A Key Question: How Do We Make the Economy Work for the Poor?

BY TRANSCEND MEMBERS, AFRICA, ECONOMICS, 18 Feb 2013

Howard Richards – TRANSCEND Media Service

This book is about a concept and a fact.     The concept is “unbounded organization.”[i]  The fact is the Community Works Programme of the Republic of South Africa.[ii]  The intended audience of the book is the educated public.  This first chapter is an essay in persuasion.  It is an attempt to persuade potential readers that learning what this book has to say will be worth the time and the effort they will need to invest to read it.

We want to make a case for the claim that “unbounded organization” is a useful concept, indeed a key concept.  A key opens doors.   We use the word “key” to suggest that the concept of unbounded organization can be said to “open doors.” It helps to answer questions and to resolve problems regarding not just one but several theoretical problems in the social sciences.   Similarly the practical question posed in the title of this chapter, “How do we make the economy work for the poor?” can be regarded as a question whose satisfactory answer would “open” answers to other crucial practical questions such as, “How can violent conflicts be transformed into peaceful cooperation?” [iii]  “How can social problems associated with poverty and inequality be alleviated?”[iv]  and “How can the world become sufficiently governable to make it possible to enforce the environmental laws needed to make human life sustainable.”[v]   We think it is almost self-evident that a satisfactory answer to the question, “How do we make the economy work for the poor?” would be a key that would open closed doors that block solutions to other crucial practical problems.  Nevertheless, redundant though they may be in our own minds and perhaps in the minds of others, we will in later chapters make explicit arguments linking poverty alleviation to solutions to other major problems.

After reading this first chapter the reader should possess an inkling of what we mean by “unbounded organization” and “an unbounded approach.”  She or he should have a rough notion of where we stand on some issues in the philosophy of the social sciences.  She or he should have an inkling of why somebody might think, and why we do think, that the problem of making the economy work for the poor will be forever intractable as long as the approaches to solving it are “bounded” –in a sense of “bounded” to be sketched in this chapter and later shaded and augmented.  This theoretical claim will be illustrated and supported later in the book by empirical evidence from a large programme designed to serve a million participants by 2014.[vi]   We shall interpret South Africa’s Community Works Programme (CWP) as an unbounded approach that does make the economy work for the poor.   After completing a reading of this first chapter the reader should be in a position to judge whether her or his time and effort would be well spent attempting to master the more detailed arguments of the rest of the book.

We now proceed to offer a way to talk about “the economy.  Then we will make a brief comment on who and what we are talking about when we refer to “the poor,” and begin to say why we believe it is useful to speak of unbounded organization to contribute to making the former “work” for the latter.

The Economy

Taking a leaf from the book of Max Weber we will start with an ideal-type of pure capitalism.[vii]   When he was studying modern western societies Weber employed as a tool for analysis a simple concept of rational economic man (dubbed by some people homo economicus).   He knew perfectly well that the ideal type was not a mirror reflecting the feelings, thoughts, and actions of flesh and blood people.  His procedure was to start with a simplified ideal type that provided important insights into human action at a given time and place.[viii]   Then he could study human action that did not conform to the ideal type by comparison with the ideal type.[ix]   We will use a stripped-down bare-bones model of pure capitalism.  It will be an ideal type not of an individual actor but of a social system.

We introduce our stripped-down bare-bones model of the economy with a simplified version of a diagram drawn by Karl Marx.[x]

Gogo Karlina Mvhendana is 91 years old and lives in Belfast, South Africa.  She has been blind since 2004 and has no one to take care of her.  CWP participants built her a one-room home with donations from people in the area.  They helped her get groceries and also linked her to an eye specialist in nearby Hazyview.  After a cataract operation she has regained sight in one eye.  “God has sent the CWP to assist me. I am so happy.  I sometimes feel that I can walk to the river and go for a swim,” she says.

M         >       C        >   ……..P …………    >        C´        >         M´

The diagram represents that the capitalist begins with M, Money.

With the money M the capitalist purchases the commodities C necessary for production, most notably the peculiar commodity that is the labour power of the workers.

(Marx’s German word translated as C “commodities” is Waren, a cognate of the English “wares” i.e. things made to be bought and sold.  The word “wares” was famously employed by the innocent Simple Simon who said to the pieman “Let me taste your wares,” unaware that in a mercantile economy the possession of money is a prerequisite to eating—a point later developed in greater detail by Amartya Sen in his study of famines.[xi])

Next in the diagram the owner of the commodities purchased sets in motion the process of production:           ……P…….

At the end of Production the same owner has become the owner of other wares. Now they have become commodities with a greater value, designated as C´

Finally comes the sale of C´ resulting in M´.   The quantity of Money M´ earned by the sale of the commodities produced is greater than M, the quantity of Money initially invested.

In theory this ideal-typic representation[xii] of a capitalist economy implies[xiii] staggering consequences.[xiv]   In practice staggering consequences follow to the extent that this simplified diagram accurately reflects how the economy works.   We do not expect the reader to grasp the consequences all at once.  We expect them to sink in gradually.   Now we will briefly mention some.[xv]

 Phumi Bombo is a teacher at the Gobelha primary school in Umthwalume in the South African province of KwaZulu-Natal.  “Every year we bury up to ten learners, all from accidents.  Since we’ve had teacher assistants from CWP there is yet to be a fatal accident that involves a child from our school.  The change is visible and the learners are taken care of.  When I am late or cannot come to school for whatever reason, I do so with the knowledge and confidence that I have left my learners with somebody who is capable of holding the reigns until I can take over.

In this stripped-down bare-bones model of the economy, money is advanced for the purpose of making something to sell at a profit.[xvi]  If money-seeking-profit is not advanced, nothing happens.[xvii]  The aim of the game is to make the difference M’ minus M as large as possible.  For that to happen the difference C’  minus C must be as large as possible; in other words the aim is to maximize the difference between the selling price of the goods and the cost of making them.   Costs must be kept down.   Wages are a cost; therefore (in this model) the wage bill must be kept down, both by limiting hires and by limiting salaries.   If costs rise to the point where the spread C’  minus C shrinks toward zero,  causing  the spread M’ minus M to shrink toward zero, then no money-seeking-profit will be advanced.   In that case there will be no employment and no production, and consequently (since nothing will be produced) no consumption.

Marx’s Presuppositions

Let us take temporary leave of the consequences of seeing the economy as a process of capital accumulation in order to look at what is presupposed when it is seen that way.   Looking again at Marx’s diagram, notice that both the left-hand side (the beginning) and the right-hand side (the end) consist of sales.  In the beginning the capitalist buys the labour-power and other inputs needed to set in motion the production process.   In the end the capitalist sells the products.   The legal and ethical rules that constitute exchange in markets are presupposed.[xviii]  Marx had earlier outlined those legal and ethical rules in a famous paragraph in Volume One of Capital:

“The sphere of circulation, or of exchange of commodities, within which labour power is bought and sold, is in fact a true Eden of the natural rights of man.  There reign only freedom, equality, property, and Bentham.   Freedom!  Because the buyer and seller of a commodity, say labour power for example, are not moved by anything but their own wills.  They make a contract, as free persons, equal in rights.  The contract is the form in which they give to a joint legal expression to their common will   Equality! Because they relate to each other as owners of commodities, and they exchange equivalent for equivalent.  Property!  Because each disposes only of his own.   Bentham! Because each is concerned only with his own self-interest.[xix]   The only force that brings them together and defines their relationship is their selfishness, their own advantage, their private interests.   And just because each is concerned only with himself, and neither has concern for the other, due to the pre-established harmony of things, or under the guidance of a most cunning providence, all work for the sake of each other’s advantage, for the common good, for the general interest.”[xx]

Adam Smith

What has Marx done here?  He has repeated some principal doctrines of Adam Smith, transposing them into irony.  Freedom, equality, contract, property, and self-interest constitute what Smith calls “natural liberty” in The Wealth of Nations.[xxi]  For Marx the same norms acknowledged by Smith and by classical economics generally are the rules that constitute and govern the exchange of commodities.  They frame the process of capital accumulation both at its beginning (acquiring the inputs of production) and at its end (selling the outputs of production).   If we ask then, “What is this thing called ‘the economy’ (which we want to transform to make it work for the poor)?” we will find that Marx and Smith (and following Smith today’s liberals and neo-liberals) define the economy by the same constitutive norms (freedom, equality, contract, property, and self-interest) –provided that we restrict our analysis to the exchange of commodities in what Marx calls “the sphere of circulation.”

Marx has also in the passage quoted (no doubt deliberately and consciously) repeated in an ironic mode a central doctrine of Adam Smith’s Theory of the Moral Sentiments.  It is the doctrine that divine providence has decreed that it shall be the nature of human beings each to pursue his or her self-interest.[xxii]

Marx agrees with Smith, in the sense that when the two look at commodity exchange in a market economy they see the same practices governed by the same norms; Smith also agrees with Marx, in the sense that Smith also finds that a consequence of market exchange is, by and large, the misery of the wage-earner.[xxiii]   That wages will be low follows from a central and pervasive feature of Smith’s conceptual apparatus.   Prices in general, including wages (i.e. the price of labour) fluctuate around and tend to converge to what Smith calls the natural price.[xxiv]  The natural price is the cost of production.   Competition in free markets tends to lower the prices sellers can charge buyers down toward the cost of production of the item sold.   In the case of skilled and highly educated workers, the cost of production of a worker includes the cost of acquiring skills and education.  In the case of 18th and early 19th century European ordinary workers (the kind of worker most observed and most discussed by the classical economists Smith, Ricardo, and Marx) the principal component of the cost of production of a worker was the cost of food.  Smith wrote, “…the demand for men, like that for any commodity, necessarily regulates the production of men; quickens it when it advances too slowly and stops it when it advances too fast.  It is this demand which regulates and determines the state of propagation in all the different countries of the world….”[xxv]   Lack of market demand for labour “stops” its production because children die, or are never born, and sometimes adults die, because wages do not suffice to buy sufficient food.  David Ricardo makes the same point with more explicit language:  “Labour, like all other things which are purchased and sold, and which may be increased or diminished in quantity, has its natural and its market price. The natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and to perpetuate their race, without either increase or diminution.”[xxvi]

Phindile Ntshangase is the Njoko community garden supervisor in Nongoma.  She is an orphan looking after four siblings. “When my mom died in 2008 I thought it was finished for my family.  I felt helpless.  I am really happy now that I am able to care for my siblings and myself.  This has brought hope into my life.  Every month I am saving R200 because I want to continue my nursing studies.  As long as I am employed I will not be helpless.”

The Poor

            In addressing the question how to make the economy work for the poor we have been discussing what is meant by the words “the economy.”  Now we will turn our attention briefly to what is meant by “the poor” but only long enough to do a short thought -exercise, and only with a single limited aim.   The aim is to underline the desirability of holistic approaches to poverty alleviation that deal with its social dimensions as well as its economic dimensions.

            Here is the thought-exercise:

            Imagine.  Imagine we are having a beer in a tuck shop[xxvii] in Alex.[xxviii]  Now imagine that we are at exactly the same location on the surface of the earth four hundred years earlier.   We notice that now (in our new now, the one four hundred years prior to the time we conventionally call now) the human population is quite small; it seems lost and insignificant in the vast immensity of the natural landscape.  Money plays a small role in our lives if we use it at all.  Although food consumption in terms of calories per day is comparable to what it will be for the poor people four hundred years later, the future-people (not just any future-people but specifically the poor ones in the tuck shop in Alex) will have lost many food-producing and food-gathering skills; they will spend more hours a day on the whole trying to eke out a living by hook or by crook and will enjoy less leisure.[xxix]  The future-people will have lost their traditional culture and identity.[xxx]  They will no longer live securely in extended families and clans where “children of the same homestead will share even the head of a locust.” [xxxi]   They will see wealth but will not touch it.    Humiliation will be the daily diet of their souls.[xxxii]   Drinking, fighting, and promiscuity will be their desserts.  The future people will live far from the lands of their ancestors, for they will have left their ancestral lands to move to the city to look for work, and many of them will not have found it.  That is a strange concept, “looking for work and not finding it.”  We cannot understand it.   How can one not find work when all of nature invites us to do something useful for ourselves and our kin?   We cannot grasp the concept, but no doubt the future-people who will have personal experience of it in daily life will know what it means.

            Of course all of this is mere imagination.  It is no substitute for the practitioner’s careful study of the particular actually existing culture of the milieu where she or he works.   It is no substitute for discerning a culture’s zone of proximal development, for discerning it can go next, starting from where it is now.[xxxiii]   This imaginary thought exercise is meant to orient real-life efforts to end poverty [xxxiv] toward what we believe to be a special strength of the CWP approach, moving beyond an already broad focus on employment, acquiring assets, and access to goods and services toward an even broader focus on social integration.[xxxv]

How We Can Make the Economy Work for the Poor

            We have been insinuating, without yet coming right out and saying it, that the phrase “the economy” is best glossed as human practice governed by the constitutive rules[xxxvi] of commodity exchange, namely[xxxvii] freedom, equality, property, contract, and self-interest, or, alternatively, following Smith, the principles of natural liberty. [xxxviii]   These rules of the game make it inevitable, or nearly so, that the logic guiding the system and the dynamic driving the system will be capital accumulation.[xxxix]   Assuming with Adam Smith that natural liberty is inseparable from free competitive markets, these rules of the game make it inevitable, or nearly so, that wages will be low.    The economy so structured is not likely to work for the poor; working for the poor is not its purpose (its purpose is to turn money into more money); the objective of working for the poor or any social or ecological objective, —indeed any objective whatever –is likely to clash with its overriding imperative.  Its overriding imperative is to keep profits flowing, since the expectation of profits is what drives it (its overriding imperative was named “confidence” by John Maynard Keynes.[xl])

Nongenisolo Madlokazi lives in the rural village of Upper Mnyameni in Keiskammahoek in Eastern Cape.  She is the elected CWP supervisor for her village.  Of seven people in her household, only one is working.  “The CWP has helped to chase away the hunger.  In my house there was no furniture and now I have furniture and there is food in the house. It has also warmed my heart because I have got respect in the village because of this project.”

      It would follow that when in history there have been economies that have reliably worked for the poor (and that if there are to be in the future economies that reliably work for the poor) there must have been (and in a happy future there must be) intervening generative causes that are not comprehended in our stripped-down bare-bones model of capitalism.   We propose to call them “unbounded.”  We can make the economy work for the poor with unbounded organization.

   Putting the same matter slightly differently, it is our view that the reasoning of the classical economists was valid.[xli]  It is as valid today as it ever was.   Whenever history turns out differently from what is to be expected within the bounds of the natural liberty that framed their analysis, it is because the facts[xlii] they observed, and therefore the premises from which they reasoned, do not obtain.

    Thus our initial answer to the question how to make the economy work for the poor is a negative one.  “The economy” in what can be regarded as the ideal-typic primary sense of the term is not going to work for the poor.  As Amartya Sen has wisely written capitalism can generate mean streets and stunted lives unless it is restrained and complemented by other institutions– in many cases by nonmarket institutions.[xliii]

   We think the best way to proceed to explain our proposal to employ unbounded organization to make the economy work for the poor will be to begin by giving a good example of what we mean.   We beg the reader to tolerate the suspense of waiting for general conceptual clarification of the bounded/unbounded distinction; and to tolerate the suspense of waiting to learn more in general terms about why we think that in general unbounded organization is a useful concept in making the economy work for the poor; while we develop one particular example of an idea that breaks the bounds of the constitutive rules of commodity exchange –the idea of separating the right to live from the necessity to sell.

The Right to Live

            We have been talking about how to talk about the economy.  We have been using and putting in perspective the language of business.  Now we shall shift to the somewhat different language of human rights.[xliv]   We will soon bring together these two rather different realms of discourse with a proposition about the kind of economy needed to honour commitments to human rights:  It must be an economy where it is not necessary to sell something (labour-power or something else) in order to enjoy the right to live.

            There is an international consensus solemnly expressed in a series of multilateral treaties signed by the authorized representatives of almost all nations [xlv]affirming that every human being has civil, political, economic, social and cultural rights.[xlvi]  Underlying all these rights is the right to live.

            In order to live every human being must satisfy certain basic necessities, such as food, water, housing, and health care services.

            Since the earliest beginnings of the human species its diverse cultures have prescribed that human beings in one form or another have duties to contribute to sustaining the lives of others.[xlvii]   Commonly social norms provide that humans have a duty to work.   Those excused from working have generally been an upper class, not a lower class.    But it cannot be a duty to sell.  A sale always requires the voluntary agreement of a buyer.  Because there cannot be a social norm obliging buyers to buy, there cannot be a social norm obliging sellers to sell.

            In mercantile societies like our own people usually satisfy their basic necessities by buying what they need with money.  They get the money by selling.  Often what they sell is their labour-power.

            In the individualistic vocabulary typical of our kind of society, it is said that “people should stand on their own two feet.”  They should not rely on “someone else” to meet their basic needs.  A moment’s reflection shows that a culture where such sayings are common is out of touch with reality.  “Standing on your own feet” means “getting your own money.”  “Getting your own money” means selling something.   But a sale can never be performed alone.    It always requires the participation of at least one other person or organization, namely the buyer.

Concerning the Philosophy of the Social Sciences

            Notice what we are doing.  We are relativizing commodity exchange.  We are relativizing the institutional frame[xlviii] of economics.  We are, so to speak, stepping out of our culture, moving backward, and seeing it from a distance as one culture among several or among many;  as we might in our imagination move to a position in outer space where we could see the planet earth as one among several[xlix] planets,  or move still farther out to see our own galaxy as one of many galaxies.[l]

            We see this book as part of a transition from bounded social sciences whose categories are derived from liberal institutions,[li] to an unbounded social science whose categories are unlimited.    We draw inspiration from the cultural/historical approach to psychology pioneered by Lev Vygotsky.[lii]  We find ourselves sympathetic with the views of the anthropologist James Boggs. [liii]  Boggs notes that the highly controversial concept of “culture” has for many years been a flagship of anthropology as a discipline.  It plays a role similar to the theory of evolution in the biological sciences,  since culture can be thought of as the ability to transmit innovations better adapted to the  environment from one generation to another through upbringing, thus giving the human species an evolutionary advantage over species that can only innovate by mutation and natural selection.     In the twenty first century “culture” can be regarded as an overarching theoretical framework for the social sciences replacing the previously hegemonic liberal doctrine of human order inherited from the Enlightenment.   In our terminology, bounded psychology, bounded economics, bounded politics, and so on, are no longer tenable.   The cat is out of the bag.  The constitutive rules of commodity exchange are neither necessary nor sufficient nor universal nor always desirable.[liv]

            Boggs suggests that the scientific success and political significance of the concept of “culture” help to explain why it is now under attack.   It has challenged the established categories of liberal social science.  It has challenged the ideologies legitimating the institutions of the global economy.   He summarizes and responds to a series of contemporary attacks “from the left” e.g. those that fault the concept for inevitably implying hierarchy, and a series of contemporary attacks “from the right” e.g. those that see the concept of culture as undermining the very possibility of rational science and the very possibility of ethics.

Agnes Moswale is a coordinator of the Bokfontein CWP.   “When I started CWP I was a participant and couldn’t read or write.  I used to sign with an X and I hated it.  At our site participants attend ABET[lv] classes.   I attended the classes and worked hard and was promoted.  As a coordinator I must write a weekly report on the work that is done by my participants.  I find that I can do this as well as manage my registers.  If it wasn’t for CWP I would not be where I am now.”

Keynes’ Concept of Liquidity Preference

          Returning to why full economic and social rights can only be honoured in a society where the right to live is separated from the necessity to sell something, we find another reason why selling cannot possibly be a duty in our way of viewing John Maynard Keynes’ concept of liquidity preference.   It is one thing to say everyone should do useful work; it is quite another thing to say everyone must find a buyer who will pay them money for doing it.

            The liquidity preference is a preference for holding cash (or assets similar to cash) instead of spending the cash to buy something.   Keynes gives a list of eight “psychological” reasons why people often prefer having money to spending it.   They are:

  1. To build up a reserve against unforeseen contingencies.
  2. To build up a reserve for foreseen future needs, such as old age, paying for the education of children.
  3. To build up funds to enjoy consumption at a later date.
  4. To enjoy a gradually increasing expenditure, i.e. instead of taking all one’s enjoyment now as soon as one has the money.
  5. To enjoy a sense of independence.
  6. To secure a flexible sum of money for carrying out business projects.
  7. To bequeath a fortune.
  8. To satisfy pure miserliness. [lvi]

Keynes drew up another list of motives for not spending money that applies not to individuals but to central and local government and to business corporations.[lvii]

            The fact that people have what Keynes calls liquidity preferences implies that some goods and services remain unsold (the ones that would have been sold if people had had no liquidity preferences and therefore had spent their money buying them). [lviii]

            Consider a way to look at three time periods.

            At Time One the population as a whole has a certain income X.   It is the proceeds from everything they have sold.

            At Time Two the population as a whole does not spend all of X.  Because of liquidity preferences it spends some smaller amount X – Y.

            Therefore, at Time Two the income of the population cannot possibly by X again.  Once again their income is the proceeds from everything they have sold.   But since the total spent is X – Y, the total income derived from sales cannot be more than X – Y.

            Therefore purchasing power at Time Three derived from sales at Time Two must be less than X.

            So here we introduce another dimension of the problem:   it is not just that sales lag because people prefer to keep money.   They also often lag because even when people want something and would prefer to buy it, they cannot afford it because their income is too small.  (And the reasons why their purchasing power is constrained cannot be traced entirely to living in a poor nation that lacks physical and technical development.)

Sizwe Nojkile is a participant at the Kagiso CWP.  “As for me if I was not a participant in this project I would be in jail for stealing, in particular cell phones.  CWP has helped me a lot because come month end, I know I have some money in my bank account that I have worked for, not a handout,” he says.

            To see this and many other things still more clearly it is useful to stand in the light of an accounting identity we consider central to Keynes’ thought:

                                     Total Sales = Total Purchases

An individual may have more sales than purchases (and accumulate cash) or more purchases than sales (accumulating debt) but if one sums up over a whole society (Keynes often writes “community” instead of “society”) first all of the sales and then all of the purchases, the two totals must be equal.[lix]  This is true because what is a sale from the seller’s point of view is a purchase from the buyer’s point of view.   It is the same transaction.

            As soon as we notice this accounting identity we smell a rat.   If the rat could talk it would tell us that a community that relies too much on the logic of commodity exchange to meet the needs of its people is headed for trouble.   Switching the terminology slightly (saying “receivables” instead of “sales” and “payables” instead of “purchases”)  we suddenly see a gaping pit where before we saw only normality:    Every business aims to have — indeed to survive long it must have– receivables greater than payables.   But

                               Total Receivables = Total Payables

because what is a receivable from the seller’s viewpoint is a payable from the buyer’s viewpoint.   It is the same outstanding obligation.  A community composed entirely of successful businesses, where every business regularly takes in more than it pays out, is an impossibility.

            At this point the reader may well already have a sense of where we are going.   We are going to a plural economy with diverse logics where what is not accomplished by one logic can be accomplished by another.

              But again we do not expect the reader to grasp the significance of these points all at once.   They will take time to sink in.   They imply that no amount of education, no amount of skills-training, no amount of encouraging the poor to go entrepreneurial and set up their own enterprises, no amount of advice on how to tap into new markets, in short nothing that makes the poor more capable of producing and marketing goods and services will suffice to end poverty.   Let Keynes speak:  “The celebrated optimism of traditional economic theory, which has led to economists being looked upon as Candides, who, having left this world for the cultivation of their gardens, teach that all is for the best in this best of all possible worlds, provided of course we let well alone, is also to be traced, I think, to their having neglected to take account of the drag on prosperity that can be exercised by an insufficiency of effective demand.”[lx]

An Abundance of Sellers, a Scarcity of Buyers

            For us Keynes provides a valuable theoretical lens for interpreting what we see every day on the streets.  Actually we see in Keynes’ contributions only a glimpse of the fundamental problem, as the tip of an iceberg is a glimpse of a much larger mass of ice under the water.   The fundamental fact (the mass of ice under the water) limiting what can be accomplished within the bounds of the logic of commodity exchange is that the constitutive rules of our type of society (unlike those of a society organized by kinship or by some other form of reciprocal obligation) leave each individual free to buy or not buy, sell or not sell.   We see no reason to believe that in a society like ours every seller who needs to sell something in order to live will find a buyer.[lxi]  We need to separate the right to live from the duty to sell because even with all the good will in the world not all those who need to sell something to make a living are finding buyers.  On the streets we see those who are doing their best to survive legally and legitimately in a world where money is needed to survive and getting money requires finding someone to buy what one has to sell; and we also see those who have given up on legitimacy in a mercantile world, who resort to begging, confidence games, and thievery; or who evade reality with drugs, drink and/or insane fantasies.   Those who strive to be legitimate often find few customers who have money and need or want what they are trying to sell.  This applies as much to high-end shops trying to sell luxuries to the rich as to the craftspeople and hawkers covering sidewalks frequented by the poor with homemade trinkets or cheap goods from China.

            Science and common sense both lead us to believe that although the logic of buying and selling may work for the majority, it does not work for everybody.  We believe that to honour in practice the human rights solemnly declared on paper we need other dynamics (other motivating forces) and other logics (other criteria for making decisions.)    Of course we have not yet considered the views of those who disagree with us and see these matters quite differently, for example those who deduce from Keynes that every year  there must be enough investment spending and/or government spending to compensate for that year’s shortfall of consumer spending.[lxii]  For that reason and others we cannot claim to have proven anything.   Hopefully we are communicating to the reader a point of view sufficiently interesting and sufficiently connected to vital questions humanity needs to answer to merit the reader’s further attention.

Working Without Selling

            But how can you work without selling?   Or without selling your labour to an employer who in turn sells the product?   Who will pay you?  Where will the money to pay you come from?   Who determines whether your work is truly useful?    How can the value of your work be measured?  Who supervises your work?  Is there not a danger that without the discipline of competitive pressure governing private sector employment, the so-called work without selling will become a charade, a disguised handout?   A slush fund politicians use to build a vote bank?  What is to prevent the programme that employs you from crowding out opportunities for the private sector by spending public funds to do things private enterprise would otherwise do  — in the end creating no net increase in employment but only a number of public jobs no higher than the number of private jobs crowded out?   Will the wage paid by the programme not become a floor so that employers will be unable to find anyone willing to work for less?  Will not wages in general rise?   And if wages rise will not some businesses fail because they are unable to pay them?   And will not the competitiveness of South Africa in the global marketplace be undermined if wages here rise higher than wages elsewhere?

            Whatever the answers to these questions might be, it is clear that separating the right to live from the necessity of selling is possible.   South Africa’s Community Work Programme is a fact.[lxiii]  Its participants are not only not required to sell;  they are not allowed to sell anything they produce on CWP time or with CWP assets.   Their work is entirely community service.  CWP is well on its way to reaching its goal of providing useful regular paid work for a million participants in 2014.  It is a fact too big to ignore.  It exists.   If it exists it must be possible.

ENDNOTES:

[i] The concept of unbounded organization has previously been developed in Gavin Andersson, Unbounded Organization: Embracing the Societal Enterprise.  Pretoria: University of South Africa Press, 2013; Gavin Andersson, “Looking Back to the Future: Conversations on Unbounded Organisation,” Dark Roast Occasional Papers Series 12.  Cape Town: Islandla Institute, 2003 (available at www.islandla.org.za, accessed 29 January 2013), revised and reprinted as a chapter in E. Pieterse and F. Meintjes (eds.) Voices of the Transition:  the Politics, Poetics and Practice of Development.  Johannesburg: Heinemann, 2004:  Gavin Andersson and Howard Richards, “Bounded and Unbounded Organisation,” Africanus Volume 42 (2012) pp. 98-119; Howard Richards and Gavin Andersson, “Neville Alexander, Unbounded Organisation and the Future of Socialism,” Education as Change Vol.?? (2013), pp.??; Howard Richards, “Unbounded Organization and the Unbounded University Curriculum,” in P.Inman and D. Robinson (eds.) University Engagement and Environmental Sustainability Manchester UK: Manchester University Press, 2013.   Videotaped discussions of the concept of unbounded organization are available on You Tube and on the websites www.humiliationstudies.org  and www.seriti.org.za

[ii] An introduction to the Community Works Programme can be found on the website of the International Labour Organization, ILO, www.ilo.org  accessed 29 January 2013.  In the subsection “Features” of the section “ILO Newsroom” an article dated 27 July 2011 is titled, “South Africa and the ILO team up to promote public employment and community work programmes.”  It begins, “With an official unemployment rate of 25 per cent, the South African government knows that employment creation cannot be left to the private sector alone. There is a huge gap between the jobs that are needed and the jobs that the market can generate. The State has the responsibility to fill that gap.”

[iii] The doctrine that there is a close link between socioeconomic development and conflict prevention has been called “the Brazilian doctrine” and identified with that nation’s positions on international issues.  Giorgio Romano Schutte, “Neo-developmentalism and the Search for a New International Insertion,” Austral:  Brazilian Journal of Strategy and International Relations. Volume 1 (2012) pp. 59-98. p. 72.

[iv] In their book  The Spirit Level: Why More Equal Societies Almost Always Do Better  London Allan Lane 2009 authors Richard Wilkinson and Kate Pickett provide evidence that more equal societies tend to do better on measures of physical health, mental health, drug abuse, education, imprisonment, obesity, social mobility, trust and community life, violence, teenage pregnancies, and child well-being.

[v] That the world economy, and consequently the world, are not now governable and that for this reason the biosphere cannot be protected is argued by Joel Novek and Karen Kampen. “Sustainable or Unsustainable Development: an Analysis of an Environmental Controversy.” Canadian Journal of Sociology.  Vol. 17 (1992).  pp. 249-273.  The authors write at p. 250. “…the relationship between economic expansion and environmental protection remains fundamentally contradictory.”  This argument is further elaborated by many authors including Michael Redclift, Sustainable Development: Exploring the Contradictions.  London:  Methuen, 1987.

[vi] Similarly a theoretical argument is combined with an empirical study of a large socioeconomic development programme in Howard Richards, The Evaluation of Cultural Action.  London: Macmillan, 1985.

[vii] Max Weber, Economy and Society.  New York: Bedminster Press, 1968 pp. 3-26.  (The original German edition of 1922 published posthumously by his widow Marianne Weber drew on material on ideal types Weber had published in 1913 in the journal Logos volume 4, pp. 253-294.)

[viii] A very important insight Weber associated with the rational economic actor was that once certain institutions were in place it became an objective (not merely subjective) need to get an income because people needed an income to purchase the necessities of life.

[ix] Somewhat similarly, physicists calculate the ideal trajectory of a falling object using Galileo’s law of falling bodies that describes how they would fall in a perfect vacuum, and then adjust their figures to take into account friction from air and any other factors that produce deviations from the theoretical ideal.

[x] Marx uses diagrams like this several times in the second volume of Capital, which was edited by Friedrich Engels after his death and first published in German in 1885.  It is available in English in a translation by Ben Fowkes published by Penguin classics in London in 1990.

[xi] Amartya Sen, Poverty and Famines: an Essay on Entitlement and Deprivation.  Oxford: Clarendon Press, 1983.   Sen shows in detailed studies that there has been food available in the great famines of recent centuries, but that the poor lacked purchasing power to acquire it.

[xii] Max Weber regarded Marx’s account of capitalism as an analysis of ideal types.  Max Weber, The Methodology of the Social Sciences.  New York: Free Press, 1949.  p. 103.   Louis Althusser and Etienne Balibar in their commentary on Capital emphasize that Marx makes many simplifying assumptions.  See their Reading Capital.  (abridged English edition) London: New Left Books, 1970.  (Complete French edition Lire le Capital. Paris: Francois  Maspero, 1968)

[xiii] “Implies” in the sense of “suggests” or “points to a further meaning,” not strict logical implication.

[xiv]  The diagram shows the essence of the logic and dynamic of accumulation.  Once M has become the larger quantity M’, the process can be repeated.  M’ can become the even larger quantity of money M’’.  M’’ can be reinvested to produce M’’’, and so the accumulation of money can go on indefinitely.

[xv] What we have to say will be only a tiny addition to the huge existing literature on capital accumulation.  Marx himself wrote in the first volume of Capital:  ““With the accumulation of capital there develops the specifically capitalist mode of production, and with the specifically capitalist form of production there develops the accumulation of capital.  … Each accumulation becomes a means for making a new accumulation.” Das Kapital Erstes Buch, Kapitel 23, part II, paragraphs 7-8 (our translation).   Four basic sources are Rosa Luxemburg, The Accumulation of Capital; London: Routledge and Kegan Paul, 1951 (original German 1913); Patrick Bond, Horman Chitonge and Arndt Hopfmann (editors), The Accumulation of Capital in Southern Africa.  Durban: University of KwaZulu-Natal, 2006; Samir Amin, Accumulation on a World Scale.  New York: Monthly Review Press, 1974; Maria Mies, Patriarchy and Accumulation on a World Scale.  London: Zed Books, 1986.

[xvi]  Today in practice the amount of money changing hands every day speculating in what John Maynard Keynes called the “casino economy” dwarfs the sums invested in the real economy producing goods and services.  See Susan Strange, Mad Money.  Manchester UK: Manchester University Press, 1998.   From Marx’s perspective this shortcut turning M into M’ without P cannot possibly be sustainable because the only way to earn sustainable profits is to hire workers whose cost to the employer is less than the value of what they produce.

[xvii] In Marx’s vocabulary there is no Bewegung, no movement.  Money advanced is the impetus that sets everything else in motion; without it everything else stands still.

[xviii] Max Weber is famous for the implausible claim that capitalism began with the protestant ethic of inner-worldly asceticism, but more often he made the more plausible claim that capitalism could only begin after or concurrently with the establishment of a rational legal order of the western Roman type.   Without law, he pointed out, economic decisions could not be made because their consequences would not be kalkulierbar; in other words without law the future enforcement of property rights and contract compliance would be so uncertain that no investments could be made.  See the section of Weber’s Economy and Society on “Meaning and Limits of Legal Authority for the Economy.”

[xix] Here Marx does not refer to Bentham’s famous felicific calculus, or to his famous views on the greatest good of the greatest number.   He appears to refer to passages where Bentham holds that since people are experts on their own pleasures they should be left free to pursue happiness as they see fit and/or to those where he regards the pursuit of self-interest as natural and inevitable.   Although it is clear enough why Marx invokes Bentham’ s name here,  it could not be said that  Bentham was in fact on the whole in favour of  each looking out only for himself.  His collectivism balanced his individualism.  See L.J. Hume, “Jeremy Bentham and the Nineteenth Century Revolution in Government,” The Historical Journal.  Volume 10 (1967) pp. 361-375.

[xx] Karl Marx, Das Kapital.  Erstes Buch, 4 Kapitel, section III in the next-to-last paragraph. (our translation)

[xxi]   Smith remarks that the only encouragement that industry requires is some “tolerable security” that it will enjoy the fruits of its own labour.  (p. 269)   He identifies basic property rights and liberty with elemental justice.  (p. 137 and passim).   A “civilized” society (p. 289) is one where property rights are established and therefore there are three “orders” (social classes).  The three orders are those who live by rent, those who live by wages, and those who live by profit.  Wherever things follow their natural course and people are at liberty to choose their occupations, they seek the most advantageous employments. (p. 111) The page numbers refer to volume one of the two volume edition of The Wealth of Nations edited by Edwin Cannan and published by Arlington House with no date at New Rochelle, New York. (first edition 1776, although the standard edition revised by Smith himself is that of 1789)

[xxii] Adam Smith, Theory of the Moral Sentiments.    Cambridge UK: Cambridge University Press, 2002 (first edition 1759)   The famous “invisible hand” metaphor to which Marx alludes when he says mockingly that a cunning providence has provided that selfishness serves the common good is found in part IV chapter 1.

[xxiii] Although little-noticed by Smith’s admirers, this point was not lost on Marx, who observed that Smith himself explained why in a free market in negotiations between employer and employee the employer commonly has the stronger bargaining position.  Das Kapital Erstes Buch, Kapitel 23, paragraph 6.  Smith’s general discussion showing why workers are usually the losers is in Chapter VIII of Book One of The Wealth of Nations.

[xxiv] We omit the complications derived from the fact that the classical economists worked with a labour theory of value, while most contemporary economists tend to define the value of a thing as whatever a buyer is willing to pay for it.

[xxv] Wealth of Nations book 1, chapter 8, at page 88 of the edition cited above.

[xxvi] David Ricardo, On the Principles of Political Economy and Taxation.  London: Macmillan, 1951.   The lines quoted are the opening paragraph of Chapter Five “On Wages.”

[xxvii] A small shop where liquor is sold and served, similar to what would be known in other parts of the English-speaking world as a pub, a bar, a lounge, or a saloon.

[xxviii]   Alexandria, a poor district of Johannesburg.

[xxix] This thought is suggested by Marshall Sahlins, Stone Age Economics.  Chicago: Aldine, 1967, although he wrote of times still longer ago.

[xxx] In the language of Emile Durkheim they will suffer anomie, normlessness.  Durkheim found that anomie was a typical consequence of the transition from archaic to modern society.  Emile Durkheim,  The Division of Labor in Society.  New York: Free Press, 1947 (French original 1893);  Suicide.  New York: Free Press, 1951 (French original 1897).   Similarly,  Karl Polanyi describes the growth of the modern economy as a “disembedding” of economic relations from social relations; while Louis Dumont construes the rise of modernity as the rise of the isolated individual.  Karl Polanyi, The Great Transformation.  Boston: Beacon Press, 1944;  Louis Dumont, Essays on Individualism.  Chicago: University of Chicago Press, 1992.

[xxxi]Bana ba motho ba kgaogana tlhogwana ya tsie.”  A proverb in the Tswana language.

[xxxii] See Evelin Lindner, The Psychology of Humiliation (Ph.D. dissertation, University of Oslo) and other works by the same author.

[xxxiii] See the discussions of Lev Vygotsky’s concept of zone of proximal development as applied to development work in Gavin Andersson, Unbounded Organization cited above.

[xxxiv]  See the case studies on particular CWP sites showing the programme’s impact on breaking the cycle of criminality and on other social dimensions of poverty on the website of TIPS,  the South African presidency’s Trade and Industrial Policy Strategies think-tank where CWP was in large part designed.  http://www.tips.org.za/community-work-programme, accessed 12 February 2013.

[xxxv]  Social integration is a concept derived from Durkheim who used intégration sociale as a synonym for solidarité and treated both as desiderata concerning which modernity is structurally deficient. Therefore they must be deliberately constructed.  Durkheim treated economic integration through employment or otherwise as part of the larger project of overcoming anomie by social integration into a normative order.  See further Jonathan Turner, “Durkheim’s Theory of Integration in Differentiated Social Systems,” Pacific Sociological Review.  Volume 24 (1981) pp. 379-391;  Werner Landecker, “Types of Integration and their Measurement,” American Journal of  Sociology Volume 56 (1951) pp. 332-340;  Geoffrey Nelson et al, Shifting the Paradigm in Community Mental Health: Towards Empowerment and Community.  Toronto: University of Toronto Press, 2001.

[xxxvi] The phrase “constitutive rules” is explained and applied in a way similar to the way we apply it here in Charles Taylor, “Interpretation and the Sciences of Man,” Review of Metaphysics  Vol. 25 (1971) pp. 3-51.   This seminal essay has been frequently anthologized and is available on line.

[xxxvii] By saying “namely” we do not mean to insist that there is anything irreplaceable about the words we have chosen (following Marx and Smith).  There are other legitimate and useful ways to describe how the same set of norms constitutes the same basic social structure; Taylor for example in the essay just cited writes of a “bargaining society.”

[xxxviii] Earlier we took the precaution of saying Smith and Marx saw the same rules “–provided that we restrict our analysis to the exchange of commodities in what Marx calls the sphere of circulation.”  The reason for this precaution was that Marx thought profit could not be explained at the level of circulation but only at the level of Produktionsverhaltnisse (the production relations found in the …..P….. part of the diagram where C becomes C’).   Although we believe “the economy” is best glossed as we have stated, we do not mean to ignore Marx’s views on this point and we will come back to them in a later chapter where we will discuss the explanation and the social functions of profit.

[xxxix] See on this point Chapter Four “Law—The Constitution of Modernity” and Chapter Five “Economics—the Operation of Modernity” in Catherine Hoppers and Howard Richards, Rethinking Thinking: Modernity’s Other and the Transformation of the University.  Pretoria: University of South Africa, 2011.

[xl]  John Maynard Keynes, A General Theory of Employment, Money, and Interest. London: Macmillan, 1936. Chapter 12.  Keynes adds a twist.   People invest not only because they expect a firm to be profitable, but also because they think the value of their shares will increase because other people will regard them as a profitable investment.

[xli] We mean “valid” regarding the topics we have discussed.   We do not mean that none of them ever made a logical error regarding any topic.

[xlii] i.e. the human practices, the institutions.

[xliii] Amartya Sen, “Sraffa, Wittgenstein, and Gramsci,” Journal of Economic Literature.  Vol. 41 (2003) pp. 1240-1255. p 1247.

[xliv]  The general notion that in any given society there may be operating different and perhaps incommensurable “languages” comes from the methodology of the sociologist Robert Bellah and his co-authors of Habits of the Heart: Individualism and Commitment in American Life. Berkeley: University of California Press, 1986.   They found four pervasive “languages” in mainstream United States culture: the language of business, that of therapy, that of religion, and that of civic life.

[xlv] As of October 2012 the economic, social, and cultural rights covenant had been signed by 162 nations and ratified by 160.

[xlvi] The International Convention on Civil and Political Rights was adopted by General Assembly resolution  on December 16, 1966.  It entered into force on March 23, 1976.  The International Covenant on Economic, Social, and Cultural Rights was adopted by General Assembly resolution on the same date and entered into force on January 3, 1976.  It includes the right to an adequate standard of living.  The Constitution of the Republic of South Africa was approved by the Constitutional Court on 4 December, 1996 and entered into force on 4 February, 1997.  Its Chapter Two is a Bill of Rights that includes among others rights to the basic necessities mentioned in the text above, food, water,  housing, and health care services.

[xlvii]  It has been argued that the most general form of the duty to contribute to the welfare of (at least some) others found in all human cultures is the norm of reciprocity.   Alvin Gouldner, “The Norm of Reciprocity: a Preliminary Statement.”  American Sociological Review Vol. 25 (1960) pp. 161-178.  Nancy Tanner has shown that the physical evolution of the human species has been that of an animal evolving to live in groups and to secure its livelihood by cooperation in her On Becoming Human.  Cambridge: Cambridge University Press, 1981.

[xlviii]  The institutional frame of economics is discussed by Joseph Schumpeter in his History of Economic Analysis New York: Oxford University Press, 1956 at pp. 544-550.      It is the same as the Smithian “natural liberty” and  Marxian “paradise” we have been discussing.

[xlix]  Thus for the historian Karl Polanyi there are not very many types of human economy, as there are not many planets in the solar system.  For Polanyi a future that corrects the exaggerations of the present is likely to feature the tried and true principles that worked for many centuries before the rise of capitalism, notably the principle of reciprocal obligation and the principle of redistribution of the surplus. See Karl Polanyi et al.  Trade and Markets in the Early Empires:Economies in History and Theory.  New York: Free Press, 1957 and other works by the same author.

[l]  Our own view is the human capacity to invent institutions is unlimited.  One reason for this view is the anthropologist Victor Turner’s opinion that the physiology of the human brain lends itself to creative processes including ritual play that function in the social construction of reality somewhat as mutation and variation function in organic evolution.  Victor Turner, “Body, Brain, and Culture,” Zygon: Journal of Religion and Science.  Vol. 18 (1983) pp. 221-245.

[li] Immanuel Wallerstein periodizes the disciplinary consolidation of economics, political science, anthropology, and sociology in the early 19th century and sees them as part and parcel of the global liberal hegemony established after the defeat of Napoleon.  See his Unthinking Social Science.  Stanford: Stanford University Press,  1995.  Michel Foucault similarly saw the founding of the social sciences as an aspect of the constitution of notre modernité dating their rise a bit earlier at the time of the French Revolution.  See the latter part of his The Order of Things New York: Random House, 1994 (French original 1966), his books on the origins of psychiatry, medicine, and criminology, and his lectures at the Collège de France where he deals with the origins of political science and economics.

[lii] See the extended discussion of Vygotsky and activity theory in Gavin Andersson, Unbounded Organization: Embracing the Societal Enterprise.   Pretoria: University of South Africa Press, 2013.

[liii] James Boggs, “The Culture Concept as Theory, in Context,” Current Anthropology. Volume 45 (2004) pp. 187-209.

[liv] In a later chapter we will discuss the views of Friedrich Von Hayek and others who agree that the constitutive rules of commodity exchange are social constructions neither universal nor eternal, but nevertheless argue that they should not be altered.  See his The Fatal Conceit: the Errors of Socialism.  Chicago: University of Chicago Press, 1988.

[lv] Adult Basic Education and Training

[lvi]   John Maynard Keynes, The General Theory of Employment, Interest, and Money.  London: Macmillan, 1936.  pp.  107-8.

[lvii] Keynes, op. cit. pp. 108-9.

[lviii] We see sellers refraining from buying as a massive fact whose consequences require in the end an unbounded approach like that of CWP.   Those who see the economy differently might be divided roughly into three classes:  (1) Those who see no problem, reasoning for example that money not spent will be deposited in banks, who will then lend it out again to people who will spend it; (2) those who positively celebrate not spending as saving which will make possible investment and therefore growth; (3) those who see a problem, but who believe that suitable monetary and fiscal macroeconomic policies can cope with it in a more or less acceptable way.   Concerning the latter two: “The development of new products for which demand is disproportionate to normal demand will not stop, even if it …breaches ecological norms.  Nor will it cease to be necessary to balance society’s books.  The new products process …and consumers who like to shop with their credit cards will still be necessary to keep employment at acceptable levels.  They display the treadmill that ensnares humanity; it is necessary to go forward faster just to stay in place…. Thus it is that caring and aware humans everywhere are asking the questions, How did we get on this treadmill?  And how can we get off it?”  Howard Richards, Understanding the Global Economy.  Santa Barbara CA: Peace Education Books, 2004.  p. 68.

[lix] This is true in an ideal-typic stripped down bare-bones capitalism.  In the real world there are taxes.  The buyer pays more than the seller receives.

[lx] John Maynard Keynes, General Theory op. cit. p. 33.   There is an unending stream of academic literature attacking, defending, and revising Keynes’ ideas.   Much of it is summarized in J.E. King, A History of Post-Keynesian Economics since 1936.   Cheltenham UK: Edward Elgar, 2002; J.E. King, Post-Keynesian Economics: An Annotated Bibliography. Aldershot UK and Brookfield VT: Edward Elgar, 1995.  Some of it will be discussed in later chapters of this book.

[lxi] The contrary view that for every seller there must be a buyer is approximately Say’s Law attributed to Jean Baptiste Say (1767-1832).   We will discuss it and contemporary views of it in a later chapter.  It makes a huge difference for CWP and for any employment guarantee scheme whether the real world is more as Say sees it or more as Keynes sees it.

[lxii]   Concerning investment spending as a solution see the trenchant arguments of Rosa Luxemburg in her The Accumulation of Capital London: Routledge, 2003.  (German original 1913)  She argues that while investment spending may well get more purchasing power into the hands of buyers thus making it possible to sell this year’s glut of otherwise unsellable goods, in the long run it will only make the problem worse by creating even greater productive capacity and even more goods that cannot be sold.  Concerning government spending as a solution see James O’Connor The Fiscal Crisis of the State.  New Brunswick NJ: Transaction Publishers, 2001.

[lxiii] Also alive and well is the Mahatma Gandhi National Rural Employment Guarantee Scheme started in India in 2005, and by 2010 enrolling participants from over 55 million households.  Its experience has been a major source of ideas for CWP.  It in turn has drawn on the experience of the employment guarantee schemes that have functioned in the Indian state of Maharashtra since 1972-73.  Later chapters of this book will review historical experience and theoretical rationales for employment guarantees in Sweden, Argentina, and Ethiopia.  It should be noted that although CWP is laying the groundwork for a possible future employment guarantee in South Africa it is not yet an employment guarantee.

 

This article originally appeared on Transcend Media Service (TMS) on 18 Feb 2013.

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