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Dr Howard Richards – Solidarity for Raising Wages

Profile Dr Howard Richards LE Mag Vol one Dec 2018

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Solidarity for Raising Wages by Dr Howard Richards

Dr Howard Richards (born June 10, 1938) is a philosopher of Social Science who has worked with the concepts of basic cultural structures and constitutive rules. He holds the title of Research Professor of Philosophy at Earlham College, a liberal arts college in Richmond, Indiana, USA, the Quaker School where he taught for thirty years. He officially retired from Earlham College, together with his wife Caroline Higgins in 2007, but retained the title of Research Professor of Philosophy.  A member of the Yale class of 1960, he holds a PhD in Philosophy from the University of California, Santa Barbara, a Juris Doctor (J.D.) from the Stanford Law School, an Advanced Certificate in Education (ACE) from Oxford University (UK) and a PhD in Educational Planning, with a specialization in applied psychology and moral education from the Ontario Institute for Studies in Education (OISE), University of Toronto, Canada. He has practiced law as a volunteer lawyer for Cesar Chavez’s National Farm Workers Association, and as a specialist in bankruptcy.   He now teaches philosophy of science in the Doctoral Program in Management Sciences at the University of Santiago, Chile, and co-teaches “Critical Conversations on Ethics, Macroeconomics and Organizations” in the Executive MBA program of the Graduate School of Business of the University of Cape Town, South Africa. He is founder of the Peace and Global Studies Program and co-founder of the Business and Nonprofit Management Program at Earlham. Dr Richards is a Catholic, a member of Holy Trinity (Santisima Trinidad) parish in Limache, Chile, and a member of the third order of St. Francis, S.F.O  https://en.wikipedia.org/wiki/Howard_Richards_(academic)

The first in this series titled – Solidarity for Full Employment by Dr Howard Richards can be found HERE


Pixabay 1Introduction

As is generally true in the cases of intractable social problems –drugs, militarism, global warming …etc.– also in the case of low wages, in order to solve the problem, it is (I allege) necessary to redefine the problem.  Buckminster Fuller suggested a question I find helpful for redefining the problem of low wages, and hence for solving it:  How can we make the world work for 100%  of humanity without ecological damage?[1]   Remembering Ludwig Wittgenstein who said that the purpose of his philosophy was to show the fly the way out of the fly bottle, we can say that  If we focus on Fuller’s question, and not on more conventional questions like How can we attract more investment?  the fly is already on its way out of the fly bottle.

Many pioneers already realize that the reliable and sustainable creation of dignified livelihoods requires new thinking and a new economy.   They have already concluded that a living wage for everybody who needs one is not going to come to pass through any possible permutation of conventional economic thinking.  While conventional economics is to a large extent about understanding or predicting how self-interested investors react to different public policies, solidarity economics is more about making human life and all life less dependent on the decisions of investors.  It is also about making investors (whether private, public or third sector) less self-interested and more socially and ecologically responsible.  It is about bringing an ethics of solidarity (also known as a care ethic, and by various other names) and the practice of economics together.

Pioneers are already building the caring economy. In the UK, the New Economics Foundation, inspired by E.F. Schumacher, is one of a number of limey think-tanks with its feet on the ground, doing as well as thinking.  Its proposals for making workers co-owners of the firms where they are employed are as I write (September 2018) being incorporated into the platform and programme of the Labour Party. [2]   Emily Kawano who helped start and for nine years directed a Center for Popular Economics at U. Mass Amherst, recently published a list of seven practical things we can do to build the solidarity economy,[3] the first of which is to increase self-provisioning and community production.  In Buenos Aires where there is a graduate programme in social economics at the Universidad Nacional General Sarmiento, its director, José Luis Coraggio is among those organizing on-the-ground worker-owned enterprises and cooperatives as a form of economic resistance to neo-liberal austerity.[4]   Jean-Louis Laville is among those similarly combining theory and practice in France. [5]   On a website supported by Catholic Charities (Caritas) of Spain almost every week there is a new example of building the new society in the shell of the old.[6]   This week it features a community currency popularly called “El Zoquito” recently launched in the city of Jerez de la Frontera. In the Executive MBA programme at the Graduate School of Business of the University of Cape Town, students and teachers study “authentic leadership” putting people and planet first, and that means working to rebuild the system from within the system as Saint Francis worked to rebuild the church from within the church.[7]  The list goes on.   Solidarity economics is not only a growing body of economic theory ignored by the mainstream academic establishment.   It is also a growing social movement ignored by the mainstream media establishment.

The proliferation of such communitarian and socialistic practical initiatives around the world gives me hope that their sum will solve a decisive problem.  The decisive problem in question, in the words of Mikhail Kalecki, is that capital has a veto power over public policy.  It has a veto power because if investors lose confidence, there will be an economic crisis.[8]  Because of that veto power, to restate the gist of Habermas’s concept of legitimation crisis, society is ungovernable.  Deciding what is rational, or what is right, is too often a fruitless exercise, because what is rational and/or right is regularly overruled –-if I may state the same point a third way (referring not to Kalecki or Habermas but this time to Robert Boyer, Michel Aglietta and David Harvey)—by the imperatives of a regime of accumulation.  As the world is now organized, keeping capital accumulation going, come hell or high water, has become the necessary condition for meeting the physical needs of the people.  Solidarity economics is not about building a more successful regime of accumulation (like a developmental state), but about “graduating” (to use Bucky Fuller’s term) to a world where life no longer physically depends on obeying the systemic imperatives (to use Ellen Wood’s phrase)[9] of any regime of accumulation. Here I will focus more on this decisive problem, and on the history that locked us into a world where the requirements of accumulation trump reason and caring, than on the details of the many solidary alternatives are hopefully step by step solving it.

I will also be trying to bring solidarity into the mainstream debate. Even though as far as I know, today the only promising alternative to the veto power of capital identified by Kalecki is solidarity economics, the mainstream debate is between the neoliberals and the moderate left.  The far left is out of it.

There are reasons why solidarity economics is needed to supplement the efforts of the moderate left to save the world from the presently dominant amalgam of neoliberal theory and sheer corruption.  One is that the moderate left concentrates on correcting market failure.  That is not an inspiring idea.  Solidarity is.  Fighting corruption requires a stronger dose of ethics than the mainstream moderate left prescribes.

A second reason is that the evidence often turns out to favour the neoliberals, or at least to keep them in the running, under the positivist rules of the academic game that still prevail in practice even though positivism is defunct as philosophy of science. Why? I suggest that it is largely because the class of people that includes most funders of neoliberal think-tanks,[10] really does have economic power. Sometimes for that unscientific reason the predictions made at those think-tanks come true.  To repeat Mikhail Kalecki’s point, capital really does have veto power over public policy, because any policy it does not like –for good reasons, bad reasons or no reasons —  will cause an economic crisis.[11]   Whatever the specious reasons may be that the neoliberals give and the left tries to refute, for adopting policies that favour the rich, it remains true that with or without reasons, those of us who have more than we need hold economic power.  Like it or not, meeting the physical needs of everybody depends on producing goods and services, while producing goods and services depends (not entirely but too much) on the decisions of the investing classes.  Paul Krugman gives an instructive example: In Brazil in 1999 there was no unusual or dangerous federal government deficit.  There was no inflation to speak of.  There was an economic slowdown, in the face of which standard economics would side with economists on the side of the angels like Krugman and Yanis Varoufakis.  It would counsel expansion, not austerity.  Nevertheless, the investment community decided that Brazil was a bad risk because of the government’s deficit spending.  Krugman continues: “But what was the use of arguing?  Investors believed that Brazil would have a disastrous crisis unless the deficit was quickly reduced, and they were surely right, because they themselves would generate that crisis.”[12]

Now, if a decisive issue is who is able to get production going so that the babies will be fed, and who can stop it whenever they want to stop it for good reasons or bad reasons or no reasons, then the five examples of solidarity economy I mentioned above –worker participation in the ownership of firms, self-provisioning, community production, community currencies, and authentic leadership — are steps in the right direction.  The pioneers of the solidarity economy are actually out there doing something to curb and perhaps eventually replace the economic pouvoir en place.

I write this as someone who experienced the economic crisis followed by a military coup in Chile in 1973; and who also observed first-hand the survival strategies of the people when the Argentine economy collapsed in 2001. I believe that those who have had similar experiences will understand me more quickly than those who have not. I also write as a critical realist unconvinced by the mathematical models of both the right and the moderate left.[13]

Writing from a point of view that emphasizes the causal powers of culture and social structure, Joanna Swanger and I have contributed to the literature on the decline of social democracy.[14]  Social democracy was touted as the wave of the future in the 1960s.  The moderate left is slow to acknowledge that now it is at best a welfare state in a process of orderly retreat.   Solidarity economy learns from its defeats. It takes a more ethical and more grassroots approach.

I cannot help but think that if our book on social democracy were read by leaders of the moderate left, they would better understand, the causal powers of social structures; and that would help them to understand why the achievements of the social democrats when the moderate left led governments proved to be unsustainable; which in turn would motivate them to see solidarity economics as a logical response, regrouping and rethinking in the light of the downfall of social democracy and the rise of neoliberalism.  They would see the shadow side of the ideals of the 18th century. Those were the ideals (in other words the ethics that defined the social structure) that founded economics as a science as well as modern jurisprudence and political philosophy.[15]    The South American origins of solidarity economics, and particularly its roots in two kinds of tradition that predate the 18th century ideals –namely the social doctrines of the Roman Catholic church and the indigenous pre-Colombian cultures that functioned and met human needs before the Europeans arrived — should be clues that it might offer modernity something it lacks.[16]

Swanger and I show with case studies of Spain, Sweden, Austria, South Africa, Indonesia, Venezuela and the World Bank that with respect to humanity’s principal problems there is no way to “get it right” by doing enough orthodox economic research, and by having enlightened policy-makers apply what that research teaches.  The main problems that cry out for solutions when none can be found are not caused by the bogus economic science taught by neoliberals.  They are not caused by the failure of policy makers to apply the valid economic science provided by the academics of the moderate left.  They are caused by (or, it might be better to say, their solutions are prevented by) the basic structure of the socially and historically constructed system that is the object of study of economic science.  The following sections will take a brief but close look at the social and historical construction of that system.

What is that system?  I do not think it is helpful to call the dominant system “capitalism” if by “capitalism” is meant a system founded on the wage-relation, and/or a system devoted to accumulation for accumulation’s sake.  Why not?    Because capitalism so understood, selon moi, is more a consequence than a cause of the basic structure.  Once self-serving simple exchange becomes the Grundnorm defining human relationships, what Alfred Marshall called the “Law of Substitution” (i.e. the law that newer and more potent ways of making money will drive out and replace older and less effective ways to make money) makes it inevitable that over time accumulation will become the law and the prophets.    On the other hand, I do think it is helpful to call the system “capitalism” if what is meant by capitalist society is a society whose wealth appears as an immense collection of commodities (Waren in Marx’s German, a cognate of the English “wares,” i.e. things produced for sale, although Marx himself generally called such a society mercantile but not yet capitalist)   I believe that the at-first-glance-relatively-innocent buying and selling (exchange) relation is the true culprit.   I am not pessimistic about the prospects for his reform and rehabilitation.

The basic structure implies low wages

At a small factory in Indiana, where in principle the workers earn a minimum wage whose real value (adjusted for inflation) has been declining since 1968, in practice they earn even less because they are called in to work fewer than forty hours a week.  True to the logic of liberalism, work is supplied only when there is market demand for it.  The supervisor put a sign on the employee bulletin board reading:  NORMAL IS NEVER COMING BACK.

We flower power children of the 1960s were living in a bubble.  We thought good wages were normal.  In reality, those were abnormal times.  They were unusually favourable for labour.  As Thomas Piketty has recently shown, the normal tendency of capitalism is toward increasing inequality.[17]  The falling Gini coefficients and high wages in the rich parts of the world during World War II and during the following thirty glorious years were a blip.   The sign should have read:  NORMAL IS COMING BACK.

The median monthly wage here in Chile in 2017 was 379,673 Chilean pesos.  At a June 2017 exchange rate 379,673 pesos was USD 570.79.   Chile and China are perhaps the two countries most cited when celebrating a world trend that has lowered extreme poverty from 70% to 20% in the last century.[18] As the 2017 median wage in Chile illustrates, and as I see every day, a decrease in extreme poverty can leave most people struggling to get by.   I shall not multiply evidence to prove that today around the world real wages (i.e. wages adjusted for inflation) are low and in the developed world trending lower.  My objective is not to rub in what everyone already knows, although I am tempted to do so because many of us privileged people avert our gazes from low wages because we do not want to see them.  But my purpose here is not to document the fact.  It is to change it.

Biology teaches us (pace Herbert Spencer) that cooperation is adaptive.[19]  Cultures perform biological functions –like getting the babies fed, and organizing what Karl Marx called the metabolism of life, the exchange of matter and energy with the environment.  As human beings we are capable of making choices, and of transforming social structures.[20]   I recommend transformation guided by a discourse coalition of numerous cultures –some of them religious and some of them secular—that have in common an ethic of solidarity.  A realist ethics (i.e. an ethics (1) supported by the findings of the natural sciences that (2) works with existing cultures as they actually are as the necessary points of departure for constructive change) is needed to backstop caring and solidarity.  Caring and solidarity (love) are already appealing ideas with large fan clubs.  Nevertheless, they need the backing of scientific research in biology, psychology and other fields to defend themselves against liberalism.  Realism adds proof that solidarity works; if it had not worked our ancestors would have died before procreating and we would not be here.

02Realism also adds a healthy dose of respect for diversity. The only cultures that exist, or at least the only old cultures that exist, are cultures that have cared enough to meet human needs at least well enough to survive. They are not just pipe dreams that will never work. They have worked.

In getting to know other people’s cultures, I am searching for allies to join a discourse coalition. We need a discourse coalition strong enough to transform the civil laws that frame the global economy and in large measure determine its outcomes.[21]  We already enjoy the benefits of a post-World War II discourse coalition that succeeded, on paper at least, in crafting a global consensus on human economic and social rights.[22]

I have grave doubts while I sympathize with allies of the angels like Yanis Varoufakis, Bernie Sanders, Robert Reich, Joseph Stiglitz, Thomas Piketty, Martha Nussbaum, Kate Pickett and Amartya Sen.  I do not believe their proposals will work without a better understanding of the causal powers of social structure.[23]   And not just understanding.  We need to change the deep structures at what Tom Berry called “the religious level” because, as Berry said, “no other level is deep enough.”

Although the policies the friends of the angels advocate would be at once more scientifically valid and more pro-people and pro-nature if they were implemented, they regularly are not implemented because they regularly are torpedoed by the homeostatic (self-defending and self-perpetuating) mechanisms of the system.[24]  The homeostatic mechanisms are established by the basic structure.  They manifest themselves as what I call structural traps.  They (the traps) are set in stone by the civil law.  The civil law follows liberal ethics.[25]   Think for example of capital flight, of competition among countries to attract investment by lowering taxes, of corporations shifting production to where wages are lower, of outsourcing of work to so-called independent contractors to evade the labour laws, of transfer pricing, and of not producing when needs are unmet and the inputs are available simply because producing would not be profitable.  Think of the conflict when good news for the economy (growth) is bad news for the physical survival of the species.   Then take another look at the dilemma of most human beings today: work at low pay or no work.  Diverse issues.  One fundamental cause: the structure of the system.  One fundamental cure: the ethics of solidarity already found in most cultures, and already hard-wired into human DNA, but fundamentally at odds with the liberal ethic entrenched in the structure of the system by jurisprudence, by economic science, by political philosophy, and – emblematically – in the rules enforced by the Word Trade Organization.  Think of the homeostatic mechanism as entrenched in the social structure by liberal ethics. Liberal ethics is a many-layered legacy bequeathed to us by the social historical process that built modernity.  Adam Smith was a modernity- builder par excellence.   Think of writers advocating solidarity and caring as having something to say that needs to be heard to remake the structures that are killing us.[26]

If what I describe as “the basic cultural structure,” and associate with “civil law” and “liberal ethics” and “Adam Smith” and with Max Weber’s iron cage of modernity that nations can enter but cannot leave, were to be named with just one word, I would choose Theodor Adorno’s term Tauschprinzip, which can be simply translated as “the principle of exchange.”  A close runner-up would be Sir Henry Maine’s use of the word “contract.”   Tauschprinzip has the advantage that its author has outdone Maine in spelling out its far-reaching consequences.[27]  Somewhat similarly, Charles Taylor has characterized our modern societies as “bargaining societies,” perhaps thinking along the same lines as Adorno’s English translator who rendered Tauschprinzip as “the bargaining principle.”[28]

The idea that the basic structure of the modern world is that of a bargaining society whose principle is exchange is a simple idea.  It means that we modern humans live mainly by selling and buying.  We need to sell something to get money, because we need money to live.  Once we have money we can buy what we want and/or need (with some important exceptions). The price of what we sell is a bargain struck between seller and buyer. The ethical justification of the bargain is that both parties freely agreed to it. When we buy, once again there is an exchange.  Once again there is a bargain, also known as a contract or as an agreement.  Once again, the outcome is a price –a price at which the buyer is willing to buy and the seller is willing to sell.

03The basic structure is not hard to understand.   However, it is confusing is that so many writers have described it in so many different ways, and have woven it into so many different theories with so many different political and ethical slants. To mention just two of many examples that could be mentioned, for Friedrich van Hayek the basic structure is the economic, legal and moral framework of an extended social order; i.e. of a society that organizes production and distribution impersonally on a large (and therefore efficient) scale. It is extended, but it is nevertheless decentralized (and therefore intelligent and libertarian).[29]  Central planning, on the contrary, is necessarily unintelligent and totalitarian, because no central agency, arrogating all power to itself, can match the astute judgments of millions and billions of free individuals each intimately aware of their own situation and each looking out for her or his own interests. But for Karl Marx, the basic structure, or to be more precise the interpretation of the basic structure common to orthodox political economy and to bourgeois common-sense, is the ideology of capitalism.  It is a disguise that uses the illusion of free consent to mask the exploitation of labour and the private appropriation of the social product.[30]

In Roy Bhaskar’s terminology, the basic structure is “existentially intransitive.” [31]  As a matter of ontology, it is what it is.  It has causal powers.  It does things.  It continues to be what it is, and to do what it does, while scholars theorize about it and describe it in different ways.

If we keep in focus the simple way of thinking about the basic structure of modernity that I have sketched, it is not hard to see why wages are normally low. And it should not be hard to see that the basic structure needs to change in the ways that pioneers of solidarity economics are changing it to build a world that works for 100% of humanity without ecological damage.   It is a biological fact that humans, like other animals, tend to multiply.   When there is food, and when disease and violence are somewhat under control, most of the infants who are born will live to be old enough to enter the labour market.  Most of them will have to sell their labour power to make a living.   To close the sale, they will have to strike a wage bargain with a buyer of labour power.  Common sense tells us that qualified buyers, who have money that they can use to buy other people’s time and energy, and who are in a position to make profitable use of it, will be comparatively few.  The sellers cannot take themselves out of existence and thus cease to have needs, while the buyers are relatively free to freeze hiring for any reason or no reason.  The labour-sellers need money right away, or in any event soon.  The buyers, by definition, already have money.  They can usually afford to wait in the expectation of making a more favourable (to themselves) wage bargain at a later date or with a different seller.  Moreover, even if the labour-buyers are lovers of humanity who ardently desire to pay high wages, often they cannot. Paying wages higher than those their competitors pay would (normally) drive their costs of production higher than the costs of production of their competitors.  It would tend to result in pricing their products out of the market.

These staggering structural facts were not lost on the early economists.

Hear Adam Smith in 1776:

“…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….”[32]

Thus, Smith implies that 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.

06A few decades later, in 1817, David Ricardo in his On the Principles of Political Economy and Taxation was even clearer in stating the normal result of the normal operation of the Tauschprinzip:

“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.”[33]

Although much has changed since 1817, it is still reasonable to regard the exchange principle of a bargaining society, often euphemistically called a “free market,” as the basic structure of a European economy (the early modern “European world-system” in the terminology of Immanuel Wallerstein) that has now expanded to become today’s global economy. (“The modern world-system”) This is the approach Jürgen Habermas took in Legitimation Crisis.  Still in the late twentieth century what I call the basic structure and Habermas calls the primary social formation is the Tauschprinzip of a bargaining society.  Specifically, for Habermas, it is the wage bargains struck by labour with capital.  Its enabling context is the legal framework of buying and selling that sets in stone the ethics of individualism and the structural principle that some people own the means of production and some do not.  That legal framework is primary. The state, its Constitution, and its governments, are not primary.  Habermas writes: “Instead, the modern rational state — whose prototype Max Weber analysed —becomes the complementary arrangement to self-regulative market commerce.”[34]  The superior power of the market, and the comparative weakness of the state, are established, Habermas tells us, by bourgeois civil law.  I will be claiming that Adam Smith built on what Habermas calls bourgeois law, which Smith sometimes called justice and sometimes called civilization, when he made what he and his fellow builders of modernity called the natural system of liberty and justice the ethical foundation of economic science

It would follow, from what has been said so far, that low wages are the normal consequence of the prevailing körperliche Organisation (physical organization)[35] of our means of subsistence.  High wages, when they exist, must be due to unusual circumstances and/or to deviations from modernity’s basic principle.  Sweden in the 1960s, where high wages prevailed; must have been a deviation from the norm, not the norm.  Making decent livelihoods for 100% of humanity normal, must require a different ethic and a different social structure.  Different from what?  Different from the house that Smith and his allies built in the 18th century (with some spill over before and after).   We still live in it.  They called it natural. It is easy for us to slide and fall into assuming it is natural. Call the following an antidote to slide and fall.

The Principle that the Producers Own what they Produce is Not Natural

Adam Smith begins the chapter of The Wealth called “Of the Wages of Labour” with the sentence: “The produce of labour constitutes the natural recompense or wage of labour.” [36]

But wait a minute!  What has what is or is not “natural” got to do with what is, or with what should be, property rights in general, or in particular with what belongs to the labourer as a “natural” wage?  Has Adam Smith not read Berger and Luckmann?[37]  Has he not read The Construction of Social Reality[38] or Constructing the Social World[39] by John Searle? Does he not know that Searle has shown that from a logical point of view property rights are created by constitutive rules that give a social status and a social function to brute facts?   And what on earth does he mean by “natural?”   For Aristotle, calling something natural and not conventional meant that it was the same everywhere, but thinking of what you produce as yours is not everywhere the custom.  If we went to the arctic and asked a hungry eskimo hunter who has killed a seal and is not taking a bite out of it until he carries it back to the igloo to share with his kin, surely, he would deny that its meat belongs only to him; or more likely, he would have no frame of reference for understanding the question. And not because the hunter is stupid.  And not because he is altruistic.[40]  He knows what side his bread is buttered on. His life depends on group loyalty. Without the solidarity of his kinship group he would be a dead duck.  Similar points could be made about the Japanese peasants Charles Taylor[41] offers as examples of humans who do not live in a bargaining society.  And has Adam Smith not learned from Nancy Tanner and David Sloan Wilson and others that humans have become the dominant species because we are cultural animals, and because we are cultural animals we are able to change our behaviour more rapidly than species that adapt to changing circumstances by the slow process of mutation and selection?[42]  And from Jared Diamond about the calamitous consequences of clinging to old institutions fallaciously regarded as “natural” when the physical reality is new?[43]

Of course, Adam Smith has a valid excuse for the lacunae in his bibliography. He was born too soon.  He could not read books that had not yet been written. But we today have no such excuse.  For us, the various uses that Smith makes of the words “nature” and “natural” are part of the intellectual history of the social construction of the basic structure of the modern world bequeathed to us by 18th century Europe.[44]   We study them not because we believe that Smith understood nature and knew what was and was not natural,  but because knowing more about how we as a species got into the pickle we are in will help us to get out of it.

11The Early Modern Revolution in Ethics

But before taking a closer look at the roles “natural wages,” “natural prices,” “natural liberty” and the like play in Smith’s thinking, it will be helpful to consider more broadly the ideological role of “nature” in Europe in Smith’s time – a time still referred to, somewhat tendentiously, as “The Enlightenment.”  I will briefly introduce three claims:  1.  That in the Enlightenment nature replaced God as a source of moral authority.  2.  That as part of the same revolution in ethics[45] freedom replaced God as a source of moral authority.  3.  That the combination of nature and freedom as “natural liberty” established the ethical bedrock undergirding the juridical bedrock of an economy (following Bhaskar, we could call the ethical bedrock a structural generative mechanism) that tends –subject to countervailing forces that produce exceptions—to keep wages low.

My first claim can be illustrated by comparing two approaches to education: The Spiritual Exercises of Saint Ignatius Loyola (1548) and Emile by Jean-Jacques Rousseau (1862).  Ignatius tells us that the purpose of spiritual exercises –which I beg to be allowed to call a form of education– is to purify the soul and to unite the will with the will of God. He treats the word “spirit” and the word “will” as synonyms.   Thus, for Ignatius, as for Plato and Aristotle, as for Augustine and Aquinas, the human will is a problem.  The will tends to be disorderly; left to itself it is as likely to do evil as to do good. (Here I would draw a parallel between the philosophers who have emphasized that social cohesion depends on education, and the anthropologist Nancy Tanner’s point that the human body did not evolve as a stand-alone fulfilment of instructions codified in deoxyribonucleic acid.  Its organs and tissues evolved as functioning parts of cultures.  In the case of homo sapiens, the Darwin-machine selected, as D.S. Wilson puts it, not bodies alone but “moral systems” that integrated genetic codes and cultural codes. It selected instincts plus education, not either alone.)[46]  While Gandhi taught that “God” is the richest word in our language, so that a lifetime is not sufficient to learn all its deep meanings, Ignatius taught one of the deep meanings Gandhi might have had in mind.  God is the being whose will we are called upon to discern and to follow in order to improve our own wills.  If we then compare Ignatius with Rousseau’s text, we find that at every point where Ignatius would write “God” Rousseau writes “nature.”  For example, every feature of the education of Sophie, who is destined to marry Emile, is authorized by nature’s requirement that Emile have a suitable helper.  Compare Genesis 2:18. The message is identical, but the identity of the authority that sends the message has changed from God to Nature.   For Rousseau, the answer to the question, “How is Emile to be educated?” is always “naturally.”

Examples could be multiplied.  In the 18th century, Nature assumed moral authority.  Sometimes as in the United States Declaration of Independence of July 4, 1776, the argument appealed simultaneously to the authority of “the Laws of Nature and of Nature’s God.”  Sometimes, as in Adam Smith himself, the 18th century revived the teachings of the ancient stoic philosophers (3d century B.C. to 2d century A.D.) who had identified the natural with the right and the good.

  1. In Europe (also then known as Christendom) after the fall of the Roman Empire and before the rise of modernity; and especially during conflicts between emperors and popes, schisms and reformations, and wars of religion; talk of rights and wrongs tended to be God-talk.  Michel Foucault has made a case that during those times there was also a major tradition of what he calls politico-historical writing dedicated to explaining (and justifying) the social structure of the day as the outcome of past wars.[47]

Contrary to God-talk and contrary to politico-historical talk, but complementary to nature-talk, the 18th century saw an explosion of freedom-talk.[48]  In 1788, Immanuel Kant began his Critique of Practical Reason explaining that the province of practical reason (and therefore of ethics) was coextensive with the province of freedom.  He italicized Freiheit.  In 1797 in his Rechtslehre he deduced the main principles of civil law from one single principle, freedom, calling the principles of law by their traditional Latin names (suum cuique tribuere, pacta sunt servanda etc.)  The other main moral philosophers of early modernity came to the same or similar conclusions.   As John Rawls has expressed the matter, “None of them doubted that property ought to be respected; all of them affirmed the virtues of fidelity to promises and contracts, of truthfulness and beneficence and charity, and much else.  The problem for them was not the content of morality but its basis: How we could know it and be moved to act from it.”[49] Liberalism – which taken literally is liberty-ism – arrived.  From the 18th century until now[50] mainstream discourses have maintained, on the whole and with exceptions that vary from one writer to another, that the legitimacy of government is conferred by the consent of the governed, that the legitimacy of economic transactions is conferred by the free agreements of willing buyers and willing sellers, and that in general all human beings (or all adults) are entitled to do whatever they may choose to do subject to only to the limitation that they should not interfere with the like freedom of others.

  1. Jean-Baptiste Say, a French follower, and on a few points an amender, of Adam Smith, explains that natural liberty –a doubly potent ideal because it combined the moral authority of two characteristic criteria for distinguishing right from wrong championed by the Enlightenment, Nature and Freedom—was a political ideal before Adam Smith made it the ethical bedrock of a science.[51]  He also makes it clear that the security of property rights was not a separate moral principle different from liberty, but indeed the very heart of liberty.  The advocates of natural liberty before Smith, known as the économistes, Say says, “…favour the most severe morality and the liberty that every man should have to dispose at will of his person, his talents, and his property, a liberty without which individual happiness and public prosperity are meaningless words.  I do not believe that one could find among them a single man of bad faith or a bad citizen.”[52]

Wage Increases do not Depend on or Follow from Productivity Increases

I have already mentioned one-way Smith uses the word “natural.”  Nature is supposed to tell us that the product of the worker who produced that product is his (or her) natural wage.

This same idea expressed by Smith (and also by John Locke and other early moderns) gives a certain rough intuitive credibility to the apparently related idea that the way to raise wages is to raise productivity.  If the natural wage of the worker is to keep what the worker produces, or to be paid its value, then it might seem to follow that the more the worker produces the higher the wage.

The more this rough intuitive approach to raising wages is examined, the more it loses credibility. First, on a common-sense reading, “The produce of labour [that] constitutes the natural recompense or wage of labour,” refers to a physical product.  If a worker can produce just one widget a day, it would seem reasonable to think that his wage would go up if he could produce two.  Here Smith must mean producing some concrete useful item because he is speaking of what was “natural” in the world he imagines to have existed before there were market societies like ours.

But he later postulates a doctrine that has been standard ever since:  an activity making something only counts as “productive” if what is made is “vendible.”   Household servants do not produce anything.  After the laundry is done and the supper is cooked and the dishes are washed, there is nothing remaining for the employer to take to a market and sell.[53]  Nothing counts as productive unless it makes something an employer can sell at a profit.  Today when productivity is defined as output per unit of input, both the input and the output are normally[54] measured in money terms; the difference between the two is “value added.”[55]

In a typical case today, a firm needs to cut costs to remain competitive and to satisfy investors. Lowering wages is usually a bad idea for several reasons.  The costs of most non-labour inputs are largely determined by factors outside the firm’s control.   The magic bullet:  Raise productivity!  But how is this done?   Most commonly raising productivity cuts costs because of investments in more up to date, more efficient, and less labour-intensive technology.

One can then say that “labour productivity” went up because output per worker went up and output per hour worked went up.  But this is not likely to be good news for most workers.  Except for firms like Hewlett-Packard[56] that make it a deliberate policy to share productivity gains with employees, the workers who remain after the new technology is installed, may and may not earn more. There was a time when ham-handed public policy snuffed out efforts by strong unions to negotiate wage increases greater than productivity increases.  But now, in these days of weak or non-existent unions, most productivity gains do not lead to wage gains.   They are captured by the famous “1%”.[57]

Now the 1% who ended up becoming richer than they already were because “labour productivity” went up can invoke Smith’s account of what is and what is not natural.  If the natural wage is constituted by the makers keeping for themselves what they made, then according to nature the 1% are the natural owners of the increased value added.  They paid for the new technology.  It was really their technology and not anything the workers did that raised productivity.

Meanwhile, the workers made redundant by advanced technologies, including young graduates entering the labour market who wish they could get a high-paying job but can’t, are shunted off to low-wage jobs and temporary gigs, many of them in the service sector.[58]

This does not mean that the increased productivity is not there, or that it is impossible to redistribute it to benefit everybody.   Indeed, with the new high-tech technologies coming on line (of which those used by Amazon, Google and Facebook are only a foretaste) we are looking at a future where it will be possible to do more with less, and even more possible than it is now to meet the needs of 100% of the people without environmental damage –as far as physical reality and natural science are concerned.[59]

But, turning to the social science side of things, when the economy needs only a few humans, while robots to the work and computers do the thinking, then tying a person’s income to a person’s productivity will make no sense at all.

A large part of what we need to forget to raise wages is the idea that increased productivity in a particular firm or industry naturally leads to higher wages for the workers employed in that particular firm or industry.

Raising wages today means socializing the benefits of valuable intellectual property.   It means sharing the surpluses.  It means transferring the benefits of the productivity of a few firms employing a few workers to create dignified livelihoods (if not precisely highly paid employment) for the majorities who are not employed by those firms.

Smith Anticipated Marx

Using the word “natural” in this same way, postulating that nature has established as a social norm the principle that the producers are the owners of their products, Smith anticipated Marx.

Smith writes: “In that original state of things, which precedes both the appropriation of land and the employment of stock, the whole produce of labour belongs to the labourer.”[60] It follows from what Smith says in the passage from which this quote is taken that whenever and wherever the rules of the economic game are those that Smith identifies with “civilization,” wherever owners take profits and landlords take rents, workers are paid less than the natural wage.

If the natural is just, and the unnatural is unjust, it follows that paying wages lower than the value of what the workers produce is unjust.   Smith adds that if the natural state of things had continued, “…the wages of labour would have augmented with all those improvements in its productive powers, to which the division of labour gives occasion.”[61] Marx followed Smith and Ricardo in holding that the true exchange value of a thing (what Smith calls its “natural price”) is determined by the amount of labour that goes into making it.  Treating the work of management as a kind of labour, Marx concluded that labour alone produces exchange value.[62]  The others who take a cut out of the revenue from sales are non-producers.  Preferring to base his case on science, not ethics, Marx did not explicitly say that this result was not just.  He did not shrink from using sarcasm to ridicule people who say it is just.[63]

As Joan Robinson has pointed out, using a labour theory of value to argue for higher wages or for social ownership of the means of production, is ultimately self-defeating.[64]   Getting a better deal for workers, especially today and in a high-tech future, now means and tomorrow will mean first and foremost admitting workers to full membership in the human race.   As human beings who were born on this planet, working people like everyone else should share in the benefits (the rents) that come from natural resources (Marx called them Gifts of Nature) and not from anybody’s labour.  Similarly, everybody, not just a privileged few, should share in the abundance made possible by advanced technologies.    By arguing that only labour creates exchange value, and that natural resources and scientific knowledge have nothing to do with it, the 99% shoot themselves in the foot.

Another consequence of following this line of thought anticipated by Smith, developed by Marx, and popularized by advocates of higher wages, hovering in its background, when not in its foreground, is, (I think) typical the prevailing common sense of the moderate left’s readers, if not of its authors.  The consequence in question is that when working to raise wages saying “We want justice, not charity,” is better than saying, “We are building communities of solidarity.”  Calling for justice, not charity, sounds dignified.   It sounds rational.  It sounds like a solid commitment that will not go away.  “Community” and “solidarity” sound too much like “charity.”

While appreciating the force of demanding justice instead of requesting charity, I would add an apology for charity.  “Charity” came into English as a translation of caritas.   Caritas, in turn, served in medieval theology as the Latin translation of the Greek agape.  I do not believe that even now, now in the 21st century, charity has lost all of her affinities with her grandmother.    And as to agape herself, I do not read her as a “Platonic idea”[65] divorced from physical reality, adored only by churchgoers who, having been disappointed in this world, seek consolation in the next.  My personal testimony regarding churchgoers is evidence to the contrary.  What I find when I attend my church are well-behaved children, drug-free adolescents, stable marriages, dignified senior citizens not abandoned by their families, meaningful ceremonies, beautiful music, poetic prose, and social responsibility.  My read of “agape” is that she is a great symbol of one of the great religions that has organized more than one successful adaptation of the physical and emotional repertory of homo sapiens to its changing physical environment.[66]  Without agape, or one of her blood relations who does similar work in other cultures,  attempts to raise wages are (I claim) incapable of reliably and sustainably surviving capitalism’s homeostatic defences (like downturns in investor confidence) and structural traps (like unpayable public deficits).    When push comes to shove, an ethics founded on early modern liberal myths (like “pure reason” and property rights determined by what nature is supposed to have intended) is less useful for raising wages than a realist ethics founded on lessons learned from the biological and cultural evolution of the species (see the footnote below for an example).[67]

In the following pages, I will consider Adam Smith’s doctrine of “natural price” (which wreaks havoc today in its modified form called “real price”).  Then I will recommend that “building communities of solidarity” be added to the conventional wisdom of the allies of the angels.  These topics will lend themselves to saying more about homeostasis and structural traps.

09The So-called Natural Price of Labour is not Natural Either

Adam Smith has a lot to say –most of which is repeated in one form or another by his contemporary followers-—about natural prices.

As in classical economics generally there are three factors of production –land, labour and capital-—so for Smith there are three natural prices: the natural rent of land, the natural wage, and the natural profit.  These three naturals together constitute a fourth natural: the natural price of the commodity that land, labour and capital together produce.

His opening gambit when he introduces natural prices (distinguishing them from market prices, unlike those among his followers who identify “natural” or “real” prices with market prices) is: “There is in every society or neighbourhood an ordinary or average rate both of wages and profit in every different employment of labour and stock.”[68] (Smith writes “stock” where we would write “capital.”)  Thus the “natural price” (not, as one might have expected, the “market price”) makes its debut as the “ordinary or average price.”

At first glance the existence of a natural price is true by definition, because for any set of integers there is an average.  It is easy to compute.  Simply make a list of each sale and its price.  Then add up all the prices and divide the sum by the number of sales.  The quotient will be the average (mean) price.  By definition it is the natural price.  But that is not Smith’s claim.   He is claiming that there is in every society a normal price to which the market price (for Smith the market price is the observed price at which sales in fact take place) regularly returns.  The market price fluctuates.  Sometimes it is above the natural price.   Sometimes below.  But the total of fluctuations up is more or less equal to the total of fluctuations down, and in time the price returns to something “there is in every society,” namely the natural price for that commodity.   Smith explains: “The natural price is, as it were, the central price, to which the prices of all commodities are continually gravitating.  Different accidents may sometimes keep them suspended a good deal above it, and sometimes force them down even somewhat below it.  But whatever may be the obstacles which hinder them from settling in this centre of repose and continuance, they are constantly tending towards it.”[69]

This is an empirical claim. It is indeed a universal claim.  Smith’s first formulation of natural price echoes the philosophy of science of his dear friend David Hume, according to whom a scientific law is a constant conjunction of observed facts.  If Smith’s empirical claim is true, it should be possible to cite observed facts as evidence for it, and indeed impossible to cite any evidence against it.  Indeed, in the pure forms of such a methodology (as distinct from its modified forms that rely on statistical significance, as in regressions where a linear relationship that would be a pure Humean law is approximated) there should be no counter-examples.

But the first five words of Smith’s empirical claim, “There is in every society…”  are obviously false.   Nothing Smith says about natural prices makes any sense if we do not assume that we are talking about a bargaining society governed by the Tauschprinzip.  Here in Chile, for example, Smith’s empirical claim makes no sense in the context of the traditional practices of the Aymara and Mapuche societies.  Around the world it makes no sense in the contexts of many of the pre-capitalist “material practices” chronicled by Fernand Braudel.[70]   In the Aymara Chhalaka and the Mapuche Trafkintu food is exchanged in ceremonies, with prayers to the Pacha-Mama, singing, dancing and feasting.  Nobody can say that their practices are utopian dreams that will never work in practice.   The observed fact is that they have worked in practice for hundreds of years, in cultures that are (unlike modernity) ecologically sustainable.

So why should we live according to a liberal mythology that imagines that nature created bargaining societies everywhere, instead of living according to some other mythology (or, as Michel Foucault naively proposes[71], try to live without mythology) when we know that a normal consequence of the körperliche Organisation of the means of subsistence according to liberal mythology is low wages?

Smith goes on to describe the operation of a causal mechanism that explains the empirical regularity he alleges to exist.  His method here can be called abduction in a sense given to that word by C.S. Peirce, reasoning to the best explanation of the observed facts.[72]  Here Smith is on firmer ground. The causal (and structural) mechanism he describes is important.  It exists and has causal powers, even though it does not determine what prices will be alone, always, or everywhere.

The causal mechanism that produces natural prices is supply and demand under conditions of free competition.

Smith explains how it works:  A market price above the natural price motivates new players to enter the game.  Or old players to increase production.  Both see that money can be made by increasing supply to meet an existing effective demand that either is not being satisfied at all, or else is being satisfied more than it costs producers to bring goods to market.   In Smith’s words, there are buyers waiting for them who are “…willing to pay the whole value of the rent, wages, and profit, which must be paid in order to bring it thither.”[73]  The increased supply will bring the price down to the natural price.

Similarly, when the market price is below the natural price a decreased supply will bring the market price up to the natural price.

Having described a structural causal mechanism that allegedly produces the universal phenomenon that Smith alleged to exist in the first paragraph of Book I, Chapter VII, Smith immediately refutes himself.  It is not necessary to consult Marxists, Keynesians, economic historians or sociologists to learn why natural wages and other prices Smith calls natural are not natural in any scientifically defensible sense of the word.  In the same chapter where he introduces the concept of natural price, Smith himself devotes three pages to listing reasons why the behaviour of business people and the policies of governments make the world as it actually exists very different from the theoretical model he has just constructed.  A little later, in Book I Chapter X he writes, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public or some contrivance to raise prices.”[74]

Thus, it turns out that the logical status of the science of Adam Smith, and (as I claim elsewhere[75], the core of orthodox economic science from his time until now[76]) is that its central claims are counterfactual conditionals combined with liberal ethical valuations.  In other words, it is a science of what prices would be if, contrary to fact, certain ideal conditions were satisfied, coupled with the value judgment that those contrary-to-fact prices ought to be.

The natural price is not the price that is observed.  It is the price that would be observed if there were perfect liberty.[77] If there were perfect liberty, then wages would be natural, rents would be natural, profits would be natural, and therefore their sum, the selling price of the commodity produced would be natural.   (This part is in principle supposed to be an empirical claim of a special [counterfactual conditional] sort; it is supposed to be a claim about what would actually happen if liberal ethical principles were consistently followed –although maverick economists have argued that the way orthodox economists have defined the terms makes it impossible to submit the claim to empirical tests.) Smith also uses the expression “natural liberty” as a synonym for “justice” and speaks of a natural system of perfect liberty and justice.[78]

To drive home the ethical rightness of the natural price, and consequently the unethical wrongness of any other price, Smith claims that when a commodity is sold for its natural price (constituted by the sum of the natural wage, the natural rent and the natural profit) it is sold precisely for what it is worth.   This means that it is sold precisely for what it really costs the person who brings it to market.[79]  The person who brings it to market is, of course, normally the employer.  If he sells it at its natural price he must have paid his workers the natural wage.  It follows that low wages are ethical while high wages are unethical.

05A Counter-Intuitive but Valid Conclusion

My conclusion is that idealism is the only true realism.   By idealism I mean rising to a higher ethical level.   I mean not following Smith by defining freedom so that by definition it means that each individual is completely self-interested and that property rights are immutable.  That is what Smith implicitly does when he defines natural wages, natural rent, natural profits, and natural prices as those that would be observed if there were perfect liberty.  For example, the landlord would charge the tenant as much as he could possibly get when there is perfect liberty.[80]

I mean emphasizing among the many uses of the terms freedom and liberty, the way a similar Greek word is used by Saint Paul in Galatians 5:13.   I mean remembering what Martin Luther did with the idea of freedom in his essay on the freedom of the Christian.  (I mention Luther with no intention to underestimate, much less exclude, the constructive uses of the same and similar terms found in secular discourses and in non-Christian cultures).  Luther writes that a Christian is a perfectly free servant of all.

These words of Alfred Marshall are worth pondering: “We must call to mind the fact that the struggle for existence tends to make those methods of organization prevail, which are best fitted to thrive in their environment, but not necessarily those best fitted to benefit their environment, unless it happens that they are duly rewarded for all the benefits they confer, whether direct or indirect.  And in fact this is not so.  For as a general rule the law of substitution –which is nothing more than a special and limited application of the law of the survival of the fittest—tends to make one method of organization supplant another when it offers a direct and immediate service at a lower price.  The indirect and ultimate services which either will render have, as a general rule, little or no weight in the balance and as a result many businesses languish and die which might in the long run have done good work for society if only they could have been obtained.  This is especially true of some forms of cooperative association.”[81]   What Marshall does not say, but Karl Polanyi does say,[82] is that the law of substitution that rewards whomever offers buyers better or the same products at low or lower prices (for example Amazon or Walmart, or, historically, almost any of the great multinational corporations), operates not only in a physical environment but also, and decisively, in a socially constructed institutional environment: the civil law.  The bargaining society.

For this reason (because the modern institutional environment is taken for granted) working to raise wages by building a solidarity economy may be counter-intuitive even though it is a feasible path to transformation while more intuitive paths are not.   Seeking answers to the right-wing question “How can we get more investment?” may be intuitively appealing because a successful answer is likely to create relatively high-paying jobs in the short run.  However, I would suggest that the moderate left, and not just the right, tends to take the institutional framework for granted.   In Marshall’s terms, at a fundamental level it neglects seeking the forms of organization best suited to benefit the environment.  Since the extreme left is out of the mainstream conversation because of the failures of central planning, while those remaining do not question a basic social structure that makes it impossible to make the world work for 100% of humanity without ecological damage, it is unfortunate that solidarity economics is ignored.

Consider, for example, what Joseph Stiglitz does say and does not say when he demonstrates that — contrary to President Trump’s claim that America has been snookered in the international trade negotiations of recent decades– the American trade negotiators have gotten exactly what they wanted: “What they [i.e. the American trade negotiators hr] asked for was essentially what American corporations wanted.  American corporations wanted access to cheap labour, without environmental and labour protections. The corporations also liked the fact that threats to move factories abroad weakened workers’ bargaining power.  This enriched their coffers, as wages were driven down.  They were pleased that trade agreements helped ensure the property rights of investments made in developing countries, for this made their threats to relocate their plants in these cheap-labour countries more credible.”[83] Paraphrasing the longer passage from which this short quote is taken, Stiglitz does say that within living memory the global economy has deliberately been restructured for the purpose of lowering wages.

Stiglitz does not say, but Joanna Swanger and I do say, that even before the trade negotiations of recent decades, and even before 1980 when Ronald Reagan, Margaret Thatcher and Helmut Kohl were elected, the basic cultural structure was already steadily undermining social democracy.   Minimum wages were already structural traps.[84]  Labour unions were already structural traps. (Let it be clear that even though they are structural traps, labour unions and minimum wages are still stepping in the right direction.  Building a solidarity economy is a larger step in the same direction because its higher ethical level makes it a moral duty to compensate the losers in today’s unacceptable trade-offs while its Deweyan [Darwinian] pragmatism makes it possible to do so.)

What we mean by “structural trap” is: something that at a common-sense level appears to be a direct and feasible solution to low wages or some other social problem (the bait); when, at a less obvious level, the system is already organized to defeat it, for reasons Roy Bhaskar would call structural conditions of human action.[85]  The obvious, direct, solution perturbs the driver of the system (profit).  It (the system) has an important general tendency, which is sometimes mitigated and sometimes exacerbated, to trigger countervailing forces in order to defend the dynamic that moves it (for examples, capital flight, disinvestment, a decline in investor confidence, relocation of production).   Since, from a biological point of view, human life has come to be physically dependent on profit-making (witness the shortages of essential goods and services in Venezuela today), to raise wages (and to solve other social problems) reliance on direct and intuitively plausible approaches is not enough.   This is where solidarity economics comes in.  It is about strengthening other dynamics (i.e. other than the profit motive, other than capital accumulation).   Many other dynamics are conveniently named “solidarity.” They include those Luis Razeto[86] called the “C Factor” because so many of its constituents begin with the letter C – including Community, Communication, Commitment, Caring,[87] Comprensión (understanding), Corazon (heart), Compañerismo (fellowship).

Thomas Piketty, another ally of the angels, does admit, that his proposal for a global wealth tax is a utopian idea.  He does say that although from an economic point of view a global wealth tax would be an ideal way to reduce inequality, nevertheless as of now the nations of the world are not going to stop competing with each other lowering taxes to attract investment, and start cooperating with each other in tax collection enough to implement a global wealth tax.[88]

Piketty does not say that the establishment of neo-Roman private law dans le monde entier while the jurisdictions of nations are divided into 196 separate spaces, made it “natural” and “inevitable” for the wealthy to evade taxes by relocating their assets or themselves or both.  He does use the term “inevitable” to describe what is inevitable given the basic cultural structure (but not inevitable if we widen the lens and see more possibilities).    For example, it is inevitable that unions by raising wages higher than they otherwise would be, increase unemployment.  Because, “If labour unions are successful, firms will inevitably use more capital and less labour as well as more skilled labour and less unskilled labour.”[89]  A structural trap.

But suppose we believe that the number of sustainable and reliable solutions to the problem of low wages within the confines of a global bargaining society structured by a Tauschprinzip is zero.   Suppose we re-conceive of the now dominant rules of the economic game as one of the hundreds and thousands of basic structures homo sapiens has used to accomplish the körperliche Organisation of the production of the means of subsistence.  Suppose we re-imagine “well-paid employment” and “profitable business” as two, but only two, subsets of the wider category of “dignified livelihoods.”[90]  Suppose that entrepreneurs re-define their vocations as serving society by creating value efficiently, in order to make it possible to meet the needs of 100% of humanity without ecological damage.[91]  Widening the imagination can make what is intuitively impeccable seem like just another flying around in another fly bottle without ever finding a way out.

It is counter-intuitive to count the idealists as experts on how to raise wages.  They do asset-based community organizing, organic gardening and farming, mindfulness workshops, basketball for at-risk youth, ethical banking, whistleblowing, heterodox economics, cooperative child care,  shared housing, hospices, seed banks, credit unions,  Habitat for Humanity,  Doctors without Borders, crowdfunding, organizing domestic workers,  freecycling, open-source software,  homeless shelters, shareholder activism, bio-construction, conflict resolution, undercover union organizing, nonviolence training in prisons, going door-to-door for Bernie, solar panels, safe houses for battered women, setting up coops and employee-owned enterprises,  urban agriculture, alternative media, alternative schools, alternative medicine,  alternative music, art and dance and other offbeat stuff.   Many of them work for low wages.  Many volunteer for zero wages.  Many volunteer for less than zero wages because they also donate.

But just as a Gestalt shift can turn a duck into a rabbit, or a rabbit into a duck, the counter-intuitive becomes intuitive when the solution to the problem of low wages is redefined as the problem of transforming the system.    Suppose we agree with Bucky Fuller that to survive humanity must “graduate” to a higher ethical level. Then it is the idealists who are the realists.


[1] This question is suggested by Fuller in (1968, 2010) Operating Manual for Spaceship Earth.  Santa Barbara CA: Buckminster Fuller Institute.

[2]  Where I do not provide references, my claims can usually be verified easily by consulting Google.

[3] https://www.opendemocracy.net/transformation/emily-kawano/seven-ways-to-build-solidarity-economy

[4] See Coraggio’s recent blog at www.repensar.cl

[5] Jean-Louis Laville (dir.)  (2011) Ėconomie solidaire. Paris, Hermès.

[6] www.economiasolidaria.org/

[7] I write as one of the teachers in the EMBA at UCT, team-teaching a course called Critical Conversations on Ethics, Macroeconomics and Organizing with my co-author of Gavin Andersson and Howard Richards (2015) Unbounded Organizing in Community.  Lake Oswego OR, Dignity Press.

[8] Mikhail Kalecki (1943, 2010) Political Aspects of Full Employment.  https://mronline.org › Commentary

[9] Ellen Meiksins Wood (2003).  Empire of Capital.  London, Verso.

[10] For an historical account of the links between money, the generation of bogus science, and the rise to power of neoliberalism, see Richard Cockett (1994).  Thinking the Unthinkable: Think-Tanks and the Economic Counter-Revolution, 1931-1983.  New York, HarperCollins.

[11] Joseph Stiglitz (2017).  Globalization and its Discontents Revisited.  New York Norton. P. 220 and following.   Stiglitz might perhaps also be read as believing that crises are inevitable, but that their unnecessary severity is caused by mistaken policies.

[12] Paul Krugman (2009).  The Return of Depression Economics.  New York, Norton.  P. 113.

[13] Tony Lawson (1997).  Economics and Reality.   London, Routledge.   See also other works by the same author.

[14] Howard Richards and Joanna Swanger (2006).  The Dilemmas of Social Democracies.  Lanham MD: Rowman and Littlefield.

[15] Gunnar Myrdal, who was perhaps the leading social democratic thinker in the sixties, stated explicitly at the beginning of Asian Drama (1968, New York, Pantheon) that his ideals were the 18th century ideals.

[16] Raúl González (editor) (2018). Ensayos sobre Economía Cooperativa, Autogestionaria, y Solidaria.  Santiago, Editorial Forja.  Available on Amazon as a Kindle e book.

[17] Thomas Piketty (2014).  Capital in the Twenty First Century.  Cambridge: Harvard University Press.

[18] François Bourguignon (2015), The Globalization of Inequality. Princeton NJ. Princeton University Press. I do not know what would happen if the 70 to 20 figure were corrected for non-monetary contributions to welfare.  My hypothesis would be that people who live on less than two 1985 US dollars a day (a World Bank criterion for extreme poverty) do not exist.  The people with so little money who manage to survive run cattle, or do subsistence farming, or dumpster dive, or steal, or are part of mutual support networks, and/or in some other way or ways stay alive thanks to non-monetary resources.  Conversely, people who become more urbanized and more dependent on money may statistically rise out of extreme poverty but physically be worse off than they were before.

[19] See the works of D.S. Wilson and C.H. Waddington cited and discussed below, those of the Chilean biologists Humberto Maturana and Francisco Varela, those of the French historian of biology Charles Canguilhem, John Dewey’s pragmatic philosophical development of a Darwinian worldview, and Charles Darwin (1871, 2004). The Descent of Man. London, Penguin.

[20] Margaret Archer (2000).  Being Human: The Problem of Agency. Cambridge UK, Cambridge University Press.  See also other works by the same author and the “transformative models of social action” of Anthony Giddens and Roy Bhaskar.

[21] Sir Henry Maine (1861, 1906) Ancient Law. New York, Henry Holt.    Karl Renner (1904, 1976) The Institutions of Private Law and their Social Functions. London, Routledge; Max Weber (1922, 1978) Economy and Society. Berkeley, University of California Press, especially the parts about the legal frame of the economy; John Commons (1924) Legal Foundations of Capitalism.  New York, Macmillan; Howard Richards (2004) Understanding the Global Economy.  Santa Barbara CA, Peace Education Books.

[22] Evelin Lindner (2009).   Emotion and Conflict: How Human Rights Can Dignify Emotion. Santa Barbara CA, Praeger.

[23] Douglas V. Porpora (1993) Cultural Rules and Material Relations. Sociological Theory Vol. 11, pp. 212-229; and other works on social structure by the same author.

[24] See my book review of Sen’s The Idea of Justice.  Howard Richards (2012) The Idea of Justice.  Journal of Peace Education.  Volume 9, pp.  326-28; and my book with Joanna Swanger (2006) The Dilemmas of Social Democracies.  Lanham MD, Rowman and Littlefield; and the similar analysis of Jürgen Habermas (1975).  The Legitimation Crisis.  Boston, Beacon Press.

[25] Although the interdependence of social structure, law and ethics I have in mind is a broad and deep historical process of social construction, energized and constrained by biological needs, it is perhaps most neatly crystallized in Kant’s metaphysics of justice, with its two parts the Tugendlehre (teachings about virtue) and the Rechtslehre (teachings about law).   It is not unfair to Kant to say that his ethics has only one principle, namely freedom (also known as autonomy or as liberty), and that he derives the main rules of the civil law from that one principle.  Immanuel Kant (1797, 1965) Metaphysical Elements of Justice.  Indianapolis, Bobbs Merrill.

[26] Robert Greenleaf (1977).  Servant Leadership.  New York, Paulist Press; Riane Eisler (2007) The Real Wealth of Nations.  San Francisco, Berrett-Koehler; Evelin Lindner (2011)   A Dignity Economy.   Lake Oswego OR, Dignity Press.  Howard Richards and Joanna Swanger (2013).  Gandhi and the Future of Economics.  Lake Oswego OR, Dignity Press.

[27] Theodor Adorno (German original 1966).  Negative Dialectics.  London, Routledge, 1999.

[28] Charles Taylor (1971) Interpretation and the Sciences of Man.  Review of Metaphysics.  Volume 25, pp. 3-51.

[29] Friedrich von Hayek (1991).  The Fatal Conceit: The Errors of Socialism.  Chicago, University of Chicago Press.

[30] Thus, Marx writes in a famous passage at the end of Chapter Six of Volume One of Capital: “This sphere that we are deserting, within whose boundaries the sale and purchase of labour-power goes on, is in fact a very Eden of the innate rights of man. There alone rule Freedom, Equality, Property and Bentham. Freedom, because both buyer and seller of a commodity, say of labour-power, are constrained only by their own free will. They contract as free agents, and the agreement they come to, is but the form in which they give legal expression to their common will. Equality, because each enters into relation with the other, as with a simple owner of commodities, and they exchange equivalent for equivalent. Property, because each disposes only of what is his own. And Bentham, because each looks only to himself. The only force that brings them together and puts them in relation with each other, is the selfishness, the gain and the private interests of each. Each looks to himself only, and no one troubles himself about the rest, and just because they do so, do they all, in accordance with the pre-established harmony of things, or under the auspices of an all-shrewd providence, work together to their mutual advantage, for the common weal and in the interest of all.”

[31] Roy Bhaskar (1998).  The Possibility of Naturalism.  London, Routledge. P. 47.

[32] An Inquiry into the Nature and Causes of the Wealth of Nations Book I, Chapter VIII. (various editions, some with varying page numbers).  Although 1776 was the date of the first edition, the 1789 edition, the last to be revised by Smith himself, is the one usually reprinted.

[33] 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.”  I am not saying the views of Smith, Ricardo, Marx and Thomas Malthus were identical.  I am saying that they all found that normally wages are low, and that in this they were correct, given the basic social structure they analysed and the facts they observed.   In other texts the same authors qualify their views acknowledging that the cost of production of a worker is not necessarily that of bare subsistence.  It also includes a culturally determined minimum that varies from place to place.

[34] Jürgen Habermas (German original 1973).  Legitimation Crisis.  London, Heinemann Educational Books, 1976. P. 21.

[35] I have borrowed the phrase from The German Ideology by Marx and Engels. (1867)

[36] The Wealth, the first sentence of Book I, Chapter VIII.

[37] Peter Berger and Thomas Luckmann (1966).  The Social Construction of Reality. New York, Penguin Random House.

[38] John Searle (1995).  The Social Construction of Reality.  Stanford, Stanford University Press.

[39] John Searle (2009). Making the Social World.  Oxford, Oxford University Press.

[40] According to Fiske, a reasonable conclusion from the available evidence is that all humans are genetically capable of adapting to four kinds of social organization: communal sharing, authority ranking, equality matching, and market pricing.  Alan Page Fiske (1991) Structures of Social Life: The Four Elementary Forms of Human Relations. New York, Free Press.  Others find reciprocity and redistribution ubiquitous.  Our own view is that the human capacity to invent new social forms is best regarded as unlimited.  In any case, the question whether a more cooperative civilization could replace the present world economy should not be reduced to a question about selfishness vs. altruism.

[41] Taylor, op. cit.

[42] Nancy Tanner (1985) On Becoming Human.  Cambridge UK, Cambridge University Press; C.H. Waddington (1960) The Ethical Animal. London, Allen & Unwin; D.S. Wilson (2002) Darwin’s Cathedral.  Chicago, University of Chicago Press. “…human moral systems have both a genetically evolved component and an open-ended cultural component…”  Wilson, position 2144 of the Kindle Edition.

[43] Jared Diamond (2005) Collapse.  New York, Viking.

[44] Karl Polanyi (first published 1944) chronicles how many features of what he calls our “market society” including the commodification of people, land and money, continued to evolve step by step in the 19th century.   The Great Transformation.  Boston, Beacon Press, 2001.

[45] I adopt the idea that there was a revolution in ethics in the 18th century from Costas Douzinas (2002) The End of Human Rights.  Oxford, Hart Publishing.

[46] Tanner and Wilson op. cit.

[47] Michel Foucault (lectures given in 1975-76) Society Must be Defended.  New York, Picador, 2009.

[48] Costas Douzinas op. cit. pp. 186-191.

[49] John Rawls (2000) Lectures on the History of Moral Philosophy. Cambridge, Harvard University Press.  Pp. 10-11.

[50] A fairly recent example is Milton Friedman (1962) Capitalism and Freedom.  Chicago, University of Chicago Press. At the beginning of the book he says that his views on the economic issues he will discuss all flow from the principle of the freedom of the individual.  He writes this in spite of having repeatedly expressed elsewhere his agreement with Lionel Robbins’ claim that economics is a value-free science.

[51] Jean-Baptiste Say (1841).  Traité d´économie politique. Sixth and last edition.  Paris, Guillamin.  (first edition 1803) This popular treatise was translated into English by Thomas Jefferson.  I agree with Say that economics is best thought of as a science founded by Adam Smith.  Others prefer to say it began earlier

[52] My translation from Say op. cit. in the Discours preliminaire that precedes the beginning of Book I.

[53] Smith op. cit. Book II, Chapter III “Of the Accumulation of Capital, or of productive and unproductive labour.”

[54] But the approach is necessarily different when output is not measured as money value of sales; for example, in measuring the productivity of a police force one might count the number of arrests.

[55] Value added today is the sum of labour income and capital income, since the source of both is the difference between input and output.  For a more complete account of how productivity is measured today see Christine Greenhalgh and Mark Rogers (2011) Innovation, Intellectual Property, and Economic Growth.  Princeton, Princeton University Press. Pp. 70-81.

[56] David Packard (1995) The HP Way.  New York, Harper Business.

[57] See for example Gillian B. White’s article Why the Gap Between Worker Pay and Productivity is so Problematic, in The Atlantic Monthly February 25, 2015.

[58] Guy Standing (2011) The Precariat. London, Bloomsbury.

[59] Peter Diamandis and Steven Kotler (2012). Abundance.  New York, Free Press.

[60] Op. Cit.  Loc. Cit.

[61] Id.

[62] Marx warns against simplistic interpretations of this claim in his Critique of the Gotha Programme (1875).

[63] See footnote 13 above for an example.

[64] Joan Robinson (1942, 1966).  An Essay on Marxian Economics.  London, Palgrave Macmillan.

[65] I use “Platonic idea” here as a convenient cliché.  As to Plato himself, in the chapters on Plato in my (1995) Letters from Quebec (San Francisco, International Scholars Press) I try to show that Plato was an ecologist at heart.

[66] D.S. Wilson, op. cit. (who is personally an atheist) confirms that my personal experience is not unusual with a systematic study of a sample of 25 religions.   Of course, religion in its worst manifestations deserves all the condemnations one might find words in one’s vocabulary to utter.

[67] For an example of realist ethics see John Dewey and James Tufts (1908) Ethics.  New York, Henry Holt.  Compare the authors’ functional (building on Darwin) account of the right to private property with Kant’s “transcendental” account.  Dewey and Tufts’ conclusions regarding wages and other economic issues are similar to those of Catholic social doctrine and those of the protestant World Council of Churches.

[68] This is the first sentence of Book I, Chapter VII “Of the natural and market Price of Commodities.”  It is followed by separate chapters on natural wages, natural profits, and natural rents.

[69] Ibid.  at p. 63 of the edition I am using, which is the Arlington House undated edition published at New Rochelle, New York, in the Classics of Conservatism series.

[70] Fernand Braudel (1992) Civilization and Capitalism, 15th-18th Century, Vol. I: The Structure of Everyday Life. New York, Harper and Row.

[71] Howard Richards (2018).  Following Foucault: The Trail of the Fox.  Stellenbosch, South Africa, African SUN Media. (available on Amazon as a Kindle e – book)

[72] Actually, Pierce’s concept of abduction evolved in several versions during his lifetime.  See Part II of Robert Sharpe (1970) Induction, Abduction, and the Evolution of Science.  Transactions of the Charles S. Peirce Society, Vol. 6, pp. 17-33.  The concept has been further developed by others since.

[73] Wealth, same chapter, p. 47 of the Kindle edition.

[74] Position 2096 at or near page 96 of the Kindle Edition.

[75] See my Economic Theory and Community Development previously cited.

[76] More recently orthodox economists do not pretend that perfect markets will ever be realities, but nevertheless evaluate the real world by calculating its deviations from what Smith defined as perfection.  See for example Arnold C. Harberger (1964) The Measurement of Waste. The American Economic Review, Vol. 54, pp. 58-76.

[77] Wealth Kindle Edition p. 45, p. 52, p.78 and elsewhere.

[78] This point can be confirmed easily using the search command of the Kindle Edition.

[79] Wealth, p. 46, position 887.

[80] Wealth, Book I, Chapter XI

[81] Alfred Marshall (1895).  Principles of Economics.  Third Edition.   London, Macmillan. pp. 561-2.

[82] Karl Polanyi (1944).  The Great Transformation.  New York, Farrar and Rinehart.

[83] Stiglitz, op. cit. p. xx-xxi.

[84] Some positivist researchers hold that the evidence is still inconclusive on the question whether minimum wages decrease employment.  They observe, for example, that in New Jersey in 1992 the minimum wage went up and total employment also went up.  Critical realists realize that in open systems there are no tendencies so strong that they always override the other factors in play, but nevertheless emphasize the enduring causal powers of structures.  Compare David Card and Alan Krueger (1995), Time-Series Minimum Wage Studies: A Meta-Analysis. American Economic Review. Vol. 85 pp. 238-243 with Richards and Swanger (2006) op. cit. Chapter 7.

[85] Roy Bhaskar (2008, first published 1979).  The Possibility of Naturalism.  London, Routledge Chapter Two, Part Three.   For Bhaskar (unlike Ludwig von Mises and Immanuel Kant) the structural conditions of human action are historically constructed although relatively enduring (witness legal principles like suum cuique that in Europe have not changed much since Justinian’s Institutes promulgated in 533) but they are not universal and eternal.

[86] Luis Razeto (1993) Los Caminos de la Economía Solidaria.  Santiago, Ediciones Vivarum.

[87] Consider Riane Eisler’s proposals for a caring economy, underpinned by what Carol Gilligan calls a care ethic, defined as “attending to and responding to needs.”  Riane Eisler (2008).  The Real Wealth of Nations: Creating a Caring Economics.  San Francisco, Berrett-Koehler.

[88] Piketty, op. cit. Chapter 15.

[89] Thomas Piketty (2015).  The Economics of Inequality.  Cambridge MA, Belknap Press of Harvard University Press. p. 89.

[90] Evelin Lindner, A Dignity Economy.  op.cit.

[91] Andrew Carnegie (1900).  The Gospel of Wealth and Other Timely Essays.  New York, Century.