Liberty for Property: On human nature, economics, and democracy

---

or women's rights and so on. It wasn't just people screaming at each other. There were interesting arguments on both sides. The pro-slavery side had substantial arguments that are not easy to answer. But there was a common moral ground in which a good bit of the debate took place, and as it resolved, which it essentially did, you see a consciousness emerging of what really is right, which must mean it reflects our built-in conception of what's right. That's something that we learn more about over time, we get more insight into what's coming out of our nature. The implications are very substantial, to the extent that we can understand them. It's better to have a conscious understanding of what's guiding you, to the extent you can, than just to react intuitively, without understanding. That's true whether you're a carpenter reacting to how to form wood artifacts or a moral human being reacting to how to decide between behaviors toward others.

One example that comes to mind is that even the most extreme neoliberals never defend income inequality in itself—it's always supposed to benefit the poor.

That's a kind of universal. Every proposal that's made is made because it helps the poor people. Doesn't matter what it is. Actually, that's something that's been noticed by mainstream economists, like Paul Krugman. He has a review article in a professional journal, International Affairs, in their 75th anniversary issue. They had reviews of various topics. He reviewed economic development. He pointed out that people have always had different ideas about economic development, and every time they're completely certain that it's right, and they're completely certain it's going to help everyone. But then it turns out, shortly afterwards, that it was all built on sand, and they switch to some other idea, with equal certainty that it's also going to help everyone, including the poor, although it's recognized in retrospect that the earlier one was a bad idea. He then adds that some people claim that bad ideas flourish because they're beneficial to the people with power. Well, yes, that probably happens—perhaps 100 percent of the time.

But you're right, it's always rationalized as being for the poor. No individual gets up and says, I'm going to take this because I want it. He'd say, I'm going to take it because it really belongs to me and it would be better for everyone if I had it. It's true of children fighting over toys. It's true of governments going to war. Nobody is ever involved in an aggressive war; it's always a defensive war—on both sides. You have to present things in such a way that they will accord with people's understanding of what's right or wrong. Sometimes reaching ludicrous levels. Let's take, say, the Nazis and Jews. That was presented to the population as a defensive action. The Germans were defending themselves against the Jewish attack.

If we just make the thought experiment that a whole generation of children were given the opportunity to grow up in a truly loving and respectful environment, through liberatory child-rearing, so that they would be able to fully develop their moral capacity, would it then, do you think, be impossible to uphold a social order based on vast inequality and elite rule?

I wouldn't say it's impossible, but I would think it would generate very considerable resistance. Actually, it always generates resistance. It would generate even more in that case. It's a striking fact, if you look at the notion of equality, take our own history, from the Greeks to the present, that just about every leading figure has regarded equality as an obvious desideratum.

Take the earliest serious work on politics, Aristotle's Politics. He points out that he's not a great fan of democracy, it's the best of a bunch of bad systems. But he said a democracy cannot function if there are extremes of wealth. Everyone has to be roughly equal—everyone has to be middle class, he said. In fact, he called for a super welfare state. He said in any democratic society, public resources will have to be used in ways that he outlines, like communal meals, to ensure that the poor are relatively well off and that there are no big differences. Otherwise, it's impossible to have a properly functioning democracy.

Or go on to, say, Adam Smith. His argument for markets was nuanced; it's not as extreme as people claim. He argued that under conditions of perfect liberty, markets will lead to perfect equality. That's basically the argument for them. Maybe the first real break with this, apart from pathological cases, is capitalist ideology. So after Ricardo, you start getting the conception that it's better for the poor if I'm rich. As capitalist ideology becomes dominant, this conception that you'll only hurt the poor by helping them, takes over. Then comes the idea that you have no intrinsic rights. The big intellectual revolution for capitalism, I think, was the principle that human beings have no rights other than what they can gain on the labor market. So Malthus and Ricardo and others said that if you can't survive by what you can gain on the marketplace, go somewhere else. Any effort to try to help you will just harm you in the long run, because of market interference. This was a real intellectual revolution reflecting the economic emergence of capitalist relations of ownership and production. People fought against it. The British army was putting down riots in the 1820s and 1830s, because people would not accept the fact that they had no right to live.

Look at what was called liberty in England, the first modern democratic revolution, in the 17th and 18th century. Liberty meant liberty for property, which meant taking away from people their traditional rights, like their rights to the commons. This was no small thing. The rights to the commons meant forests, and pasture lands, grazing lands, and so on. That's what kept people alive, and it was considered communal property. With proprietary rights established, with liberty given to the owners, that land was taken away from everyone else. Thereafter you had formal liberty, but popular deprivation, which proletarianized the British working class. There was plenty of resistance to that. The resistance goes on today. I think this is a deep sentiment, and an understandable one, and we all recognize, at some core of our being, that there's something quite wrong with one person having superfluities and another person starving. You find that all the way through the tradition, in people's actions, in literature.

Just looking at the latest Human Development Report, the figures on the combined wealth of the 250-something richest individuals in the world...

But you notice that they criticized it. They don't say, isn't this wonderful? They say it's something wrong. Everybody says there's something wrong. The only arguments that support it are saying, really, everybody benefits because it trickles down. The arguments are ludicrous, but it's interesting that they have to give the arguments. The arguments for defensive war are often equally ludicrous.

If we consider the likelihood that we as humans have an instinct for creativity and a moral instinct, what is it in the way our system of education is functioning that perverts or inhibits these instincts from fully developing?

A good educational system ought to nurture and encourage these aspects of human life and allow them to flourish. But of course that has problems. For one thing it means that it will encourage challenge of authority and domination. It will encourage questioning of powerful institutions. The fact is that honesty, integrity, creativity, all these things we're supposed to value, all run up dramatically against the hierarchic, authoritarian structure of the institutional framework in which we live. Since that structure is what sets the basic framework in which things happen, it becomes virtually contradictory to implement the values that you talk about in church on Sunday morning. So you put the values to the side, to the Sunday Service, and get on with existing the rest of the time. Sunday is when you say, yeah, love and kindness and charity and equality and all that stuff are the soul of life. But the other six days of the week you're working within institutions of authority and domination and control and self-enrichment and so on and you must comply or suffer even graver consequences for not complying.

Schools are like that. The way schools actually function—of course it's not 100 percent, because there is a contradiction, so all sorts of aspects show themselves, depending on the teacher and so on—but, by and large, there's a very strong tendency which works its way out in the long run and on average, for schools to have a kind of filtering effect. They filter out independence of thought, creativity, imagination, and in their place foster obedience and subordination. I think everyone knows this from their history. How did I get to a good college? I was always very critical and dissident. But I got there by shutting up. I went through high school thinking it was all really stupid and authoritarian and boring, but I was obedient, I was quiet, I wasn't a behavior problem, I didn't tell the teacher that I thought he was teaching was ludicrous when I thought it was, so I made it to a good college.

There are people who don't accept, who aren't obedient. They are weeded out, they're behavior problems. The long-term effect of this is to reward and foster subordination; it begins in kindergarten and goes all the way through your professional or other career. If you challenge authority, you get in one or another kind of trouble. It's not 100 percent the case, and there are some areas of life where it's dramatically not the case, but on average it holds.

I just reread the chapter “Psychology and Ideology” in The Chomsky Reader, your critique of Skinner. Behaviorism is much less influential today, but I wonder—it is two or three decades ago that you wrote about this—but what do you think has happened in the time since with the theory of human malleability in a broader sense?

Behaviorism was very popular among the managerial classes, for not surprising reasons. For one thing, it gave them a moral right to control and dominate people. If people have no intrinsic nature, then there is no moral barrier to control or manipulation of them—in their own interest, of course. Somehow “we,” the controllers, are immune from this human condition of infinite malleability, however. “We” have a nature and “we” understand what's good, that's kind of like a hidden premise. But for the rest of the “slobs” out there, they're just passive objects, and we can control and manage and organize them using the latest behavioral techniques, and they'll all be better off.

That's a strain of thought that runs right through the whole intellectual, managerial culture, from priesthoods up to Leninist commissars and to contemporary liberal theorists. Behaviorism gave the perfect intellectual justification for it; it didn't matter that the intellectual foundations were ridiculous. It served a function so it survived. The parts of the society that need that, they still believe it—believe it more than ever.

So, instead of talking only about academics, let's go to the big institutions, like, say, the public relations industry. Now we've gone several orders of magnitude larger in power and significance. They were based from the beginning on the same idea. The idea that it is necessary to control the public mind. The modern public relations industry was in many ways an outgrowth of the increase in democracy—and consciously so. You read the manuals, they talk about it, in the 1920s and so on. With the extension of the franchise, with the bringing in of working people and others into the public arena, you can no longer ensure that the wealthy and the “capable” and the “enlightened” will run everything. So it is necessary to use the techniques of propaganda. Right after World War I this was very prominent because of the enormous success of Anglo-American propaganda during the war, which had real success in affecting people's views, and they were aware of it.

In England for example—documents have now come out—the British Conservative party recognized that its traditional domination of English politics was threatened seriously by the extension of the franchise. They concluded that they must turn to the techniques of propaganda, drawing on the war-time experience, when the British Ministry of Information had set off, as they put it, to control the thought of the world—particularly the thought of the United States, because that's what they cared about, that the United States come in and save them from this mess. The Conservative party organized around the theme of propaganda to overcome the threat of democracy. Something comparable happened here, but here it happened primarily in the rise of public relations, which became a huge industry devoted to “controlling the public mind.” The “intelligent minority” must “regiment the public mind every bit as much as an army regiments the bodies of its soldiers.”

I'm quoting from a manual written, incidentally, by a New Deal liberal intellectual, for whom this was second nature—of course you have to regiment the public mind. He had come out of Woodrow Wilson's wartime propaganda ministry, the first state propaganda ministry in American history, which was very successful. You have to remember, during World War I, the population here was pacifist, the tradition was: don't get involved in the European bloody nonsense, it's not our business, we're the New World. Somehow, Woodrow Wilson had to—he was elected in 1916 on a slogan of “Peace Without Victory”—quickly turn the country around to become raving jingoist fanatics, hating everything German. They did it with remarkable success. The British Conservative party was impressed, the business world was extremely impressed (then came the huge growth of the propaganda industry). Another person who was impressed, incidentally, was Adolf Hitler. He writes in Mein Kampf that Germany lost the war because of propaganda, and next time we're going to have it too.

The idea that you can control people was supported by that experience. They didn't read Watson or Skinner. You can control people, and you must control people—of course in their own interest, it's always in their own interest. You can read it in the Encyclopedia of the Social Sciences by one of the founders of modern American political science, Harold Lasswell. In an article on propaganda, he says that we should not succumb to “democratic dogmatisms about men being the best judges of their own interests.” They're not, they're too “stupid,” they're too “ignorant.” We're the best judges of their interests, and although they have this official right to vote, we have to make sure they don't make any use of it in an unreasonable way. We do that by controlling the public mind, by propaganda.

After World War II, the business world, particularly in the United States, was appalled by the fact that most of the world, the industrial world, was being swept by radical democratic ideas—takeover of factories and all sorts of activities, including in the United States incidentally—and the business world was terrified. You can read it in their manuals and pronouncements. They say we have a few years to try to reverse this tide, we have to fight “the everlasting battle for the minds of men,” and “indoctrinate citizens with the capitalist story” until “they are able to play back the story with remarkable fidelity.” Huge campaigns took place, covering everything you can imagine. In factories you have a captive audience, so they ran what they called economics lectures on the principles of “free enterprise,” and Americanism lectures that went on radio and television. They aimed at churches and schools, even sports leagues. There was a huge coordinated campaign, with many purposes. It demonized unions. It instilled the idea that the government can't do anything for you—it's not your government anyway, it's some thing out there and what it does is harmful, stealing your money and taxes and so on, and the only real kind of freedom is freedom to function in a market economy. You should be a consumer and not worry about anything else except maybe diversions, entertainment, sports, and so on

In societies where people have won a degree of freedom from state coercion, you have to turn to the techniques of propaganda, control of the mind, all on the assumption that people are not only malleable but that they're better off if they're molded. There is a very striking similarity between Leninist and Western liberal doctrine on this, they're almost interchangeable. I've sometimes run paragraphs side by side, and if you change a few names you can hardly see the difference. I think that helps account for the appeal of behaviorist doctrine. It gives a kind of moral basis for all this.

With the global economic crisis growing deeper and deeper, several mainstream economists are saying that we're about to see a replay of the Great Depression. Clinton and Blair produce rhetoric about the need to regulate markets and Business Week argues the case for capital controls. What is happening and what does this tell us about this past decade of capitalist triumphalism?

The triumphalism was an expression of the fact that a very small section of the population was becoming enriched. But this crisis happens to be at a point where it's hitting rich people, and that's why it's a crisis. But the crisis has been going on for 25 years. There was a period after World War II, sometimes called the Golden Age of capitalism, in which there were unprecedented growth rates over most of the industrialized world. There was also growth of the social contract, labor rights, workplace reforms, as well as growth of both the economy and productivity. That continued into the late 1960s, more or less.

Since the early 1970s growth rates have slowed, both of the economy and of productivity, wages and incomes have basically stagnated for most of the population; for a period, corporate profits were lowered, but in the 1990s—and that's the triumphalism— corporate profits shot up, sky-high. Read the business press in the United States, every year: “dazzling,” “stupendous”—they ran out of adjectives a long time ago. For a small sector of the population, this long downturn happened to lead to extreme wealth mostly via redistribution upward.

Take, say, the recovery in the United States, the latest stage of the business cycle in the United States, from about 1991 until now. It's the slowest postwar recovery. It's the first one in American history in which most of the population has been left out. Wages and incomes are barely getting back to their 1989 level, let alone their level of the 1970s. One thing that is booming, however, is the stock market. When you read—this is pre-August, still triumphalist—the stories about “the fairy-tale economy,” about Americans being “smug and prosperous,” there is only one example that's given: that's the stock market. But close to 50 percent of the stocks are held by 1 percent of households; and most of the rest is held by the top 10 percent so that roughly 90 percent of the stocks are held by 10 percent of the population. If you look more closely, the richest 1/2 percent holds about 40 percent of the stock. For that sector, the economy no doubt is a fairy-tale economy. But for maybe 2/3 of the population or perhaps as much as 70 percent of working people, wages have either stagnated or declined, working conditions have gotten worse, working hours have gotten longer, and you have to have both husband and wife working just to keep food on the table.

It's been a long slowdown across the industrial world, and it has hit the underdeveloped world in much harsher ways.

You can roughly date when it happened, it's from the early 1970s. There was one crucial event that took place in the early 1970s, namely the Bretton Woods system was dismantled. The Bretton Woods system—the postwar economic system—was based on an effort to free trade from restraints, but simultaneously to regulate finance. [See Hahnel series in this issue.] The U.S. took the first steps to break it down, Britain went along, and gradually other financial powers went along as well, and so the rest of the world had to do it too. Some parts held back, like South Korea. They maintained the system of controls through the late 1980s. Then they were more or less forced to give them up. That was a condition for entry into the OECD. The United States put enormous pressure on them to overvalue their currency, to take more American imports, to deregulate their financial markets, and so on, and they gave in. Next you had this huge market failure, which is largely what it is: the so-called Asian crisis.

First, the pundits were talking about crony capitalism and that sort of thing, as an explanation, which is nonsense—I mean, it's there, of course, but it's here too, it's everywhere, and it was there during the growth period as well. What was different about the recent period of decline was that you had an almost classic failure of financial markets, a huge flow of capital, huge borrowing, private borrowing, private lending, and an extraordinary flow of herd-like behavior, and then pulling it all out in another irrational, herd-like action. This is very familiar. Keynes warned about it 60 years ago, when he argued that finance ought to be closely regulated and controlled, as indeed it sort of is internally. The banks want to keep it controlled or otherwise everything blows up.

But during this neoliberal escapade, the rich and the super rich were having a ball, while most of the population suffered. They spread the conditions supporting this sort of triumph far and wide. Now the crisis is hitting home, hitting them too, so now it's called a crisis.

Notice that there is nothing new about the volatility. Since the early 1970s, markets have become much more volatile, contrary to the predictions of many famed economists. Milton Friedman predicted with confidence that, free the exchange rates, let the market rule, and everything will settle down, it will all be stable. It went exactly the other way. With capital restraints reduced, with limits on how capital could be moved about, markets became far more volatile, with very sharp ups and downs. The IMF recently released a report saying that of its roughly 180 members about 20 percent had suffered severe financial crises, and about 60 percent had suffered fairly serious ones, over this post World War II triumphalist period (1980 to 1995). This is the way financial markets operate. There is no theory of financial markets. It's mostly amateur psychology. When you read economists—Alan Greenspan and so on—talking about economic policy, it's mostly, this is going to inspire confidence, or this will make people feel better, or something like that. You can sort of dress it up in formulas if you like, but it's a kind of amateur psychology, no real theory applied.

It's known descriptively that highly irrational behavior, even from the point of view of market doctrine, takes place all the time. So in a rational market, investors are supposed to look for economic fundamentals, they're supposed to value solid manufacturing capacity and fiscal austerity and all that kind of stuff. They are not supposed to do what is called technical trading, to look for short-term patterns and see if you can make a tiny gain by playing this and that game over a period of weeks, or days, or even hours. But the latter is exactly what they do. About 80 percent of the capital in foreign exchange has a turnaround time of less than a week, much of it a day or less. What this is, it's smart guys, a lot of PhDs in math who are working for Wall Street firms on sophisticated techniques to extrapolate little changes in currency fluctuations and so on, so that you can make a lot of money fast.

It finally hit home that this is a real crisis when one of the big hedge funds collapsed, which wasn't supposed to happen, but that's the game they're playing. Not only does it not contribute to the economy, it harms it.

Now the taxpayers are paying the bill.

In some manner the public bails it out, that's the name of the game. Capitalism means, we don't take the risks, the public takes the risks, we take the profits. As much as possible, risk and cost have to be socialized, profits privatized. It's the basic principle. But the thing has become so serious that by now even the major establishments are worrying about it.

So what they're now talking about in the G-7, and the finance ministers, and Business Week, the Financial Times, and so on, is what critics have been saying all along, that unless there is some careful regulation of financial flows and some penalty for short-term speculation, you're going to have serious problems. There have been problems, in blow-up after blow-up. They're even willing to talk about things that were anathema to them until recently, like the Tobin tax.

The Tobin tax was proposed more than 20 years ago by a Nobel prize-winning economist, who pointed out that unless you do something to throw sand in the gears of short-term, speculative capital flows, it's going to seriously harm the international economy. Well, nobody wanted to hear that, because that was challenging the orthodoxy that markets are wonderful, which was an orthodoxy precisely because it was benefitting rich people, not because there was any logic in it.

There was a major study done on the Tobin tax by a group of international economists, about five years ago. The UN Development Program wanted to distribute it, and they were apparently put under pressure by the Clinton administration not to, so the book is known mostly to technical economists. Not all of the authors thought it was a great idea. It includes people like the chief economist of the IMF, who didn't particularly like it. But it was a serious discussion of its possibility, and this discussion was not supposed to be on the agenda. In today's newspapers, however, they're talking about it. What's the difference? Well, now rich people are in trouble.

Given the risk that the world economy might spin out of control completely, and considering that last time, in the 1930s, it took a world war to overcome the depression, how worried do you think we ought to be about the prospect of war?

The prospect of war is much less, but for other reasons. Europe is, in modern history at least, the most violent part of the world. One of the reasons why Europe conquered the world is that it created a culture of war, based on centuries of mutual massacre and slaughter—both a culture of war and a technology of war. That largely came to an end in 1945, and for a very simple reason. Everybody could understand that the next time we play this game, we're all dead. The techniques of destruction had reached such a point that war is not an option for rich and powerful countries. If they try it once more, that's the end. Somebody may be irrational enough to do it anyway, but within anything remotely like the domain of rationality, where you can at least begin to talk about prediction, there isn't going to be war among the powerful countries. This is understood.

For example, in the middle of the Gulf War, somebody at the Pentagon leaked to the press—which buried it—an interesting document. When any new administration comes in, the CIA and the Defense Intelligence Agency and so on give them a kind of intelligence assessment of the world, a strategic analysis of the world. Someone leaked part of the Bush administration strategic analysis (this would have been from early 1989), and one part of it dealt with war. Here is approximately what it said: it said in case of a conflict with “much weaker enemies” (implication: that's the only kind of conflict we're ever going to get into), we must defeat them “decisively and rapidly,” because anything else will “undercut political support.” So no more bombing of South Vietnam for 15 years, and certainly we don't go to war with any major power.

This was well before the Gulf War in 1991. At that time Saddam Hussein was a great friend, so he wasn't contemplated as a target—but that's what you can do. You can invade Panama, kidnap Noriega, and get out in a couple of weeks; bomb the Sudan; bomb Libya; bomb Iraq from a distance, very fast, and don't get involved in more than a few days of fighting. That kind of thing you can do with a much weaker enemy, rapidly and decisively, but nothing else.

But to return to your other point, what actually overcame the depression was not so much the war as the semi-command economies. The British economy started to pick up in the late 1930s, when it sort of deliberalized and became a kind of semi-command economy. The U.S. was barely at war, there was no fighting here. But the wartime economy not only overcame the Depression, it flourished as industrial production tripled. But that was a semi-command economy, it was highly coordinated from Washington, run by corporate executives, with wage and price controls, industrial policy deciding what would be produced. That worked like a charm. Just like it worked in England—England out-produced Germany and came close to the United States.

So the mobilization of the economy did overcome the Depression. The war was taking place and that was the justification for it, but the war was not what overcame the Depression. This was pretty well understood. The consensus among American economists and businesspeople and others in the mid-1940s was that with the government-coordinated economy declining, after the war, they were going to go right back to the depression due to market failures. There was recognition that we've got to do something to get the government to stimulate the economy again.

It was understood—you didn't have to read Keynes to figure it out—that you could stimulate the economy in a lot of different ways. You could stimulate it with social spending or you could stimulate it with military spending. There there was a perfectly sane discussion, in Business Week, of which to do. The conclusion was: well, social spending is not a good idea and military spending is a great idea. The reason is that social spending has a downside. Yes, it can pump the economy. But it also has a democratizing effect, because people are interested in social spending; they want to know where you're going to build a hospital or a road or something, and they become involved. They have no opinions about what jet plane to build. Social spending also gives people more security and better conditions, better education, more means of communicating, more ability to withstand threats of unemployment. It makes people, workers, more powerful, and thereby better able to win higher wages and better conditions.

Social spending has a democratizing effect, and it's not a direct gift to corporations. Military spending, however, has none of those defects; it's non-democratizing—on the contrary, people are frightened and they seek shelter under the umbrella of power. While it aids corporations it doesn't directly improve the lot of workers; rather it tends to reinforce workplace discipline. So it's a direct gift to corporations. It redistributes upward and it's easy to sell if you terrify the public. So what emerges is a Pentagon-based industrial policy program, one which is now buckling a bit, due to the excessive liberalizing of capital movements, and thus, one which has to be repaired a bit, so that it once again benefits the rich, as intended.                                         Z

Tor Wennerberg is a freelance journalist living in Stockholm.