Thomas Piketty vs. Yanis Varoufakis

TRANSCEND MEMBERS, 25 Mar 2019

Howard Richards – TRANSCEND Media Service

Certainly, we all should be grateful to Thomas Piketty and Yanis Varoufakis.  Nobody has worked harder or more intelligently for the common good.

But gratitude does not entail agreement.  That a lot of hard work and brain power and grassroots participation and collaborative teamwork went into the TDEM (Piketty) and DIEM (Varoufakis) proposals is no guarantee that either one makes sense.

Recent developments offer an opportunity –a hinge in Paulo Freire’s terminology—for facilitating conversations that lead beyond changing economic models and rewriting constitutions to working to transform the basic constitutive rules of society.  They open up an opportunity to talk about what is often termed revolution.   Those of us who believe la douceur est la seule vraie force prefer to call it transformation.  The current dispute between Piketty and Varoufakis affords a glimpse of deeper issues.

Each is right to criticize the other.   The conclusion to be drawn is that indeed neither the TDEM proposal or the DIEM proposal makes sense.  This conclusion in moves the conversation onto the terrain of the constitutive rules: their causal powers, their systemic imperatives, their homeostatic resistance to transformation.  If we can get to that point, then we will be well-positioned to move on to designing strategies for what Margaret Archer calls morphogenesis.

In a moment I will explain what the basic constitutive rules of society (also sometimes called basic cultural structures or basic social structures) are.  But first I will lead up to it.

Varoufakis points out that the TDEM plan for a green new deal is to be paid for by raising taxes on corporate profits, high incomes, great inherited fortunes and carbon emissions.  Varoufakis argues that Europe is already tax-weary.   New and higher taxes, no matter who is to be obliged to pay them, are not likely to be approved.  Varoufakis is right.  He could also have gone on to say, citing Piketty’s own reservations about his own proposals toward the end of Capital in the Twenty- First Century, that as the world is now organized, raising taxes on wealth is just not in the cards.  What is in the cards is tax competition.  Every jurisdiction competes with 195 other jurisdictions to attract investment, to attract high net worth residents, and to discourage capital flight.

Piketty, for his part, criticizes the DIEM plan for financing its green new deal by borrowing more money, driving governments even more deeply into debt than they already are. Piketty is more aware than anyone else that for centuries there has been an upper class that lends money to the government. For centuries it has been able to use the interest it collects on its government bonds, as well as income from its other investments, both to accumulate still more capital and to be able to live in leisure without working.   (Piketty finds that today most people able to live without working work anyway, apparently finding it morally unacceptable to live as gilded clochards.)  From Piketty’s point of view Varoufakis’ plan must seem like more of the same:  going farther into debt, charging the taxpayer to pay the rentier, to fund building a promised better tomorrow that decade after decade keeps being tomorrow and never becomes today.

In the light of the Hobson’s Choice confronting TDEM and DIEM –tax or borrow– perhaps the reader is already beginning to see what I mean, even before I explain in a few words –briefly and inadequately— what the constitutive rules of society are.

Nobody has defined them more clearly and succinctly than Karl Marx.   My brief explanation   will piggyback on his brief explanation.   There are four of them: freedom, property, equality and Bentham.  I would add explicitly what Marx might be taken to imply:  It would be more precise to call them the perversion of freedom, the perversion of property, the perversion of equality and the perversion of Bentham.

Marx glosses freedom giving an example of buying and selling.  The seller of labour power (the unemployed person seeking to become a worker) seeks a contract with the buyer of labour-power.  Each is free to take it or leave it.   The fact that I need a job to feed my children, or just to survive, does not obligate anyone to hire me.  All the potential employers who potentially might hire me (if they choose to do so) are free.  I am also free.  Free to lose.  The contract, if I am hired, is justified, whatever its terms may be, as an expression of our common will –of our freedom.

Marx glosses property as something to sell, i.e. a commodity.  The property the worker has to sell is his or her labour-power.   Even though meeting vital needs, including the needs of the worker’s dependents, may depend on employment –at a decent wage– for the basic constitutive rules of society labour-power counts as property up for sale like any other property up for sale.

Equality means formal equality.  Each plays the same formal role.  One is a buyer.  The other is a seller.

Bentham, according to Marx, refers to the principle that each individual pursues only his or her own self-interest.  This was not actually the philosophy of the real flesh and blood Jeremy Bentham.  Bentham ascribed to all of us a duty to work for ‘the greatest good of the greatest number.’  But no matter.  We know what Marx means.  It is really true that the basic constitutive ethical and legal rules of what Karl Polanyi called our ‘market societies’ allow us to be indifferent to the fate of others if we choose to be indifferent.  It is also true that market competition often forces us to be indifferent or callous even when left to ourselves guided by our cultural norms and our biological instincts we would choose to be kind.

Recently, André Orléan has come up with an even briefer definition of the basic constitutive rules of a market society.  It consists of just two words:  séparation marchande. In a pure market society (and it is in a hypothetical pure one that one defines the basic rules) people are separated.   They are separated from each other.  They are connected, if at all, by contracts.  (Immanuel Kant, modernity’s greatest moral philosopher, defined marriage as ‘a contract by which each cedes to the other the exclusive use of the private parts.’)  Most people are also separated from their means of subsistence.

Another way to look at the constitutive rules of market society is to treat them as basic law, and then to trace out the consequences of having the basic law we have and not some other basic law.  This is what Karl Renner, the first socialist chancellor of Austria, does in his book The Institutions of Private Law and their Social Functions.

As for Marx, after making a brilliant start, stating the key rules of the game in a few words, Marx blew his lead.  Instead of taking these constitutive rules –so basic that they are often taken for granted and not even seen– as the ethical and legal foundation of the modern world-system, he reverts to seeing them as window-dressing.  They are high-sounding words like ‘freedom’ cynically used to put a pretty face on bloody exploitation.  The hard facts of exploitation happen in factories, not in markets. They happen wherever people work and produce value, only to have the difference between what they produce and what they are paid stolen from them by property owners.   The ‘veritable Eden of the rights of man’ whose praises are sung by the ethical/legal quartet ‘freedom, property, equality and Bentham’ is bla bla.  Thus Marx.

Marx makes a valid point.

But there are other points that are equally valid.  Other points are especially valid today when the human being is rapidly becoming obsolete as a factor of production; when the market value of labour-power is plummeting toward zero; and when productivity increases –when they occur—are not caused by workers working harder and smarter.  They are caused by scientific research and capital investments in technology.  Today productivity increases usually result in layoffs as capital is substituted for labour (as Piketty shows in his book The Economics of Inequality).

The civil law is not just window-dressing.  It really does organize markets.   As Amartya Sen shows in his studies of famines, it is really true that if you cannot sell something for enough money to buy enough food to stay alive, then the civil law says you have no right to eat and you must die.   Although the Irish famine and a number of famines in India were made worse by the dogmatic free market economics of their British rulers, the basic dynamics of famine are established at the level of jurisprudence, not at the level of economic theory.

As Jürgen Habermas (The Legitimation Crisis), Karl Polanyi (The Great Transformation) and others (like me and Joanna Swanger in The Dilemmas of Social Democracies and in Gandhi and the Future of Economics) have shown, markets are the primary institution.  Governments are secondary.  Markets govern governments.  Governments do not control markets.  The first imperative for any government is to make the economy work for the people.  The government can only comply with that imperative –to the extent that it can comply with it at all—by pleasing the markets.   Governments must please investors.  Therefore, even if DIEM or TDEM were to win elections and form governments, they would still not have real power.  The markets would still have the main power, the decisive power, including but not limited to what Giorgio Agamben calls the power to enforce a state of exception.

Governments cannot simply invoke the principle of popular sovereignty, and then apply it to take control of markets.    As the historical research of Michel Foucault has shown (see, for example, the last lectures in his Society Must be Defended) for several centuries, at least since the Enlightened Despots, it has been a principle of jurisprudence that any government that does not respect freedom, equality, property and Bentham (especially property) is not a legitimate government.  It violates the social contract.  A state of exception is justified.   As Fareed Zakaria puts it today, speaking to a worldwide audience on CNN, democracy loses legitimacy when it becomes ‘illiberal.’

Jean-Claude Juncker recently let the cat out of the bag when he remarked that he and his colleagues know perfectly well what they ought to do.  What they do not know, is how to do what they ought to do and get re-elected.  Exactly.  What they ought to do –not just according to his worldview, but according to the way the world is presently organized– is obey the markets.  Ethics, the call of duty, clashes with democracy.  Such is the conceptual muddle in which Europe and all humanity is trapped.

This is why the disagreement between Thomas Piketty and Yanis Varoufakis is a splendid educational opportunity.   It is an opportunity to move the conversation to a deeper level.   It is an opportunity to take to heart the words of Albert Einstein: ‘We cannot solve our problems with the same level of thinking that created them.’

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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.clSolidaridad, Participacion, Transparencia: conversaciones sobre el socialismo en Rosario, Argentina. Available free on the blogspot lahoradelaetica.

Yanis Varoufakis, a former finance minister of Greece, is a professor of economics at the University of Athens and the co-founder of DiEM25 (Democracy in Europe Movement). His latest book is And the Weak Suffer What They Must? Europe’s Crisis and America’s Economic Future.

 

 

Thomas Piketty is Professor of Economics at the Paris School of Economics. His most recent book is Capital in the Twenty-first Century. (June 2015)

 

This article originally appeared on Transcend Media Service (TMS) on 25 Mar 2019.

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2 Responses to “Thomas Piketty vs. Yanis Varoufakis”

  1. rosemerry says:

    Thank you, TMS. I had never herd of Prof. Howard Richards and will now follow up the lead.

  2. Jon Olsen says:

    Regarding the conclusion:
    ” What they ought to do –not just according to his worldview, but according to the way the world is presently organized– is obey the markets. Ethics, the call of duty, clashes with democracy. Such is the conceptual muddle in which Europe and all humanity is trapped.”

    Obvious next conclusion is to reject “the way the world is presently organized.” Nothing but a rapid evolution to eco-socialism makes sense to me. Far too much attention is paid to economics and far to little to ecology. If life cannot be sustained, any argument about affording a different way is utterly irrelevant. It may sound trite, but corporations do not need to breathe or eat nor to have potable water. In order for us to live, the global corporate model must die.

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