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Markets Über Alles?

by Michael Albert

 

Regular readers of Z know I frequently use this column to argue that private ownership yields grotesque inequalities, while markets:

  • hide human relations, ensuring that economic calculations focus only on dollar profits
     
  • promote antagonism among buyers and sellers, yielding conflict and precluding solidarity
     
  • promote a class of intellectual workers dominating traditional workers, precluding democracy and self management
     
  • bias against social goods, diminishing social and ecological concern

Other than broad references to income distribution, homelessness, infrastructure, and ecology, most efforts to demonstrate the above points have been abstract and have not yet convinced even progressive economists, much less the broad population. Perhaps this is because the discussion has been too abstract. If so, a couple of case studies may help. “Pile It On” enhighlights the worst of markets, with or without private ownership. “Movie Time” adds a new criticism and interesting avenues for further examination.


Pile It On

In the February 8 issue of The Economist there is a brief, boxed article titled “Let Them Eat Pollution.” Ninety-five percent of the article reproduces parts of a purloined memorandum sent by Lawrence Summers, chief economist of the World Bank, to some of his colleagues. Summers is the picture of civilized accomplishment: a scholar, administrator, theorist, writer, dressed impeccably, exuding confidence—the fruit of our best breeding, the archetype, responsible, liberal Harvard economist. In his memorandum, this living ode to Western achievement argues, “Shouldn’t the World Bank be encouraging more migration of dirty industries to the [Third World]?” He presents three supporting arguments, which, though it goes unstated, apply equally to dumping in urban ghettoes rather than wealthy suburbs.

First, Summers intones that “the measurement of the costs of health-impairing pollution depends on the forgone earnings from increased morbidity and mortality.” Thus “a given amount of health-impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages.” In Summers eyes, markets, by definition, correctly value all factors in production. If markets set a low wage for Third World workers, they must be less productive than workers elsewhere. If we’re going to dump toxic wastes, let’s do it where those hurt by the dumping are not as productive. As Summers says, “I think the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccible and we should face up to that.” Of course, the history of imperial domination and colonial and neo-colonial status, as well as the current imbalance of economic and military power, and how these affect wage rates and reduce the productive potential of Third World citizens are not part of Summers’s “economic logic.” Nor is the idea that the worth of a human is not measurable in the same way we measure the worth of a machine or a pile of copper. Nor is the insight that those who create poison ought to deal with it. None of these views enter a fully developed capacity for “facing the facts” so they are not part of “economic logic” markets operate by.

Summers’s second argument is that “the costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost.” In English, if you let toxics build to a high level in one region there will be grave results, but if you spread the same load of toxics widely enough, no one will get enough of a dose to make a difference. Summers adds, “I’ve always thought the under-populated countries in Africa are vastly under-polluted; their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City.” So why doesn’t the vaunted market spread wastes more efficiently? Summers answers, “Only the lamentable facts that so much pollution is generated by nontradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world-welfare-enhancing trade in air pollution and waste.” In other words, less polluted countries can’t offer to take car exhaust off our hands, no matter how much we would pay, because its just not technically possible, and they can’t take solid waste for a fee, because, while technically possible, the costs of moving it make the fee exhorbitant.

So, what’s the solution? Summers doesn’t offer a way out for toxics spewing from our cars. But to get rid of toxics coming from factories, Summers says we need only export the factories to the Third World. The products made in these factories can be economically shipped back to us even as the accumulating wastes, increased by the absense of expensive pollution control machinery, flood into till now “inefficiently” unpolluted Third World countries. The moral question of why we needn’t stew in the fruits of our own oppulence need never be addressed. Indeed, the U.S. won’t even have to pay a fee to Third World countries taking the pollution. It will be their’s by “eminent domain,” and the guns their “leaders” import from General Electric will reliably quell unwanted dissent from the unproductive workers and peasants wallowing in the more efficiently distributed toxic wastes we have wisely imparted to them.

Finally, for those not already convinced, Summers offers a third argument. “Concern over an agent that causes a one-in-a-million change in the odds of prostrate cancer is obviously going to be much higher in a country where under-5 mortality is 200 per thousand” than in a country where it is higher. That is, if the people in a country live a long time, they may die due to the effects of a toxic that, if they were to live shorter lives for some other reason, would have little or no effect on them. Summers’s analysis does not cause him to worry that in some places people die younger than is biologically, technologically, and socially necessary, and to wonder why markets don’t correct this particular “inefficiency.” Rather, he takes this morbid injustice as given and notes only its salutory side, that is, that it gives us a place to dump slow-acting toxics without fear that anyone will live long enough to suffer their ill effects.

Of course, if we let toxics accumulate sufficiently in our own backyard, the slow acting ones will in due course also become irrelevent, as the faster acting ones lower our own lifespans below the relevent threshold, but again, that’s a silly option because we’re too productive to sacrifice. After all, without us where would the world get the necessary supply of poisons, not to mention the intellectual productivity measurable in the achievements, wisdom, and civility of people like Lawrence Summers.

The punchline of Summers’s memorandum is its conclusion. “The problem with the arguments against all of these proposals for more pollution in [the Third World],” for example, “intrinsic rights to certain goods [like breathable air], moral reasons, social concerns, [and] lack of adequate markets could be turned around and used more or less effectively against every bank proposal....”

Summers’s logic is the logic of the market. His mind works the way the market works, and the market works that way regardless of what anyone, including Summers, says about it.

Counter arguments to Summers’s proposal that we dump more pollution on the Third World—whether these counter arguments are based on right, morality, power relations, etc.—are simply irrelevent. (1) These factors are not part of how markets operate and do not influence market assessments. (2) These factors are not part of how an advocate of markets thinks, since to think this way would undermine “every Bank proposal,” which is to say, the entire market and private ownership system. Of course, Summers will not jettison capitalism, so instead he openly demonstrates his allegiances, by a priori excluding this kind of counter argument from consideration.

If you look at letters indicating the mindsets of slave-owners in pre-Civil War America you will find similarly “cogent” accounts of why bartering human beings was the most civilized thing to do. Moreover, if you can restrain your anger, you will see that within the self-serving, and ignorant assumptions of the time, the “logic” of these defenses was “impeccable.” Let us hope that not too many years from now, when people look back at our time and read Lawrence Summers or any other economist on the virtues of markets and private ownership, they too will note the time-bound “logic” even as they marvel that humans accorded the maximum of education and advantage could have been so grotesquely inhumane and ignorant.

Summers’s comments will arouse a mini-furor. Summers will say he was only being provocative. Other economists will disavow Summers’s tone. Bad enough, but the real bottom line is that neither Summers nor other economists will disavow markets, though none will deny that markets behave precisely as Summers indicates.


Movie Time

Recently, I went on a fund-raising trip to LA. While there we spent an interesting afternoon talking with a Hollywood insider. Our topic was the operating procedures of a movie production company that develops script ideas into screenplays and casting proposals in hopes of convincing a major studio to finance the final movie.

Our insider friend explained that at any given time the company might have 10 or 15 projects underway. Each project begins with a plot idea, either one tidy paragraph or an already published book. In either case, someone is hired to write a first screenplay to submit to a vice president in charge of that project, who then claims a long list of horrible flaws and fires the first screenwriter. The product of the first writer’s labors belongs to the production company, and the vice president sends it off to a new writer, who becomes familiar with it and then rewrites it in light of the vice president’s many suggestions. The cycle repeats, each time with a new writer, sometimes five or more, till the final screenplay incorporates contributions from numerous fired writers. The final screenplay becomes the basis for finding a director, actors, and, if things work out, a major studio underwriter. The whole process can take 10 years, from original idea to big screen portrayal.

As I listened to this description, I couldn’t contain my incredulity. Think about one author after another gutting and rewriting a novel and you can see the absurdity of the typical movie screenplay scenario. I know screenwriters accept their pitiful lot because they are so unorganized and numerous that to work at all they must anticipate frequent dismissal and permanent lack of control over their work. But why does the company, which is certainly not weak and unorganized, accept long, expensive delays and a poorer script? Why doesn’t the desire to operate as frugally as possible cause the company’s owner to curtail the inefficient scrambling of the vice presidents? This is, after all, what capitalism is supposedly good at. Our mentor replied:

(1) The owner needs vice presidents since there are too many projects for the owner to oversee without high-level, authoritative, help.

(2) The vice presidents don’t want to maximize profits so much as to make themselves indispensible to the company, justify their high salaries, lay grounds for further increases in their autonomy, and better employment elsewhere, etc.

(3) Thus, (a) the vice presidents almost never accept the first writer’s screenplay, but instead find many more faults than exist and repeatedly demand new writers who they have to bring up to speed and motivate, and (b) the owners have to put up with it or close up shop.

But why doesn’t the owner restructure the company so the vice presidents have more security and get a share of profits giving them an interest in minimizing costs rather than maximizing their own role and indispensability. The answer, of course, is that capitalists, by definition of what capitalism is and by all its logic and implications, don’t ever give anyone even a tiny piece of profits. Not even to increase their own return.

And what difference does all this make? Is it merely the peculiar lament of a strange industry where everyone knows that procedures are both alienating and inefficient, yet no one can do anything about it? Or does the story contain a more general lesson?


Leftists have long understood that workers don’t willingly help capitalists maximize profits but instead give as little of themselves as possible in the time they have contracted to work. To profit, capitalists must therefore coerce effort from their workers via familiar struggles over the length of the work day, work intensity, and conditions of work. Because of this, for example, a huge part of the country’s productive energies goes to disciplining, coercing, and punishing workers.

At the same time, however, most people, including leftists, assume that management does use their skills and authority to maximize profits. A more sophisticated analysis recognizes that administrators also seek to preserve their own prerogatives against incorporation of their responsibilities into workers’ roles. In this sense, managers guard their profession against encroachment from below by ensuring that managerial tasks are never usurped by workers. It is exactly like doctors (who are also in the coordinator class) guarding against increases in the skills of nurses, or the use of preventive medicine or popular remedies.

However, the “Movie Time” example introduces another possibility. In the movie company, not only is the interface between coordinators and workers characterized by managers curtailing worker potentials and guarding against their usurping conceptual responsibilities, so is the upward looking interface between coordinators and capitalists characterized by coordinators redesigning production to make themselves as indispensible and valuable as possible.

So what? Well, this indicates still another reason why the so-called efficiency of markets is nonsense. Not only does tremendous energy go to exhorting work from de-skilled, recalcitrant workers whose interest is to work as little as possible for as much pay as they can win, but also managers make work inefficient to advance their own pay and power, rather than the overall productivity of the firm.

If you think back to the movie production company and chaos of all the many hired and fired writers creating a mishmash screenplay, you can see that the impact of this dynamic, like the impact of worker recalcitrance due to their alienation and exploitation, is major. In the case of workers, the only solution is to give them a significant share of profits. Coordinators too need a share of profits to have an interest in frugality and productivity. However, they also need job security and a reduced job advantage over those below.

In short, the overall trick to having people interested in doing their jobs without increasing waste and other inefficiencies is to create a workplace in which all actors have a shared interest in a balance between: (a) having the totality of work be as fulfilling and efficient as possible and (b) having the product be as good as possible. In fact, to really do the job right, each actor’s interest should be in maximizing the human worth of the economy’s total product while making the involved total of work as fulfilling and minimally dislocating as possible. To achieve this, of course, every actor must share equally in both the increased rewards and reduced costs. An economy can accomplish this even partially, much less comprehensively, only by eliminating private ownership as well as the hierarchicalization nof the capital/labor distinction and the market-bred coordinator/capital and coordinator/worker distinctions.

It follows that if they were funded at the same level and treated similarly by all other firms, a more participatory production company should outperform the traditional more hierarchical one, even in the presence of private ownership and markets. So why don’t a few rich capitalists fund more efficient, collectively organized companies?


In fact, capitalism is not simply “Accumulate, accumulate, that is Moses and the Prophets.” Instead, with very few exceptions capitalists are also driven by the need to rationalize their past rapacity and play by institutionally inscribed rules. They will not even entertain that reducing their authority could somehow increase overall achievement.

People with ten million dollars don’t seek eleven and people with one hundred million dollars don’t seek two hundred million because they have their eye on a new bauble to consume and need the extra cash by any means possible. Their motives to plunder beyond all possibility of consumption are more often to fulfill their destiny and increase their power. Accomplishing these ends requires respecting the rules of the game.

Moreover, suppose tomorrow you inherit a lot of wealth and therefore don’t have a rapacious past to rationalize. And suppose you want to expand profits only to fund worthy projects. You still won’t use collective structures and other dramatic innovations to have a more successful company, not because it wouldn’t be more efficient on an even playing field, but because if you made such choices the playing field would tilt as other capitalists (directors, actors, cinematographers, etc.) refuse to deal with you. And this is the point of the insider-critic: it doesn’t matter that the vice presidential run-around is irrational when viewed within the production company. Within the whole system this run-around, however ridiculous and irrational, is the only workable way to play the game.

So, to what extent do these dynamics operate elsewhere? Do coordinators in the auto, shoe, education, and mining industries introduce procedures that enhance their status even at the cost of wasting time and diminishing the quality of cars, shoes, schooling, and extracted ores? This might be a worthy topic of economic investigation.

Meanwhile, no one ought to have any trouble seeing the broader and more obvious ills of markets, whether in the growing population of homeless people, in our crumbling infrastructure, or in the toxic waste spewing from high-productivity plants. And if that isn’t enough, we also have the World Bank mentality of Lawrence Summers and his remarkable admission that “intrinsic rights of certain goods, moral reasons, social concerns...could be turned around and used more or less effectively against every [World] Bank proposal.” Shouldn’t this stem the pro-market tide?

 

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