GABlog

September 18, 2018

Constrained Economies

Filed under: GA — adam @ 7:21 am

It might be best to think of markets as networks. The word “market” tends to evoke a society of randomly distributed individuals, each with some property, but with none of them related to any other property owner more than the others. If I buy bread from one baker for $2 a loaf today, I’m quite ready to switch over to another baker for an equally good loaf for $1.95 a loaf tomorrow. The baker himself is quite irrelevant to the equation. But if I’ve been buying from the same baker for 10 years, and I like his bread, maybe like his store, like him, the 5 cents, or even more, won’t make a difference. Especially if the baker is on my way to the butcher, and then the laundry, etc. Of course, I’m presenting an antiquated model here, but which supermarket we go to is similarly determined. Quite bit less, though, at least in some respects—no one thinks the supermarket you go to will miss you, personally, if you start going to its competitor. But that just means the form of our loyalty changes—it’s the specialty items plus the sales plus the fresh rolls in the morning and maybe that you’re more likely to see your friend there. You are “always already” tied into a certain set of connections, you have a built in “bias,” and if you want to make a change it involves wrenching yourself away from all that. You are never all alone faced with a vast range of equally plausible alternatives, which you then proceed to whittle down based on a checklist of pros and cons.

The same thing is true if you want to start a new supermarket, or a new anything. You know how to do something, you’ve been around people who do the same kind of thing, they know about people with money who like people who do that kind of thing, and they know about the kinds of people who buy the kind of product you’re planning to make. You can figure out what kind of person you need to present yourself as so as to be trusted with the money and support of the people in the networks you’re proximate to, you can shape your product and your persona to their inclinations. Again, it’s never you, with an “idea,” “shopping” that idea around to an endless list of people with enough money to invest what you need in your “idea,” and then trying to arrange meetings where you “pitch” it to them. You’re always embedded in a set of relationships with different foci and different degrees of strength, different levels of trust. And, no doubt, various “extrinsic” affiliations, like ethnic, religious, geographic, college ties, and so on help to consolidate these networks. This is all so obvious that I’m sure it’s already well known, but it’s important to point out that there are really a set of gradations from gift and kin networks to the more abstracted relationships normally represented as market ones and, even more, that the introduction of more marketized relationships into more networky ones are just strategies by some up and coming network aiming to usurp power from a more established one. Even when an institution or organization deliberately goes out of its way to break up established networks by, for example, pursuing “diversity hires,” that just means that either the institution has embarked on a path of self-destruction or the network will take on some new form, drawing upon other, emergent networks—perhaps this helps to account for the politicization of so many corporations.

If markets are ultimately networks, and relations between networks, then the whole notion of governments interfering with or intervening in markets must be reconsidered. First of all, that markets are networks would help explain why so much government regulation is ineffective and harmful—the government looks at one part of a dense network, in accord with a narrow purpose, or at the behest of a specific constituency, and tries to affect or control that, without understanding how all the “tissues” of the network fit together. But it also makes government involvement in markets less intrinsically fearful. A de-politicized government, one which didn’t need to be elected, and which therefore doesn’t need to buy off members of one network while being bought off by members of another, which doesn’t need to take sides within the various networks, could simply be part of the networks. Some working members of all the networks would simply be government agents—this would be known to all, and some of the actual agents would be known to be such, while others wouldn’t. And, of course, the government itself needs to buy lots of things, and would therefore be present in many networks. The government’s one demand must be that no network resort to settling disputes by violence that falls below the threshold set for a recognizable justice system. That threshold itself is assessed with the specific networks in mind—even vigilante justice is not necessarily excluded, as long as it doesn’t pass the threshold beyond which there will be nothing but vigilante justice.

The government introduces its own bias into the network of networks (I mean “bias” here more in the sense of a “tilt” that leads objects to roll in a particular direction than in the sense of deliberately favoring some over others). As an economic agent itself, it has more need of some things than others (the most advanced weaponry, for example), and as the agent responsible for maintaining a coherent social order, must promote some things over others (the population must be fed, energy independence, to the extent possible, is a good thing, etc.). The networks will be constrained accordingly. In this, any ruler will take other, presumably successful, rulers as a model, while also considering that any decision modifies the results of previous decisions made by the ruler himself and his predecessors. These considerations, and the reference to models, provides ways of thinking things through and arguing for one decision over another. In constraining the networks, meanwhile, the government makes itself un-networky, which is to say hierarchical and imperative: the government must value continuity, consistency and chain of command over all else. Hierarchical imperatives will therefore reach into the networks as well, in the form of establishing guarantors that constraints will be adhered to, and in the form of some kind of conscription, according to which hierarchs in the networks do government work, at government pay, in some kind of rotation.

The networks are all oriented, “tropistically,” toward the center. Money is the means by which agents compete within the networks so as to prove their usefulness to the network and to the center. Money itself consolidates networks while allowing for new entrants—I think Mises was right to say that when the government puts money into circulation, those who receive it first are advantaged over those who receive it later, and who are we to imagine receives it first if not the most networked? Still, someone receives it last, and having money enables one to access a network, on the margins, without actually being known by the participants in that network. Those with some money on the margins, the “end consumers,” make it possible to determine, once all the biases have had their play, which economic agents should be recognized and elevated within the networks. (This may be a much more orderly version of how much of this works now.) But the social nature of capital would need to be more explicitly recognized. The most common complaints about capital and capitalism today provide us with a frame for speculating on ways of doing this. First, capital eviscerates communities and even countries by exploiting its mobility so as to first, undermine living standards at home and eventually leave those affected devastated by exiting the country in search of cheap labor, lower taxes, less regulation, etc. Second, capital homogenizes by replacing local cultures and norms with standardized national and ultimately global ones; while what is lost in the first case is extremely palpable, the losses in this second case are more intangible, and more balanced against the gains (the only gain even adduced in the first case is cheaper goods, which is really only a gain for those who haven’t lost anything in the first place, i.e., the “salaried” employees who are not dependent on an industrial base).

I would keep in mind that the first process, in particular, was set in motion by the conditions created in the late 60s and into the 70s by the welfare state and widespread unionization, which created costs for capital beyond any gains in efficiency. (The second process is more endemic, even constitutive.) Still, the process continued and even accelerated and became more systematic once the unions were broken and taxes dramatically lowered. The reason is simple—politicians on both ideological wings became completely dependent on the support of transnational corporations, even while this dependency was inflected along different ideological lines—neither party, in the US at least, even refers to working conditions or workers at all, other than the completely anomalous Trump. If you listen closely, it’s easy to get the sense both parties hate wage workers. The solution is not to bring back unions, especially if a de-politicized order is based upon disallowing organizations predicated on perpetual conflict. But the government can certainly constrain these known propensities of capital.

In the second case, constraints can be imposed so as to limit standardization, or produce diversities within standardization. Local boards could propose the constraints to be imposed, and if they do so credibly and in good faith, keeping in mind that the final decision will not be theirs, their recommendations might be taken very seriously, maybe even routinely incorporated—this in itself would have a “heterogenizing” effect. In the first case, perhaps a certain amount of the capital held and gained by companies can be held in trust by the government, to be returned to that company based on that company’s adherence to a series of graduated constraints involving working conditions, wages, community investment, stability, commitment to stay put, and so on. Companies that wish to surrender some of their capital in the pursuit of cheaper labor and greater profits aboard might be free to, since that would also provide what might be needed economic information and the repatriation of profits. And agreements with the countries capital might decamp to could also help contain such movements. In the course of all these decisions being incorporated into rule, a well governed order would make the central source of economic value the consistency and coherence of government decision making itself. A company that eschews short term profit in cheaper labor abroad would do so in the knowledge that its government will constrain the market at home so that, while it might be good to have newcomers nipping at the heels of established companies, large scale waves of investment and “dumping” will not be permitted to overwhelm normally functioning companies. This approach is clearly a “decelerationist” one, from which it further follows that innovation will be encouraged but so would efforts to mitigate the effects of innovation on companies, workers and consumers alike. Again, it seems to me that constraints, rather than more targeted interventionist approaches, will be most effective here. Perhaps constraints would determine the ways innovations need to be embedded in existing networks, structures, institutions, and disciplines. Ultimately, it would be simply taken for granted that of course we take a holistic approach to economic and technological developments, once the sociopathic reduction of all corporate decisions to the imperative to maximize shareholder value is a distant memory.

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