Is It A Scandal? An Economic Diversion

The Passions and the Interests, Albert O. Hirschman

The Great Transformation, Karl Polanyi

Voltaire's Bastards, John Ralston Saul

While nearly everyone is familiar, usually at second or third hand, with Adam Smith's famous justification of self-interest as the most rational way to organize economic life ("It is thus that the private interests and passions of individuals naturally dispose them to turn their stock towards the employments which in the ordinary cases are most advantageous to the society," and so forth), fewer readers are aware of this passage, generally ignored by the defenders of free-market capitalism:

"These are the disadvantages of a commercial spirit. the minds of men are contracted, and rendered incapable of elevation. Education is despised, or at least neglected, and the heroic spirit is almost utterly extinguished. To remedy these defects would be an object worthy of serious attention."

I was reminded of this passage in The Wealth of Nations while rereading Albert Hirschman's seminal essay The Passions and the Interests, a rereading prompted by the college-admissions scandal that broke this past week.  The spectacle of wealthy families bribing college coaches, SAT and ACT tutors and anyone else who could advance the chances of their (dull-witted) children gaining admission to America's elite colleges and universities--USC, Georgetown, Yale, etc.--reminded me yet again of how unlikely it is that, despite the optimistic predictions of Montesquieu, Steuart, Smith and other political thinkers of the Enlightenment, human folly will ever by tamed by self-interest.

Hirschman's compact essay relates the history of the idea that human passions--primarily greed and violence--can be redirected into self-interested economic activity.  From Francis Bacon to Adam Smith men who saw in mercantilism an irrational centralization of political and economic power in the hands of absolute monarchs, a compressing of power that resulted, as it must, in constant wars over limited resources, developed what they believed was the antidote: the enlightened, rational, and unregulated pursuit of self-interest.  Adam Smith is the most famous of the proponents of this view, though as the quotation above indicates, he was able to see the moral risks of self-interest more clearly than many of his disciples.

The "inoculation" theory of the social and economic order has never made sense to me. The idea that you encourage individuals to cultivate their worst instincts in a framework that ends up benefiting society as a whole seems as irrational as the Victorian idea that if you have an erotic impulse you either bottle it up or redirect it, usually as violence against dark-skinned people (e.g. Passage to India).  Neither viewpoint places much hope in the possibility of human self-improvement through education, in the potential of a just government to constructively overrule the irrational passions of its citizens, or in the existence of altruistic impulses that might very well be as deeply embedded in human character as greed and vanity.

Adam Smith felt that capitalism was likely to channel our passions into socially constructive modes of economic production, but he also recognized that human material needs are limited, and that most of what industry produces is not needed for survival but instead is a form of personal aggrandizement.  What we end up with under capitalism, what we have always ended up with, are self-interested people who game the system for themselves and who have not the slightest concern for the well-being of others. (Any economic system that could lead a judge--a judge!--to placidly summarize Paul Manafort's life as "blameless" has something wrong with it.)

A cursory reading of history confirms this as a fact, not an ideological pronouncement. One might rationalize this truism (if one is capable of recognizing it as such) by saying something like, "Well, sure, but look at all the good things we have," a view that I think of as the "breaking-a-few-eggs" theory of history. Easy to say if you know you aren't going to be one of the eggs. But why not argue instead that we might have all these good things without breaking any eggs at all? (See below)

It baffles me when the talking heads and editorial writers wring their hands, as they have all week, over the college admissions scandal. (By the way, if you type the word "college" into your search engine the first link to appear will be "college admissions scandal.") Well, what did we expect?  If you set up a system of economics and social life that rewards greed and egotism, how can you be surprised by daily examples of greedy, egotistical behavior? If Masha Gessen were a talking head and offered her view of American higher education, Americans would express shock that such a "radical" perspective was allowed to be aired. Have a look at her article, linked below, and see if her interpretation makes sense.

*** 

That's a picture of Karl Polanyi, whose 1944 book, The Great Transformation has helped me to think more clearly (I hope) about politics, economics, and history.  Contrary to the classical/liberal view that self-regulating markets arose necessarily out of the developing conditions of economic history, Polanyi painstakingly demonstrates that the so-called free market, with its alleged reconciliation of the passions and the interests, was but one alternative, and that many societies have organized production and exchange along social and reciprocal lines, rather than through the deliberate optimization of personal self-interest.  The "great transformation" came when, in the eighteenth century, a particular set of economic and social relations, born in a time of relative peace and described with canonical certitude by Adam Smith and others, became an article of nearly religious faith.  The next time you are relaxing with friends try saying, "the self-regulating capitalist market, far from being the inevitable by-product of economic history, was only one option for organizing production and exchange, and not, as history shows, the best one," and see how quickly you are dismissed as a "socialist" or worse.  Every FOX commentator will tell you that Marx was wrong in seeing communism as the inevitable end of history (as he was), but suggest to them that there is no reason to see the "free market" as any more "inevitable" and you will be called a crackpot or get punched in the nose (e.g. the blowhard Bill O'Reilly on the writings of Robert Reich).

Here's a snippet of Polanyi: 

"To allow the market mechanism to be sole director of the fate of human beings and their natural environment, indeed, even of the amount and use of purchasing power, would result in the demolition of society. For the alleged commodity 'labor power' cannot be shoved about, used indiscriminately, or even left unused, without affecting also the human individual who happens to be the bearer of this particular commodity. In disposing of a [person's] labor power the system [the free market] would, incidentally, dispose of the physical, psychological, and moral entity 'man' attached to that tag. Robbed of the protective covering of cultural institutions, human beings would perish from the effects of social exposure; they would die as the victims of acute social dislocation through vice, perversion, crime and starvation. Nature would be reduced to its elements, neighborhoods and landscapes despoiled, rivers polluted, military safety jeopardized, the power to produce food and raw materials destroyed." (GT, p. 73)

Human beings are more than their passions and interests.  Remarkable, really, that most economists can't grasp this fact. I suppose every astronomer (as Walt Whitman reminds us) sees human beings as dust, and every cardiologist as a beating heart. Dear Milton Friedman: Communities are more than markets. And culture is more than money. And a good life, as even Adam Smith saw, is more than a totting up of possessions. Dear Lori Loughlin: Why not send your underachieving child to trade school? Better to be an honest electrician than a crooked TV actor or Instagram doyen. Way better.

Speaking of Ms. Lori Loughlin. She wanted her daughter to attend an "elite" university.  Ms. Loughlin and her husband have lots of money and so they did what (I hope) only a very few people with lots of money do--they bought their daughter the credentials she needed to join the elite at an elite university so that, upon graduating (presumably after more bribes and more cheating), she would take her place among the elite (and the rich, it goes without saying).

No one has done more to uncover the pretensions and perversions of elitism in supposedly democratic societies than the Canadian political theorist John Ralston Saul.  Claiming access to what is called "rationality," elites have, since the eighteenth century, dominated society.  Because "rationality" is nothing but a neutral sounding word for ideology, access to reason has become the holy grail of economic and social power in capitalist societies.  Graduate from Harvard or Stanford and you have been baptized into the minuscule population of true elites, and you are henceforth immune from the oversight of the masses: "There is no language available for outsiders who wish to criticize [elites]." How can an ordinary person challenge the policies of a pharmaceutical company, of Exxon/Mobil, of his local cable provider, of the wunderkind Wall Street broker who leveraged his house out from under him?  The junior college graduate, or, worse, one of the thirty-percent of Americans who don't attend college at all, has no place to stand, no voice to raise, no words to address those who tower above him in credentials, in contacts, and in social capital.  This loss of public power is what moves the voiceless to the exercise of private power and violence.  And to the support of demagogues.

Those who attend elite universities belong to a club.  They may be nasty to one another, but, in the end, when it's time for cocktails, Donald Trump (Wharton School at the University of Pennsylvania) will be more likely to be sitting down with Hillary Clinton (Wellesley) than with you or me.

I pity the poor mentsh who works hard, plays by the rules, saves her pennies for the kids' college, goes into debt, who can't afford expensive tutors, and who would be mortified to learn her son or daughter had cheated on the SAT's or faked athletic credentials.  As one commentator, dismissing the seriousness of the college admissions scandal put it: "This is the way the game is played." It's callous to say so, but, unfortunately, he's right.   

   
George Ovitt (Pie/Pi Day, 2019)

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