookfair on the October 23rd, “From Proudhon to Kropotkin” now… I’ve worked out how it starts and ends, and I think the middle bit would be best organised in chronological order. Still, work needs to be done on it… And I should stress that a new Black Flag will be out and that I’ll be having a little book-sale and raffle on its stall at the bookfair to raise funds for it. The first prize will be volume 1 of An Anarchist FAQ or the impressive Emma Goldman: A Documentary History of the American Years volume 1: Made for America, 1890-1901. I’m running out of space on my bookshelves so I’m getting rid of a few duplicate copies of books I have more recent editions of. Hopefully, that will make a dent in our debts to the printers!

Until I blog again, be seeing you…


Interestingly enough, the

Interestingly enough, the so-called "Nobel prize" in economics wasn't even created by Alfred Nobel:

It was created by Swedish state central bankers who wanted to privatize their bank in the 60s. The Swedish people were against this and believed that Austrian and monetarist economics were nonsense. They wanted the bank to be under some sort of democratic control. So on its 300th anniversary, the Swedish Central Bank creates the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” This is 70 years after the real Nobel prizes listed in Nobel's will were created. Scientists were furious at the time, because they thought that this "Nobel" prize brought down the prestige of the real Nobel prizes.
They then began to give awards to economists who supported central bank independence, like Friedman. The propagandistic use of this award to raise the status of Austrians and monetarists is partly responsible for the movement towards neoliberalism from the 70s onward.

Great writing. I especially

Great writing. I especially like your reference to Keynes' discussion of whether a more downward flexible money wage would imply that an economy in recession would approach full employment in his chapter 19 of the General Theory.
And how wonderfull it is to see someone finally envoking the historical importance of labour unions. If only the young people of my generation (I myself am 28) would realize that no strong working middle class has emerged in any western countries (I'm Danish) without these same people coming together and fighting for more rights.
I also like your reference to Sraffa's and Joan Robinson's struggle to tumble the neoclassical value and distribution theory. A battle forgot but not in vain.

Many thanks for your kind

Many thanks for your kind words. It is important to remember the ideas of Keynes, Robinson, Sraffa and so on -- their work was important and is now mostly forgotten (in terms of Keynes, many so-called Keynesians blame unemployment on "sticky" wages even though Keynes explicitly rejected this!). I hope my summaries of their work in "An Anarchist FAQ" and elsewhere do them justice.

you call out the non-Nobel

you call out the non-Nobel committee for awarding prizes to capitalist-friendly economists, yet I remember they recently award Elenor Ostrom a prize for her work showing the efficiency of the commons vs. private or state control.
her work is pretty elegant and awesome, and i often cite her when talking about anarchism...
it's worth remembering, not that i disagree that the non-Nobel committee mostly awards capitalist-supporting economists.

I never said that the award

I never said that the award committee would never give the prize to non-neo-liberals (Paul Krugman is another obvious example). I was pointing out (yet another) co-incidence of economics, namely just as neo-liberal governments and organisations are arguing for and implementing austerity, the non-Nobel prize is given to theories which support those policies. As stressed, I should note, by their press release and which was repeated by all the major media.

As I said in the article, these economists do say other things. The award committee in their press release, and the media reporting it, stressed that high benefits add to unemployment. What a co-incidence.

i didn't read this whole

i didn't read this whole thing, but i want to point out that these economists, when interviewed themselves, pointed out that their work was not a call for less unemployment benefits, but, on the contrary, showing that more generous benefits allows people to be out of work longer gives them the time to overcome the lag time in matching worker-with-job and find a job that more efficiently makes use of their skills instead of having to settle for a shitty job because they don't have the time needed to search out the best new job.
get it?

i'm sure many politicians and pundits won't understand that, but it doesn't mean their work isn't arguing it. it just means politicians are morons, and the rich will see the results in the way they'd like to....

what say you?

i didn't read this whole

i didn't read this whole thing...

Obviously, otherwise you may have noted I explicitly stated that these economists do say other things but that the (non-)Nobel prize people stressed that high benefits leads to higher and longer unemployment. This was repeated, usually word-for-word, by the media. Surprise!

get it?

Do you "get it"? Probably help if you read what was written...

i'm sure many politicians and pundits won't understand that, but it doesn't mean their work isn't arguing it. it just means politicians are morons, and the rich will see the results in the way they'd like to....

Particularly if the press followed the award committee's press release and explicitly stated that higher unemployment benefits lead to higher unemployment...  And I explicitly noted that these economists said other things...

what say you?

Well, you seem to be complaining about something I did not actually say and, moreover, proved my point by saying that  "many politicians and pundits won't understand that" -- particularly is the press release of the award committee stresses one specific point!

And since I'm replying, this blog posting is of interest: Nobel prize – hardly noble. Also of note: Adding insult to injury

In short, as I made clear in the article I'm well aware that these economists have said other things. I'm stressing that the (non-)Nobel award committee stressed and which, thanks to their press release, was parrotted across the media. By a strange co-incidence this summary reflects what various neo-liberal organisations and governments recommend and are imposing.


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