July 31, 2013
One of the major capitalist institutions that the market socialism sketchily outlined in my last post didn’t address, is the banking system. The banking system plays a fundamental role in capitalism in at least two ways. 1) It creates money. 2) It determines to a considerable extent the allocation of investment resources. Money is obviously a central institution to any system that makes substantial use of the market. And decisions around the allocation of investment determine to a large extent what ‘we’ take to be valuable productive uses of the surpluses our economic system generates.
I’ll take these two functions one at a time. The banking system creates money by lending out customers’ savings to other customers. If I put $10 in a savings account, the bank can then lend this $10 to another customer. If they spend the money on bibles, and the bible-seller pays the money back into a savings account, the bank can then lend it out again to another customer. If this customer then puts the money into their own savings account, the bank can lend it out again; and so on. This ‘duplication’ of ‘the same’ money – in this example, the transformation of $10 into $30 – is how banks create money.
The same process allocates investment resources. Banks’ decisions about who to lend to determine to a considerable extent how the surplus resources generated by our economic system are reinvested. We’re going to need some institution or institutions that perform this function – pooling common resources and redirecting them to places we regard as the most worthwhile locations for investment – if we are going to have any kind of complex and large scale economy. The issue is the principles by which this system will operate. Banks will lend to businesses that they regard as likely to be profitable; so ‘the profit motive’ here determines where our society invests its surplus.
Both these functions are, under capitalism, centrally influenced by the principle of return on investment. What renders the ‘trick’ of banks’ money-creation relatively stable, most of the time, is the growth of the economy underwriting an overall return on investment that allows the banks to, on average, receive back more money than they lent out, even accounting for defaults. (When this goes wrong, and default overruns the banks’ margin for error in their lending calculations, the whole institution can potentially collapse: this is a banking crisis.) So capitalist growth is what enables the banks’ process of money-creation to ‘work’; and the banks’ process of money creation is, at the same time, a central driving force of capitalist growth. (Because money is created as loans that require repayment with interest, the need to valorise capital is ‘baked in’ to the capitalist economy at a quite basic level: the economy must grow, over the medium-long term, or the banking system will fail.)
So – the capitalist banking system binds the institution of money to the social compulsion for economic growth, in a way that strikes me as potentially quite hard to ‘unpick’ through institutional reform. To what extent is this a problem?
Initial thoughts on that question:
1) There’s nothing wrong with economic growth; economic growth doesn’t have to be environmentally destructive, for example (although it is, under our current system).
2) There is something wrong with ‘blind’ growth – growth that is driven only or principally by investors’ sense of the most profitable avenues for investment.
3) The socially destructive consequences of blind growth could possibly be ameliorated by:
3a) the more equitable distribution of wealth (because investment choices would be less likely to overwhelmingly serve economic demand associated with a small elite), and
3b) planning, regulation and/or incentivisation to guide investment in directions chosen through more democratic decision-making
4) A system that operates using a banking system of this broad kind is still going to be crisis-prone; there will just be less severe human consequences of crises, because people will be less reliant on labour for income
5) The system will also involve a strong set of incentives to ‘overide’ regulatory or social-welfare-oriented policy, in order to prevent profit-crisis (this is part of the overall social dynamic that makes left achievements in capitalism so unstable).
6) I’m not sure whether those incentives are stronger or more worrying than the usual incentives people have to screw each other over.
I admit, I am uneasy about the idea replicating this central element of the capitalist system in a proposed alternative economic system. That said:
a) it’s not clear to me that this element of capitalism in fact has to be altered/abolished in order to do away with the negative features of capitalism we’re aspiring to remove; and
b) I also don’t really know how to dissociate the socially useful functions of money from the growth dynamic described above, given our starting-point.
Of course, one could abolish money – but this seems to me to be an extreme step, with very major institutional repercussions; I want to explore the possibilities of less wholesale institutional overhauls, before assuming that such a step would be required to achieve our goals. For these reasons I am – at least for now – going to work on the assumption that we can retain something in the ballpark of a banking system that creates money by turning savings into investments; but I’m also going to try to remain attentive to alternatives.
July 29, 2013
If we were interested in realizing the broad political ideals I wrote about in my post on social democracy, what alternative economic institutions would be required? Here’s a first pass at answering that question[a][b].
1) Guaranteed minimum income of some kind, for everyone, globally. This would go a long way towards providing a baseline standard of living for most everyone. It would also remove one of the major levers of economic exploitation (that is, the fear of poverty).
2) Free movement of people, globally. One could imagine a scenario in which our broad political goals are achievable without this; but free movement of individuals would be a valuable step in the direction of a more liberated global society. This would greatly reduce one major mechanism of global economic exploitation – the enforced international segmentation of the labour market by national class boundaries – and would provide a powerful weight against political oppression at the national (or equivalent) level.
3) Considerable democratic regulation/direction of production. A more ‘socially rational’ direction of productive resources would tend to follow from a more equitable distribution of global wealth; but one would also need heavy regulation/direction to address externalities (such as, for example, carbon emissions), and one would presumably also want a degree of collective decision-making around preferred use of collective resources. These forms of regulation/direction would have to be implemented at least in part through global institutions.
4) Considerable reduction in a typical individual’s lifetime labour, and corresponding increase in leisure/volunteer activities. This would probably follow naturally from a guaranteed minimum income – the institution-building challenge would very likely be the incentivisation of socially useful labour, rather than the reduction of labour hours – but it would be an important goal of our institution-building.
These items constitute a ‘market socialism’. More radical overhauls of global economic institutions would of course be possible – though the institutional changes above are obviously already very substantial. I’d like spend more time thinking and reading about these and other alternative institutions.
[a] This post incorporates content from offline conversations.
[b] I obviously make no claims to originality here, nor do I know the relevant literature.
July 9, 2013
Back on the Brandom beat briefly, with a long-promised post (if anyone besides the omniscient gods keeps track).
Brandom is a rationalist – but in what sense is he a rationalist? Well, Brandom believes that what distinguishes sapient creatures (like human beings) from “merely sentient” creatures (like, presumably, caterpillars) is that we (we sapients) participate in the space of reasons. What does it mean to participate in the space of reasons? Well, Brandom explains his views on that matter in enormous detail, but they more or less boils down to: participating in the social practice of asking for and giving reasons.
As any regular readers of my blog will know, I disagree with Brandom about the centrality of specifically linguistic practice to the account of sapience his work offers. I think that non-linguistic communicative practices are more than capable of being understood as social practices of asking for and giving reasons: enormously complicated communication is possible at a non- or pre-verbal level, and I see no reason to restrict sapience to those creatures whose communicative acts happen to make use, in part, of the particularly idionsyncratic skill of language. Nothing of central importance in this post hinges on that disagreement, but I want to keep it somewhere in mind.
So – we are sapient if we can ask for and give reasons for our beliefs and actions. So far so good. But what are reasons? Well – reasons are anything that can be offered in the game of asking for and giving reasons; less tautologously, they are anything that can be used as a premise in an inferential chain. Roughly speaking, in any sentence, proposition, thought or bodily intuition of the structure “If X then Y”, X is a reason. Reasons are, as it were, an entirely formal category.
The point I want to make, in this post, is that we must take great care not to confuse reasons with good reasons. Anything at all that can occupy this communicative role is a reason – whether or not we regard it as having any persuasive or normative force at all, is neither here nor there. It suffices that it could, conceivably, be taken as potentially having such force.
Put otherwise – bad reasons are reasons too. The rationalism that Brandom advocates is, therefore, an extremely slimline rationalism. It is not a rationalism that dictates that anyone, anywhere, actually be reasonable. (Though of course if Brandom’s arguments for all this are good ones, one can presume that at least some philosophers and readers of philosophy have their wits about them, at pain of performative contradiction.)
Furthermore, even the overt statement that there is no reason for something is itself the offering of a reason. If I ask “why is there something rather than nothing?” and you reply “that is just how things are”; or if I ask “why must we continue suffering?” and you reply “because I say so”, these may not be good reasons, but they are reasons. “Because I say so”, “just coz”, “no reason”, “if you disagree I’ll hurt you” – these are all reasons. If we refuse to treat them as adequate reasons, this is because we are ourselves participating in the challenge/response game of asking for and giving reasons – not because there is anything un-reason-like about the statements themselves, ‘as such’.
By the same token, if “I’ll hurt you if you do” is a reason (which it unambiguously is, on Brandom’s account), so – by my lights – is the actual act of violence that this linguistic act threatens. Violence is communicative; if I ask “why can’t I?” and you draw back your fist – this is the offering of a reason (it is the same propositional content expressed by “I’ll hurt you if you do”). By the same token, if I ask “why can’t I?” and you simply punch me to the ground – this is also communicative – it clarifies the consequences of the action I was proposing, and in so doing offers a reason against this action.
I don’t regard this as a weakness of Brandom’s theory. Brandom is not committing us to the absolute dominance of force, by advocating for this vision. We do not have to accept the legitimacy of these reasons – we do not have to take them as good reasons. Indeed they are bad reasons – the worst. But if our acts of violence communicate in this way, we are still inhabiting the space of reasons; there is nothing formally irrational or irrationalist here, no matter how substantively irrational we may take these reasons to be.
I believe all this is a consequence of Brandom’s theoretical framework – but Brandom himself does not agree. These remarks take me back to my very first, uncomprehending post on Brandom, from – my goodness – July 2010. There I was puzzled by the discussion, in Making It Explicit‘s first chapter, of “beating people with sticks”, as an examplification of the kind of ‘naturalistic’ explanation that Brandom opposes. I now, I’m sure, have a much more nuanced sense of what Brandom means by ‘naturalism’ and ‘anti-naturalism’ (see this post) – but I remain perturbed by these passages. Indeed, more than perturbed. I’m now convinced that Brandom gets this wrong – something has gone wrong in Brandom’s comprehension of his own theory, in these early passages of Making It Explicit. More ‘diagnostically’, I think – Brandom’s commitment to rationalism, in a substantive sense, has led him to confuse that substantive sense with the much more formal definition of rationalism that his work elsewhere articulates and defends.
To be both ‘diagnostic’ and a little simplistic: Brandom wants reason, not force, to be the driver of human affairs. Brandom wants to rescue reason from the clutches of force. He wants to liberate a form of rationalism from the naturalistic, materialist, pragmatist, social-theoretic tradition whose insights he nevertheless does not wish to abandon. He succeeds in doing this, I am sure. But in these pages of Making It Explicit, Brandom’s desire is visible, in that his claims overreach the degree of ‘autonomy’ he can in fact grant reason. Brandom shows us some of the ways in which ‘the force of the better reason’ can emerge from the ugly, violent, contingent, banal, unredeemed world of everyday social practice. But Brandom cannot, as he here wishes, fully differentiate the administering of beatings from that social structure of reason. What differentiation we find here must take place ‘downstream’, in our own enacted and contingent politics. The rejection of force as warrant cannot be ‘baked in’ to our philosophy. We have to draw and reproduce this difference in practice.