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In search of the executioner of the Invisible Hand PDF Print E-mail
The Labour Movement-Economy
invisible_hand_commonMan has built up the concepts of the economic process according to his experience. The sciences of man acknowledge the world of experience and points of crisis in history as a supreme principle and source of knowledge, in contrast with the approaches and pursuits of scholasticism.
We shall place emphasis in particular on the scholasticism of private enterprise and the market, or, as others have it, on the fundamentalism, the scholasticism of privatism and of privatisation in the context of the market, so as to be able to approach afresh, in terms of institutions and academically, the concepts which have been used as non-negotiable and axiomatic obstacles to an attempt at re-thinking, finding of alternatives, and re-regulation where the economy is concerned.

The dialectic between the free market and its avaricious agents
From the very beginning of the science of economics, with François Quesnay and the Victor de Riqueti, Marquis de Mirabeau, we can see a dualism between the production and the circulation of the product, on the one hand, and trading and profit, on the other.

An attempt was made at resolving this dualism by Adam Smith - a man without experience of the world of economics, but with abundant experience of moral, philosophical, and investigative thought.

What Adam Smith attempted to do was to show that in a free economy a mechanism is created which operates in a levelling way and for the good of society. This mechanism is created in the field of the economy, in supply and demand, and is the result of the dynamic, innate in man, of competitiveness, self-interest, and divisiveness. He called the functioning of this mechanism the 'Invisible Hand' of the market and summed it up in the words: "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own [greedy] interest".[i]

For François Quesnay, the "father of political economy", as Marx called him,[ii] his source of inspiration was the circulatory system of the organism. He developed his description of a healthy economic system in terms of a circulatory system in his historic work Tableau économique, which was published in 1758 and in which he observed that "in the economy, natural laws prevail". Both Quesnay and Mirabeau were opposed to mercantilism.

The thought of the philosophers of the Enlightenment about human nature at the political level moved in a similar direction. They were concerned with the dialectic of the delimitation of the individual players on the basis of rules within the framework of a game which would lead to both the maximisation of the common benefit and to democratic organisation. They were also concerned with the fact that whereas democratic organisation is founded upon freedom, this must be understood, in the nature of things, in economic, political, and psychological terms as self-interested.

The Enlightenment attempted to solve the anthropological problem in a functional and administrative way, by means of the creation of a system of organisation, of a phenomenon of scale and institutional rules. The enterprise of 'modernity' did not prove adequate to transform the "crooked timber of humanity",[iii] as Kant called it, something to which - inter alia - the phenomena of colonialism, totalitarianism, two world wars, the Cold War, and the re-appearance of economic totalitarianism testify.

The 'consequences of modernity' have been analysed by the former Director of the London School of Economics, Anthony Giddens, in his book of the same title,[iv] where he speaks of that "utopian realism" and utopian expectations or plans which lay the foundations for future states of affairs which eliminate the eternal character of modernity. The weakness has remained in the cultural, economic, political, institutional, and social field, and for that reason, extremes, bifurcations and scenarios of dissipation and involution, which are observed by systems analysts and thinkers, such as the professor of philosophy, systems science and futurology studies Ervin László,[v] continue to this day.

Who cut off the economy's 'invisible hand'?
Our problem is to see whether, why, and when the 'Invisible Hand' does not 'work' properly. Nobody could say that 'common benefit' was generated in the year 1929, the year in which the great crash of the stock markets took place. Nobody can see the common benefit in the whole development of the 'great transformation', as analysed by Karl Polanyi.[vi] Nobody can see the common benefit in the many-faceted world crisis of recent years.

Why is it that often the common benefit does not work in on-going everyday life? Where was the common benefit of the market lost? Theoretically, the pattern is easy: competitiveness brings down prices, increases productivity and the leverage of resources, leads to innovation, and serves the consumer.

Even Marx[vii] diagnosed the civilising of the economy and of the power of production as regards the consumer and did not call it into question; we also see it in humanitarian forms. There have been in the past outstanding examples of this civilising effect with major figures of the business world, such as Carnegie, who also worked on a political level against colonialism. Additional examples are provided by the sponsors of corporate social responsibility programmes and the pioneers of the culture of the control of demand.

Of course, here a strategic game of power and domination is being played, in every way reminiscent of the techniques of politics: that is, of playacting, of communication, and the games of public relations and the 'creation of consensus' of Edward Bernays. This power game reached its culmination, to a despicable point, in the course of the great economic recession and led to utopias in the realm of promises of the 'Futurama' type - a plan inspired by Bernays and put into action by General Motors.[viii] According to Pascal Bruckner, this power game is nothing more than craftiness of wealth against the greed for a deceptive or spurious good.

Re-examining the doctrine of the self-regulation of privatism
The same game is played in democracy, as well. And here again we have to understand why politics, communications, or the cultural market in the society of spectacle do not work.

We have in all these areas insistently taken a stand on the necessity of networking and a contribution from people free of mechanisms of self-entrapment or theatrical entrapment and hypostasisation. This is also the basic issue of alienation, an issue which, admittedly, religions and philosophies touch upon, in a limited or broader, more profound or shallower range, but our problem here is to see in functional terms where the academic doctrine, the academic school of privatism misses the mark.

We can see the inadequacy of the public sector very clearly in its extreme versions through the critiques applied by thinkers such as Trotsky and Cornelius Castoriadis, which arrived at the concept of totalitarianism under the dictatorship of the proletariat or under the rule of the people. They have spoken of the bureaucratisation, the narcissisms, and the process of operation of power, political surplus value, and of politics as a phenomenon.

In the case of the economy, our main concern is to answer the fundamental innovation of the thought of Adam Smith, which describes how competitiveness, the market, supply and demand work through private enterprise as the 'Invisible Hand'. This innovation had numerous successes, but in the sense of a technological dividend or an instrumental supply of knowledge and consciousness to the economy. Adam Smith represented competitiveness as a holistic mechanism which adapts and operates the economy as a market for the common benefit.

Points which still await their systemic incorporation into economic theory
1. There is now a fundamental acknowledgement that in production, in communication, and in signs of the market there are mechanisms and economies of scale which distort competition and the smooth operation of the Invisible Hand - which is something which has not been analysed yet. We can also observe this gap at the level of operation and analysis of the stock-market cycle. Present-day micro-economic analysis and theory has been confined to simplistic and 'anti-academic' axiomatic bases about issues of knowledge and information, in its attempts to describe how the market can operate properly. Hence the enormous importance of transparency has come to the surface.

2. Another factor which often disrupts the operation of the 'Invisible Hand' are psychological mechanisms. These mechanisms can take many forms and culminate - as regards consumers - in the 'angry statues' syndrome.

We are speaking here of consumers' inability to function as active factors in the economy precisely because they are fixated on the representations and the paternalisms which are levered by their desire, by their demand. Consumers have difficulty in forming communications economies of scale so that these can act in a balancing way on the economies of scale of the producers, and, especially, large-scale producers. This is achieved only in some borderline cases.

The deflections of monopolies and oligopolies are not a matter of mechanistic, functional understanding only. The oligopolistic dynamic in the operation of the market system is inherent in most players as a line of least resistance. It constitutes another important anthropological feature which justifies the description of humanity as 'twisted timber' and which brings us back to the initial problématique of the thinkers of the Enlightenment and to the quest for an answer which would not be limited to the devising of institutions.

Human beings move in the direction of production primarily because they expect - as entrepreneurs, as owners, or as workers - their maximum safeguarding. In reality, however, in functioning in this way, they lose the opportunity to act as consumers upon the market in a balancing and remediating way. One area of the economy in which this division of the subject can very easily be seen is that of health.

What happens in the market when, in spite of the forecasts of economic science and the ensuring of a framework of operation for many players in the market, the natural trend is towards high cost, the maximisation of prices and the maximisation of profit? What is it that is "rotten in the kingdom of Denmark", of privatism, narcissism, and the market?

It could be said that the Invisible Hand is diseased. It is, in fact, suffering from a broad range of bodily diseases.

When supply patronises demand
Because of the world economic crisis which broke out with its origins in 'toxic' bonds, we have become conscious of the 'morbidity of the Invisible Hand' in the intangible economy and in the imaginary part of economies of scale of. But this pathological dynamic is also inherent in the real economy. At this point, we must justify the critique of mercantilism, realising that there is a deeper problem which the various waves of academic thought and analysis have not succeeded in solving, only in trying to manage their side-effects - and here we would include Keynes.

Keynes did not guide economic thought to a fundamental re-thinking in search of a solution to the economic impasse, but led it to a complementary reforming approach in order to deal with the side-effects. He did not operate in the field of causes. On the other hand, we cannot overlook the fact that his proposals on prices and incomes committees, etc. had as their aim a mechanism for intervention and welfare, the institutional effectiveness of which we encounter even today, and which has often served to avert phenomena of abuse.

Nevertheless, this mechanism cannot substantively intervene over the longue durée, as long as the dynamic of demand is incorporated into the hegemonic role of supply as paternalism and as surplus value in the dynamic of production, and it would be a good thing if we were all aware of this.

At this point, Marx was essentially right when he spoke of the definitive role of the accumulation of capital in the cyclical emergence of the crises which this finally causes. In effect, the problem lies in the fact that there is a communications shift of the institutional and functional dynamic and surplus value from demand towards production and trading.

This is the crucial point of division of society, division of the economic and the social subject, of the productive and the consumer subject; and it is this which must be resolved in its fundamental depths and on the full breadth of its range, and not on an intermediate scale. It cannot be resolved on terms of prohibition or on terms of power, which tend, sooner or later, either to be blunted or to become totalitarian.

To put it concisely, we would say that though rules and limits are necessary, they evolve in the course of history in two directions: either that of totalitarianism and bureaucratisation - efficient or otherwise - or that of blunting and dematerialisation.

On the other hand, there is the weakness in inspection and supervision, in trustworthy monitoring and in the mapping of the signs of the market and the economy. This is the case because the great crisis is taking place at the level of the signs and their interpretations and this makes the economic problem much more complex for the present-day level of the human sciences.

At the same time, there is the crucial problem of how the monopoly conditions created by the economies of scale of the major producers, which usually operate as machines for greedy financial interests, are controlled.

We have noted previously that the crisis of profiteering and high prices is not located only at the level of the intangible economy, but also at that of real trade and of the real relation between production - consumption and the market. This is what prompts us to seek constantly for new economies of scale, which end up distorting competitiveness and the market and shape an inherent paternalistic mechanism - strategically and tactically engineered by the players.

The challenge of building bridges between political, psychological, and economic thought
The whole of this crisis which has broken out recently is also a crisis of the real economy, with features and needs for control of demand and of consumers’ assets. On the other hand, in addition, it is a crisis of control of profiteering, of public finance balance and of the control of recession in the interests of development which has brought us face to face with certain concepts which we must see as they are, free of the present form of the institutional vesture of this control and its dogmatic theoretical interpretation. We have placed the concepts of privatism, of investment, of the market, and of competition on a pedestal of mechanistic authority and institutionalisation, leaving their notional nucleus without posing questions. This is why academics and politicians do not ask the question: "why doesn't the market work in favour of the consumer?"

In spite of any achievements of the market which may exist, we have overlooked the role of the technological dividend in the increase of wealth and its distribution. Moreover, we have ascribed all the advantages to the market, to investments, and privatism. In reality, it is as if we are searching - very mistakenly - like cosmologists in a cosmological model, ignoring the radiation from the base. There is a radiation from the base in the economy and in economic organisation which we must diagnose. The recognition of this base is a challenge for all of us, as we are called upon to work exhaustively in the mind, without simplicities, without hostility and pedantic negativities, without authorities and non-negotiable institutional issues.

The difficulty lies in the fact that we are called upon to build bridges between the political, the psychological, and the techno-economic constituents in terms of re-thinking, critique, and planning, without succumbing to the temptations of totalitarianism.
 

[i] Cohen, Daniel, The Prosperity of Vice: a worried view of Economics (Greek edition), publ. Polis, p. 100.
[ii]
François Quesnay: "François Quesnay was a French economist and physician, founder of the Physiocrat School who laid the foundations of political economy".
[iii]
Berlin, Isaiah, The Crooked Timber of Humanity (Greek edition), publ. Kritiki, p. 7. "Out of the crooked timber of humanity no straight thing was ever made" - quotation from Kant.
[iv]
Giddens, Anthony, The Consequences of Modernity (Greek edition), publ. Kritiki, 2001, p. 213.
[v]
László, Ervin, Worldshift 2012 (Greek edition), publ. Esoptron, 2010.
[vi]
Polanyi, Karl, The Great Transformation (Greek edition), publ. Nisides, 2001; see also Pantazis, Apostolos, The 'Historical Functionalism' of Karl Polanyi.
[vii]
Marx, Karl, Grundrisse (Greek edition), publ. A/synecheia, 2009.
[viii]
Zisis, Ioannis, The Deception of Homo Economicus - and the Reconstitution of the Labour and Cultural Movement (in Greek).

 

Ioannis Zisis, Writer

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