A Vision of a World without Poverty or Economic Insecurity
By Howard Richards
“Recall the face of the poorest and weakest man you have seen and ask yourself if the step you contemplate is going to be of any use to him. Will he gain by it?”*(1)
--- M.K. Gandhi
The indictment of modern society made by Martin Luther King Jr. in April of 1968, in a sermon at the National Cathedral in Washington a few days before his assassination, remains valid. King said, “There is nothing new about poverty. What is new is that today we have the resources and the techniques to get rid of poverty. The question is, do we have the will?”*(2)
I will elaborate on this statement by Dr. King, which I believe to be a true statement, and I will sketch a vision of a world without poverty and economic insecurity derived from asking what it would mean to have the will to get rid of poverty.
I am not advocating simple solutions. The simple solutions have already been tried, and they have not worked.
I shall not offer a blueprint, nor attempt to answer all the objections a skeptical reader might raise. Rather I shall sketch a kaleidoscopic vision of a world without poverty for a reader assumed to be sympathetic. I regard the reader as sympathetic because I feel that the readers of this particular book share with me some variant of what Aldous Huxley called the perennial philosophy, some non-sectarian religious and spiritual worldview. *(3) Before most audiences I would feel intimidated and expect to be misunderstood if I were to venture, as I shall venture here, to blend with economics words like “spirit,” “love,” and “God.” I believe that the readers of this book will mainly be people who find religious ideas to be as precious and meaningful as I find them to be, and who will be prejudiced rather more in favor than against a viewpoint which sees the world’s great religious traditions as treasure troves rich in ideas for improving modern institutions.
I am broadening King’s call to get rid of poverty to include also a call to get rid of the economic insecurity of the middle classes. There are many who are not poor because they are consuming goods and services at an adequate level, often at a wasteful level, who are nonetheless worried sick because they are deeply in debt, or because they depend for the making of their purchases -- for their very lives-- on streams of income which may be here today and gone tomorrow.
Besides being a goal for those most directly concerned, the poor themselves and those in immediate fear of becoming poor, the goal Dr. King proposed at the National Cathedral was a goal for everyone. It is even a logical goal for the least generous among the most prosperous, because it is a goal conducive to the building of a culture of peace. In a less violent world, everyone would be safer. The oft-told tale about rich people who make it their goal to keep the poor down, because they fancy that by repression they serve their own upper class interests, is a tale about stupid rich people. It is not a tale about the intelligent affluent aware that their interests and the interests of civility coincide.
Although it is not in general true that the rich, and the non-poor generally, desire the poverty of the poor, King’s indictment implies that the continued existence of poverty in our times is in some way virtually an intentional crime committed by society against the poor. Since today society has the techniques and the resources to get rid of poverty, and since society has not gotten rid of poverty, there must be some inadvertence or neglect, or some misunderstanding, if not a deliberate and conscious desire, behind the actions or omissions which cause poverty to continue to exist.
Throughout most of history it has generally been assumed that it was natural and inevitable that the common people, the toilers, the vast majority, would lead short lives in material deprivation. For example, in the early 19th century David Ricardo, the most careful reasoner among the early economists, advocated free trade for Britain on the ground that free trade would lower wages, and therefore raise profits, thus stimulating manufactures. Logical analysis of market exchanges led Ricardo to conclude that competition among wage earners naturally and inevitably drove wages down to the minimum required to stay alive. The minimum is determined by the price of food. Cheap imported grains from France would therefore bring lower wages, which would provide a competitive advantage for British manufactures.
Ricardo’s friend Thomas Malthus, the first to hold a chair of political economy at Cambridge, published in 1798 a mathematical proof that trying to get rid of poverty was futile, since it would only result in augmenting the numbers of the laboring classes, which would increase the pressure of population on food supply, and thus re-establish poverty more firmly than ever. Food supplies increased, Malthus believed, only arithmetically, by multiplying production; while, due to sexual passion, population increased geometrically; doubling, as in the American colonies of his time, whenever there was no scarcity of food to check it, every twenty five years. Population increase is exponential, as in the series 1, 2, 4, 8, 16, 32, 64, 128…. Malthus wrote, “The power of population is so superior to the power in the earth to produce subsistence for man, that premature death must in some shape or other visit the human race. The vices of mankind are the active and able ministers of depopulation. They are the precursors of the great army of destruction; and often finish the dreadful work themselves. But should they fail in this war of extermination, sickly seasons, epidemics, pestilence and plague, advance in terrific array, and sweep off their thousands and ten thousands. Should success be still incomplete, gigantic inevitable famine stalks in the rear, and with one mighty blow, levels the population with the food of the world.” *(4)
The mathematical argument of Malthus proved to be incorrect, as the food supply grew faster than he expected. Today Frances Moore Lappe, among others, has demonstrated that the annual production of carbohydrates and proteins is more than sufficient to support the present global population. It is a population much larger than any Malthus thought possible. Or, rather, the food supply would be more than sufficient if everyone ate lower on the food chain. *(5) Lappe, like Peter Singer, who holds similar views, does not oppose measures to limit population, but rather holds that such measures, such as increasing the power of women to control their own bodies, are part and parcel of what could be done with existing techniques and resources to get rid of poverty. *(6)
A century and a half after Malthus, in 1942, another economist, Joseph Schumpeter, made a mathematical argument to prove the contrary. He reasoned that since historical statistics showed the average annual growth of production to be above 2% per capita, which compounded from year to year like compound interest, and since historical statistics showed that the distribution of income among the social classes was constant, then assuming normal growth poverty would be ended in the United States by 1978. *(7) This mathematical argument also proved to be incorrect, not for the reason Schumpeter half expected (he half expected normal growth to be stunted by creeping socialism), since production did indeed grow as much, and more, than he postulated, but rather because the distribution of income among social classes did not hold constant. Inequality widened. The rising tide did not raise all ships.
The economic historian Immanuel Wallerstein has estimated that due to the economic and scientific progress of the last four hundred years as much as 20% of the of the world’s population has escaped poverty, leaving by implication the vast majority, at least 80%, in poverty. *(8) This high percentage is consistent with World Bank numbers, in the neighborhood of 20% to 24% identifying the poorest of the poor. *(9) The poorest characteristically lack -- besides food, adequate shelter, education, and health care-- also drinking water, sewers, and sanitation.
The Federal Republic of Germany, one of the world’s richest countries, has been called a 70 – 20 – 10 society. *(10) 70% are not poor. 20% move in and out of poverty during their lifetimes. 10% are permanently poor. Assuming that the German pattern is typical of the rich countries, my opinion, based in part on my experience as a practicing attorney representing middle class clients in the USA, is that at least half of the 70% are economically insecure. My opinion is supported by Viviane Forrester’s account of what she calls “economic horror,” in France, another rich country. *(11)
Dr. King suggests, truly in my opinion, that the answer to the decisive question depends on qualities of will. The decisive question is whether humanity at last is going to get rid of poverty, or whether it is going to continue to commit the crime against itself of excluding the majority of its members from the full benefits of the techniques and resources now available. The answer does not depend on the logical analysis of market exchanges, nor on mathematical models, nor on the statistical analysis of historical data. It depends on the choices people make. It depends on the principles they follow.
As an ordained clergyman, Dr. King was a member of a profession devoted to teaching the continuing relevance of ancient wisdom -- which has so much to say about qualities of will. King was also trained in philosophy. The philosopher Immanuel Kant, whom King often cited, defined “will” as the capacity to act from principle. For Kant, any given human action proceeds from a subjective principle, or “maxim,” which is the idea or rule that guides it and which it exemplifies. Kant’s specific intention in defining will in this way was to distinguish human action from things of nature. Speaking in a more contemporary idiom, the sociologist Anthony Giddens describes human action as “reflexively self-regulated.” In a manner similar to a number of other recent social theorists, Giddens thinks of society as a process of “structuration,” rather than as a set of given structures.
Identifying “will” with the guiding of human action by social rules; and with the processes of interpreting, monitoring, restructuring, and renegotiating, meanings and relationships; is not the only way to think about “will.” However, it is a cluster of the many dimensions of that simple yet polysemic word that is crucial to getting rid of poverty. One reason I call my vision “kaleidoscopic” is that it is a vision of an ever-changing creativity in finding ways to overcome poverty, in a world which is not made of social structures, but instead is constantly being remade through social structuration processes. Unfortunately, when we struggle to get rid of poverty, we encounter resistance from habits of mind that conceive modern institutions not as continually restructured and renegotiated patterns of human interaction, but as unalterable physical things.
Fortunately, alongside modern business and modern government, there continue to exist modernized versions of older institutions –-families and extended families, churches, voluntary associations-- which remind us, because they operate from different principles, that there are alternatives.
To try to spell out what I mean, and what I think Dr. King meant, by having a will to get rid of poverty, I will connect up with ideas contributed by five prominent commentators on today’s global economy, by making comments on their comments. Like the ever-changing patterns in a kaleidoscope, which nevertheless reflect a systematic structuration process, my vision is one of millions of people worldwide committed to doing whatever works to end poverty. Poverty consists of millions of different problems, which require millions of different solutions.
First, however, before commenting on five leading commentators, I will comment on some ideas of Adam Smith. In 1776 Smith articulated some basic rules of the economic game, which most people have followed most of the time ever since. It is time to rotate the kaleidoscope and see the world in different colors.
Smith wrote: “In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature. But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is to their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly on the benevolence of his fellow-citizens.” *(12)
If the principal teachings of the world’s religions, and of all the world’s traditional cultures, were to be condensed into two words, those two words would be “Be good!” Many have identified the good with God and identified the aim of life as serving God. Many have believed that we are here on earth to love and serve one another.
At the beginning of the modern age, however, Smith and a number of others asserted that far greater benefits to society as a whole flow from orderly selfishness than from goodness. Europe was becoming in their time a center of worldwide market exchanges. Societies built on market relationships needed principles different from those provided by the moral codes of closely-knit local communities.
Smith rested his case mainly on the enormous increases in wealth made possible by the division of labor, which, in turn, he attributed to the human tendency to truck or barter, to trade, to exchange commodities for sale in markets. Larger markets meant more specialization. More specialization meant that each worker, confined to a very limited task, would develop greater skill, dexterity, and judgment. The blessings of machinery Smith also attributed mainly to market exchanges, since it was the specialized worker who was most likely to invent a machine to lighten the task, and the capitalist who was most likely to pay for new inventions and install them in service.
Smith recognized that in earlier and ruder ages all people were usefully employed. In his own time the produce of society was diminished because a considerable portion of the population was idle, either because they were members of a leisure class living off rents and profits, or because they were unemployed workers. Nevertheless, the net result was that even the poorest worker in the England of his time was better off than the savage, because the increased production caused by the greater division of labor (itself caused by larger markets) far exceeded the losses due to idleness.
Smith was not against benevolence. He did not think that benevolence could be the mainspring of human progress, while he thought that self-interest channeled through exchange in free markets, could be. Nevertheless, as he made clearer in another book, his Theory of the Moral Sentiments, *(13) he thought that the good will that humans naturally bore toward one another was indispensable. In a perfect Smithian world the magic of the market would drive the accumulated wealth of society higher and higher, through ever-greater improvements in manufactures and agriculture, driven by ever-finer divisions of labor called forth by ever-larger markets. At the same time, the natural sentiments of sympathy would guarantee the maintenance of civilized manners and morals. They would assure that there would always be a social safety net for beggars, orphans, and others unable to live by truck and barter. Although he bases his theory of ethics on natural sympathy, and not on revealed religion, in his chapter on education in the Wealth of Nations he proposed that the laboring masses should continue to be instructed from the pulpit on Sundays in the same Judeo-Christian virtues of love for neighbor that had been preached for centuries in Europe. (The upper classes, however, were to study also the newer disciplines of political economy and natural philosophy.)
Smith held that the whole purpose and point of economic activity was to produce the wants and conveniences of life, what he called values in use. In a system based wholly on organized benevolence, such as Plato’s Republic, people would produce use values directly, because other people needed them. It would be their conscious aim to contribute to society by producing what other people needed. Smith found it enormously more powerful and effective to produce goods to take to market to sell, to devote one’s energies to producing what he called value in exchange. The direct result was profit for the producer. The indirect result was value in use, the satisfaction of people’s needs and desires. Value in use answers the question from Gandhi quoted at the beginning of this chapter. It actually provides some concrete benefit to someone. The invisible hand of the market would lead people to deliver more value in use by approaching the goal indirectly, seeking directly value in exchange.
From Smith’s distinction between value in use and value in exchange I derive the principle of my vision. Benevolence produces use values. Self-interest produces exchange values. Benevolence is weak. Self-interest is strong. The constant will to get rid of poverty is the commitment to reshape modern institutions until they accomplish what benevolence would accomplish if it were strong enough. It is what Dr. King called “love in action.” *(14) This is the invisible active principle behind the visible kaleidoscope of multitudes of diverse anti-poverty programs.
The higher ancient wisdoms teach the unity of all life; modern society teaches the infinite worth of every individual; both propose the welfare of all as the goal of social cooperation. Both teach and propose, in one word: benevolence. In three words: value in use. For several centuries now Adam Smith and his followers have persuaded most of the world most of the time that the realistic way to put into practice these generally accepted ideals is through market economies.
Meanwhile, over these same several centuries poverty and economic insecurity have not gone away. Modern society has broken its pledge. Having pledged to respect the intrinsic worth of each, it has rejected many. Since every individual is of infinite worth, there should not be a single unhappy lonely homeless alcoholic living in the streets. There should not be a single middle class professional woman whose blood pressure is out of control because she cannot pay her taxes. The early advocates of modern ideals, including Adam Smith, supposed that they would preserve the best of ancient wisdom, while liberating humanity from ancient shackles. In practice at least five problems inherent in Smith’s meet-human-needs-by-exchange-of-commodities model have dug a wide and deep chasm which separates what ought to be from what is.
A FIRST inherent problem is that, contrary to what Smith hoped for, self-interest and benevolence often do not nicely complement each other. They often interfere with one another. For example, if, for whatever reason, in some part of the world commercial agriculture is not doing the job of meeting certain people’s need for food, benevolence may step in and provide free or subsidized food. (It makes no difference whether the benevolence takes the form of a government program or a church or other Non Governmental Organization donates food.) But then commercial agriculture loses incentives, because the farmers cannot sell food to people who are getting free food. Then the system of meeting-needs-through-exchange-of-commodities does an even worse job than it was doing previously. Farmers may be forced to abandon their farms and join the homeless destitute masses on the streets of the cities. The example illustrates a fundamental problem. If we are not to let people starve, something must give way: either dependence on benevolence, or dependence on markets.
I submit that in the last analysis it is dependence on markets that must be modified. Love is the basic law of the human species. Sometimes tough love is called for. Sometimes commodity exchange in free markets works better than any alternative. But when push comes to shove, the question to be answered is the question Gandhi asked. If it does not work for the weakest and poorest, then it does not work. It is time to try something else. Dr. King defined the ultimate ideal, which describes the framework within which institutions should be evaluated and restructured, as “beloved community.” *(15)
As a parting shot concluding my direct comments on Adam Smith, a methodological point: Did Adam Smith really know why his butcher, his brewer, and his baker brought him his dinner? Obviously he did not know when he was a tiny tot, nor in his dotage, but in a sense he did not really know even when he was a middle aged professor at Glasgow University. The most honest answer to the question, “Why do people do what they do?” is always, “I have some ideas and opinions, but actually I do not really know.”
Nor do we really know, as we organize diverse projects to fight poverty, what it is that motivates people to shake off apathy and strive to better their situations, nor what it is that motivates people to shake off indifference and volunteer to join the cause. As a practical principle for community organizing, we should not assume in advance that “self-interest” or “benevolence” or any other concept names the spirit that moves people. The best methodology is to begin as radical empiricists without preconceptions and to be sensitive to following the leadings of the spirit as we encounter them, joining in what God is doing, as we find it in the minds and hearts of people on the ground.
To have a will to get rid of poverty means to act on principles that are effective in getting rid of poverty. Those principles include patience, persistence, sensitivity to diverse contexts, and openness to experimentation with diverse practices in search of practices that work. It is not helpful to say, “All problems would be solved if people were nicer.” But it is also not helpful to say, “Since people are not nice and never will be; we must accept a world built on selfishness and violence.” A will to get rid of poverty cultivates what Dr. King called “a tough mind and a tender heart.”*(16)
Having outlined the basic meet-human-needs-by-exchange-of-commodities model pioneered by Smith, I will now continue to sketch a vision of ways to overcome problems inherent in it, by commenting on ideas contributed by five contemporary critics of the global economy.
FROM PAUL VOLCKER: (former chairman of the Board of Governors of the Federal Reserve System): “ The problem [the recent collapse of the Indonesian economy and several others] is not regional but international. And there is every indication that it is systemic –systemic in the literal sense that it arises not from some deux ex machina, but from within the ordinary workings of the international financial system itself. … In emphasizing so strongly the systemic nature of the financial problems, I do not want to be misunderstood. … I believe, over time, that crony capitalism, state ownership, and official industrial policies are all inherently less efficient than open competitive markets.”*(17)
COMMENT: The ordinary workings of our Smithian world at the level of the international financial system follow the same principle they follow at the local level: “Give me that which I want, and you shall have this which you want….” Such is the principle of exchange in markets, of buying and selling. A SECOND inherent problem in such a system is that any economy may collapse at any time, because at any time, for whatever reason, or for no reason, many people may simultaneously decide not to buy, not to exchange. The exchange value of anything is what people will pay for it. When nobody wants to buy it, its value dissolves. When the value of many things dissolves, economies collapse. This inherent problem in meeting-human-needs-by-commodity-exchange, the problem of instability, can translate into opportunities for taking steps to get rid of poverty. Many schemes for modifying markets to benefit the poor, such as the encouragement of collective bargaining by governments under the influence of John Maynard Keynes in the 1930s, also make economies more stable, and vice versa. The visible hand of government, which steadies the shaky invisible hand of the free market, can deliver the poor from merciless labor markets which pay them starvation wages, at the same time that it wards off collapse, or rebuilds after a collapse. What I suggest here is not a blueprint, but a constant will to take advantage of the opportunities that history offers.
Volcker believes, nonetheless, that in spite of the inherent systemic tendency of open competitive market economies to collapse, they are still better than crony capitalism, state ownership, or official industrial policies. But there are more than three or four alternatives; the number of alternatives is infinite. A will to get rid of poverty is a will to find the alternatives that translate the abundant techniques and resources made available by scientific and technological progress into welfare for people. (My opinion is that in some cases two things Volcker does not believe in, state ownership and official industrial policies, may contribute to welfare for people.)
FROM GEORGE SOROS: “…the current campaign against moral hazard [e.g. government guarantees leading private banks to make unsound loans] is just an excuse for resisting any kind of interference with the market mechanism. This resistance is based on the false doctrine of our age, namely that financial markets automatically tend towards equilibrium –from which it follows that there is no need to interfere because markets will correct their own excesses.” *(18)
COMMENT: What is holding humanity prisoner; with the poor in the worst cells, the torture chambers; is not the Smithian market conceived as truck or barter where each exchanges her surplus she does not need for someone else’s surplus she does need. A THIRD inherent structural problem can be called addiction to the market. Progress has made humanity dependent, as an addict is chemically dependent on a drug, on the market mechanism. In modern times poverty and insecurity threaten to arise whenever the market fails to move steadily forward, keeping investors investing, so that there will be jobs, so that there will be tax revenues, so that there will be goods and services produced. The market imprisons us because we cannot escape it. Looking at the matter from this point of view, Soros is surely right to say that governmental interference with the market is needed. The market is too important to be left to govern itself. Certainly the IMF should, as Soros advocates, be a global lender of last resort infusing cash at low interest rates into slow economies everywhere, as the Federal Reserve does in the United States. Certainly there should be a global tax on international financial transactions, to discourage speculation with no productive purpose, and to raise revenue for world anti-poverty projects. Governmental interference can be called post-market correction measures, designed to make more reliable the global market we have all come to depend on.
But there is also a second way to cope with humanity’s addiction to markets, a complementary way. It is a way that must be pursued if the first way is going to work: it can be called pre-market corrections. Humans lived on this planet for thousands of years before becoming dependent on commodity exchange for their livelihoods. There was a time when for most people market exchange was a mutually beneficial activity, which added comfort and convenience to life, but which was not, strictly speaking, necessary to acquire life’s necessities. A world without poverty would not only be a world in which governments corrected market failures. It would also be a world in which the ancient pre-market institutions, families, service clubs, lodges, neighborhoods, churches, small towns, and cities as well as national governments and the United Nations, would care for people and shelter them against the ultimate rejection the market can inflict on them –nobody wanting to buy what they have to sell.
FROM JEFF FAUX AND LARRY MISHEL: “For a long time, many policy-makers denied the reality of the slowdown in per-capita growth, the stubborn persistence of rising poverty or the maldistribution of incomes. When the reality became impossible to deny, they belittled its importance. In the wake of a crash of financial markets and the subsequent tumble into deep recession of approximately 40% of the world’s population, the question of inequality can no longer be shrugged off.”*(19)
COMMENT: Unacceptable levels of inequality are not something new that arrived in the world with the intense globalization and liberalization of the last few years, nor are they found mainly in countries that have made a political choice to accept less equality in exchange for greater liberty. *(20) They are part and parcel of the Smithian system. Unacceptable inequality is greatest where trade liberalization, with or without a veneer of political liberalization, brings no liberty at all to the people. Maria Mies cites examples from Asian factories where women make the microchips for our computers, where the owners may be fabulously wealthy while the women typically work long hours for low pay, lack health benefits, get no compensation when their eyesight fails due to the exacting work, have no free speech, no union, and no freedom to take a break to go to the bathroom or get a drink of water. *(21)
Smith acknowledges at least three reasons why inequality is a FOURTH inherent structural problem in the world that exchange value built:
1.As Smith notes, wealth is capital. Capital plays a role similar to the seeds saved for next year’s planting in an earlier and simpler society. If the seed is consumed, then everybody goes hungry. Reducing social inequality by distributing wealth more evenly encounters the objection that it gives more money to the working class, who will spend it to increase their consumption, and takes capital away from the wealth-creating class. As Alfred Marshall wrote a century after Smith, “…the labourer without the aid of his own or someone else’s capital would not long be alive.”*(22)
· Smith also acknowledges that investors invest only when they expect profits; they only give when they expect to get more back. It is consequently an inherent problem of the logic of exchange that growth and the accumulation of profit go together. No increase in the wealth of the wealthy; no growth. Under such circumstances although it is not mathematically certain that inequality will widen, it is likely, because one side of inequality, the rich getting richer, is a condition without which growth does not happen. If statistical analysis of historical data yielded causal laws, then Schumpeter’s prediction of an end to poverty, based on inequality staying the same, would have been correct. But it is the human will that activates the economy, guided in a Smithian world by the principle of self-interest: “Give me that which I want, and you shall have this which you want.” As this cause worked itself out in history, inequality widened. Contrary to Schumpeter’s prediction, the poor remained poor while the rich got richer.
· Wages are usually low. Smith wrote: “It seldom happens that the person who tills the ground has wherewithal to maintain himself till he reaps the harvest. His maintenance is generally advanced to him from the stock of a master, the farmer who employs him, and who would have no interest to employ him, unless he was to share in the produce of his labour, or unless his stock was to be replaced to him with a profit. …. What are the common wages of labour, depends everywhere upon the contract usually made between those two parties, whose interests are by no means the same. The workmen desire to get as much, the masters to give as little, as possible….In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, a merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment.” *(23)
Although rising inequality is an inherent structural trend in a Smithian world, from time to time the trend is reversed, as it was reversed in Smith’s own time, for reasons Smith duly noted, in the British colonies in New England. It was reversed again in America during the 1940s when the war economy managed by the Roosevelt administration led to greater equality than America experienced before or since. Most notably, it was reversed in Sweden and in other West European social democracies in the decades following World War II. *(24)
The secret of Sweden’s success was this: business, labor, and government worked together in a number of crucial ways. The retained earnings of corporations were the main source for capital for new investments (as they are in most modern nations most of the time). Corporations were allowed to keep their earnings tax free, and were even assisted with public funds, to the extent necessary to provide them with adequate working capital. But there were no fabulous executive salaries, no windfall profits, no unreasonably high profits generally. Running the business was funded, research to develop new technologies was funded, private enrichment was not. As it turned out the great Swedish corporations --Volvo, SAAB, Weyerhauser, Electrolux, Erickson ….-- did very well in world markets, indeed better on the whole than their competitors from free marketeer economies. Meanwhile, wages went up, workers feared unemployment little because what unemployment meant was being paid to be retrained for another job, and the wages of women were deliberately raised with the aim of bringing them equal to those of men.
The postwar Swedish model was not perfect, and it has survived only in a modified form, but it did show the world, and it still shows the world, how to solve one crucial problem: how to capitalize business adequately while keeping inequality in check. Sweden’s achievement adds poignancy to the words of Dr. Martin Luther King Jr. Not only do we have today the resources and the techniques to get rid of poverty, but something else is new too: Now we know that capital, like seeds for next year’s harvest, can be preserved without ethically unacceptable inequalities. Now we know that a modern economy can simultaneously reduce inequality and compete successfully in world markets.
FROM VANDANA SHIVA: “On 3 March 1998, the US Department of Agriculture (USDA) and the Delta and Pine Land Company, a subsidiary of Monsanto and the largest cotton seed company in the world, announced that they had jointly developed and received a patent on a new agricultural biotechnology. Benignly titled `Control of Plant Gene Expression’ the new patent permitted its owners and licensees to create sterile seeds by selectively programming a plant’s DNA to kill its own embryos. The patent applies to plants and seeds of all species. The result ? If farmers save pods, tomatoes, peppers, heads of wheat, and ears of corn, they will essentially be stockpiling seed morgues. The system will force farmers to buy seed from seed companies each year. It has been dubbed `terminator technology’ by groups such as Rural Advancement Foundation International, which says it threatens farmers’ independence and the food security of over a billion poor farmers in Third World countries….
“The right to trade freely on a global scale is being established as the highest right. People’s right to safe and adequate food is being treated as a non-tariff trade barrier, to be dismantled and destroyed. … At the heart of these conflicts are the rights of citizens to safety versus the rights of corporations to profit.” *(26)
COMMENT: A FIFTH problem inhering in meeting-human-needs-through-exchange-of-commodities, closely related to the four previously mentioned, is the profit imperative. Smith did not anticipate it. Smith advocated a system based on voluntary exchange between willing buyers and willing sellers. He did not expect the system to generate an imperative that would override human choice and human ethics. As it has turned out, economic conditions such that buyers choose not to buy and/or sellers choose not to sell cannot be tolerated. Exchange has become the lifeblood of society. If commerce stops, everything stops. But commerce only goes if there are profits to be made. Hence government at every level, from the local city council to the United Nations must concern itself, first and foremost, with creating a favorable climate for business. If government cannot establish an environment in which businesses make profits, it cannot do anything else. Profits are imperative.
A few dents in profit can be accepted here and there without shutting down the system, but in the end anything that fundamentally obstructs the mainspring that makes it possible for commerce to go forward must get out of the way, as long as the world works the way it does. If safe disposal of toxic wastes (seriously) conflicts with profits, safety must go.
If stopping global warming conflicts with profits, then global warming will not be stopped.
If genetic diversity conflicts with profits, genetic diversity must go.
If human rights conflict with profits, human rights must go.
If indigenous cultures and the ecosystems that support them conflict with profits, then they must go.
If international law conflicts with profits, then international law must go.
If farmers saving their own seed for next year conflicts with profit, then saving seed must go.
If the socially responsible use of public or private property conflicts with profits, then social responsibility must go.
There are two principles (and a postscript) for solving this FIFTH inherent structural problem of a Smithian world.
One is the principle of green and fair profits. Then there is no problem: doing good does not conflict with profits. There are many examples, often identified by the Buddhist phrase “right livelihood.”
The second principle, absolutely necessary too, is to make the profit imperative less imperative by meeting human needs without it. The number of examples is infinite. They include co-op housing, groups of parents who take turns sharing child care, neighborhood gardens, the public bus company or rail passenger service that is not required to stay in the black, the non-profit hospital or school that calls in volunteers to help, and any number of out-of-the-mainstream gambits. Mobilize resources to meet needs. That is the name of the game.
The postscript is this: another key question is, What happens to the profits after they are made? A major part of getting rid of poverty consists of capturing rents and profits and channeling them toward worthwhile purposes.
Gandhi’s question, posed in the quotation at the beginning of this chapter, cannot be answered without making judgments about the links that connect causes with effects in the Smithian global economy we live in, built mainly on the principle of meeting human needs through the exchange of commodities. Whether what I am doing will benefit the weakest and the poorest depends on the effects my actions cause.
The vision I have been sketching is one that takes the principles humans act on to be the main causes of historical events. The set of principles I recommend calls for a will to take advantage of historical opportunities, to be creative, to be patient and persistent, to respect diversity, to be a radical empiricist who does not assume that the answers are known in advance, to discard what does not work and find what does work; until revised modern institutions, together with still living vigorous ancient institutions; together get rid of poverty. Smith’s value in exchange principle needs to be modified and supplemented, in a moving kaleidoscope of different ways, by Smith’s value in use principle. The second is the more basic. It is the one that states the point and the purpose of human cooperation.
· (1) Mohandas K. Gandhi, quoted in the Introduction to Kuruvilla Pandikattu, The Meaning of the Mahatma for the Millennium. New Delhi: Maadhyam Book Services, 2000. P. 1.
· (2) Martin Luther King, Jr. recorded in the video documentary “Eyes on the Prize.”
· (3)Aldous Huxley, The Perennial Philosophy. New York: Harper, 1945.
* (4) Thomas Robert Malthus, On Population. New York: The Modern Library, 1960. (first published 1798) Pp. 51-52.
· (5) Frances Moore Lappe, Diet for a Small Planet. New York: Ballantine Books, 1971.
* (6) Frances Moore Lappe and Joseph Collins, Food First. Boston: Houghton-Mifflin, 1977; Peter Singer, One World: the ethics of globalization. New Haven: Yale University Press, 2002.
· (7) Joseph Schumpeter, Capitalism, Socialism, and Democracy. New York: Harper and Brothers, 1946. Pp. 64-67. (First published 1942)
· (8) Immanuel Wallerstein, Unthinking Social Science. Philadelphia: Temple University Press, 2001. Pp. 107, 113, 167.
· (9) Shaohua Chen and Martin Ravaillon, “How Did the World’s Poorest Fare in the 1990s?” Washington DC: The World Bank, 2000. Policy Research Working Paper # 2409.
· (10) Lutz Leisering and Stephan Leibfried, Time and Poverty in Western Welfare States: united Germany in perspective. Cambridge UK: Cambridge University Press, 1999. P. 242. (first published in German 1995)
· (11) Viviane Forrester, L’horreur economique. Paris: Fayard, 1996.
· (12) Adam Smith, The Wealth of Nations. London: J.M. Dent, 1954 (first published 1776). P. 13.
· (13) Adam Smith, The Theory of Moral Sentiments. Oxford: Clarendon Press, 1976. (first published 1759)
· (14) Martin Luther King, Jr. Strength to Love. Philadelphia: Fortress Press, 1963. Pp. 36-46.
· (15) John J. Ansbro, Martin Luther King, Jr.: the making of a mind. Maryknoll, New York: Orbis Books, 1982. Pp. 187-97.
· (16) Martin Luther King, Jr. Strength to Love. Philadelphia: Fortress Press, 1963. Pp. 9-16.
· (17) Paul A. Volcker, “The Sea of Global Finance” in Will Hutton and Anthony Giddens (Eds) Global Capitalism. New York: The New Press, 2000. P. 77.
· (18) George Soros, “The New Global Financial Architecture” in Will Hutton and Anthony Giddens (Eds.) Global Capitalism. New York: The New Press, 2000. P. 91.
· (19) Jeff Faux and Larry Mishel, “Inequality and the Global Economy,” in Will Hutton and Anthony Giddens (Eds.) Global Capitalism. New York: The New Press, 2000. Pp. 106-07.
· (20) For rational arguments proposing criteria for deciding how much inequality is ethically acceptable see John Rawls, A Theory of Justice. Cambridge, Mass.: Harvard University Press, 1971. As is the case with most of the books here cited, there is a very large literature commenting on Rawls’ arguments. Partners: levitra generique.
* (21) Maria Mies, Patriarchy and Accumulation on a World Scale: women in the international division of labor. London: Zed Books, 1986. P. 136.
* (22) Alfred Marshall, Principles of Economics. New York: Macmillan, 1948. P. 544 (First edition published in 1890)
· (23) Adam Smith, The Wealth of Nations. London: J.M. Dent, 1954 (first published 1776). Pp. 58-59.
· (24) See generally, Amartya Sen, On Economic Inequality. New Delhi: Oxford University Press, 1973.
· (25) Vandana Shiva, “The World on the Edge,” in Will Hutton and Anthony Giddens (Eds.) Global Capitalism. New York: The New Press, 2000. Pp. 119-120, 122, 124.