The story of this book so far is that the global financial crisis is both a technical and an epistemological event, but that at a certain level these two aspects – the way we think about economic life and the way we behave – are in effect two sides of one coin. We have also pointed to the reflexive relationship between the two. Simply said, or at first sight, the problem is chicken–egg. But close-to it seems more the case that the way we think is primary, or rather the images we use are. When looking at socio-economic conditions in the nineteenth century, for example, it would have been simple enough, surely, to reduce adverse conditions by increasing wages, or to see that capital, while it might appear to belong to a particular class in society, technically has nothing to do with social status. But this is to look at those times with the benefit of hindsight and, it has to be said, of the considerable social evolution since those times.
The point is that, whether rightly or wrongly, such an economic approach was not taken. The ideas that we now are able to have, thanks to universal suffrage and much else, simple did not exist, aside, that is, from such ‘enlightened’ people as Robert Owen and the Quakers (to keep a British focus). Far more powerful were the ideas that came from two quite different quarters. The one was the gradual unfolding of economic theory from Smith to Ricardo to Mill to Jevons to Marshall (again, to stay with Britain). In the course of the nineteenth century, economics was given the tone of mechanism in the way it portrayed economic life. The other was Karl Marx’s analysis. In general terms, these two perspectives live on today as the main but divided view of the world.
Both look at the same set of circumstances – modern economic life – so it cannot be those circumstances that inform our disparate images of it. Those images must come from elsewhere. It need not concern us where from precisely; the point is that they then overlay economic life with an image of it. It is from this image, or these images, that we then go on to fashion, shape and organise economic life itself through the enactment of policies.
5.1.1 ImAgES ARE pRImARy
From this point of view, images are primary and what the global financial crisis has done is to call into question the way we understand economic and financial events. It is easy enough to say that the ‘efficient markets hypothesis’ has (or has not) failed. That discussion is likely to serve little purpose, however, other than to keep alive the Left:
Right divide on which it is predicated. The efficient markets hypothesis presupposes a more general, and more generally accepted, set of ideas, namely that markets, not the state or any other agency, are the primary modality, the stuff even, of economic life and that these, when allowed to follow their own logic, can perform ‘perfectly’. They succeed (though one seldom uses the term) when perfect competition obtains, when, that is, the myriad players in a market cancel out each other’s ability to corner it. In acting in this way, they are motivated by short-tem profitability, this being the way they increase the return to (or the efficiency of) their capital.
When, for whatever reason, this ‘ideal’ condition does not arise, markets are said to have ‘failed’ and it is in order for some other agency, usually the state, to step in, on the assumption that it, however, presides or claims to preside over all our interests.
Though they are difficult to see because of the seemingly objective and quasi-scientific vocabulary of economics, two images lie behind this way of looking at things. The first is a negative view of human beings – they can only serve themselves, never one another.
(If this were the case, there would be no charities, however. But no jobs either because in economic life one cannot do anything except for other people. No one made a living from building his own house or eating all the meals he cooks in his restaurant.)
The second is that, humanity being held in such low esteem, we cannot ourselves overcome our egoism and self-interest, but rely on a Leviathan to do it for us. Whether the Leviathan is a figment of some pre-Enlightenment novelist or the state bailing out private banks, the image is the same. The message given is the same. The behaviour encouraged is the same. Namely, do not believe that ordinary human beings, ordinary citizens, can act otherwise than out of blind egoism. The idea that, alongside our self- interest could be, let alone is, another dimension to human existence, namely enlarged egoism, the ability to take others into account, is not admitted.
And yet how much simpler life would be if we recognised that human nature is not essentially selfish, but only partially so. The other part concerns itself with earthquake victims, the poor of the world or the starving. We need but elevate this aspect of ourselves to the level, accorded in economics so far only to egoism, and we would right our ship, re-balance our economy, solve our crisis. For to what else do government injunctions or central bank admonitions make appeal than to the part of us which does not think short term or only of itself?
The English at best often call this an appeal to enlightened self-interest. Only that is imprecise. We do not touch solid ground until we refer to ‘awakened other interest’ – the more so if ‘other’ is a reference to the health of the worldwide economy as a whole.
5.1.2 bEyond ‘ThE mARkET’
Why this monologue? In order, hopefully, to call into question the language of ‘perfect competition’ and ‘market failure’ insofar as they are the unconscious surrogates for acting individually and acting collectively. With ‘perfect competition’ and ‘market failure’ one has no clue that the human being has any part to play, because the very ideas preclude him on the ground of his supposedly subjective nature. Acting individually and acting collectively, on the other hand, are themselves a picture of the two-sided nature of the human being. This places human beings at the centre of economic affairs, but calls on them to discern within their behaviour which side of their being is active at any one time or in any one transaction.
For there are things we do individually in economic life – like eat or buy a pair of shoes. But there are other things we do collectively – like pay our share of the local fire service (because to do so is more not less efficient). The idea that only individualism connotes efficiency has to be overcome. Likewise, that collective connotes socialism (in the pejorative Randian sense of the word).
If we could look afresh at the human being and overcome the myopia of modern economics in that regard, life would seem very different. And not only seem: it would be very different. The way we felt about economic life would change, becoming less contentious. And economic life itself would be perceived as a field of active mutual endeavour, rather than a battleground full of herdish behaviour and quasi-military terminology, such as ‘strategy’ and ‘banks leading the charge’, as one business editor described the way out of the global financial crisis.
Then, too, we would begin to see that by ‘perfect competition’ we need not only mean all actors behaving atomistically in ignorance of and in competition against one another. It could equally mean they work together to the same end, for example, price stability, so that the value of money equates with the value of available goods and so that financial behaviour is inherently stabilised rather than after the event. In that sense, the future lies not with any form of class warfare, whether overt or sublimated, but with
‘citizenised central banking’, to refer to a topic taken up in Chapter 10.
And by ‘market failure’ we can come to mean that when our economic actions, whether individual or collective, overstep their bounds, when for example, we pollute or use child labour (in the negative sense) we are able to adjust the context, the property rights, the laws within which our otherwise ‘free’ economic activity is nevertheless conducted.
In short, ‘perfect competition’ and ‘market failure’ understood as external agencies can give way to something very different, much more concrete and close to the human being – a sense for the free play of initiative in economic life and, alongside but not in antithesis to it, a sense of right or of when such free play exceeds its healthy limits. It is this sense of right, after all, that is alert when we seek to maintain clear property rights and the law of contract, without which no economic activity can be ‘safely’ undertaken.
This sense of fair play, to use an English term, is not the same as the sense that one needs to be free in one’s initiative. They are different senses, but they belong together. Once we know this, we would rather not speak in terms of an opposition between ‘perfect
competition’ and ‘market failure’, but speak instead of the contrasting natures of economic life and rights life, and of the need for them to work together, not for one to ‘trump’ the other, to use Alistair Darling’s expression.
5.1.3 STEInER And bobbITT
All this has been a prelude to the two remaining sections of this chapter – Rudolf Steiner’s socio-economic analysis and, its foil in our times, Philip Bobbitt’s concept of ‘market state terrorism’. In the twenty-first century, after the global financial crisis, everything will depend on the images we make of the future. In particular, whether they are linked to fear or courage, above all courage in one’s conviction, especially one’s conviction concerning human nature.
Egoism necessarily links one to the edge of the world. Once that edge is reached, however, what then happens? Or, to change the metaphor, when people set out from their different sides of a mountain to reach its summit, at which point by definition all territory comes to an end, whose flag is planted there? That of one part of the human family, or one that we can all own? Similarly, does one fight blindly against others for market share or work together so that the market serves all our purposes?