Thomas Piketty’s Proposal to Remake Europe: Three Comments and a Suggestion
BY TRANSCEND MEMBERS, 17 Dec 2018
13 Dec 2018 – In the midst of more than one crisis, a stellar group of left-leaning intellectuals led by Thomas Piketty has written a proposal to remake Europe. It includes a manifesto, a treaty establishing what would amount to a new European legislature, and a budget. Details can be found at www.tdem.eu. As its authors say, the greatest merit of their proposal is that it exists. Everyone is invited to comment on it and to suggest improvements. Taking them at their word, here are three comments and one suggestion.
Comment One: The proposal, especially the budget, exaggerates the power of governments to control markets. It calls for governments to impose heavy taxes on property holders. They include taxes on inheritances, carbon emissions, corporate profits, and high personal incomes. But property owners and managers have market power governments do not have.
Already in The Legitimation Crisis of 1973 Jürgen Habermas showed that in modern times the market is the primary institution. The government is a secondary institution. Markets command governments more than governments command markets. A market is an institution where property owners are free to buy or not buy, sell or not sell, move their movable assets or keep them where they are, invest or not invest. As Mikhail Kalecki put it, capital has a veto power over all public policies because any policy that saps investor confidence, for any reason or for no reason, will cause an economic crisis.
Habermas explained why the social democracy he called late capitalism implies the fiscal crisis of the state. Within the iron framework of the civil law, the state’s capacity to tax wealth is severely limited, not least by capital flight or the threat of it. The state is compelled to spend money to attract capital, and also expected to guarantee social rights to health care, pensions, housing and others. Expenses will exceed income. Promises will be broken. Legitimacy will be shattered.
Comment Two: In many ways, the proposal attempts to revive post World War II social democracy, deepening it and colouring it green. It lacks a strategy for coping with the structural reasons why social democracy did not work and was succeeded by neoliberalism.
Have the prospects for social democracy improved since Habermas analysed them in 1973? Not at all. Capital is even more mobile now than it was then. The 1994 treaty establishing the World Trade Organization, and innumerable other documents with the force of law, have made property rights even more immune to democracy than they were in 1973.
As Piketty himself has shown, the fact that spending on the social safety net has remained roughly the same does not mean that people are still enjoying the economic security of the thirty glorious years of social democracy that followed World War II. Welfare guarantees are eroding at the same time that more people need them. Fewer benefits and more beneficiaries add up to about the same total spending. Combined with intense tax competition to attract investment, they add up to ever more unpayable public debt! Today social democracy is at best undergoing a process of orderly retreat. If the far right sweeps the European elections of May 2019, the retreat may become a rout. It has already become a rout in Greece and in parts of Eastern Europe.
In our book The Dilemmas of Social Democracies my co-author Joanna Swanger and I looked for deep underlying structures in the spirit of critical realism, as distinct from looking for patterns in the observed data in the spirit of positivism. Echoing Habermas, using historical case studies of Spain, Sweden, Austria, South Africa, Indonesia, and Venezuela, we showed why social democracy not only did not work, but also could not possibly work, without modifying the social and cultural basic structures of modernity, emblematically manifested in the civil law. Karl Renner was wrong.
Who was Karl Renner? From 1918 to 1920 he was the first chancellor of Austria after the defeat of the central powers in World War I. In 1904 he published the first German edition of The Institutions of Private Law and their Social Functions. He spelled out, as Max Weber later spelled out in Economy and Society more famously but less thoroughly, how European civil law, inherited and adapted from Roman Law, and later imposed on the rest of the world by the power of the sword, constituted the basic framework what Karl Polanyi later was to call “market society.”
In 1904 Renner asked, can capitalist market society become a social democratic market society within the European framework of civil law inherited and adapted from the Roman Empire? His answer: Yes!
Our answer: No!
Our answer does not imply that capitalism can only be transformed by violence. On the contrary, it implies that it can only be transformed by education. At this point in history humanity is on a path to self-destruction. It is destroying the biosphere and shredding the social fabric. These are results desired by not one single human being! Far from serving the interests of a ruling class, these outcomes do not serve the interests of a single woman, man, child, or grandchild !! If education could teach how and why basic structures can and must be transformed, the ranks of the transformers would multiply, while those of the not-yet-educated opponents of fundamental change would diminish.
Comment Three: The proposal does not take seriously the coming –and to a considerable extent already arrived—obsolescence of human labour as a factor of production. It does not take seriously the coming –and to a large extent already arrived– worthlessness of much labour-power in the market. I will elaborate on this and related points alluding implicitly to some details of the Piketty proposal without specifically referring to any of them.
Orthodox economics will be a non-starter in a world where the market value of much of human labour (nobody knows exactly how much) will be zero. The intellectual project of Adam Smith, followed by his successors, rests on Smith’s premise that the natural and proper price of labour is and ought to be labour’s contribution to the value of what Smith called its “vendible product.”
It is time to start over with different principles. In a not very distant future, and to a large extent even now, we cannot create livelihoods with dignity for all by inflating the value of labour-power when it is as a matter of physical fact redundant. Raising minimum wages and strengthening collective bargaining could be parts of a comprehensive proposal capable of coping with the structural problems mentioned above, but they do not address the massive redundancy of labour. Coaxing private capital into investing by putting up public money to shield it from risk is not likely to persuade anybody to use outdated labour-intensive technologies. The same can be said of trying to make every business into a copy of Procter and Gamble, constantly creating innovations; creating new markets to be able to sell new products; as P and G has created new markets by convincing ever younger women to worry about growing old.
Counting on higher productivity to be reflected in higher wages is deceptive. There was a time when Smith could notice the exploitation of labour, and Marx could hammer what Smith noticed into a powerful ideology. Today raising productivity usually means buying technology and employing fewer workers. Today –if we still follow the ethics of John Locke and Adam Smith that postulates that the producer has a moral right to what he (or possibly she) produces— we must concede that the proximate cause that produced the increase of surplus value (the Mehrwert of Marx) was the investment in new technology made by the capitalists. And the limit toward which increasing productivity tends is a factory run mainly by robots. Today’s challenge is to make the robots work for everybody, not to work just for the shareholders and not just to work for the few remaining humans who tend the robots.
It is time to start over with an ethics of solidarity. Labour is not a commodity. The right to a decent life should not depend on finding a buyer for one’s labour power. The purpose of an economy is to serve human needs and purposes, in harmony with nature. As Piketty writes in Capital in the Twenty First Century, it is time for democracy to take control of the process of capital accumulation. Nature’s gifts, its minerals, its soils, its waters, its atmospheres, and its living species, belong to everyone to use and to no-one to abuse. The gifts of history –the wealth created in the past by people no longer living, the scientific knowledge built up over the centuries, and yesterday’s contributions to today’s technical know-how—are gifts meant for everyone. It is time to think outside the boxes of civil law and orthodox economics. It is time to think instead, as Antonio Gramsci recommended, of adjusting culture to its physical functions.
Let me close this third comment with an example of solidarity economics adjusting culture to its physical functions in the neighbourhood known as Alex in the city of Johannesburg in South Africa. If you visit a certain old church building on the main avenue of Alex on a weekday afternoon you will find twelve formerly unemployed young people there who have become employed and happy.
They are practicing their song and dance routines: like Black Motion by Imali, and Babes Wodumo by Wololo; as well as oldies like Cat Daddy and Bird Walk. They had to audition to get into the troupe. Once they are in, they need discipline and self-discipline to learn their steps and their lines to prepare for performances. They perform mainly for children in elementary schools, where besides providing entertainment they provide a shining example of young people not on drugs who are having fun. More self-discipline is required to show up for work, to be on time, to arrive sober, and to stay clean in more senses than one. Expressing general agreement with Aristotle’s theory of virtue (arete) in his Nichomachean Ethics, although I have no hard evidence about the dancers of Alex, I believe their discipline leads them to virtue, and that virtue leads them to happiness.
The song and dance troupe practicing in the old church on the main avenue of Alex is an example of non-market employment made possible by solidarity because it is paid for by capturing rents and sharing surplus. Money and other resources are moved from where they are not needed to where they are needed to serve human purposes. Thanks to public and private donors (whether voluntary, involuntary as in the case of taxpayers, or semi-voluntary in one of the many ways social norms can be motivating without being strictly obligatory), non-market employment steps into the breach. Solidarity saves the day when market employment has done the best it can do and can do no more.
Here is my suggestion for improving the proposal: Wait a month. Maybe two months. Then reconvene the team that wrote it. Rewrite it in the light of the feedback received.
Prof. Howard Richards is a member of the TRANSCEND Network for Peace Development Environment. He was born in Pasadena, California but since 1966 has lived in Chile when not teaching in other places. Professor of Peace and Global Studies Emeritus, Earlham College, a school in Richmond Indiana affiliated with the Society of Friends (Quakers) known for its peace and social justice commitments. Stanford Law School, MA and PhD in Philosophy from UC Santa Barbara, Advanced Certificate in Education-Oxford, PhD in Educational Planning from University of Toronto. Books: Dilemmas of Social Democracies with Joanna Swanger, Gandhi and the Future of Economics with Joanna Swanger, The Nurturing of Time Future, Understanding the Global Economy (available as e-books), The Evaluation of Cultural Action (not an e book). Hacia otras Economias with Raul Gonzalez, free download available at www.repensar.cl. Solidaridad, Participacion, Transparencia: conversaciones sobre el socialismo en Rosario, Argentina. Available free on the blogspot lahoradelaetica.
This article originally appeared on Transcend Media Service (TMS) on 17 Dec 2018.
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