Liberty for Property: On human nature, economics, and democracy


or women’s rights and so on. It wasn’t just people screaming at each
other. There were interesting arguments on both sides. The pro-slavery side
had substantial arguments that are not easy to answer. But there was a common
moral ground in which a good bit of the debate took place, and as it resolved,
which it essentially did, you see a consciousness emerging of what really is
right, which must mean it reflects our built-in conception of what’s right.
That’s something that we learn more about over time, we get more insight
into what’s coming out of our nature. The implications are very substantial,
to the extent that we can understand them. It’s better to have a conscious
understanding of what’s guiding you, to the extent you can, than just to
react intuitively, without understanding. That’s true whether you’re a
carpenter reacting to how to form wood artifacts or a moral human being
reacting to how to decide between behaviors toward others.

One example that comes to
mind is that even the most extreme neoliberals never defend income inequality
in itself—it’s always supposed to benefit the poor.



That’s a kind of universal.
Every proposal that’s made is made because it helps the poor people.
Doesn’t matter what it is. Actually, that’s something that’s been
noticed by mainstream economists, like Paul Krugman. He has a review article
in a professional journal, International Affairs, in their 75th
anniversary issue. They had reviews of various topics. He reviewed economic
development. He pointed out that people have always had different ideas about
economic development, and every time they’re completely certain that it’s
right, and they’re completely certain it’s going to help everyone. But
then it turns out, shortly afterwards, that it was all built on sand, and they
switch to some other idea, with equal certainty that it’s also going to help
everyone, including the poor, although it’s recognized in retrospect that
the earlier one was a bad idea. He then adds that some people claim that bad
ideas flourish because they’re beneficial to the people with power. Well,
yes, that probably happens—perhaps 100 percent of the time.


But you’re right, it’s
always rationalized as being for the poor. No individual gets up and says,
I’m going to take this because I want it. He’d say, I’m going to take it
because it really belongs to me and it would be better for everyone if I had
it. It’s true of children fighting over toys. It’s true of governments
going to war. Nobody is ever involved in an aggressive war; it’s always a
defensive war—on both sides. You have to present things in such a way that
they will accord with people’s understanding of what’s right or wrong.
Sometimes reaching ludicrous levels. Let’s take, say, the Nazis and Jews.
That was presented to the population as a defensive action. The Germans were
defending themselves against the Jewish attack.


If we just make the
thought experiment that a whole generation of children were given the
opportunity to grow up in a truly loving and respectful environment, through
liberatory child-rearing, so that they would be able to fully develop their
moral capacity, would it then, do you think, be impossible to uphold a social
order based on vast inequality and elite rule?


I wouldn’t say it’s
impossible, but I would think it would generate very considerable resistance.
Actually, it always generates resistance. It would generate even more in that
case. It’s a striking fact, if you look at the notion of equality, take our
own history, from the Greeks to the present, that just about every leading
figure has regarded equality as an obvious desideratum.
Take the earliest serious
work on politics, Aristotle’s Politics. He points out that he’s not
a great fan of democracy, it’s the best of a bunch of bad systems. But he
said a democracy cannot function if there are extremes of wealth. Everyone has
to be roughly equal—everyone has to be middle class, he said. In fact, he
called for a super welfare state. He said in any democratic society, public
resources will have to be used in ways that he outlines, like communal meals,
to ensure that the poor are relatively well off and that there are no big
differences. Otherwise, it’s impossible to have a properly functioning
democracy.


Or go on to, say, Adam Smith.
His argument for markets was nuanced; it’s not as extreme as people claim.
He argued that under conditions of perfect liberty, markets will lead to
perfect equality. That’s basically the argument for them. Maybe the first
real break with this, apart from pathological cases, is capitalist ideology.
So after Ricardo, you start getting the conception that it’s better for the
poor if I’m rich. As capitalist ideology becomes dominant, this conception
that you’ll only hurt the poor by helping them, takes over. Then comes the
idea that you have no intrinsic rights. The big intellectual revolution for
capitalism, I think, was the principle that human beings have no rights other
than what they can gain on the labor market. So Malthus and Ricardo and others
said that if you can’t survive by what you can gain on the marketplace, go
somewhere else. Any effort to try to help you will just harm you in the long
run, because of market interference. This was a real intellectual revolution
reflecting the economic emergence of capitalist relations of ownership and
production. People fought against it. The British army was putting down riots
in the 1820s and 1830s, because people would not accept the fact that they had
no right to live.


Look at what was called
liberty in England, the first modern democratic revolution, in the 17th and
18th century. Liberty meant liberty for property, which meant taking away from
people their traditional rights, like their rights to the commons. This was no
small thing. The rights to the commons meant forests, and pasture lands,
grazing lands, and so on. That’s what kept people alive, and it was
considered communal property. With proprietary rights established, with
liberty given to the owners, that land was taken away from everyone else.
Thereafter you had formal liberty, but popular deprivation, which
proletarianized the British working class. There was plenty of resistance to
that. The resistance goes on today. I think this is a deep sentiment, and an
understandable one, and we all recognize, at some core of our being, that
there’s something quite wrong with one person having superfluities and
another person starving. You find that all the way through the tradition, in
people’s actions, in literature.


Just looking at the latest
Human Development Report, the figures on the combined wealth of the
250-something richest individuals in the world…



But you notice that they
criticized it. They don’t say, isn’t this wonderful? They say it’s
something wrong. Everybody says there’s something wrong. The only arguments
that support it are saying, really, everybody benefits because it trickles
down. The arguments are ludicrous, but it’s interesting that they have to
give the arguments. The arguments for defensive war are often equally
ludicrous.


If we consider the
likelihood that we as humans have an instinct for creativity and a moral
instinct, what is it in the way our system of education is functioning that
perverts or inhibits these instincts from fully developing?

A good educational system
ought to nurture and encourage these aspects of human life and allow them to
flourish. But of course that has problems. For one thing it means that it will
encourage challenge of authority and domination. It will encourage questioning
of powerful institutions. The fact is that honesty, integrity, creativity, all
these things we’re supposed to value, all run up dramatically against the
hierarchic, authoritarian structure of the institutional framework in which we
live. Since that structure is what sets the basic framework in which things
happen, it becomes virtually contradictory to implement the values that you
talk about in church on Sunday morning. So you put the values to the side, to
the Sunday Service, and get on with existing the rest of the time. Sunday is
when you say, yeah, love and kindness and charity and equality and all that
stuff are the soul of life. But the other six days of the week you’re
working within institutions of authority and domination and control and
self-enrichment and so on and you must comply or suffer even graver
consequences for not complying.


Schools are like that. The
way schools actually function—of course it’s not 100 percent, because
there is a contradiction, so all sorts of aspects show themselves, depending
on the teacher and so on—but, by and large, there’s a very strong tendency
which works its way out in the long run and on average, for schools to have a
kind of filtering effect. They filter out independence of thought, creativity,
imagination, and in their place foster obedience and subordination. I think
everyone knows this from their history. How did I get to a good college? I was
always very critical and dissident. But I got there by shutting up. I went
through high school thinking it was all really stupid and authoritarian and
boring, but I was obedient, I was quiet, I wasn’t a behavior problem, I
didn’t tell the teacher that I thought he was teaching was ludicrous when I
thought it was, so I made it to a good college.


There are people who don’t
accept, who aren’t obedient. They are weeded out, they’re behavior
problems. The long-term effect of this is to reward and foster subordination;
it begins in kindergarten and goes all the way through your professional or
other career. If you challenge authority, you get in one or another kind of
trouble. It’s not 100 percent the case, and there are some areas of life
where it’s dramatically not the case, but on average it holds.


I just reread the chapter
“Psychology and Ideology” in


Behaviorism was very popular
among the managerial classes, for not surprising reasons. For one thing, it
gave them a moral right to control and dominate people. If people have no
intrinsic nature, then there is no moral barrier to control or manipulation of
them—in their own interest, of course. Somehow “we,” the controllers,
are immune from this human condition of infinite malleability, however.
“We” have a nature and “we” understand what’s good, that’s kind of
like a hidden premise. But for the rest of the “slobs” out there,
they’re just passive objects, and we can control and manage and organize
them using the latest behavioral techniques, and they’ll all be better off.
That’s a strain of thought
that runs right through the whole intellectual, managerial culture, from
priesthoods up to Leninist commissars and to contemporary liberal theorists.
Behaviorism gave the perfect intellectual justification for it; it didn’t
matter that the intellectual foundations were ridiculous. It served a function
so it survived. The parts of the society that need that, they still believe
it—believe it more than ever.


So, instead of talking only
about academics, let’s go to the big institutions, like, say, the public
relations industry. Now we’ve gone several orders of magnitude larger in
power and significance. They were based from the beginning on the same idea.
The idea that it is necessary to control the public mind. The modern public
relations industry was in many ways an outgrowth of the increase in
democracy—and consciously so. You read the manuals, they talk about it, in
the 1920s and so on. With the extension of the franchise, with the bringing in
of working people and others into the public arena, you can no longer ensure
that the wealthy and the “capable” and the “enlightened” will run
everything. So it is necessary to use the techniques of propaganda. Right
after World War I this was very prominent because of the enormous success of
Anglo-American propaganda during the war, which had real success in affecting
people’s views, and they were aware of it.


In England for
example—documents have now come out—the British Conservative party
recognized that its traditional domination of English politics was threatened
seriously by the extension of the franchise. They concluded that they must
turn to the techniques of propaganda, drawing on the war-time experience, when
the British Ministry of Information had set off, as they put it, to control
the thought of the world—particularly the thought of the United States,
because that’s what they cared about, that the United States come in and
save them from this mess. The Conservative party organized around the theme of
propaganda to overcome the threat of democracy. Something comparable happened
here, but here it happened primarily in the rise of public relations, which
became a huge industry devoted to “controlling the public mind.” The
“intelligent minority” must “regiment the public mind every bit as much
as an army regiments the bodies of its soldiers.”


I’m quoting from a manual
written, incidentally, by a New Deal liberal intellectual, for whom this was
second nature—of course you have to regiment the public mind. He had come
out of Woodrow Wilson’s wartime propaganda ministry, the first state
propaganda ministry in American history, which was very successful. You have
to remember, during World War I, the population here was pacifist, the
tradition was: don’t get involved in the European bloody nonsense, it’s
not our business, we’re the New World. Somehow, Woodrow Wilson had to—he
was elected in 1916 on a slogan of “Peace Without Victory”—quickly turn
the country around to become raving jingoist fanatics, hating everything
German. They did it with remarkable success. The British Conservative party
was impressed, the business world was extremely impressed (then came the huge
growth of the propaganda industry). Another person who was impressed,
incidentally, was Adolf Hitler. He writes in Mein Kampf that Germany
lost the war because of propaganda, and next time we’re going to have it
too.


The idea that you can control
people was supported by that experience. They didn’t read Watson or Skinner.
You can control people, and you must control people—of course in their own
interest, it’s always in their own interest. You can read it in the Encyclopedia
of the Social Sciences
by one of the founders of modern American political
science, Harold Lasswell. In an article on propaganda, he says that we should
not succumb to “democratic dogmatisms about men being the best judges of
their own interests.” They’re not, they’re too “stupid,” they’re
too “ignorant.” We’re the best judges of their interests, and although
they have this official right to vote, we have to make sure they don’t make
any use of it in an unreasonable way. We do that by controlling the public
mind, by propaganda.


After World War II, the
business world, particularly in the United States, was appalled by the fact
that most of the world, the industrial world, was being swept by radical
democratic ideas—takeover of factories and all sorts of activities,
including in the United States incidentally—and the business world was
terrified. You can read it in their manuals and pronouncements. They say we
have a few years to try to reverse this tide, we have to fight “the
everlasting battle for the minds of men,” and “indoctrinate citizens with
the capitalist story” until “they are able to play back the story with
remarkable fidelity.” Huge campaigns took place, covering everything you can
imagine. In factories you have a captive audience, so they ran what they
called economics lectures on the principles of “free enterprise,” and
Americanism lectures that went on radio and television. They aimed at churches
and schools, even sports leagues. There was a huge coordinated campaign, with
many purposes. It demonized unions. It instilled the idea that the government
can’t do anything for you—it’s not your government anyway, it’s some
thing out there and what it does is harmful, stealing your money and taxes and
so on, and the only real kind of freedom is freedom to function in a market
economy. You should be a consumer and not worry about anything else except
maybe diversions, entertainment, sports, and so on

In societies where people
have won a degree of freedom from state coercion, you have to turn to the
techniques of propaganda, control of the mind, all on the assumption that
people are not only malleable but that they’re better off if they’re
molded. There is a very striking similarity between Leninist and Western
liberal doctrine on this, they’re almost interchangeable. I’ve sometimes
run paragraphs side by side, and if you change a few names you can hardly see
the difference. I think that helps account for the appeal of behaviorist
doctrine. It gives a kind of moral basis for all this.


With the global economic
crisis growing deeper and deeper, several mainstream economists are saying
that we’re about to see a replay of the Great Depression. Clinton and Blair
produce rhetoric about the need to regulate markets and
Business
Week argues the case for capital controls. What is happening and what does
this tell us about this past decade of capitalist triumphalism?


The triumphalism was an
expression of the fact that a very small section of the population was
becoming enriched. But this crisis happens to be at a point where it’s
hitting rich people, and that’s why it’s a crisis. But the crisis has been
going on for 25 years. There was a period after World War II, sometimes called
the Golden Age of capitalism, in which there were unprecedented growth rates
over most of the industrialized world. There was also growth of the social
contract, labor rights, workplace reforms, as well as growth of both the
economy and productivity. That continued into the late 1960s, more or less.


Since the early 1970s growth
rates have slowed, both of the economy and of productivity, wages and incomes
have basically stagnated for most of the population; for a period, corporate
profits were lowered, but in the 1990s—and that’s the triumphalism—
corporate profits shot up, sky-high. Read the business press in the United
States, every year: “dazzling,” “stupendous”—they ran out of
adjectives a long time ago. For a small sector of the population, this long
downturn happened to lead to extreme wealth mostly via redistribution upward.
Take, say, the recovery in
the United States, the latest stage of the business cycle in the United
States, from about 1991 until now. It’s the slowest postwar recovery. It’s
the first one in American history in which most of the population has been
left out. Wages and incomes are barely getting back to their 1989 level, let
alone their level of the 1970s. One thing that is booming, however, is the
stock market. When you read—this is pre-August, still triumphalist—the
stories about “the fairy-tale economy,” about Americans being “smug and
prosperous,” there is only one example that’s given: that’s the stock
market. But close to 50 percent of the stocks are held by 1 percent of
households; and most of the rest is held by the top 10 percent so that roughly
90 percent of the stocks are held by 10 percent of the population. If you look
more closely, the richest 1/2 percent holds about 40 percent of the stock. For
that sector, the economy no doubt is a fairy-tale economy. But for maybe 2/3
of the population or perhaps as much as 70 percent of working people, wages
have either stagnated or declined, working conditions have gotten worse,
working hours have gotten longer, and you have to have both husband and wife
working just to keep food on the table.


It’s been a long slowdown
across the industrial world, and it has hit the underdeveloped world in much
harsher ways.


You can roughly date when it
happened, it’s from the early 1970s. There was one crucial event that took
place in the early 1970s, namely the Bretton Woods system was dismantled. The
Bretton Woods system—the postwar economic system—was based on an effort to
free trade from restraints, but simultaneously to regulate finance. [See
Hahnel series in this issue.] The U.S. took the first steps to break it down,
Britain went along, and gradually other financial powers went along as well,
and so the rest of the world had to do it too. Some parts held back, like
South Korea. They maintained the system of controls through the late 1980s.
Then they were more or less forced to give them up. That was a condition for
entry into the OECD. The United States put enormous pressure on them to
overvalue their currency, to take more American imports, to deregulate their
financial markets, and so on, and they gave in. Next you had this huge market
failure, which is largely what it is: the so-called Asian crisis.
First, the pundits were
talking about crony capitalism and that sort of thing, as an explanation,
which is nonsense—I mean, it’s there, of course, but it’s here too,
it’s everywhere, and it was there during the growth period as well. What was
different about the recent period of decline was that you had an almost
classic failure of financial markets, a huge flow of capital, huge borrowing,
private borrowing, private lending, and an extraordinary flow of herd-like
behavior, and then pulling it all out in another irrational, herd-like action.
This is very familiar. Keynes warned about it 60 years ago, when he argued
that finance ought to be closely regulated and controlled, as indeed it sort
of is internally. The banks want to keep it controlled or otherwise everything
blows up.


But during this neoliberal
escapade, the rich and the super rich were having a ball, while most of the
population suffered. They spread the conditions supporting this sort of
triumph far and wide. Now the crisis is hitting home, hitting them too, so now
it’s called a crisis.


Notice that there is nothing
new about the volatility. Since the early 1970s, markets have become much more
volatile, contrary to the predictions of many famed economists. Milton
Friedman predicted with confidence that, free the exchange rates, let the
market rule, and everything will settle down, it will all be stable. It went
exactly the other way. With capital restraints reduced, with limits on how
capital could be moved about, markets became far more volatile, with very
sharp ups and downs. The IMF recently released a report saying that of its
roughly 180 members about 20 percent had suffered severe financial crises, and
about 60 percent had suffered fairly serious ones, over this post World War II
triumphalist period (1980 to 1995). This is the way financial markets operate.
There is no theory of financial markets. It’s mostly amateur psychology.
When you read economists—Alan Greenspan and so on—talking about economic
policy, it’s mostly, this is going to inspire confidence, or this will make
people feel better, or something like that. You can sort of dress it up in
formulas if you like, but it’s a kind of amateur psychology, no real theory
applied.


It’s known descriptively
that highly irrational behavior, even from the point of view of market
doctrine, takes place all the time. So in a rational market, investors are
supposed to look for economic fundamentals, they’re supposed to value solid
manufacturing capacity and fiscal austerity and all that kind of stuff. They
are not supposed to do what is called technical trading, to look for
short-term patterns and see if you can make a tiny gain by playing this and
that game over a period of weeks, or days, or even hours. But the latter is
exactly what they do. About 80 percent of the capital in foreign exchange has
a turnaround time of less than a week, much of it a day or less. What this is,
it’s smart guys, a lot of PhDs in math who are working for Wall Street firms
on sophisticated techniques to extrapolate little changes in currency
fluctuations and so on, so that you can make a lot of money fast.


It finally hit home that this
is a real crisis when one of the big hedge funds collapsed, which wasn’t
supposed to happen, but that’s the game they’re playing. Not only does it
not contribute to the economy, it harms it.


Now the taxpayers are
paying the bill.


In some manner the public
bails it out, that’s the name of the game. Capitalism means, we don’t take
the risks, the public takes the risks, we take the profits. As much as
possible, risk and cost have to be socialized, profits privatized. It’s the
basic principle. But the thing has become so serious that by now even the
major establishments are worrying about it.


So what they’re now talking
about in the G-7, and the finance ministers, and Business Week, the Financial
Times,
and so on, is what critics have been saying all along, that unless
there is some careful regulation of financial flows and some penalty for
short-term speculation, you’re going to have serious problems. There have
been problems, in blow-up after blow-up. They’re even willing to talk about
things that were anathema to them until recently, like the Tobin tax.


The Tobin tax was proposed
more than 20 years ago by a Nobel prize-winning economist, who pointed out
that unless you do something to throw sand in the gears of short-term,
speculative capital flows, it’s going to seriously harm the international
economy. Well, nobody wanted to hear that, because that was challenging the
orthodoxy that markets are wonderful, which was an orthodoxy precisely because
it was benefitting rich people, not because there was any logic in it.


There was a major study done
on the Tobin tax by a group of international economists, about five years ago.
The UN Development Program wanted to distribute it, and they were apparently
put under pressure by the Clinton administration not to, so the book is known
mostly to technical economists. Not all of the authors thought it was a great
idea. It includes people like the chief economist of the IMF, who didn’t
particularly like it. But it was a serious discussion of its possibility, and
this discussion was not supposed to be on the agenda. In today’s newspapers,
however, they’re talking about it. What’s the difference? Well, now rich
people are in trouble.


Given the risk that the
world economy might spin out of control completely, and considering that last
time, in the 1930s, it took a world war to overcome the depression, how
worried do you think we ought to be about the prospect of war?

The prospect of war is much
less, but for other reasons. Europe is, in modern history at least, the most
violent part of the world. One of the reasons why Europe conquered the world
is that it created a culture of war, based on centuries of mutual massacre and
slaughter—both a culture of war and a technology of war. That largely came
to an end in 1945, and for a very simple reason. Everybody could understand
that the next time we play this game, we’re all dead. The techniques of
destruction had reached such a point that war is not an option for rich and
powerful countries. If they try it once more, that’s the end. Somebody may
be irrational enough to do it anyway, but within anything remotely like the
domain of rationality, where you can at least begin to talk about prediction,
there isn’t going to be war among the powerful countries. This is
understood.


For example, in the middle of
the Gulf War, somebody at the Pentagon leaked to the press—which buried
it—an interesting document. When any new administration comes in, the CIA
and the Defense Intelligence Agency and so on give them a kind of intelligence
assessment of the world, a strategic analysis of the world. Someone leaked
part of the Bush administration strategic analysis (this would have been from
early 1989), and one part of it dealt with war. Here is approximately what it
said: it said in case of a conflict with “much weaker enemies”
(implication: that’s the only kind of conflict we’re ever going to get
into), we must defeat them “decisively and rapidly,” because anything else
will “undercut political support.” So no more bombing of South Vietnam for
15 years, and certainly we don’t go to war with any major power.


This was well before the Gulf
War in 1991. At that time Saddam Hussein was a great friend, so he wasn’t
contemplated as a target—but that’s what you can do. You can invade
Panama, kidnap Noriega, and get out in a couple of weeks; bomb the Sudan; bomb
Libya; bomb Iraq from a distance, very fast, and don’t get involved in more
than a few days of fighting. That kind of thing you can do with a much weaker
enemy, rapidly and decisively, but nothing else.


But to return to your other
point, what actually overcame the depression was not so much the war as the
semi-command economies. The British economy started to pick up in the late
1930s, when it sort of deliberalized and became a kind of semi-command
economy. The U.S. was barely at war, there was no fighting here. But the
wartime economy not only overcame the Depression, it flourished as industrial
production tripled. But that was a semi-command economy, it was highly
coordinated from Washington, run by corporate executives, with wage and price
controls, industrial policy deciding what would be produced. That worked like
a charm. Just like it worked in England—England out-produced Germany and
came close to the United States.


So the mobilization of the
economy did overcome the Depression. The war was taking place and that was the
justification for it, but the war was not what overcame the Depression. This
was pretty well understood. The consensus among American economists and
businesspeople and others in the mid-1940s was that with the
government-coordinated economy declining, after the war, they were going to go
right back to the depression due to market failures. There was recognition
that we’ve got to do something to get the government to stimulate the
economy again.


It was understood—you
didn’t have to read Keynes to figure it out—that you could stimulate the
economy in a lot of different ways. You could stimulate it with social
spending or you could stimulate it with military spending. There there was a
perfectly sane discussion, in Business Week, of which to do. The
conclusion was: well, social spending is not a good idea and military spending
is a great idea. The reason is that social spending has a downside. Yes, it
can pump the economy. But it also has a democratizing effect, because people
are interested in social spending; they want to know where you’re going to
build a hospital or a road or something, and they become involved. They have
no opinions about what jet plane to build. Social spending also gives people
more security and better conditions, better education, more means of
communicating, more ability to withstand threats of unemployment. It makes
people, workers, more powerful, and thereby better able to win higher wages
and better conditions.


Social spending has a
democratizing effect, and it’s not a direct gift to corporations. Military
spending, however, has none of those defects; it’s non-democratizing—on
the contrary, people are frightened and they seek shelter under the umbrella
of power. While it aids corporations it doesn’t directly improve the lot of
workers; rather it tends to reinforce workplace discipline. So it’s a direct
gift to corporations. It redistributes upward and it’s easy to sell if you
terrify the public. So what emerges is a Pentagon-based industrial policy
program, one which is now buckling a bit, due to the excessive liberalizing of
capital movements, and thus, one which has to be repaired a bit, so that it
once again benefits the rich, as intended.
                                        Z


Tor Wennerberg is a freelance journalist
living in Stockholm.