ECO 4119 POLITICAL ECONOMY

Chapter 4

The Radical Perspective

Introduction• Although Radical ideas can be traced to antiquity, modern Radicalism

was born out of conflict between the democratic aspirations of the Enlightenment and the emerging power of private property rights.

• Radicals claimed that public control of production was essential to attaining the Enlightenment values of freedom, equality, and justice.

• During the nineteenth century, as Classical Liberalism became increasingly pessimistic and anti-egalitarian, Radicalism exerted an immense influence among the working class and intellectuals.

• It raised the possibility of transcending capitalism to achieve a more humane, cooperative society.

• Thus, while Radicalism’s direct influence in the United States and Western Europe has been minimal, it has indirectly changed the contours of society by pushing liberalism toward acceptance of the welfare state and government regulation of business.

Architects of Radicalism

Jean Jacques Rousseau (1712-1778) • Unlike Hobbes’s and Locke’s portrayal of humans as self-

interested creatures who establish government only to protect their individual rights, the French philosopher Rousseau claimed that humans need to be engaged in a community to develop fully.

• Without a network of social relations, the individual is isolated, lonely, and helpless.

Architects of Radicalism • In Discourse on the Origin of Inequality (1775), he blamed unequal

holdings of property for destroying the naturally peaceful and cooperative nature of humans.

• Inequality enabled wealthier individuals to dominate others, and this subordination caused selfish and competitive traits to appear as people sought to protect themselves from the power of the wealthy.

• Rousseau proposed a reorganization of society to promote greater individual freedom, equality, and a sense of community.

• In On the Social Contract (1762), Rousseau outlined the details of this reorganization.

• He advocated popular sovereignty in which all citizens would actively participate in politics.

• Rousseau called the public interest the general will and claimed that it reflected the interests of people in their roles as citizens rather than as private individuals.

• To assure that the general will would prevail, Rousseau proposed the abolition of all groups seeking to promote their own narrow interests at the expense of the well-being of society.

Architects of Radicalism • Participatory democracy was the key to solving the tension

between individual freedom and social order.• Individuals could conform to the general will and yet still be free

if they participated in establishing the institutions by which they were governed.

• For Rousseau, government was not a threat to individual freedom if it functioned simply as a means by which citizens could realize and pursue their common interests.

• Rousseau also believed that democracy and freedom required greater equality of property holdings so that no citizen would be completely dependent on others for survival.

• This equality would be maintained by a progressive income tax, a tax on luxury goods, and government regulation of economic activity.

Architects of Radicalism • By portraying narrow self-interest as immoral and damaging to

society, Rousseau created the rationale for extending government control over all aspects of life to assure that private interests do not interfere with the public good.

• While Rousseau relied on small communities to harmonize private and public interests without coercion, the potential for oppression increases as the size of the community grows.

• If the community is an entire nation, the opportunities for meaningful political participation are limited, and any proclaimed general will is likely to reflect the decisions of a small ruling party.

• Without political participation, enforcement of the general will will be perceived as oppressive by many citizens.

Architects of Radicalism

Karl Marx (1818-1883) • Marx, a German political economist, spent most of his

adult life in London. • After earning a doctorate in philosophy at the University of

Berlin, where he was heavily influenced by the ideas of G. W. F. Hegel, Marx discovered socialism by reading the works of the utopian socialists, including Fourier and Saint-Simon.

• A friendship with Friedrich Engels (1820-1895) established a lifelong working relationship resulting in many coauthored works.

Architects of Radicalism • Marx believed that the material conditions of society,

specifically the production process, exerted a profound influence on all other dimensions of human existence, including politics, religion, and ideas.

• Marx’s critics have labeled his approach “economic determinism” but he acknowledged mutual interaction among the economy, other social institutions, and human consciousness.

• Marx was convinced that a successful socialism could emerge only out of capitalist society, so he dedicated himself to understanding the inner workings of the capitalist system and the reasons for its ultimate demise.

• According to Marx, the accumulation of capital is the driving force shaping all other aspects of the social system.

• In Das Kapital (1867), he analyzed the process by which capital seeks self-expansion through profits.

Architects of Radicalism • Because capital accumulation proceeds in a fashion largely

independent of the will of any person or of society as a whole, Marx argued that capital, rather than government or citizens, is the actual ruler of society.

• Whereas Classical Liberals defended the autonomy of capital as essential to protecting individual freedom from oppression by government and aristocrats, Marx argued that the freedom of capital meant a loss of freedom for people.

• Competitive pressures forced even the capitalists to adhere to the dictates of capital.

• They could not pay higher wages or provide safer workplaces without losing their competitive edge.

• Capitalists were not evil people; the blame for society’s problems lay with capital--that “cancerous cell” whose growth would eventually destroy existing society.

Architects of Radicalism • Marx’s claim that capital accumulation is the primary force

shaping capitalist societies seems to imply that machines have a demonic control over human beings.

• However, Marx used the word “capital” to signify more than just machines and factories; capital is the social relationship between owners and workers.

• According to Marx, capital creates profits not because machines are productive, but because the dominant power of the owners of capital enables them to pay workers a wage worth less than the products being manufactured.

• When Marx attributed exploitation and other social problems to “the logic of capital accumulation”, he was not blaming machines; instead, he faulted the class structure that gave power to a small minority of the population.

Architects of Radicalism • Marx’s understanding of capitalism led him to predict that the

system would result in a falling rate of profit, increasing centralization of ownership, the elimination of the middle class, and perpetual misery for workers.

• Yet he also viewed capitalism as laying the groundwork for a future socialist society.

• In its short lifespan, capitalism had brought about more technological developments and accumulation of productive assets than had occurred in all previous history.

• Moreover, the experience of working in large factories was causing workers to develop more cooperative attitudes and a greater sense of solidarity.

• The combination of “class consciousness” and the depressions brought about by falling profits would eventually trigger a proletarian revolution and the establishment of socialism.

Architects of Radicalism • Marx anticipated that a proletarian revolution would entail a

massive uprising by a vast majority of the population and therefore would be quite democratic.

• To prevent a counterrevolution and to handle the administration of the new socialist society, a “dictatorship of the proletariat” would be necessary.

• In a socialist society, productive assets would be subject to public control, and people would be paid according to their productive contribution to society.

• With the advent of communism would come an end to scarcity and a “withering away of the state” since a highly cooperative society would have no need for police, courts, or prisons.

• Communism would operate according to the slogan: “from each according to his ability, to each according to his needs.”

Architects of Radicalism Thorstein Veblen (1857-1929) • A distinctly American brand of Radicalism was founded by

Thorstein Veblen, a political economist whose caustic critique of corporate capitalism and bourgeois lifestyles influenced American social theory significantly.

• In his book The Theory of the Leisure Class (1899), Veblen contrasted “dynamic” aspects of society such as science, the use of tools, and the “instinct for workmanship,” with “static” aspects such as superstition, ritual, and habit.

• Veblen praised modern technology for undermining old traditions and myths, but argued that capitalist production, with its focus on profits, tended to spoil the potential dynamism of technology.

Architects of Radicalism • Although capitalism was once a progressive force in vanquishing

feudal customs and authority, it initaited a new privileged class. • This “leisure class” had little direct involvement in production but lived

in splendor on income derived from the ownership of property. • Veblen argued that the leisure class interfered with the efficiency of

capitalism by serving as role models for the rest of society. • Unable to afford genuine luxury, the middle and lower classes

attempted to imitate the leisure class by engaging in “conspicuous consumption.”

• Since the motivation behind conspicuous consumption is to reduce the insecurity and sense of inferiority created by the existence of a leisure class, Veblen concluded that abolishing this class would conserve resources and make everyone happier.

Architects of Radicalism • Another problem created by the leisure class is erosion of

the “instinct for workmanship.” • Seeking to imitate the leisure class, people develop an

aversion to work and seek shortcuts to success. • Even businesses are prone to this syndrome. • Rather than encouraging innovation and the production of

high-quality products, corporations try to manipulate the market and the consumer in pursuit of short-term profits.

• Veblen created the term “planned obsolescence” to describe the manufacture of products that quickly deteriorate, forcing consumers to replace them often.

Architects of Radicalism • Veblen believed that modern technology made large

corporations and concentrations of business power inevitable.• He proposed that control of corporations be delegated to

engineers and scientists who, by virtue of their training and temperament, focus on efficiency and quality.

• By relying on “technocrats” to restore dynamism to modern societies, Veblen steered a path between capitalism and Marxian socialism.

• While convinced of the waste and inefficiency of modern capitalism, he was also critical of Marx and had no confidence in government expropriation of the means of production.

• He anticipated that scientists and engineers would operate businesses in the public interest without the bureaucracy and concentration of power entailed by government ownership.

Architects of Radicalism

V. I. Lenin (1870-1924) • Vladimir Ilyich Ulyanov, Russian theorist and activist who

adopted the name “Lenin,” led the first successful socialist revolution in 1917.

• An extremely forceful personality and skilled debater, Lenin almost singlehandedly refashioned Marxism to address the particular situation of Russia in the early twentieth century.

• Because Marx had said very little about conducting a revolution or about the nature of post-revolutionary society, Lenin faced a formidable task.

Architects of Radicalism • Marx had envisioned socialism as arising from the misery and

alienation of workers in the most advanced capitalist countries. • In contrast, Lenin was faced with a backward country ruled by

an autocratic tsar and lacking a large industrial working class. • In What Is To Be Done? (1902), Lenin proposed that a

“vanguard (front line) party” of dedicated intellectuals take responsibility for initiating the revolution and providing leadership for the masses.

• He also urged Radicals to resist the temptation to join reform movements that would accomplish only minor changes in the status quo; a genuine revolution was the only solution to Russia’s backwardness.

Architects of Radicalism • In Imperialism, The Highest Stage of Capitalism (1916), Lenin

developed another theoretical argument favoring the possibility of revolution in Russia.

• He claimed that capitalism had evolved from its earlier competitive phase into a monopoly phase that required corporations to move beyond national boundaries in their quest for cheap resources and markets for their products.

• Imperialism had three major consequences. • First, it generated higher profits, thereby permitting capitalists to pay

higher wages to their workers in the industrialized countries of Western Europe and North America.

• Lenin concluded that workers in these countries had unwittingly become incorporated into the exploiting class because they were benefitting from the profits extracted from their fellow workers in the less-developed countries.

• As an “aristocracy of labor,” workers in the industrialized countries could no longer be expected to provide the impetus for a socialist revolution.

Architects of Radicalism • Second, increasing oppression of the less-developed

countries would fuel revolutionary anger outside the core of the global capitalist economy.

• Lenin argued that Russia, as the most backward of the European nations, was the “weakest link” in the capitalist chain and therefore would be the first to break.

• Finally, imperialism would lead to war between the advanced capitalist nations as they struggled for control of global resources and markets.

• Lenin viewed World War I as an imperialist conflict and was confident that the capitalist countries would so devastate each other that socialism would quickly spread from Russia throughout Europe.

Principles of Radicalism • Human Nature. Humans have certain biological needs and a

capacity for reason, but their social and natural environments significantly affect their consciousness and behavior. The social context provided by language, traditions, values, and modes of interaction is so essential to human development that individuals cannot fully realize their talents and capacities except in association with other persons.

• Society. Society is more than just a collection of individuals. Because society precedes the individual, it has interests apart from--and potentially conflicting with--any particular individual’s desires. A good society encourages the fullest possible range of personal development and social relations based on mutual respect.

Principles of Radicalism • Government. Government properly serves as the

representative of the collective interests of citizens. Government permits citizens to do for themselves collectively what they cannot accomplish as individuals.

• Morality. Although Marxists have traditionally rejected the notion of a Radical ethic, non-Marxist Radicals find a basis for morality in the human need for social relationships based on mutual respect. An individual action or a social system is immoral if it treats people as objects and demeans their humanity.

• Freedom. Freedom is the ability to fully develop one's human capacities. Freedom can be achieved only in the context of a nurturing community based on cooperation and participation.

Principles of Radicalism • Authority. With the possible exception of revolutionary leadership,

authority is legitimate only when democratically established, based on widespread participation, and publicly accountable.

• Equality. Equality means not just equal opportunity, but also substantial equality of result. To achieve equality may require taxation or even confiscation of property income along with governmental efforts to assist disadvantaged persons.

• Justice. Justice means that rewards are distributed in accordance with those rights established by the democratic political process. Citizens should have rights to those conditions essential to human development such as material necessities and health care. Justice also includes the impartial administration of the law.

• Efficiency. Efficiency means that society's resources are used in a way that maximizes the attainment of society's goals including such intangible goals as justice, solidarity, and human development.

Radicalism Today • The cruelty of Stalinism during the 1930s and 1940s was

a major blow to the credibility of Radical ideas.• After World War II, the anticommunism of the McCarthy

era effectively suppressed Radical voices in America until the 1960s.

• With the emergence of mass political movements for civil rights, student power, women’s liberation, environmental protection and an end to the war in Vietnam, the Radical perspective enjoyed a renaissance.

• Three of the most important contemporary Radical schools of thought are institutional economics, social economics, and post-Marxian theory.

Radicalism Today Institutional Economics • Institutional economics arose out of Thorstein Veblen’s

criticism of both Marxism and neoclassical economics. • Veblen found the neoclassical portrayal of autonomous

individuals rationally pursuing maximum utility to be as implausible as the Hegelian dialectics underlying Marxism.

• He proposed to analyze the economy as an evolving process embedded in an institutional framework including the legal system, political system, educational system, family life, work, customs, and ethics.

• Because the entire array of institutions allocates society’s resources and distributes income, to study the market in abstraction would be a pointless and misleading exercise.

Radicalism Today • Prior to World War II, a strong case can be made that

institutionalism was the dominant approach to economics in the United States

• Institutionalism lost its prominence after World War II. Its decline can be traced to three factors.

• First, the rise of McCarthyism and the Cold War created a political climate that was hostile to any ideas suggesting major restructuring of capitalist institutions.

• Second, the apparent success and acceptance of Keynesian economics eased many doubts about the viability of capitalism and undermined proposals for radical change.

• Third, the publication of Paul Samuelson Foundations of Economic Analysis in 1949 marked the full-fledged mathematization of economic theory.

Radicalism Today • Institutionalism is less suited for expression in mathematical

form because it analyzes customary patterns of group behavior rather than the rational behavior of individuals.

• The institutional approach has been described as “storytelling,” relying on a narrative style to convey understanding of economic processes.

• As economists gained increasing influence in government policymaking, the more “scientific” mathematical methods of neoclassical economics successfully dominated the less rigorous institutional approach.

• Institutionalists criticize the neoclassical assumptions of rational consumers and perfect competition for disguising the power relations and inefficiency of real-world capitalism.

Radicalism Today

Social Economics • The roots of social economics lie in nineteenth-century

continental European economic thought. • German and French political economists exhibited much

greater skepticism toward free markets than did their British counterparts.

• They were particularly concerned about the effects of markets on culture and the spiritual well-being of citizens.

Radicalism Today • Like institutional economists, social economists have

devoted much of their effort to criticizing neoclassical economics and constructing alternative methods for analyzing economic activity.

• Social economics is publicized as offering a more integrated, holistic, evolutionary approach incorporating social, cultural, and political factors into its understanding of economic affairs.

• The ethical vision of social economists points toward greater equality, decentralization, and accountability of power, and the priority of human development over profit.

Radicalism Today

Post-Marxian Theory • During the nineteenth and early twentieth centuries,

Marxism was hardly visible in the United States due to rising standards of living and government repression of Radical organizations.

• Even when the Great Depression triggered a resurgence of Radicalism, little of it was explicitly Marxist.

• By the 1950s, Marxian economics in the United States was confined primarily to the works of two theorists-- Paul Sweezy, the editor of Monthly Review, and Paul Baran (1909- 1964), a professor of economics at Stanford University.

Radicalism Today • Post-Marxian visions of socialism do not preclude the

possibility of considerable private ownership of property and reliance on markets.

• To prevent abuses of government power, post-Marxians emphasize the necessity of participatory democracy; elected officials and bureaucrats should be publicly accountable for their actions, and citizens should be actively involved in the political process.

• Another bulwark against tyranny is democratization of the workplace, giving workers extensive control over the production process.

• With these institutional safeguards, post-Marxians are confident that tensions between individual freedom and social order can be minimized.

An Assessment of Radicalism • Radicalism grew out of the industrialization process of Western

Europe. • A new class appeared, lacking access to productive property

and, therefore, having no means of support except selling labor for wages.

• As capitalism undermined the self-sufficiency of rural areas, farmers flocked to the cities, only to find disease, horrendous working conditions, and subsistence wages.

• These conditions contrasted so sharply with the bright future anticipated by Enlightenment thinkers that attention turned toward private wealth as the last supporter of privilege and unaccountable power.

• Some workers and intellectuals began to demand the abolition of private ownership of large-scale means of production.

An Assessment of Radicalism • Radical demands for greater equality have been partially

realized through the welfare state. • By threatening to take away property, Radicals forced the

wealthy to make recognition. • For example, the extension of civil and human rights in

democratic societies has given workers greater protection against the power of employers.

• Government support for labor unions and a minimum wage partially insulates workers from competitive market forces.

An Assessment of Radicalism • Many Radicals were rethinking their principles in light of

disappointment with existing socialist societies. • Radicals now acknowledge that some of the problems

traditionally blamed on capitalism may be inherent in any form of social organization.

• For example, the problem of motivating productive activity does not disappear with the advent of socialism, nor does the problem of scarcity of resources and making choices between alternative uses of those resources.

• Not all conflicts in society are class conflicts, and therefore not all conflicts will disappear with the elimination of classes.

• Moreover, problems of individual loneliness, alienation, and frustration do not vanish along with capitalism.

An Assessment of Radicalism • If conflict will persist in any future society, then Marx’s

vision of communism as a society in which neither market nor government mediates conflict should be rejected.

• Government serves not only to represent the collective interests of society, but also to resolve the conflicting interests of individuals and groups within society.

• Furthermore, given the inherent problems of relying on government to mediate all conflict, the market may be essential to socialist society as an arena in which the private interests of individuals find expression and fulfillment.