This is something that has been bouncing around in my head since reading David Graber's Debt: The First 5000 Years and Acemoglu and Robinson's Why Nations Fail. While the central themes of the books are rather different they have polar opposite takes on capitalism's impact on individuals. Graber sees debt (the parallel is imperfect here since Graber is more narrowly focused) as being rooted in exploitative practices and creating, to some degree, a form of bondage between lender and borrower that has become disconnected from other human relations. Acemoglu and Robinson, on the other hand, see the modern capitalist system as one that approaches being an open access system, instead of oppressing its participants it presents a contrast to the exploitative relationships of the past, particularly when combined with democratic political institutions.
This represents a long running divide between the far left and far right. There are two polar opposite ways of thinking about the market, on the far left it is described as having become disembedded from other social relationships, leading to alienated, exploited, and incomplete individuals. On the far right, there is the efficient markets hypothesis which holds that unfettered market interactions can maximize use of all available information to optimize outcomes.
I think both of these perspectives contains important insights. I agree with the left wing view pushed by anthropologists and sociologists, capitalism disembedded many interactions from the human context that they were previously embedded within. However, once disembedded these interactions became sufficiently simplified to allow for efficient maximization behavior. This is a key element that led to the spectacular increase in growth and human welfare.
However, an essential insight is to recognize that this ability for maximizing behavior came as a result of disembedding markets from other social relationships. Markets can seem complete because of what they exclude. They are not in any way natural consequences of human nature, modern markets are artificial social constructs that have been propagated due to their efficiency. They are able to fulfill their role not because they incorporate all available information but because they define what information is important and sharply restrict the information taken into account by market actors.
There are two important insights that proceed from this frame. First, re-embedding markets in social relationships, as desired by many on the far left, would have disastrous results for human well being by moving us back towards the complicated set of rights and obligations that were previously such a large impediment to economic growth.
The second insight is that since markets are efficient because of their role in defining what market actors take into consideration it becomes essential for institutions to develop which register all the individual and social concerns that markets have become disembedded from. Without this, markets serve only those that are most naturally alienated from human relationships and serve as nothing but a vehicle of oppression. Those that would push for unfettered markets are unknowingly pushing towards this dystopian future.
Next: Why Efficient Markets Require Democracy
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Though I think you did a fantastic job of defining the ethical reorientation that capitalism brings, I think there may also be an argument that, if not capitalism, then the underlying disembedding allows for a re-embedding among a more diverse set of people.
ReplyDeleteIn other words, I was thinking about what property rights really do for us, considering that most cultures have done without them in our strict definition. And considering that most critiques of property rights lament the disembedding of once-social relationships from a human construct, which you say. I think their benefit, ultimately, is that by clearly defining what is mine and no one else's, it allows me to engage with any other type of person who respects the same premise. In other words, property rights are the difference between having to live with someone and living next to a respectful neighbor. I no longer have to view new and strange people as threats, as long as they and society respects my propriety. The human relationship is then re-introduced once we share the same milieu, and diversity thusly expands.
I would largely agree with that. I think the critique of those upset with the disembedding is that the new relationships between strangers are no where near as powerful or comprehensive as what has been lost. I intend to take this up more completely later when I have the time to write up a well thought through post.
ReplyDeleteI'd also add that while I agree market interactions allow for the expansion of diversity I feel the need to add the caveat that this is only contingent, markets can be quite narrow. I have a few scenarios in mind, such as ethnic enclaves, such as the Jews, Armenians, Arabs, and Chinese in pre-modern history which formed market oriented groups embedded within broader societies.
Also, I'd add that I would distinguish property rights from markets and capitalism, Rome and Imperial China both had strong notions of private property but markets remained embedded in traditional social relations, in the sense talked about by cultural anthropologists. I think this embeddedness comes at great cost, and prevents the formation of the larger scale social bonds you're suggesting come with private property rights.
I'll take this up in later posts, but I agree the trade offs are well worth the costs.