For a scientific economy (part I): planning, not the free market, made the West wealthy

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The economy is a complex system – a system pulsating with billions of agents that interact between themselves, sometimes along planetary scales. From these interactions, that at first glance appear random, emerge properties and laws subject to certain quasi-deterministic logics. These emergent laws were studied for the first time by the old political economists of the 18th and 19th century, like Smith, Ricardo, and Marx. One of these emergent laws is the existence of certain resources that are considered “free”, but are extracted without their value reflecting in price. For example, the domestic sphere, which contains house cleaning, child rearing, and cooking, is “free” since this labor is not remunerated and isn’t reflected in prices. In other words, the domestic sphere is invisible to the price system, even when this labor is necessary for the reproduction of the worker and therefore, for the reproduction of capital.

A similar phenomenon is reflected in the treatment of the environment by capital. Marx once argued that the the value of a commodity is a function of the labor quantity employed in creating it. If we use this idea, then the value of lumber, oil, and water simply reflects the labor spent in extracting, processing and transporting these resources. However, the natural resource in itself, without being processed by such labor, has no value. We could say then that these resources are “free” for capital – opened to absolute plunder provided there is access to enough labor power. Therefore, the domestic and environmental sphere are unintelligible to capital – this unintelligibility is a law that emerges from random processes of billions agents – such as firms, workers, consumers, etc., without those agents being conscious that their coupled actions give rise to these laws. This was Hegel’s observation, who referred to this emergence as the “cunning of reason”, since even though the passions of different human beings are varied and contradictory,  they somehow end up coalescing into an intelligible motion of history.

This problem, of the invisibility of the earth system before capital, has become one of the most important political-economic problems of the last couple of decades, since this unintelligibility  of the environment before price signals has pushed the planet to the brink of devastation. In its spontaneous state, the price does not reflect the ecological damage that the extraction and use of certain natural resources infringe on the planet. In conventional economics, this damage is referred as “externality” since its information is not reflected in the price. Economics usually recommend that these “externalities” are transformed into internal variables, through the intervention of the state. Particularly, these conventional economists recognize the existence of emergent phenomena springing from capital that are destructive, and require public planning so that the ecological damage becomes intelligible to the capitalist system. Yet this intelligibility is applied in an external manner, it does not emerge spontaneously from the market, but from the conscious planning  of the state, through the volition of scientists, politicians and judges.

This need of gubernamental intervention to tackle the problem of climate change shows something very important: the emergent laws of the market not only cannot solve the problems of existential dimension facing the human race, but these same emergent laws often enlarge the problem, for example, the tendency of capital to perceive the environment as a storage of free resources that can be ransacked. This observation is more profound than the idea that capitalism is guilty of all the problems of modernity, which is a proposition that often is pronounced in a reflexive manner, without much thought. The principal problem of capitalism is that it is not designed for the direct resolution of problems – capitalism is a system that, as a first approximation, emerges from the random interactions of billions of consumers, firms, and workers, without the behavior of the system being the result of someone’s volition. Specifically, emergent phenomena and laws, that originate in the random behavior of billions, control the destiny of the system, laws that will not necessarily result in favorable consequences, and that in reality, can impact society in a destructive way. Not only can these laws be destructive, but simply there is no human will that legislated them, instead, they emerged spontaneously from aleatory processes.

The incapacity of the market to resolve the fundamental problems of society is well known by the state’s functionaries, and this is the reason why much of the infrastructure required for society uses public planning. Some examples are roads, railways, medical services, the police, and education.  Many markets owe their existence to technology and methods developed by the state, since only the state is capable of absorbing the large financial risk and has the will to spend the necessary capital to springboard certain industries. For example, the oil industry in Alberta, Canada could emerge thanks to Peter Lougheed’s government investing in the required  technology and research so that the oil industry is profitable, industry that today is the most important of that province. This fact is interesting since it contradicts the usual “right wing” attitude of Alberta, one of the most conservative provinces in Canada.

If at first glance, planning appears so superior to the market, why is then the free market the economic orthodoxy? In spite of the existence of a class system, why did capitalism enrich certain countries such as Great Britain, Netherlands, and the United States? The defendants of capitalism, even if they admit it is not a perfect system,  can point at certain advantages the market brought. In the core economies,  during  the twentieth century there was an exponential jump in the quality of life for even the poorest individuals. It can also be said that the countries that “invented” capitalism, such as Great Britain, United States, Netherlands, and Germany are  some of the wealthiest countries in the world. The socialist bloc, even if it brought immense material gains to the population, raising millions from poverty, could never surpass the capitalist west in production and riches. Not only did the socialist bloc fell, encouraging all reactionaries to proclaim the supremacy of the market, but some of the “socialist” countries are materially fairly miserable, such as North Korea or Venezuela. Finally, many see China as proof of the supremacy of the market, since this country’s economy is rapidly growing after they opened up to the global market. All these facts are frequently used to justify the greatness of the market and attack the socialist project.

Without doubt there are countries that adopted the doctrine of the free market and keep being miserable, such as the majority of peripheral countries. Yet, the arguments of neoliberals must be dissected – we must find that secret of capitalism that brought it to the resolution of certain technological and social problems, which gave the advantage to the so called “first world” countries. This problem is important since as we said, the atom of capitalism is the aleatory interaction between agents, such as firms, consumers, etc, not a unified and conscious problem-solving will. However, even when there is no “plan”, capitalism invented the diesel engine, modern medicine, made of certain countries immensely rich, and lead to longer life expectancies. We must discover the reason why the Smith’s “invisible hand”, could resolve certain problems that benefited so many people.

One of the developments that brought capitalism to its almost total triumph is instrumental reason. We will define instrumental reason as that technic that uses scientific rationality for some end. For example, instrumental reason can be applied to public health, using research, medicine and logistics to neutralise  some epidemic. The end of instrumental reason is axiomatic: in the case of capitalism it’s often profitability, where the rationality of marketing, engineering, and logistics is applied. Many philosophers and sociologists will argue that instrumental reason emerged with capitalism. But there is a contradiction here: we have mentioned that the phenomena of capitalism are not legislated by conscious volitions, but emerge spontaneously from the stochastic and granular interactions of agents. Yet, at the same time, we have argued that capitalism emerged coupled to instrumental reason, that scientific rationality that must be applied by a conscious will to accomplish some intelligible end.  Furthermore, with capitalism emerged bureaucratic rationality, something Weber was obsessed about. How can a system that apparently emerges from disordered interactions give light to to a rationality that requires conscious human volition?

The answer is that Instrumental reason wasn’t the result of conscious wills that sat in a table and discussed its creation, but emerged spontaneously from class struggle. This was the thesis of Robert Brenner, marxist historian. In the sixteenth century there was an agricultural revolution in the British countryside, where scientific and technical methods were applied to reorganize production, such as animal husbandry, or the centralization of infrastructure to create a more efficient production chain. In order to reconfigure production in a more scientific and efficient manner, it was necessary that the lords stripped the peasantry of their lands and converted them into waged workers.  In consequence, it became possible for the lords to centralize and manipulate the land through scientific reason, investing in infrastructure and training the peasantry with more advanced skills required for a more scientific agriculture and animal husbandry. These advances were motivated by the growing absorption of lords under the logic of the commodity, where it was necessary to produce crops in a more quick, efficient, and cheap manner, in order to be able to survive the brutal world market.

Brenner argued that this agricultural revolution did not appear in the other regions of Europe, such as France, or Poland, since in the case of France, the peasantry had such a high level of organization and autonomy that it was impossible for the lords to break them and atomize them into waged workers. In the case of Eastern Europe, the lords were so powerful and the peasantry so dominated that the creation of a waged class was unnecessary. In this region, the lords dealt with the growing mercantile competition by simply hyper exploiting a peasantry that did not have the means to defend itself. Therefore, it was the specific balance of class forces that brought the agricultural revolution that converted Great Britain into a world power. We could say then that Great Britain invented instrumental reason as used today – where the unquestionable end was profitability, and the rational means were the technical reorganization of the countryside.

If we take Brenner’s thesis seriously, then the economic supremacy of certain capitalist countries was formed by the technical reorganization of their societies for the end of creating commodities more cheaply and efficiently.  Yet for Brenner, this technical jump does not appear spontaneously out of the existence of commercial relations, such as the process of buying and selling commodities, but only emerges if the configuration of classes permits it, and only in specific industries. From Brenner’s observation, we can perceive the weaknesses of the pro-capitalism arguments of the orthodoxy: the source of wealth of specific capitalist countries was subject to certain exogenous restrictions: in the case of Great Britain it was the balance of class forces between lords and peasants. This thesis is incompatible with Smith’s theory, who saw technical reorganization as an endogenous process of the market.

Once certain capitalist sectors developed instrumental reason, then the State began to wield this process, and applied it for other more macroscopic ends. The foundations of this state were established in the french revolution at the end of the eighteenth century, where secular reason replaced the arbitrary deliberations of the nobility with the will of the people, where human beings, by their free will, legislate laws that emerge from rational discourse.  This was was Hegel’s fevered dream, where Reason, the essence of the true God, manifests itself in the kingdom of this world as a secular and rational State. In this new order, the proto-capitalists converted the small landholdings of the peasantry into proto-factories, centralized under the sun of reason, and broke communities into atomized proletarians that can be integrated into a logistical mesh.

Once agricultural capitalists unleashed instrumental reason into society, the state began to apply it to more ambitious ends, since this reason as wielded by capitalists was constrained and distorted by the small scales in space and time of profitability. First, the french revolution applied this reason in a political manner, where this rationality was used to deal the final blow to the lords and kings. But then, the state began to use science and the technic for concrete ends, developing large public projects that the private sector could never develop by itself, such as railways, electric grids, and public plumbing, coordinating thousands of workers across the continent. The socialists of the second international, who marvelled before public planning,  demonstrating the irrationality of capitalism – for it was absurd to let private companies take advantage of public infrastructure and coordination, necessary ingredients for the survival of capital. It was simpler to submit the private sphere in its totality to public planning through the socialization of firms.

However, the incapacity of capitalism of resolving certain social problems, coupled with the flourishing of instrumental reason in early capitalism, demonstrate that capitalism’s technical triumph wasn’t necessarily a function of the free market, but instead, of the class struggle, where the lords destroyed the old forms of life of the peasantry, and replaced them with the atomized worker. Once the proletarian is unchained from their relationship to the countryside and the patriarchal household, then instrumental reason can integrate them to a scientific and coordinating logic. This scientific logic that enriched the countries that developed capitalism first, was not the market. Instrumental reason only emerged when the peasantry was stripped of their old forms of life rooted in soil and honor, and their labor power centralized under larger scales to produce commodities more efficiently. In other words, the technical supremacy of “first world” countries was unleashed by processes that are exogenous to the market, such as the class struggle between lords and peasants.

Therefore, those countries that couldn’t destroy the processes that root the individual into a spatial coordinate, did not transcend their material backwardness when they adopted capitalism. This was because traditions and communal constraints did not let capitalists and politicians abstract completely human beings from their spatial roots and convert them into an atomized mass that can be manipulated by scientific coordination.

A skeptic could use the experience of the old socialist bloc to protest against my argument, since in these countries, supposedly scientific reason was applied through planning. Yet, these states were never able tos surpass in wealth and technical prowess the capitalist west, and their foundations were so unstable that many states could barely survive through the duration of a human life. Moreover, some of these supposedly planned economies remained materially miserable, such as North Korea. However, this argument is defective, for at this point in time, all national economies are embedded into a world capitalist system, where notwithstanding the alleged existence of scientific planning, the law of value that operates internationally would starve any country refusing the market. All states are embedded in an international division of labor, and ultimately, the computers, vaccines, and engines required to build a hospital can only be imported from rich countries through dollar transactions.

The existence of this antagonistic world order does not mean that these socialist societies did not have endogenous dysfunctions, such as a lack of democratic rights, corruption, and bureaucratic hierarchies. However, the political problems of these countries, including their authoritarianism and corruption, were caused in part by the aggression of the political-economic world order.  For example, the dysfunctions of the USSR, such as stalinism, emerged in part as a reaction to an aggressive west, since the USSR had to industrialize in a fast paced, disjointed manner in order to create a war machinery that can be used to defend themselves against the “capitalist” west. Furthermore, In many of these socialist countries, forms of life endured that predated modernity, sabotaging instrumental reason, since those pre-modern structures enabled the survival of the patron and the client at the expense of the collective. It’s very probable that the alleged inefficiencies and inflexibilities of planning are not inherent, but related to the  the antagonistic nature of the capitalist world order, and the antiquated forms of lives embedded in many of these countries. Wealthy capitalist countries did not necessarily enrich themselves only through the market, but through the destruction of the peasantry and the application of instrumental reason – in other words, through planning.

We conclude the first part of this essay. The second part will deal with the necessity of socialist planning to combat climate change.

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2 thoughts on “For a scientific economy (part I): planning, not the free market, made the West wealthy

  1. I have problems with it too, I don’t think its the whole picture, because I believe there is imperialism and asymmetric core-peripheral relations as well that enrich the core at the expense of the periphery. I feel the more accurate model synthesizes wallerstein and brenner.

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