Photo courtesy of Stephen Gudeman
Stephen Gudeman has suggested in the past that the indiscriminate application of Western economic understanding and terminologies to all societies is wrong. One should come to understand "local models", he has argued in his explorations of modern economic anthropology — a school of thought which uses anthropology in trying to understand economy in human terms.
Gudeman travelled to Pazinok, Slovakia in September to speak at the first joint biennial conference of Czech and Slovak social anthropologists' associations, with the theme of this particular event titled: What is Capitalism and What Comes Next? Green Horizon's Pavel Antonov spoke with Gudeman at the conference.
By Pavel Antonov
Where do you see flaws in the two basic laws of economy?
Well, they're called theorems, and they originated with a working out of Adam Smith's original perception that the division of labour and exchange lead to greater opulence. And the resulting Pareto Theorem was the whole business of trading for advantage, and that a market finally stops when there can be no more trades — that is, a situation occurs in which no one person can be better off without another being worse off. No one's going to agree to a worse position, so trade stops at that point. That's price, that's equilibrium. It's been formalised, and people have got the Nobel Prize for working that sort of thing through. And in the long run, it's really a working out of Adam Smith. It leaves out, however, questions of justice, of merit, of any other kinds of values that you want to insert. It's simply about efficiency, the most efficient way to use things. This is what economists call Pareto One, theorem one. If you want some other arrangement, if you think that it all ought to go to women, or to men, or to the old or the poor ...
... or the environment ...
...or the environment, then we can tax this and subsidise that, and we'll make a whole new arrangement. Where you used to have 100 euros, with taxes now you've got 50 euros, less to trade with, while someone else has 150 euros, or whatever it would be. You could arrange to favour green concerns. And then you can have another market-clearing mechanism; and you can still have, given those resources, an efficient distribution of resources. But what this leaves out is: How do you get from one situation to another if it is self interest that drives the first situation and the second situation? In the first situation, one doesn't care about anybody else; and in the second, one doesn't care about anybody else. So how do we get from here to there? What motivates such a movement? And on this economists are largely silent. In my talk I mentioned someone like Gary Becker, who through a contorted sort of argument would say that it's in your self interest to not be self-interested, which is a bit of a contradiction.
I also mentioned in my talk that markets always have borders; they are arenas, although they may not seem that way in some discourses. But recognising this truth would be another way of bringing in environmental concerns. Some things cannot be traded, whether old forests or carbon emissions that could be prohibited.
What I didn't have time to talk about today is that the linkages of the two theorems involved in this very discussion could go back to Adam Smith. Seventeen years, I believe it was, before The Wealth of Nations in 1776, he published The Theory of Moral Sentiments [1759, Ed.]. In The Wealth of Nations Smith's famous phrase 'the invisible hand' — that the market works by this invisible hand and we end up with such and such arrangements — appears exactly once. But he also used the phrase earlier in The Theory of Moral Sentiments, in which he wrote something like: "As if by an invisible hand, the wealthy will share their wealth." So in The Theory of Moral Sentiments he's positing a sort of empathy. He says: I have empathy or sympathy for another person. And that means we share. So, in fact, you see in Adam Smith a sort of dialectic between what anthropologists more focus on and what economists more focus on. But economists never, as far as I know, invoke the earlier point to help justify the later. So there is in Adam Smith an awareness of what I would call the tension or the dialectic in economics.
How does all of this look from the point of today's financial crisis? Things like regulation and state interference are being discussed or implied — things often equated with socialism.
I think a lot of these things can be read differently. First of all, why would I or anybody else want to have their tax money help bail out the banks? I don't think it's out of a theory of wanting to help others. The banks had all the money in the first place. I think it has to do with wanting to save ourselves, so that I'm willing to let some of my tax money, you're willing to let some of your tax money, et cetera, help do the bailouts. People are now trying to save General Motors. Some might call this socialism, but I think it's to save capitalism. That is to say: 'I'm worried about unemployment, and there are 60,000 or whatever number of workers at General Motors, and there's the whole plant. I want to save it, I want to revive it, and I want to get it back into the capitalist system.' I don't think it's a statement of 'Oh, I'm really worried, I feel sorry for the unemployed, I feel sorry for the managers.' There isn't that kind of &emdash whatever you might call it — socialist impulse. It's not that kind of community impulse. That's my reading. It's more like: 'We've got to save ourselves.' That's the way I think it's sold politically, and I think that's the meaning of it for most people. But then it gets called socialism and nationalisation or whatever because some people don't even want to do that much.
And for some people 'socialism' is a very bad word.
Oh, it's a terrible word in the United States. It's not used. You can't even use 'nationalisation'. But what is actually happening is socialism or socialist in the sense that the control of the means of production has partially fallen into the hands of a government panel.
But here, in Central and Eastern Europe, societies have emerged over the course of 20 years from a state which was called socialism to a state which is called capitalism. Some things today are obviously not working properly, but I'm wondering how people here can be convinced to buy into any concepts — such as sharing — that seem associated with the former system? Bridging from one system back to the other, so to speak.
Well, I don't think you can just bridge. You've got to see that markets are social creations, and not born purely out of self interest. They're always bordered, and they've always been that way. What I mean is that there were markets of different kinds in socialism. There are markets in Cuba, for example. There are markets everywhere, and they're wonderful mechanisms, but they have to be made to serve their purposes.They can do wonderful provisioning if you do it right, and people can make gains, and people can have a profit. They can do a lot of good things. And I think we have to raise the level of human understanding, whether through history or through ethnography — and history provides lots of examples of the emergence of markets. They've always had some sort of social rooting or borders.
There is a popular myth where two savages meet in the forest and carry out some silent trade — trade in which a social context is unnecessary. Someone puts down this and flees, and someone puts down that and flees, and slowly they work out a price. See? You don't have to communicate, and you don't need to have a social order to have a market. That's the message of the myth, but the truth is that it has never occurred. There's no evidence. It's just a mythological fantasy to justify 'free' or unregulated markets. What they didn't need in the past, we don't need either, and so forth. I think we invent these myths, narratives or stories to justify free markets. Maybe anthropologists and historians need to illustrate how markets have always been contained. Look at what has happened. We had a bubble! We had a bubble in derivatives because there was no properly constituted market in derivatives. If there had been — not that I know what a properly constituted derivatives market would look like — then maybe we wouldn't have had that bubble. Maybe we wouldn't have had the crisis.
Have you encountered in your work in Central and Latin America any examples of what you would consider a successful market approach?
A country like Cuba has limited resources and its own share of problems, but also quite a good medical system. On the other hand, markets open up and markets close down in Cuba, and you don't know where they're going. You also have these experiments going on with various populist leaders, who are often rightist: Evo Morales, Hugo Chavez, et cetera. Things very often take a populist right turn when you begin to move away from markets, and that's not good. But no, I haven't come across the ideal system. I'm sure it's still out there somewhere...
So several questions remain open. Where do we go? And are countries in Central and Eastern Europe still places where things could work?
I don't know what the story will be here. My perverse notion, and I've said this about Cuba, is that maybe the best preparation for capitalism is socialism — which is quite the reverse of what Marx argued. But a good socialist base — education, a sense of which things might belong in the public sphere, and what might belong in the private sphere — that might be one outcome.
