“We should not have to wait for collapses to do our work for us. If we stake everything on a collapse and then the economy recovers in a few months, we will be discredited, even though the present contradictions remain in place.”
Michael Perelman is Professor of Economics at California State University, Chico. He has published 19 books, including, Railroading Economics, Manufacturing Discontent, The Perverse Economy, and The Invention of Capitalism.
His most recent book is The Confiscation of American Prosperity: From Right-Wing Extremism and Economic Ideology to the Next Great Depression (Palgrave Macmillan, 2007). SoN editors Jon Bailes and Cihan Aksan conducted the following interview via email in March 2008 to discuss the issues it raises.
State of Nature: You describe the economic policy in the US since the 1970s as a “right-wing revolution”. What is particularly “revolutionary” about it?
Michael Perelman: A revolution occurs when one group of people is able to overthrow the existing institutions. Usually revolutions occur relatively quickly. This one was slower and more methodical. It may have been more effective in achieving its short-term goals than most revolutions, although current events suggest, as my book foretold, eventual outcome will prove bad for all concerned, including the revolutionaries.
SoN: You examine how business leaders oppose any kind of state regulation that could be detrimental to short term profits, even when it would seem beneficial to them in the long term, and also how most economists tow the line of the market without question. Does this imply that they are not interested in the longevity of the market economy, or that they are simply unaware that such short-term objectives are undermining it?
MP: I do not think that many business leaders see the world from a long term perspective. Typically, they worry about the next quarterly report. Some of the business press has a slightly longer term outlook; for example, compare Business Week’s sometimes more thoughtful approach relative to the Wall Street Journal editorial page. Economists raised a more interesting question. Economic ideology tells us that in the long run markets work out perfectly, but economists rarely look at long-term processes. One of the problems is that capitalism is relatively new, around 300 years or so, despite the earlier existence of little shoots of capitalism. Great depressions occur around 50 years apart, although more than 70 years have passed since the last great depression. As a result, we do not have many historical examples.
Even if economists had a fuller sample of depressions, their rigid faith in markets would probably prevent them from grappling with deeper processes at work.
SoN: All the requisites for long term growth and stability that you examine, such as higher wages, better education and greater solidarity, would empower the majority. To the extent that politicians and business leaders are aware of these potential benefits, does this not suggest that their primary concern is the disempowerment of the people, even when the consequence is lower productivity and the risk of a recession or even a depression? To put it another way, if rebellion has been reduced to the likes of “counter-productive behaviour on the job, including excessively long lunches and breaks, slow, sloppy workmanship, and sick-leave abuse”, is this still not a victory from a business point of view compared to dealing with well organised unions?
MP: Your question hits the nail on the head. Capitalism entails two separate objectives, over and above the blather about creating a stronger economy or a better society. First, of course, on a more abstract level is the increase in profits. At the same time, human beings enjoy exercising authority, and this exercise can be counterproductive. But, empowering workers, in effect, reduces the status of those in authority. Gulf jets and mega yachts provide some status, but the exercise of power over other people creates a certain type of enjoyment.
In other cases, a short-term perspective plays a role. A boss can probably get a worker to speed up right now with a loud yell or even a threat, but in the long run that sort of management will prove counterproductive.
I just sent a new book manuscript to my publisher, The Invisible Hand Cuffs: How Market Tyranny Stifles the Economy by Stunting Workers, which describes how business and economists pay virtually no attention to work, workers, or working conditions. In terms of economics, the profession has treated the few economists who have investigated such matters harshly. Frank Knight, for example, dismissed such research as sentimentalism.
For economists, work is nothing more than the absence of leisure.
SoN: The concept of class is marginalised in much radical criticism today. To what extent do you feel that class should still be a central concern to social and economic theory?
MP: I believe that human potential is the most important productive asset available to humanity besides the environment. Ignoring matters of justice and humanity, class, which consigns the majority to a life in which most people will be performing mind-numbing work, is destructive even by the criteria of standard economics.
SoN: You say that influence can be more important to business than investment in productivity. Is this not always going to be the paradox of the market economy – that, because it is based on ‘free’ competition, attempting to change the rules to make it less free will always be a tactic for those at the top?
MP: Obviously so, I do not know of any major capitalist who has been a consistent libertarian — even ignoring social libertarianism, which would relate to moral questions, such as abortion or drug legalization. In fact, I suspect that quite a few major capitalists are social libertarians, but economic libertarianism is something else. While capitalists become irate about government policies that hinder their pursuit of profit, most are delighted with the opportunity for a no-bid contract or wielding the power of regulations or the courts to prevent a competitor from cutting into their profit.
SoN: Economists continually reinforce the need to restrict wage levels for the good of an economic growth that benefits the whole of society. Effectively, people are expected to make personal sacrifices for social gain, even though, as you point out, “the less affluent sectors of society will not necessarily benefit from that growth”. Does this apparent need for social solidarity (albeit in a distorted form) confuse the message of the market economy, which relies on the cult of the individual?
MP: I do not think that many economists would understand your question. The ideology does not usually refer to social gain, but rather to improvements for all individuals. Of course, the trickle down theory has never been confirmed in practice, in part, I believe because this strategy hardens the negative consequences of class division.
SoN: You examine the benefits of higher wages; one of these is that it causes businesses to develop technology more quickly, in order to cut costs. But does technological development lead to a reduction in overall employment? Also, you suggest that a slight decrease in inequality would lead to a better long-term growth rate. Is there an optimum level of inequality for growth, or is greater equality always better, economically?
MP: Let us begin with unemployment. The ready answer would be that more productivity would allow people to produce the same amount or even more with a shorter working day. So, cutting hours could eliminate any problem about employment.
The book discusses the numerous studies that find that more equality is beneficial for economic growth. Complete equality, in the sense that anybody would have the opportunity to develop their own potential would have very positive consequences, over and above considerations of economic growth. I develop these thoughts in the new book I just mentioned.
Even so, an immediate transition to complete equality would require very difficult adjustments in the face of enormous resistance. In effect, the right wing revolution, which occurred over more than three decades, was a reaction to the temporarily increasing equality of the 1960s.
SoN: You talk about numerous issues related to college finances – government under funding, the ‘earmarking’ system, which requires colleges to lobby for political favour, and departments relying on corporate money, which carries specific requirements. How difficult do you now find it to be an economist in a university, writing against mainstream opinion? Is there such a thing as an autonomous university in the US?
MP: I am tenured. I have little or no influence. If somehow I were as effective as, say, Noam Chomsky, I suspect I would have some difficulty.
Instead, writing, for me, is a matter of conviction rather than courage. The real repression affects prospective academics. The young economists, looking for jobs, are the ones that require support and solidarity. For example, a young person expressing the ideas found in this book would have difficulty finding a job. I believe that more than 20 years have passed since any known leftist economist has been hired by an Ivy League university.
Today, an autonomous college or university is a dream — a noble dream, but a dream nonetheless. Academic institutions are expensive to run. In The Confiscation of American Prosperity, I mentioned that the defunding of universities was a conscious strategy to restrict the influence of critical academics. Universities don’t worry as much about hiring radical English professors, since they don’t consider their subject to be important. In more controversial subjects, the censorship can be extreme. The heavy pressure coming on people critical of Israeli policies is a case in point. If there were a truly influential leftist economist, he or she would come under severe fire.
SoN: The right-wing provides simple explanations to many of society’s problems – often by blaming individual behaviour – or simply diverts the public’s attention, and therefore circles around any questioning of the workings of the system itself. You say that “surely, telling the truth should be easier than misleading [the people] in the way the right wing has”, but is it the case that the right have been so successful because their answers are easier to understand, and easier to accept?
MP: Again, you are absolutely correct. The right wing story is extremely simple, often buttressed by misleading anecdotes. Just try reading the first chapter of Capital alongside Adam Smith’s Wealth of Nations. Or compare the scientific analysis of global warming with a simple statement that natural disasters are God’s way of communicating with humanity, punishing society for sins, such as permitting homosexuality or abortion. Unfortunately, truth and reality are more complex than simple stories.
On a deeper level, the right wing has managed to indoctrinate people effectively. Because the press no longer has the stomach for investigative journalism, because it both threatens to discourage advertisers and can be expensive, the media heavily relies on right wing think tanks, like Heritage, which is very creative and effective in framing right wing stories in very simple terms.
SoN: Given the conditions in academia, politics, places of employment, the media and the law, along with the complexity of the system itself, what hope is there for any kind of open dialogue? Is an economic collapse perhaps the only conceivable way of breaking the spell?
MP: Certainly the collapse is providing an opening for dialogue, but we should not have to wait for collapses to do our work for us. If we stake everything on a collapse and then the economy recovers in a few months, we will be discredited, even though the present contradictions remain in place. I think that the problem is we, who think of ourselves as part of “the left,” tend to talk to each other, while not being very successful in engaging others. I include myself in this criticism.
Developing a dialogue that runs counter to the conventional wisdom is hard work. It can be done. Michael Moore, for example, can tell humorous stories that appeal to a fairly wide portion of the population. I do not want to enter into some debate about the pros and cons of Michael Moore. Although his work does not present any political analysis, it does open up spaces, allowing for others to provide that analysis. In any case, people who identify with progressive movements need to find new ways of communication, to develop a counterpoint to the mind-numbing drumbeat of the right wing.
SoN: Do you see the current economic downturn as a minor blip, or the chickens coming home to roost on the practices of the last 30 years?
MP: I am reminded of the answer of Chou En-lai, when asked what he thought about the French Revolution. He said that it was too early to tell. I can say that what has happened so far includes many of the necessary conditions for a serious downturn, whether this will be sufficient is difficult to say. It reminds me of a drunk stumbling along the street. He may recover his balance when he looks like he is going to fall, but an eventual fall seems inevitable.
Jon Bailes is co-editor and webmaster of State Of Nature. He is currently writing a PhD thesis on ideology theory at the Centre for European Studies, University College London, and has an MA in European Thought from the same department. He is co-author of Weapon of the Strong: Conversations on US State Terrorism (London: Pluto, 2012).