Dear Eva:
I am tempted to say that we disagree on some fundamental points, and
leave it at that. However, I believe that you (and, in a different
form, Ed Weick) raise important points, so let me try to distinguish, by
"deconstructing," the strains of these argument.
As I see it, there are two questions at the core of the discussion:
(1) What is the nature of capitalism (in its psycnological and
behavioral roots, and in its functioning as a business-economic system)?
(2) What is the nature of the relationship between capitalism and the
society of which it is a part?
As to the first question, I can accept the validity of what you and
Weick are saying. Capitalism is based on the ethics and behavior of
selfishness and this comes out most clearly if there is no other element
that influences the participants -- ALL of the participants (not only
owners, but investors -- including "widows and orphans", workers, small
tradespeople, publicists, etc., etc., i.e. all the people, or the vast
majority of them, in a society characterized by the capitalist mode of
economic behavior). Ironically, the kindest view of this was
articulated by Marx. He emphatically declared that the capitalist was
not necessarily a bad person, but rather, caught up in the realities of
the competitive system, is alienated from all moral or other
considerations that might otherwise condition his behavior. ("If I don't
act this way, and go for the last bit of competitive advantage in
maximizing my profit, then someone else will do that to my disadvantage
and eventually I may be driven to the wall. Where would I be then? And
where would the system be? Would it be any better --- or would it be
the same, but with me as a loser?" -- etc., so it goes.) The polite
term for this, in conventional economic and business parlance, is
"profit maximization." Less politely, all kinds of horrors are built
into the system. In more contemporary analysis, this is a "zero-sum
game", in which the gains of one are the losses of the others. In
traditional pollitical palance, it is Hobbes's "war of all against all."
At this point, we won't go down a whole other road of argument, i.e.
whether this is a necessary condition, or whether capitalism can be
replaced by something altogether different, in terms of human
motivation, behavior, and economic functioning. We will accept Weick's
view that this is capitalism "as is," in the real view, and also other
views that have been articulated that suggest that there is "no free
lunch" in designing and putting in place real world systems, i.e. that
any alternative also has its own characteristics, some advantageous,
some disadvantageous, some quite horrifying if taken in their pure form.
(In imagining systems of alternatives, whether as regards economic
systems, personal lifestyles, careers, relationships, etc., there is
always a tendency -- as long as one is imagining -- to see the most
negative features of the reality one is dealing with and which one
dreams of escaping from, and idealizing that which one is imagining, and
believing that it will be something as pure as the physical
relationships between human beings in Erica Jong's first novel, an
evocation of daydreaming abstracted from reality.)
Let me turn to the second point. Given a reality like the functioning
of capitalism, as it is, and in its pure, unrestrained, form, prudence
dictates that we regard this as dangerous, even if it may be reality.
So we construct systems of law, regulation, counterbalancing forces,
economic policy systems (like Keynesianism -- but also others), or
whatever =-- we try to tame this system to a point where we can live
with it. Sometimes we will be more successful, sometimes less.
Sometimes we will give up altogether, and then the beast begins to rage
among us in its "natural" form. This is what I originally referred to
be by asserting the positive possibilities and expereience of past
regulation, etc.. And this was what I meant when I said that
electorates, used to relatively smooth functioning of regulation,
eventually become bored, become less vigilant, and contribute to a
system where the blandishments of "unrestrained free enterprise" become
sufficiently sufficient that the safeguards that have been built by
society over time are disregarded and allowed to become corrupted.
I don't want to take this father, at this point, because -- if my
position is not understood -- it would simply mean repeating and trying
to reiterate, in a different form, what I have already stated in my
previous posting.
There are, however, 3 other points that should be touched upon, at least
to suggest further points which might be fruitful for useful discussion
and argument. These are (a) regulation from the point of view of the
capitalist; (b) Weick's point about mobility of capitalism in a
globalized economy; and (c) the environmental question. I can try to
sketch out just very bare beginnings of a discussion (from my
perspective -- of course, I welcome your views, asssenting or dissenting
so long as the discussion and understanding of the question is advanced
by our mutual contributions):
(a) Officially, the capitalist has to take the position that all
regulation etc. is bad and is accepted with the greatest reluctance (to
do otherwise would be "to let down the side.") Behaviorally, I am not
too sure. In the war of all against all, the individual will want to
maximize his gains without limit; but he is simultaneously living in
fear that someone else will gobble him up. I think the few sentences
that Marx devoted to this, early in the modern development of industrial
capitalism, can probably stand the test. To jump to my conclusion it is
that the individual capitalist (and others in the system) will be
relieved whenever some rules are imposed on behavior. Of course, he
will hope (and will try to pull strings) so that the rules go as far as
possible to protect him and his interest, while having as little bearing
as possible on constraining his own strategies and drives. If this is
the reality, then I think that that bugbear of all right-thinking
economic critics, Adam Smith (who was also a moral philosopher and
psychologist) has a useful contribution to make: individual interests
will differ; the ensemble of individual interests, in their interaction,
each seeking protection from law and simultaneouslly wanting freedom
from the restraints of law, will cancel each other out, and will leave
scope (if the citizens push for the implementation of law and
regulation) for some control over the system.
(b) A few postings back, Weick, in passing, made the important point
that the mobility of capitalism in a global economy made governments
adverse to exerting controls over the system in their jurisdiction, or
doing things that in general would be resented by the business
community, which would find more attractive havens elsewhere.
Obviously, Weick has made a very useful, realistic, and sensible
observation. The behavior of governments in the last decade certainly
seems to confirm this observation. To further the discussion, however,
I would like to suggest that the history of the economy and society does
not really unfold in a straight line, with a continuous reinforcement of
the same trends and tendencies. It is more of a zig-zag (or, if you
prefer, up and down) pattern, in wihch all kinds of risks and changes
influence the outcomes and perspectives on what is happening now and
what may be emerging as the next pattern. The East Asian crisis, for
example, may deter (for a while) certain corporate and investment moves;
already, "risk aversion" in terms of overseas investment is becoming a
more frequently used term in economic and financial commentary. If
mobility is constrained to more stable and political environments, then
it is interesting to note that, in the European countries, in France,
Britain, Italy, and Germany -- to cite only the major economies -- and
in the Czech Republic, Poland, and Hungary, to speak of the newly
emergent East-Central European states, Social Democratic governments
have replaced right of center governments following the
Thatcherite-Reganite-Kohl ideology and economic line. These newer
goverenments may not move to policies that wholly satisfy the critics of
the old order, but they may collectively create a critical mass of
policy and programs that shift to the center left. In the last few
weeks, the German developments have been particularly promising: first,
in terms of the SDP-Green coalition and the agreement on policy (e.g.
higher energy taxes) that forms the understanding on which this
coalition was possible; secondly, the communique of a few days ago,
issued after the Blair-Schroeder meeting, which stated that the two
goverenments would work within the European Union to pursue a common
European social policy agenda. These trends do not betoken as free a
ride for the unrestrained capitalism forces as prevailed in the past;
but how far this will go will depend on the forces that the public and
that the activists can bring to bear to see that government statements
are translated to meaningful realities. Finally, on this point, it is
interesting that the U.S. elections of last week are being widely
interpreted as a Democratic victory that was due to mobilization of the
Afro-Americans and other minorities to protect their position against
dangers inherent in the Republican ascendancy, and that it was an
election that was fought on social-economic policy issues that, in the
exit polls, these outplayed by far the attention that was expected to be
given, in forming voters' voting decisions, on the Clinton-Lewinsky
affair. It is hardly an accident that this election victory was gained
when President Clinton was forced to keep out of the public eye and that
social issues (which he had given only lip-service to, in his effort to
compete with the Republicans for the middle-American constituency) were
emphasized by the more socially active and receptive Democratic leaders,
including Hillary Clinton and the Rev. Jesse Jackson. If we take all of
these straws in the wind together, it may be that, for the next little
while, there will be fewer safe places for business investment, and that
the majority of these places will be prepared (individually and
collectively) to deal with the market in more proactive fashion than the
dominant Thatcher-Reagan-Kohl policies of 1978-1998 were prepared to
envisage.
(c) In the medium-to-longer-run (and showing some signs of serious
impacts even now) the environmental and social consequences of an
unrestrained economic system that is *successful* at doing what it is
supposed to do -- i.e., increase productivity, and hence increase
growth, with attendant pollution, waste, and rapid social change -- is
by far the most difficult problem to deal with. I don't pretend to have
an answer to this, far less to be able to give the answer in a few
sentences or a few paragraphs if I could give one. What I feel is worth
thinking about, and debating, is whether further evolution and
implementation of the regulatory regimes is useful as a way of trying to
get a handle on this problem. In the context of the notion that
capitalism can be regulated, and that the question is really whether we
get the right kind of regulation in place, with the right degree of
regulation, and with adequate will to put in place and enforce
reasonable regulatory constraints, then I base my argument on the
follwing. If profit maximization is the key to capitalism, then the
system (insofar as decisions are concern) will move into areas where
profit is easier and attractive, and move away from areas where risk is
higher, profit is harder to achieve, and profit is less attractive
(i.e., lower). I remember that about 25 years ago, when these issues of
growth were first being described, I first became aware (as a
non-economist) of the significance of externalization of costs.
According to my old friend Arthur Cordell (who, fortunately, is still
making his contributions as a leading member of this list), business
economics is based on offloading (externalizing) as much of your costs
as possible elsewhere -- to have other people, such as the taxpayer, or
the breather of polluted air, or the consumer of a product that may last
only a few years instead of many years, bear the costs that you do not
want to bear. In various ways, the system can be geaared to adding to
the costs, and internalizing the costs, of behavior that bears heavily
on the natural and social environment, while encouraging risk and
investment in environment-sparing technologies and systems.
(Obviously, this is an oversimplification, but it is as far as I can
take things in this posting, and without a great deal more thought and
development.)
Saul Silverman
