Progressive Economics

Ely-Richard-TDemocracy: A Journal of Ideas is a really fine publication which I have managed to mostly neglect for the last couple of years – the editor is the very astute Michael Tomasky, who I came to love back when he wrote for the Guardian, also a columnist at the Daily Beast. Just recently they put out a delightful pair of articles, “Economists of the World, Unite!” and “The Exclusionist Legacy of Progressive Economics,” both written by historian Bernard Weisberger and economist Marshall Steinbaum, and I wanted to take the time to respond to them.

The first of the two, which is the longer, more in depth piece, goes into the history of the American Economics Association (of which I am a member), beginning with its founding on a progressive platform geared towards workers and social justice advocacy. The principle founder, Richard Ely, was one of the many American social scientists educated in Germany (W.E.B. DuBois was as well) in the late 19th century, studying under Karl Knies at the University of Heidelberg. The German Historical School of economics, then at the height of its influence, was in many ways a response to Classical school of economics that had been pioneered in England by Adam Smith, Thomas Malthus, and, most importantly, David Ricardo. Classical economics was the dominant school in the United States, and its theories provided the underpinnings of free trade and the laissez-faire doctrine. When the AEA was founded in 1885, their founding document explicitly rejected laissez-faire, and stated that “…the conflict of labor and capital has brought to the front a vast number of social problems whose solution is impossible without the united efforts of Church, state, and science.”

This was a radical position to take at the time. Established University economists at the time specifically rejected such rhetoric, insisting that the market was the essential institution. On the other hand, Ely was an adherent of “social gospel,” and his landmark work, The Labor Movement in America, was shot through with a fervent Christianity that did not necessarily appeal to all economists. In the meantime, just three months before the book was published, the Haymarket Riots in Chicago caused a backlash against organized labor in the United States. Ely was very much an advocate for labor unions, and believed that social welfare programs ought to be carried out by unions rather than the government. Many economists, however, were not as interested in Ely’s radical advocacy, and when, in 1890, he attempted to arrange the AEA’s yearly gathering at Chautauqua, a popular resort town in upstate New York frequented by Christian social reformers, they removed him from the association. He was brought back a couple of years later, as President, but the experience moderated Ely, and the organization generally.

Ely, along with his influential student John Commons, ended up at the University of Wisconsin in Madison, helping to establish the idea that State Universities ought to be geared towards providing government with able (and politically neutral) bureaucrats. The AEA became the arbiter of mainstream academic economics journals in the United States, and slowly lost its roots in the progressive tradition. The American Economic Review is not necessarily a conservative publication, but it is most certainly dominated by neoclassical economists. How this came to be is a long story that I’m not going to attempt to tell here, but the short version is that after the 1970s, business interests saw to it that neoclassical economics became orthodoxy. Most economists exist within the neoclassical framework, which is very powerful, very flexible, and capable of utilizing elegant, sophisticated mathematics. But, like the classical economics from which it derives its name, the neoclassical school has little time for the interests of labor, or the concerns of social justice.

The article mentions the recent work of Thomas Piketty, and his criticism of economics in the US, as well as the recent developments of empiricism in economics. “In many ways,” the authors write, “the data revolution repeats the intellectual challenge that the AEA’s German-trained generation brought to deductive economics as it had been practiced. New data-based tools and approaches cast doubt on old ways.” I feel ambivalent towards this development, however: it seems like just another swing of the pendulum. Is something really new if it is predictable?

Hannah Arendt’s The Human Condition, in my opinion, should be required reading for economists. It’s analysis of modern society breaks open the categories left unobserved as assumptions in most economic analyses. In her section on labor, she writes:

…the specter of a true consumers’ society is more alarming as an ideal of present-day society than as an already existing reality. The ideal is not new; it was clearly indicated in the unquestioned assumption of classical political economy that the ultimate goal of the vita activa is growing wealth, abundance, and the ‘happiness of the greatest number.’ And what else, finally, is this ideal of modern society but the age-old dream of the poor and destitute, which can have a charm of its own so long as it is a dream, but turns into a fool’s paradise as soon as it is realized.

This, in my view, is the basic shortcoming of Richard Ely and Progressives generally. It is not enough to advocate for the working classes, nor to hope for their liberation. Returning to Arendt, in a footnote summarizing the conclusions reached by philosopher Simone Weil in her study of working conditions in industrialized France in the 1930’s, she writes “…the hope for an eventual liberation from labor and necessity is the only utopian element of Marxism and at the same time the actual motor of all Marx-inspired revolutionary labor movements. It is the ‘opium of the people’ which Marx had believed religion to be.”

This points to an idea I have slowly come to embrace: that capitalism is, itself, a religion – the religion of the modern world – and that economics is, in this sense, theology. The market is the omniscient, omnipotent deity, the creative/destructive force animating all life, the arbiter of justice, and so on. Banks are temples, and financiers, priests. Prophets of profits! And a god that exists without needing to be believed.

The second article, on the exclusionist legacy of the Progressives, ironically demonstrates almost precisely my problems with contemporary progressives:

To argue that their intellectual contribution should not just be ignored, but actively opposed, solely on the grounds of their exclusionary and retrograde views, is short sighted and mistaken. The fact that prominent Progressives advocated ideas like imperialism or the supremacy of one race over another does not discredit their other ideas or their overall ideology or political agenda.

The progressives currently rallying behind the Presidential campaign of Bernie Sanders frequently criticize Hillary Clinton for her past betrayals of social justice principles, and her legacy of untrustworthy behavior. For many people, the fact that she has not always supported LGBT rights, or that she has not always advocated the financial reforms demanded by Occupy Wall Street, are absolutely discrediting of her overall ideology. For me this is a fundamental weakness of progressive thought: the privileging of one category of people over another. The liberals who revolted against feudalism and brought about the modern world. Progressives seem to me to be little more than conservatives under a different name. It is not to say that they’re all bad – by no means! But I think that the genuine spirit of progress belongs to liberalism.

I consider myself a liberal, but not a progressive. I am an advocate of economic capitalism, but only in conjunction with political democracy. I recognize the important contributions of labor unions to social justice movements, but I believe that democratically managed labor cooperatives are superior. The democratically governed state ought to be the arbiter of justice, but idea of justice should always be defended above and beyond the interests of the temporal state. In some sense, this is all to say that I want to emphasize the priority of philosophy in economics, or perhaps more properly ideology, over empirical concerns.

There has been a great deal of consternation on both sides – the Republican party, being the “right” or conservative side, and the Democratic Party, representing the “left” or liberal side – of the political debate in the US over free trade and the shape of the economy. In particular, there has been a great deal of discussion of the disappearance of manufacturing jobs. Once upon a time, the Democratic party was a coalition primarily between the labor unions in the north, and the racist Southern politicians. Richard Nixon changed that with the “Southern strategy” in 1968, after LBJ passed the Civil Rights Act and upended the basis of the century long political, economic, and social domination of blacks by whites in the old Confederacy. As the manufacturing jobs that made those labor unions possible in the first place have slowly vanished over the past 50 years, a great deal of political rhetoric has arisen that seems to appeal to resentments and fears related to this phenomenon. Americans are angry about free trade agreements that off-shore jobs, as well as the rise of international banks that increasingly seem to inhabit a different world altogether from the one in which regular working people live.

Economists, however, have little to offer of comfort. Fivethirtyeight this week brings out an article about how, despite the rising productivity of American manufacturing, actual jobs have continued to fall. Bloomberg View’s Justin Fox writes much the same thing. Rather, manufacturing has simply become much more capital intensive, which is to say, its been automated. We can make way more stuff with way fewer people. And so even though there are more jobs right now than there have been in a while, the Center for Economic and Policy Research’s blog reports that it is not employers who are competing over workers, but rather workers who are competing over employment. Hence, wages remain stagnant, and even face downward pressure.

In a long, wide ranging interview with Ezra Klein of Vox, World Bank President Jim Yong Kim at one point talks about how one of the major challenges coming up in the world is that low-skill manufacturing jobs are beginning to disappear, and so is the subsistence farming that used to be the basis of most economies throughout the world. There are a lot of potential crises that are being discussed in the world right now, but I don’t think this is one of them. In a society based on labor – that is, the vast majority of people must balance  consumption with labor, input with output – how does one survive when the available supply of labor goes away. We have plenty of resources. To me, what this points to is a lack of imagination. The old conflict between capital and labor has disappeared – capital won. The problem is not how to return to the way things used to be – the question is how to move forward. Kim, in the interview, at one point mentions that today power rests not with the means of production, but with the means of symbolic production. He also mentions the influence of liberation theology. Here I think he’s on to something.

This not all to say that progressive economics have nothing to teach us – they remain relevant and worthy of serious consideration. In the future I hope to write a post about a particular progressive economist, Carlton Parker, who is not well know but of whom I have particular awareness. Also, it has been my intention for some time to create a series around reading Piketty’s Capital in the 21st Century. But this all seems like enough for now.


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