Monday, 9 March 2015

Quote of the day: On economists’ implicit “tribal premise”

“The success of capitalism is explained by the [Encyclopaedia] Britannica (1964) as follows:

        “’Productive use of the "social surplus" was the special virtue that enabled capitalism to outstrip all
    prior economic systems. Instead of building pyramids and cathedrals, those in command of the social
    surplus chose to invest in ships, warehouses, raw materials, finished goods and other material forms
    of wealth. The social surplus was thus converted into enlarged productive capacity.

“This is said about a time when Europe's population subsisted in such poverty that child mortality approached fifty percent, and periodic famines wiped out the "surplus" population which the pre-capitalist economies were unable to feed. Yet, making no distinction between tax-expropriated and industrially produced wealth, the Britannica asserts that it was the surplus wealth of that time that the early capitalists "commanded" and "chose to invest"—and that this investment was the came of the stupendous prosperity of the age that followed. 
    “What is a "social surplus"? The article gives no definition or explanation. A "surplus" presupposes a norm; if subsistence on a chronic starvation level is above the implied norm, what is that norm? The article does not answer.
    “There is, of course, no such thing as a "social surplus." All wealth is produced by somebody and belongs to somebody. And "the special virtue that enabled capitalism to outstrip all prior economic systems" was freedom (a concept eloquently absent from the Britannica's account), which led, not to the expropriation, but to the creation of wealth..
    I shall have more to say later about that disgraceful article (disgraceful on many counts, not the least of which is scholarship). At this point, I quoted it only as a succinct example of the tribal premise that underlies today's political economy. That premise is shared by the enemies and the champions of capitalism alike; it provides the former with a certain inner  consistency, and disarms the latter by a subtle, yet devastating aura of moral hypocrisy—as witness, their attempts to justify capitalism on the ground of "the common good" or "service to the consumer" or "the best allocation of resources." (Whose resources?)
    “If capitalism is to be understood It is this tribal premise that has to be checked—and challenged.
Mankind is not an entity, an organism, or a coral bush. The entity involved in production and trade is man. It is with the study of man—not of the loose aggregate known as a "community"—that any science of the humanities has to begin.
    “This issue represents one of the epistemological differences between the humanities and the physical sciences, one of the causes of the formers well-earned inferiority complex in regard to the latter. A physical science would not permit itself (not yet, at least) to ignore or bypass the nature of its subject. Such an attempt would mean: a science of astronomy that gazed at the sky, but refused to study individual stars, planets, and satellites—or a science of medicine that studied disease, without any knowledge or criterion of health, and took, as its basic subject of study, a hospital as a whole, never focusing on individual patients.
    “A great deal may be learned about society by studying man; but this process cannot be reversed: nothing can be learned about man by studying society—by studying the inter-relationships of entities one has never identified or defined. Yet that is the methodology adopted by most political economists. Their attitude, in effect, amounts to the unstated, implicit postulate: "Man is that which fits economic equations." Since he obviously does not, this leads to the curious fact that in spite of the practical nature of their science, political economists are oddly unable to relate their abstractions to the concretes of actual existence.
    “It leads also to a baffling sort of double standard or double perspective in their way of viewing men and events: if they observe a shoemaker, they find no difficulty in concluding that he is working in order to make a living; but as political economists, on the tribal premise, they declare that his purpose (and duty) is to provide society with shoes. If they observe a panhandler on a street corner, they identify him as a bum; in political economy, he becomes "a sovereign consumer." If they hear the communist doctrine that all property should belong to the state, they reject it emphatically and feel, sincerely, that they would fight communism to the death; but in political economy, they speak of the government's duty to effect a "fair redistribution of wealth," and they speak of businessmen as the best, most efficient trustees of the nation's "natural resources."
    “This is what a basic premise (and philosophical negligence) will do; this is what the tribal premise has done.”

- Ayn Rand, from her article ‘What Is Capitalism?,’ 1965, 
republished in her book Capitalism: The Unknown Ideal

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