July 26, 2007

Cameron in Rwanda

Filed under: Politics — duncan @ 1:14 pm

David Cameron has been getting a bit of stick recently; he’s been neglecting the watery plight of his constituents in favour of atrocity tourism. The Conservatives are six points behind Labour in the latest ICM poll; people see Cameron as all spin, no substance. Brown is pounding on about extending police powers to detain terrorist suspects without charge… and here’s Cameron, the Tory leader, visiting Rwandan orphanages.

I welcome this. Anything that hurts the Conservatives is good news, obviously. I really don’t care how Cameron loses votes, as long as he does. But if he’s going to go down, what better way than through misguidedly left wing PR? After all those years of covert, and not so covert, Tory racism (“It’s not racist to put limits on immigration. Are you thinking what we’re thinking?”) this is a refreshing change in direction.

The question is how far Cameron’s willing to take it. He’s so determined to distance himself from his party’s core policies, almost anything seems possible. I have high hopes for future news cycles. Cameron misses Conservative party conference to unveil statue of Lenin. Cameron spends general election week at Fidel Castro’s bedside. Cameron, Letwin, Gove re-enact storming of Bastille for Comic Relief. Obviously he’ll change his tune as soon as he gets power; but until then, isn’t this fun?

July 25, 2007

The Social Content of Money

Filed under: Economics — duncan @ 12:23 pm

Okay, so. Money is the medium of exchange and equivalence by which things can be traded. This seems fairly straightforward – as if money were a more or less transparent medium through which commodities, services, etc. can be observed.

But money is also the embodiment of a highly complex set of social conventions; it is part of money’s achievement to make these conventions seem like facts of nature. Money is a promise; I carry in my wallet a set of social relations. As long as we view money as an undistortingly transparent medium, it directs our attention away from the arbitrariness, contingency and complexity of these relations. This contingency relates in the first place to what counts as tradeable. In what contexts and in what ways can something be observed through the prism of money?

I’m reading Jack Harvey and Ernie Jowsey’s textbook ‘Modern Economics’. Page 9: “[The economist] cannot measure all goods. If he gives a value to the vegetables grown in gardens or to do-it-yourself repairs to cars, should he not logically include also something for housewives’ cleaning and cooking services? Because it is impossible to know where to draw the line, the economist simplifies matters by confining attention to those goods which are exchanged against money.” Pages 352-3: “the national income figure cannot be accepted solely at its face value… [It] is swollen when people pay for services which they previously performed themselves. Thus a married woman who returns to teaching but pays a woman to do her housework adds to the national income twice – although the only net addition is her teaching services.”

The line between paid and unpaid labour is not arbitrary: it is the product of our social conventions. One such convention is that domestic labour is, more often than not, female. This unpaid labour does not enter into most economists’ calculations. It falls outside the scope of value, as defined by most economics.

On The Economists’ website, their ‘Free Exchange’ blogger writes “the heterodox economists want an economics that helps them further their vision of a good society. We all want that, of course; but there is a limit to how much goodness even a discipline as fascinating and fulfilling as economics can provide. Economics should be able to tell us the likely outcomes of our plans for Building a Better Nation; it cannot tell us what that better nation should look like. So complaining that economics doesn’t give you the tools you need to attack the patriarchy seems to me oddly beside the point, like lamenting the fact that a banana cream pie won’t make you a better tap dancer.”

Which is of course oddly to miss the point. Here are Harvey and Jowsey, explaining the difference between positive and normative economics. “Positive economics limits itself to statements that can be verified by reference to the facts. Thus the observation that ‘the UK’s real national income in 1997 was larger than in 1994, is a positive statement. In other words, positive economics holds that any hypothesis formulated should be testable against empirical evidence.” (p. 10). But what counts as real national income is itself massively determined by social norms. And those norms are… yes… often products of the patriarchy. The complaint isn’t that economics doesn’t give us the tools to attack the status quo; it’s that those tools often operate in the status quo’s interests.

All this has been said a thousand times before, and my time would be better spent reading feminist economics than stating the crushingly obvious. But never mind.

July 23, 2007

States and Markets

Filed under: Economics, Politics — duncan @ 12:53 pm

This really is too obvious and boring to need saying; but we’re on the very basics. So take a look at this quote from Balaam & Veseth’s ‘Introduction to International Political Economy’: (a thoroughly meretricious book; I should never have bought it.)

“Much of the study of IPE focuses on the interaction of two highly important social institutions: states and markets…. Robert Gilpin, for example, has defined political economy as ‘the field of study that analyzes the problems and questions arising from the parallel existence and dynamic interaction of ‘state’ and ‘market’ in the modern world.’… The parallel existence of states (politics) and markets (economics) creates a fundamental tension that characterises political economy. States and markets do not always conflict, but they do overlap to such a degree that their fundamental tension is apparent. The tensions created by their differing interests or values can be resolved in different ways at different times, but the underlying conflicts remain and reappear throughout human history… States and markets embrace different basic values. They work in different ways to achieve different ends.” (pgs. 13-14).

This is an unwisely bald statement of an idea that you find all over the place: that there is fundamental conflict between state and market. A (slightly) more sophisticated version of it can be found in, for instance, Milton Friedman’s ‘Capitalism and Freedom’. But the idea is pervasive.

A lot of the time, this idea is used to denigrate the state and commend the market. We all know the routine: state power is more or less inherently oppressive – a large state is the first step on a road to serfdom – and so the market really ought to be given the largest role possible in our political and social life. The leftist argument is equally familiar: markets are notoriously poor at providing general social goods, and notoriously heartless in their treatment of the losers in market competition. These are the good old trustworthy battle lines of left versus right, big versus small government, high versus low taxation, interventionism versus laissez faire.

But the opposition between state and market, while plainly useful and valid in spades, is a very blunt tool. For one thing, it has a tendency to understate their interdependence. Balaam & Veseth: “The interaction of states and markets is dynamic, which means it changes over time. In particular, states influence markets and markets influence states, constantly changing the pattern of interests and values that political economists study.” (p. 14). But, of course, states and markets do more than influence each other: they constitute each other. The ‘state’ and the ‘market’ are so intertwined that trying to separate them into two opposing forces is a brutal piece of oversimplification.

Here’s Friedman: “How can we benefit from the promise of government while avoiding the threat to freedom? … First, the scope of government must be limited. Its major function must be to protect our freedom both from the enemies outside our gates and from our fellow-citizens: to preserve law and order, to enforce private contracts, to foster competitive markets.” (Capitalism and Freedom, p. 2).

Now, in the first place, the roles Friedman mentions are already both substantial and paradoxical. Consider preserving law and order: this may seem like a minimal state role; but since our laws are already the codification of an overwhelmingly complex set of social norms, just preserving law and order brings the state into virtually every aspect of our lives. Lest we forget, the preserving of law and order is fundamentally based on the state’s ability to punish its citizens (which includes, in the case of the United States, the ability to kill them). The most important form of punishment is imprisonment: the state has the right to take away a citizen’s freedom. And this removal of freedom is what Friedman calls the protection of freedom. The paradox is eternal; it need not detract from the cogency of Friedman’s argument; but it is troubling that Friedman doesn’t confront it. This alone should give us pause before endorsing Friedman’s bold claims about the relation between capitalism and freedom.

Just as important, however, is the state’s role in the fostering of competitive markets. Everyone knows that a market economy would be impossible without massive political power to back it up. But the easy opposition between state and market all too often slides into the idea that political power is the enemy of markets. This is part of a more general blindness: a failure to see just what a complex and contingent social construction the ‘free market’ is. The economist’s vision of independent atomic individuals, interacting on principles of rational self interest, is fundamentally opposed to a careful investigation of the social bonds that are utterly essential to the phenomena economists describe. A market economy is not a state of nature; it is not even an inevitable product of a society governed by the rule of law. It is the product of centuries of history, and any economics that fails to trace its genealogy will also fail to understand it.

This stuff isn’t abstract. The textbook case, perhaps, is the transformation of Russia that followed the fall of communism. God knows I know little enough about this. But I hope it’s fair to say that neoliberal economists tried to create a full market economy in Russia without understanding that such an economy would not function as it should without massive social, political and regulatory transformations. Result: chaos – a direct product of a flawed view of the independence of the market from political process. However useful the opposition between state and market may be, if it is made in too simplistic a way – as it frequently is in economics, and in many political views that call on economics for support – it leads to stupid politics and stupid economics. Which in turn lead to actual, real world disaster.

Of course everything I’ve said here is itself simplistic and dumb. But never mind. Once more, with nuance.

July 21, 2007

Underwater Daughter

Filed under: Uncategorized — duncan @ 2:07 pm

This keyboard and monitor are still above the water line, so I thought I’d swim out here and start posting again.  I have two weeks holiday, and the bank I work in is flooded.  Perhaps the end times are at hand.  Anyway, the blog will soon include a few more minimally informed economics posts.  The idea is still to state the obvious.  Once the obvious is out the way, we can move on to actual intellectual content.

All the usuals provisos and apologies: ignorance, haste, uncertainty.  I particularly apologise for the oncoming rash of Theory jargon.  Yes, the idiom sucks; but it says the sort of things I want to say.  One day academic hermeticism will actually meet practical concerns.

July 11, 2007

Short Lived Enthusiasm # 94

Filed under: Uncategorized — duncan @ 1:18 pm

This blog has been cancelled, due to weariness and there being better things to do.  It may get resurrected, if I have a sudden onrush of energy or insomnia.

July 1, 2007

Money as Debt

Filed under: Economics — duncan @ 6:53 pm

“… the sign that is money, the sign that it carries and the pledge that it is, are one and the same thing – just as a man’s signature is also what commits his responsibility.” (Mauss.)

Derridean themes: the signature and the sign; counterfeit money. I’ve got a twenty pound note here: Adam Smith’s dashing profile; the hardworking pin manufacturers; an invisible hand. It bears the same legend as all English banknotes: “I promise to pay the bearer on demand the sum of…” (“…Twenty Pounds”). It’s signed by Andrew Bailey, the Bank of England’s chief cashier.

Vertiginous reflexivity: this twenty pound note is a promise to pay me twenty pounds. The money is a promise to supply itself. A bank note is a promissory note. The note itself is not money. This fiction is the foundation of our economy. Banks make money by lending out money. They lend money by promising to supply money. The promises they supply are themselves money.

Easy to forget how recently we’ve got used to this. Fifty years ago economists fought for the gold standard. Now we are prepared to accept our currencies as castles in the air. This acceptance is part a radical shift in perspective.

If money is already debt, then money cannot be opposed to debt.  Let’s take this as a starting point. There is nothing outside of debt: debt is money.

[August 3rd 2007:  Well, okay.  So unconvertible paper money was already pervasive during the Napoleonic Wars.  And “Fifty years ago” may not be… absolutely precise.  But still.  In 1925 Keynes was more or less a voice in the wilderness when he opposed the return to the gold standard.  Which surely shows (doesn’t it?) a strong reluctance in the contemporary economic mainstream to accept money’s self-sustaining reflexivity.  This all requires a somewhat more detailed analysis – which I’ll provide just as soon as I know what I’m talking about.]

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