economics


There’s nothing particularly new in the liberal economic arsenal, since they’ve been trotting out the same stuff for more than 200 years. Take the incredibly naive Thomas Malthus, for instance, on age pensions, support for single mothers and for the unemployed:

By the application of calculations to the probabilities of life and the interest of money, he [Condorcet] proposes that a fund should be established which should assure to the old an assistance, produced, in part, by their own former savings, and, in part, by the savings of individuals who in making the same sacrifice die before they reap the benefit of it. The same, or a similar fund, should give assistance to women and children who lose their husbands, or fathers, and afford a capital to those who were of an age to found a new family, sufficient for the proper development of their industry. These establishments, he observes, might be made in the name and under the protection of the society.

Such establishments and calculations may appear very promising upon paper, but when applied to real life they will be found to be absolutely nugatory … If by establishments of this kind of spur to industry be removed, if the idle and the negligent are placed upon the same footing with regard to their credit, and the future support of their wives and families, as the active and industrious, can we expect to see men exert that animated activity in bettering their condition which now forms the master spring of public prosperity? (An Essay on the Principle of Population, pp. 46-47)

Ah yes, the idle poor have always been with us. Shouldn’t reward them for their laziness, now, should we?

As part of my reading for Idols of Nations, I have to work my way through some mind-numbingly dull material. Hugo Grotius is bearable to a point, but John Locke and Adam Smith and the others are dead bores. ‘Utter tedium’ barely captures it, so much so that I wonder at the attention lavished to these writers, supposedly the doyens of English economic thought. John Locke, my focus at the moment, was a man quick to anger and without any sense of humour. Then again, he does manage the odd pearl despite himself, especially when it comes to sex:

God in his infinite wisdom has put strong desires of copulation into the constitution of men, thereby to continue the race of mankind, which he doth most commonly without the intention, and often against the consent and will of the begetter (First Treatise on Government).

Not so long ago, most of the necessities of life were pretty cheap in these parts. A trip overseas meant haemorrhaging money and then returning with a debt to make your grandchildren’s embryos blanch. Now all that’s reversed, for visitors here, returnees from long voyages on the seven seas, and home dwellers all know that we pay among the highest prices on the planet – even surpassing Norway for many things.

Why? Many theories have been put forth:

1. Transport costs. This is crap, since transport covers about 7% of costs, as I am told by a recently retired head honcho in the world’s largest shipping firm.

2. Taxes. Nope. The goods and services tax is a measly 10%. This hardly explains the 100% markup (and more) on many goods from overseas. For instance, I can buy my favourite (and only) pair of shoes at less than half the price on the internet than in the local shoe shop.

3. High wages. True enough to some extent, since Australia has one of the highest average wages in the world, and a decent minimum wage. Hence the high cost of coffee, restaurant meals and so forth. But it still doesn’t explain everything, like those shoes.

4. High dollar. We’ve slaughtered the US dollar, the Euro, the pound. Great when you are on the road, but now it supposedly pushes up prices here. Not sure I can see how that obtuse argument works, for does it not push down the price of anything you buy overseas?

5. What transnational company executives think Australians will pay. There seems to be a bit more in this one. Music, software, computers, mobile phones … the list is long indeed. They all cost more here relative to prices overseas. Why? Because people keep paying for the damn things at the prices listed. Infamously, there is some software that costs more here than the airfare overseas and its purchase price somewhere else combined. Since some idiot will pay for it, the companies charge it.

That said, being a somewhat stingy bastard, I can say it is possible to live very cheaply indeed in the land of Oz. Less than $50 per week is no problem at all.

A new piece on another shibboleth between the religious left and the religious right: Leviticus 25:23 and ‘the land is mine’. It is over at Political Theology.

This one is a bit of a puzzle. A Mesopotamian ruler sends out a donkey caravan, headed by a dodgy tamkar (grovelling merchant) or two. Great outlay to equip the caravan; armed guard; promise of handsome rewards for the delivery of certain preciosities; reminder to engage in some diplomacy, since the tamkars were part of the court’s indentured service. Yet, time and again, the ruler would plunder such caravans. Why? We may be able to understand the looting of someone else’s caravan passing through territory a potentate claimed as his own, although even this would have the negative effect of deterring other caravans crossing the same ground. But one’s own? It reflects the profound suspicion of the merchants. Not only did they engage in the acquisition of preciosities for a ruler, but they also doubled up as tax-collectors and lenders of last resort. And they would invariably make sure they made a killing on the mission in question. Hence the suspicion: these merchants are working for me anyway, so let’s make sure they don’t keep too much for themselves.

This afternoon I had a rather puzzling and at times disconcerting conversation with a staunch defender of neoclassical economics. The catch is that my interlocutor prefers not to use the epithet: it is simply ‘economics’. I will come back to that in a moment. First, let me recall some basic propositions that were put to me:

1. ‘Economics’ provides a set of tools in order to analyse an objectively existing reality.

2. “Economics’ asks the fundamental questions of life and is therefore the basis of all other inquiry.

3. Mainstream economics is incredibly diverse and can incorporate all perspectives (at last an epithet).

Let’s take each in turn. The first is pretty much what Lenin argued in his worst and very undialectical book, Materialism and Empirio-Criticism. The world exists out there and it is the task of science to come to a greater understanding of that world. Our only limitations are those of the tools we use. I’m told that most neoclassical economists work with such an assumption. On the one hand, I want to ask, what world? Capitalism? Or is it neutral? On the other hand, I guess it doesn’t leave much room for the possibility that the independently existing ‘economy’ was a creation of a new discipline needing a topic.

Second, not much needs to said here, except that it is a classic case of disciplinary chauvinism.

Third, when an epithet does appear, it is a pseudo-epithet, since ‘mainstream’ claims what the solitary ‘economics’ claims as well. As for the assertion of diversity and flexibility, it is the classic assertion of the status quo: there, there, don’t worry, your perspective will also be taken into account. No need to get too excited or offer any challenges, since we are a broad church.  The present world is fine, after all.

Finally, let me return to the quiet dropping of the epithet ‘neoclassical’. This is a telltale and imperialistic move that makes a universal claim from a dodgy particular. Cover the tracks, have a shit, shower, and shave, and people will soon forget the particularity of the term itself. This is comparable to the use of ‘democracy’, rather than Greek democracy, ancient Near Eastern democracy, bourgeois democracy,or socialist democracy.

Recently, I came across a similar process in a different context. I had passed on a document originally drafted by some people from eastern Europe. In it they spoke of ‘Orthodox’ churches and countries. Some other readers immediately asked, ‘don’t you mean “Eastern Orthodox”‘? The catch here that those readers are precisely the ones who use ‘Catholic’ when what is really meant is the Roman Catholic Church. All of which reminds me uncannily of the early church and its councils, where all manner of groups claimed to be ‘mainstream’, ‘catholic’ or ‘orthodox’, and denounced their opponents as heterodox.

As I was pondering some of these things on the ride home, I went from ‘bugger the blinkers of neoclassical economics’ to being reminded of Wallerstein’s observation:

The institutionalization of history and the three nomothetic disciplines – economics, sociology, and political science – in the last third of the nineteenth century and the first half of the twentieth took the form of university disciplines wherein the Western world studied itself, explained its own functioning, the better to control what was happening (Wallerstein, Modern World System vol. IV, p. 264).

As part of my sacred economy project, I have finally finished working through J. David Schloen’s The House of the Father as Fact and Symbol: Patrimonialism in Ugarit and the Ancient Near East (2001). It is eminently useful, obsessive, rambling, conservative, and ultimately flawed. The basic thesis is that Max Weber’s patrimonialism (patronage) is a valid category for understanding the politics and economies of pretty much every society in the ancient Near East, at least until the ‘Axial Age’ in the first millennium when ‘rationalisation’ began. He also deploys Paul Ricoeur for his theoretical armoury in order to provide what he feels is a ‘dialectic’ between fact and symbol (it is really more of a wooden correlation).

Useful: it is one of the few works on ancient politics, society and economics that is concerned also with theory. It also engages with the work of the heterodox Marxist of the USSR, Igor D’iakonoff, although it slips too quickly into the work of those who developed some of D’iakonoff’s ideas. And it supplies a wealth of data, even if the material leads to different conclusions than the ones Schloen wants to find.

Obsessive and rambling: it runs for over 400 large-format double-column pages, which would be well over 800 pages in a standard book. Endless pages are devoted to obscure Ugaritic terms, to discussions of architectural ground plans, to just about anything. In short, it is one of those books that took well over a decade to write, attempting to say everything. Where was the supervisor (it began as a PhD thesis) or editor? Where was the wise friend who could say, ‘David, drop that, that, and that’?

Conservative: the reading of Weber is a highly idealised one, with heavy emphasis on the force of ideas on history and a dismissal of any materialist analysis as ‘functionalist’. The choice of Ricouer is no accident in this respect, since that gentle conservative was able to wield a knife in such a way that you knew you’d been stabbed only when the blood began to flow. It is conservative on a historical register as well: Schloen accepts the hypothesis that the settlements in the Judean highlands during the prolonged economic crisis at the end of the second millennium BCE were Israelite, that one can speak confidently of the divided monarchy, that there are clear ethnic differences between Canaanites, Phoenicians, and Israelites (even though they could all speak their own dialects and understand one another). Above all, he attempts to wash away any form of social conflict. It matters not whether one is slave or free, rich or poor, exploited or exploiter, monarch or nomadic pastoralist, for we are all part of a patrilineal household, whether with our joint family, with our monarch, or with our god. There are no social contradictions, no reasons for conflict, but an over-arching social harmony in which everyone knows their place.

That last point leads onto the flaws, which are many. In his effort to paint a picture of patrimonial harmony, Schloen cannot deal with tension and conflict. That makes him curiously impervious to Marxist approaches, the discussions of which are among the worst in the book. To those approaches he attributes strange motives (a desire for a rigid sequence of modes of production), adduces strange arguments (Stalin was vitally concerned that scholars of the ancient Near East toe the party line), and simply misses the key points of Marxist analysis. He also makes the rookie mistake of announcing the next book, concerning the ‘Axial Age’, in some detail. You do that only when the manuscript is complete and with the press, not when it is an idea in your head and maybe a few notes. Why? Obsessive habits delay plans and thoughts shift. Basically, things change, don’t they?

But the main flaw is that he takes a particular feature and makes it the key to his argument. That is, he focuses on the specific institutional form of patronage and then universalises it as a template that explains everything. He thereby fails to see that it is but one institutional form among others – subsistence survival, kinship-household, state and estate, tribute-exchange, and credit-debt. The specific combinations and adjustments of these produced both the possibilities and fault-lines of the shifting economies of the ancient Near East.

I have always liked this one from Marshall Sahlins:

There are after all two roads to satisfaction, to reducing the gap between means and ends: producing much or desiring little.

I know which one I prefer.

I have just signed a contract with Fortress Press for a book called Idols of Nations: The Bible and the Development of Classical Theories of Capitalism. It is the follow-up to The Sacred Economy and is due with the press by 1 September, 2013.

The title comes from Jer 14:22 (and Ps 135:15). Since Adam Smith drew the title of Wealth of Nations from Isa 61:6, 12 (and 60:5) and since my book is critical of the way classical economists used the Bible, Idols of Nations it is.

Summary

The book critiques the rise of early theories of capitalism in light of their engagement with biblical texts. It traces the way significant theorists dealt with the Bible in order to develop their positions. Why and how did these theorists use the Bible, is that use legitimate, and what are the implications for the influential theories they developed? How did those engagements change over time as those theories developed a life of their own? This study focuses on material often relegated to the margins of analysis. Thus, while Hobbes and Locke found it necessary to build their theories from biblical analysis, Grotius was an accomplished (and ecumenical) theologian and Malthus an evangelical minister, both seeking to reconcile their positions with their theological approaches. The study also traces the way biblical themes are subsumed at a less explicit but deeper level with the later moral emphasis of Smith, Mill and Ricardo.

In more detail: of late a recovery of the looser connection between Christian theology and neoclassical economics has been pursued by some economists and theologians. However, these studies really do not address crucial issues in relation to theology and the Bible. In this light, we find a disjunction: if the Bible is mentioned, it relates to the political or theological thought of the critic in question; where economics is discussed, the Bible does not appear. For example, while secondary literature mentions the Bible in relation to Locke’s political thought, the crucial role of Genesis in the opening section of Locke’s treatment of private property in Two Treatises on Government is ignored or even excised from printed editions. With Grotius, theology in general may be mentioned in his discussion of property, natural law, freedom of the seas and agonism in ethics and commerce, but the Bible is nowhere to be seen. In regard to Hobbes, the central role of religion in Leviathan is noted in relation to politics and ethics but the Bible’s role in his economic thought on property, money and interest is neglected. As for Rev. Malthus, his theory concerning the relation between population and long-term economic stability is recognised as having a general theological basis in theodicy: overpopulation and its problems be divine moral lessons, but ultimate responsibility lies with human sin. Yet the fact that Malthus grounds his moral arguments on the Bible (eg. Gen 1:28) is rarely, if ever, explored in detail.

Outline

1. Introduction: Concerning the Bible and Economic Theory

The book begins by emphasising the importance of the Bible for early theorists of capitalism and the simultaneous neglect of precisely that feature of their work. Rather than peripheral scaffolding that may conveniently be ignored once the theories have been erected, the Bible and their modes of engaging with it are crucial for understanding the development of those theories. The work focuses on four key economists who used the Bible extensively: Hugo Grotius (1583-1645) Thomas Hobbes (1588-1679), John Locke (1632–1704) and Thomas Malthus (1766-1834).

2. Grotius and the Biblical Seas

Concerning Grotius, an analogy may be identified between his Arminian theology and his doctrine of the ‘free seas’ (developed against claims to dominance by other European states) . Following Jacob Arminius (professor of theology at the  University of Leiden until his death in 1610) and his followers, Grotius believed that salvation involves not merely God’s inscrutable decision concerning election (predestination), but also the faith of each individual. This faith is eternally known, but the shift from orthodox Calvinism is crucial: God elects all who have faith. In other words, a window is left open for individual human agency, even if it is foreknown by God. The analogy with his doctrine of the free seas may be cast as follows: instead of states monopolising the sea, each state and individual is free to use the seas for trade, unhindered by any other state. That is, anyone who could be shown to be a user of the sea was thereby entitled to do so; so also, anyone who shows the true marks of faith is thereby one of the elect.

3. Hobbes and the Natural State of ‘Man’

Hobbes the materialist was the son of a vicar, taught by the puritan, John Wilkinson of Magdalen Hall, Oxford, and held rather unconventional theological views. Sporadic attention has been given to Hobbes’s economic thought, especially in terms of its contradictions, working on the tension between self-interest (greed) and public welfare, between homo economicus and absolutism, between the state and the need for individuals to engage in buying, selling and the pursuit of profit, but also of his anticipatory naturalising of capitalism’s functions as intrinsic to human nature in a way that universalised a particular form of economic activity (Levy 1954; Macpherson 1962; Viner 1991). Yet, what is not noticed is that Hobbes develops these arguments through extensive engagement with the Bible. Most significantly, his treatment is highly critical (he is often seen as a precursor to historical critical methods of interpretation), with scepticism concerning miracles, prophecy and traditional views of authorship. Here then I pursue a close analysis of precisely those sections of Leviathan where Hobbes develops his politico-economic arguments through his critical analysis of the Bible.

4 Locke: The Problem of Paradise and Property

Locke is particularly interesting, for he struggled to overcome the profound difference between the Bible and his own economic context. For Locke, the Bible ‘has God for its author; salvation for its end, and truth without any mixture for its matter’. Given that it contains infallible truth, he vowed, ‘I shall immediately condemn and quit any opinion of mine, as soon as I am shown that it is contrary to any revelation in the holy scripture’. The problem was that on his reading, the state of paradise, when human beings were in harmony with God, contained no private property. Human beings had free run of the Garden, with no sense of owning any part of it, since it was God’s creation. How then did private property arise? Through tilling the soil and using the earth for human sustenance. From this first step, the ever more complex patterns of private property developed. Locke thereby elaborates on Hobbes’s preliminary effort to develop the myth that capitalism is the eternal unfolding of basic human proclivities. Three points are worth noting. First, the Bible is naturalised as part of a grand myth of capitalism. Second, he embodies the very difference between the Bible and his own context by the effort to overcome the contradiction of property. Third, the development of private property becomes a result of the Fall, for the human beings only begin to till the soil after they have been expelled from paradise.

5. Malthus: Theodicy and Political Economy

The Reverend Malthus brought the problem of theodicy into the heart of political economy. How could an all-powerful, all-knowing and loving God afflict human beings with overpopulation and thereby famine, disease and starvation? On the one hand, the results of overpopulation may be seen as a moral lesson in order to make us reform our social modes of life. But God is not responsible, argued Malthus, for human beings are guilty (Gen 2-3). In order to counter the objection that Gen 1:28 encourages us to be fruitful and multiply, he argued that we have been reckless and misinterpreted that text, for we have not been fruitful in a responsible manner. Malthus’s answer was characteristic of early 19th century theology: repentance from sin requires a strictly moral life, with sexual abstinence and honest lives (only his followers proposed contraception). Malthus also signals on a theological register a central feature of economic thought, namely, its deeply moral nature.

6. Sublating the Bible: Morality and Classical Economic Theory

Thus, in the chapter on ‘sublating the Bible’, I focus on the work of Adam Smith, David Ricardo, and J.S. Mill. Apart from Malthus, economic theory separated from theology in the 19th century (Waterman 1991; 2004), thereby producing the theoretical perception of an economic sphere independent of all else. In the process, explicit biblical engagements are increasingly sublimated by moral concerns. Thus, the Bible is peripheral in Smith’s work – Wealth of Nations is drawn from Isa 60:5 (and 61:6; 66:12) and the ‘invisible hand’ is a short step from the inexplicable and ubiquitous ‘hand of God’ throughout the Bible – but his argument is deeply moral, with an emphasis on both compassion and self-interest as universal elements of human nature that determine economic behaviour. In Ricardo, this moral focus is manifested in the theory of comparative advantage, while J.S. Mill sought to counter the element of greed in these theories by emphasising that at the end of capitalism, when profits, capital, industry and population had become static, people would turn from selfish to altruistic concerns – the ultimate maximisation of pleasure and happiness. A mark of the sublimation of biblical and even theological concerns is that Smith was a deist, Ricardo a Unitarian and Mill an agnostic who saw the moral and aesthetic power of religion in providing ideals and hopes for human improvement.

7. Conclusion: Economising the Bible

The conclusion explores the paradox in which it seems ‘natural’ to apply neoclassical theories of capitalist economics to the Bible, despite the evident difference between its economic context and capitalism. Two paths may be identified. For some (Locke and Malthus), the Bible presented them with a profound difference between its context and their own. Their work functions as both a recognition of that difference and a sustained effort to overcome that difference in order to naturalise the Bible. For the later theorists (Smith, Mill and Ricardo) and their moral focus, they assumed that human nature is always the same, being a mixture of self-interest and altruism. By connecting that human nature and the core drives of capitalism as a natural fit, they easily moved to the assumption that the history of economies is an unfolding of the same principle. Both paths converge with the myth of a long history of capitalism in which earlier economies function as ‘capitalism light’ – those ‘primitives’ did not know the complexities of fully-fledged capitalism. In regard to the Bible, it thereby seems perfectly ‘natural’ to apply neoclassical economic theory to studying its context. Yet, since it can be shown that early theorists misappropriated the Bible, and since biblical economies were very different than they imagined, such economic theory becomes highly problematic for the study of non-capitalist economies.

Contrary to the assumption that the primary function of debt was to ensure that the lender grew richer from the interest, it seems that that key issue was labour. In a situation with plenty of land and scarce labour, all sorts of means were used to secure labour. One was debt. Why else would a wealthy person lend money to an impoverished peasant? Would it not be more profitable to lend to another wealthy person? It seems not. Since it was routinely impossible for the debtor to pay off even even the interest, he would need to work the land of the lender until the ‘debt’ was paid off. The lender was in no hurry to see the debt repaid. As Steinkeller observes:

Assuming that most loans were made with other objectives than the interest-generated profit in mind, it follows that, in such circumstances at least, interest was a tool and not an economic end in itself, being therefore devoid of real economic value. Its rate was largely irrelevant vis-à-vis the amount of the loan, except that it had to be sufficiently high to make it impossible for the borrower to repay the capital (‘The Money-Lending Practices in Ur III’, 2002, p. 113).

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