Preface
In a Nutshell
The Enlightenment gave us the idea of the individual as an independent sapient being. Freed from superstition and official dogma, the individual was now in comprehensive control of her innate and acquired capabilities. Fearing the loss of moral certitude, Immanuel Kant found a substitute—it was moral to be rational and rational to be moral. The young discipline of economics embraced this newly created autonomous agent and assigned that individual the task of rendering rational—self-interested—choices. Such choices revealed true value: the rational individual could not be wrong about her choices. Individualism was now wedded to acquisitive behavior.
Max Weber’s The Protestant Ethic and the Spirit of Capitalism provided theological gloss to the emergent culture of enterprise and striving. By the middle of the twentieth century, economics had become the civic religion of the modern industrial state whose purpose was to provide ever-increasing living standards for its citizens. As with daily weather updates, certain economic data came to define life under industrial capitalism. The unemployment rate, daily movements in the stock market (including those in far-off places), and the latest perturbations in the consumer price index became the contemporary equivalent of ancient astrological sightings.
By the end of the twentieth century, industrial capitalism with a new global reach—had given way to financial capitalism. As the twenty-first century dawned, there was yet another transition underway: managerial capitalism. The Great Recession of 2007–2009 delivered a surprising destructive shock to large swaths of the population in western Europe and the United States. The angst and anger produced by that disruption have not abated. An abrupt loss of faith in the presumed beneficence of capitalism coincided with mounting despair—and political revolts—in the Middle East, parts of Latin America, and much of Africa. Immigrants became a threat to the comfortable social compact that had defined life since the end of World War II. The political class, regardless of party affiliation, was now bereft of ideas.
The lack of comprehension is to be expected. Governing elites have been mentally nurtured on the defining fiction of modernism. The autonomous acquisitive individual was both rational and moral. The civic religion provided the necessary benediction. The destructive paralysis was abetted by a fiction within a fiction. The civic religion had managed to insist that the economy—the “market”—is a separate and quite delicate sphere of efficiency and rectitude. When held up against the self-dealing incoherence of politics, tampering with the economy can only inflict harm. Kenneth Arrow proved that social choices were inconclusive and contradictory. Only markets offered consistent clarity. Politicians must not interfere with the mystical workings of the economy. Private firms, praised as “job creators,” now comprise the sacred temples of modern capitalism. Government intervention in the market is dangerous and must be avoided. This protected realm is the fragile fount of future well-being.
Ironically, the autonomous individual is now an unwitting accomplice in his own economic marginalization. Dependent on the constellation of sanctified private firms for his precarious livelihood, he is unknowingly enlisted in the self-defeating cause of laissez faire. As politicians in western Europe and the United States quake and bluster before the alleged hordes of migrants seeking a better life, their constituents—nervous victims of the abundant caprice of managerial capitalism—exhibit behavior that further confounds the anomie and paralysis.
Possessive individualism both reigns and incapacitates.
The Journey
The sweep of history and ideas covered here suggests that a brief guide would be useful. The book is divided into three parts: The Problematic Triumph of Capitalism, The Great Unraveling, and Recovering Hope.
Part I contains three chapters. In Chapter 1, I develop the case that it is time to take a fresh look at what might reasonably be called world disorder to play off of Henry Kissinger’s recent book, World Order (Kissinger, 2014). I suggest that the primary reason for this disorder is the depth and reach of possessive individualism in contemporary life. In this first chapter I explain the role of the Enlightenment in creating the individual, I discuss the rise of industrial capitalism in eighteenth-century Britain (and a century later in Germany), and the emergence of economics as the civic religion of
modern life. It is also in Chapter 1 that I spell out the general attributes of what I call possessive individualism. Finally, I introduce the idea of personhood, and argue that possessive individualism has undermined personhood. The promise of the Enlightenment has been hijacked by the acquisitive urge under market capitalism.
In Chapter 2, my purpose is to develop the broad outlines of how the discipline of economics—building on the created individual of the Enlightenment—has crafted a suite of concepts and practices that constitute justificationism. Here I argue that much of contemporary economics is misleading in its assumptions, willful in its presentation, and contrived in its conclusions. The central idea of rationality—the rational individual and rational choice—is circular and is thus a profound deception. Its purpose has been to situate economic calculation—maximizing utility—at the center of human behavior. To borrow from Gertrude Stein, I will show that there is no there there.
The popularity of contemporary economic concepts and the acquired habits of mind based on those concepts will be exposed as the perverse contamination that has undermined the aspirations of the Enlightenment. Freed from the chains of ancient superstition, the individual was soon reenslaved in the service of industrial capitalism and its offspring. Today the liberated individual is a nervous striver seeking something that relentless acquisitiveness cannot provide.
Chapter 2 is essential in yet another way. Most of the accounts of world disorder—the political anger, the rise of authoritarian xenophobic leaders, the alienated pro-Brexit voter, the forgotten rural resident of the great American Midwest—tend to be circular. It will be claimed that there is political unrest because the political system is broken. Partisan politics has become the reason for the political dysfunction, while political dysfunction is offered up as the reason for partisan politics. Yet the real explanation is found elsewhere, outside of this bizarre circle. The political class—those whose task it is to help the rest of us figure out where we wish to go—is immobilized by its many failures to understand the perverse workings of contemporary capitalism. Having accepted the promise of a world organized along the lines of a striving consumer maximizing his or her utility, yet emasculated by the associated deceit that a market economy is some inviolate parallel universe ruled by wise entrepreneurs who bring forth marvelous products and necessary employment, it seems that there is no place to turn.
If the subject of stagnant incomes does arise, inequality will be seen as a political problem rather than a problem with the economic system. And if inequality is somehow recognized as a systems problem, the durable cultural commitment to capitalism will divert any possible conversation about how to correct the reasons for the obvious problem. Fragile employment prospects—and defective earnings—will be blamed on endless political fights over international trade, immigrants, or taxation and regulations of businesses. Accepted economic verities lurk behind each of these issues, but their central role is misunderstood. And so the prevailing narrative becomes preoccupied with a failure of political will. It is often claimed that if only there could be a return to the good-old days of bipartisan compromise, these problems would be fixed. However, the root of the current despair is economic, not political, and therefore no amount of bipartisan comity will fix the problems under consideration.
The central message of Chapter 2—standing apart from the theoretical details therein—is that contemporary economics continues to provide a defective and misleading account of how a market economy actually does its work. In more practical terms, the culturally agreeable economic message accepted by the population at large, but especially in the political class, is one of a benevolent signaling system that guides the rational individual toward utility-maximizing transactions. After all, isn’t exchange natural to the human system? The origin of this beneficent account of market capitalism is no surprise. As I note in Chapter 1, it was as recent as 1991 that Soviet communism collapsed of its own internal incoherence. The giddy triumphalism following that momentous event solidified in the public mind the idea that capitalism was the best of all possible systems. Economics as taught and practiced in the capitalist world provided the theoretical justification for why that was the case. Think of it as apologetics. Chapter 2 exposes the nature and extent of this deceit.
The purpose of Chapter 3 is to explain the evolutionary trajectory of the household from precapitalist provisioning, then into merchant capitalism, evolving into industrial capitalism at the end of the eighteenth century, next into financial capitalism, and finally, as the twenty-first century got underway, being transformed into managerial capitalism. We will see that each stage in this evolutionary pathway has rendered the household increasingly marginalized and precarious. Coincident with this difficult journey for the household, the increasingly atomized individual within the household has become more isolated and tenuously engaged with a meaningful livelihood.
The possessive individual is now seen to be the victim of her own liberation wrought by the Enlightenment.
The evident anger and alienation that mark much of the forgotten class in western Europe and the nonmetropolitan reaches of rural America are misplaced. The cultural embeddedness of the possessive individual, a creature of the acquired economic spirit of our time, blinds each of us to the underlying source of our perplexity. We have so much to be thankful for—just look at our material abundance. Why are we so haggard and jumpy?
Part II contains two chapters. In Chapter 4, I present a brief window into the evidence and associated accounts that suggest just how precarious life now is under the attentive financial wranglers of managerial capitalism. We are introduced to the ancient tale of foxes and hedgehogs. In today’s wealthy countries—but especially in western Europe and the United States—daily life for many individuals is a precarious and peripatetic quest for reliable employment, a “livable wage,” and financial security. The modern household now resembles, in many respects, the wily fox who must know many things and who must have a portfolio of survival strategies available for the wielding. Gone are the days when a household with one income earner could hope to achieve a plausible “middle-class” lifestyle. Many households contain multiple earners engaged in more than a single job. So-called full-time work is now a remote dream when considered against the daily scramble of juggling children, schooling, aging parents, unreliable (and often unaffordable) child care, flawed urban transportation, and the many other aspects of modern life.
Meanwhile, a class of individuals (in earlier versions of capitalism they were called the “captains of industry”) now sits astride massive accumulations of liquid assets easily deployed to capture the immediate attention of sweatshop clothing manufacturers in Bangladesh, Cambodia, or Vietnam, electronic device assemblers in East Asia, or corporate flower farmers in East Africa. Global commerce is now orchestrated by a class of financial wranglers, hedge-fund conjurers, and private equity tormentors who—like the reliable hedgehog—need to know only one big thing. And the one thing they know is that they can render low-wage workers unemployed at the click of a button on their computer. They bear no responsibility for their actions because they are from Thomas Nagel’s nowhere. They are divorced from place and the attachments thereof.
Chapter 5 represents a profound turn in our story in terms of both geography and economic circumstances. We come to the other side of the world in
more ways than one. If daily life in the metropolitan core is characterized by a growing realization of stagnant livelihoods and financial anxiety, life in the periphery has always been precarious and problematic. Here we see just how difficult life has been for those countries that missed out on the Industrial Revolution. In fact, that enduring misery can be traced to the growth and spread of capitalism in the metropolitan core. In that sense, this chapter is the logical companion to Chapter 4.
Chapter 5 introduces us to a yet more profound distinction between the harried life under managerial capitalism and meager existence in the poor periphery. Where political life in the metropolitan core is stabilized by a reasonable though paralyzed democracy, the problematic periphery is littered with ineffective notional states. By a notional state, I mean political jurisdictions in which the mask of citizenship precludes coherent governance. The mask of citizenship can be thought of as a grand deceit in which individuals reside in a particular political jurisdiction—a nation-state—but they are not of that jurisdiction. The central element in the mask of citizenship is the absence of the tax bargain.
The modern nation-state in the wealthy metropole is characterized by a historic and secure tax bargain. Citizens are part of a social compact in which they understand that the payment of a certain suite of taxes represents their commitment to the larger public good, but it also represents something much more profound. It acknowledges that in exchange for those tax receipts, the government of the day recognizes the reciprocal obligation to provide a suite of goods and services that could not be made available otherwise—national defense, roads and bridges, schooling, local police services, garbage collection, and the provision of reasonably safe drinking water, to name just a few. The payment of taxes not only funds those necessary collective consumption goods and services, it provides the citizen a plausible claim on the attention of government agents when the quality of those services fails to live up to the expectations of those who are paying for their provision. The tax bargain is an essential “binding agent” of the citizenship exchange that characterizes the modern nation-state.
By way of contrast, many countries in the poor periphery do not levy taxes on their citizens. They rely, instead, on excise taxes levied on exports to the rich metropole. Government income is thus derived from timber, minerals, oil, and perhaps a few agricultural products that bring revenues directly into the central treasury. Notice that these excise tax receipts are divorced from any accountability to the citizens. In fact, they often
work to the detriment of those citizens when local forest and mineral resources are made available to international corporations for export to global centers of manufacturing. Furthering the problem, with no revenue available to local units of government—states, counties, provinces, towns, cities, villages—these political entities must beg the central government for funds to pay for schools, roads, communications facilities, libraries, water supplies, etc. And in this necessity to solicit the central government for funds, we find yet another mechanism for political graft and dubious transactions.
This political reality of revenue mobilization in the poor periphery epitomizes the perverse mask of citizenship we find in much of the developing world. Central governments pretend to care about all of their citizens scattered across the impecunious countryside, but in fact, receiving nothing from them in the way of tax payments, they have scant incentive to pay attention to their needs and aspirations. To the extent that economic progress has long required a collaborative and focused effort by most citizens across the geographic reach of a nation-state, the absence of a citizenship exchange in the poor periphery sentences those countries and their populations to persistent want and despair.
We cannot leave the material of Chapter 5 without noting that the situation just described, a world of politically dysfunctional notional states, is the plausible result of colonialism throughout Africa, South and Southeast Asia, and the Middle East—and to a lesser extent in South and Central America. This long period of external control—one that was not eliminated in many places until after World War II—was motivated by the logic of surplus extraction. Colonial powers were motivated to establish administrative structures and processes in their colonial possessions in order to facilitate the extraction of desired raw materials to the metropolitan core. Included in these desired imports were oil, tropical timber, precious minerals (diamonds, gold, silver), tasty spices and condiments (salt, pepper, chilies), comforting beverages (tea, coffee), and—most despicably—slaves.
The point of colonialism was not to improve tax collections or to create enhanced governance. Christian missionaries were there to convert souls, and colonial administrators were there to collect materials and convert them into new income streams in the metropole. Those colonial possessions were mere supply depots for industrial capitalism, and their defective governance today is the inevitable result of that unpleasant history. Possessive individualism shaped their past, and it continues to undermine their future.
Part III turns the emphasis away from an explanation for the current state of affairs and shifts our attention to a discussion of how we might work our way out of the current predicament. Chapter 6 brings us to a practical account—a theory—of how human systems are continually undergoing adaptation and accommodation to new stresses and strains. It is offered as a reminder that all human systems are constantly in the process of becoming. The accounts in Chapters 1 through 5 reflect this continual transformation from precapitalist provisioning to merchant capitalism, then to industrial capitalism, on into financial capitalism, and now into the early stages of managerial capitalism. The life span of an individual is too short to perceive these profound transitions in economic and political structures. Our attention span is too attenuated to fix on the details of what is going on around us. The news of the day is focused on the latest tax reform, on the gradual emergence of commercial giants such as Apple or Amazon, on slow reforms in the health care system. But over a decade or more, important transformations have been taking place.
In Chapter 6, I explore these changes as the inevitable result of new, unwelcome problems in the status quo ante. These unwanted settings and circumstances motivate problem solving. Change is difficult. I introduce the concept of the habituated mind, which is resistant to new ideas and does not easily accommodate change. John Dewey (1859–1952) insisted that we do not adopt or take on new habits. Rather, we are our habits. But some problems demand our attention, and change cannot always be avoided. These persistent problems are the animating spring of human action. I introduce the idea of human systems as purposeful evolutionary constructs, and I develop the argument that this gradual evolution in social structures and processes can be thought of in three phases: (1) animation; (2) adjustment; and (3) adaptation. This process of change and adaptation is one of the most difficult undertakings for the human psyche. We come to love and revere what has become familiar to us. We like our “ruts,” or most of them anyway. The human mind adapts itself to familiar routines, and once those routines become normal, they also become right, correct, and worth defending.
But of course change is both inevitable and necessary. I draw on Dewey’s Arc as an essential component of what I call volitional pragmatism and the development of a theory of change in human systems.
Chapter 7 concerns the decisive institutional change that is necessary to rescue managerial capitalism from its flawed state. The prevailing demarcationist notion that regards the economy as a separate autonomous
realm standing distinct from politics and civic activity by governments must be abandoned. Believing in the sanctity of the private firm destroys any opportunity to rescue contemporary life from the ravages of possessive individualism. I argue in this chapter that the private firm is, necessarily, a public trust. This recognition would clear the way to rectify the manifold damages being wrought by managerial capitalism.
In Chapter 8, I elaborate the reasons why possessive individualism must be overcome. Here I document the extent of the persistent economic inequality between the metropole and the problematic periphery. I show once again how possessive individualism undermines plausible livelihoods across the globe. And I conclude by introducing an idea that has gone missing under the conceits of the Enlightenment, the emergence of neoclassical economics, and the full flowering of possessive individualism. That idea, so jarring to the modern citizen of the global economy, is obligation. Modernity has brought us a profusion of claimed rights, and in that abundance of self-interested claims to special standing, the idea of obligations has fallen away. Can it be any mystery why the angry occupants of rural America, or eastern Germany, or the north of England are so worked up over immigrants? The selfish citizen is the social and economic manifestation of what Richard Dawkins likes to call the “selfish gene.” The profound difference is that genes are inanimate biological constructs. Humans are sentient creative beings. All they lack is good reasons.
Chapter 9 brings us to an idea by which personhood might be rescued from the comprehensive ravages of possessive individualism. Here I draw on an idea from Josiah Royce (1855–1916) who was writing during the height of the crushing and dehumanizing Industrial Revolution and its heartless barons. Royce wished to advance the profound idea of loyalty. Loyalty seems more congenial to most of us than obligation. Royce liked to talk of loyalty to loyalty and of burdened loyalty. The point was to ask us to consider “burdened loyalty to community.” I show that in this simple and quaint notion of loyalty we might just find the key to rescue the future from the perverse ravages of possessive individualism.
Reflection
This book is a project of renewal. It is a detailed account of the political and economic implications of what seems to be a spent force. My purpose is an appeal to start over. The spent force of interest here is capitalism, which now is so involuted, disfigured, and encrusted that it has ceased to be a source of hope. The burst of material plentitude that began in the mid-nineteenth century in Europe seemed to offer a better life all around. Instead, it has bred a culture of acquisitiveness and self-centered hedonism. It also has become an excuse for realization of the worst of human instincts—social differentiation and exclusion.
We here confront the essential flaw in a meritocracy. That flaw is the evolutionary tendency toward exclusionary webs of advantage that resist penetration. There is an endogenous process at work that tends to reinforce a narrowing trajectory toward the commanding heights. There is nothing in democratic systems that can assure modulation of that tendency.
This is also a diagnostic undertaking. I stress the need to search for reasons as distinct from symptoms. Pragmatism insists on a relentless quest for reasons. The most important phrase in the English language is quite straightforward: “Please tell me again why you think that would be a good idea.” The speaker is eager for reasons.
Imagine just how disarming—how humbling—that can be to someone intent on imposing some new imperative on a homeless person, a corporate executive, a welfare recipient, a neighborhood association, a small shopkeeper, a school superintendent, a police chief, or a local mayor. All assertions about what it would be good to do must be held up to the pragmatist’s insistence concerning the asking for and giving of reasons. Democracy is not about voting. Democracy is about reason giving. It is only in the cold hard stare of a calm query about one’s reasons that humans work out what it seems we would like to have as we struggle with what it seems possible for us to have. Asking for and giving reasons is a diagnostic activity. The reason we reason is to generate reasons for why it would be reasonable to do this rather than that. And the judgment of what is reasonable is not an individual gift. Reasonableness is a collective benediction.
In today’s fraught political and economic climate, it seems the world is full of people who are seldom right but never in doubt. Doubt is the first step in the quest for reasons. Good reasons defeat doubt.
D.W.B.
Madison, Wisconsin
June 2019
Acknowledgments
The genesis of this book dates from November 2009 when I had the honor to present the prestigious Helmholtz Lecture at Humboldt University-Berlin. I had just begun what would turn out to be a five-year research and teaching appointment at Humboldt. Each autumn I taught an intensive 10-week version of my standard graduate course—"Institutional Economics”—at the University of Wisconsin-Madison. The title of my Helmholtz Lecture that November evening was: “Hunger, Poverty and Financial Crisis: Are We Trapped in an Obsolete Economic Order?”
The year 2009 was momentous in several respects. It would mark the official end of the Great Recession (2007-2009)—an event of unimagined severity for millions of unsuspecting households. The constant discussion throughout that period had been the alleged role of contemporary economics—with its emphasis on individual acquisitiveness. Also implicated was the extreme mathematical approach to our work that somehow pushed “real live” individuals aside for the sake of formal elegance. Were “we” to blame for this disaster? Were our models avoiding important issues?
The year was also profound in a larger sense. My lecture was just ten days after the twentieth anniversary of the breach of the Berlin Wall on November 9, 1989. The city had recently been awash in celebrations and self-satisfaction that the hated Wall had finally been rendered impertinent. A mere 200 meters from the large lecture hall, just across Unter den Linden, loomed Bebelplatz the shameful scene of the Nazi book burnings of that famous university’s library collection on the night of May 10, 1933. In 2009, the good people of Berlin certainly had much to celebrate, and yet here—in the heart of what was once East Berlin—I was offering caution and concern. I still recall the vague sense that the audience saw me as much too pessimistic. After all, many students and faculty in attendance had recently been liberated from the severe version of East German Soviet fealty. Now they were free and learning to love a market economy. I felt like an uninvited guest at a picnic.
I had been developing the philosophical grounding of my concerns for several years. My 2006 book Sufficient Reason: Volitional Pragmatism and The Meaning of Economic Institutions (Princeton) had allowed me to work
out a way to look at economic systems from a deep ideational perspective. That book had also opened up a number of opportunities to present my ideas on volitional pragmatism to a generally receptive German academic audience. This was a valuable reminder that American economists differ from German (and European) economists in profound ways. It seems that social views mirror—in some general way—academic views. As the reader will see, this should not surprise us.
Prior to my appointment at Humboldt University, I had benefitted from valuable feedback to my 2006 book at a number of German universities— Freiburg, Göttingen, Heidelberg, Marburg, Greifswald, Jena, HalleWittenberg, and the Max Planck Institute for Human Development in Berlin. I also encountered an encouraging audience at the University of Geneva. These valuable interactions stimulated my commitment to keep pressing ahead. In 2011, I was fortunate to receive the marvelous Reimar Lüst Prize from the Alexander von Humboldt Foundation. Proceeds from that Prize enabled me to extend my stay in Berlin for several more years—and to remain engaged with an academic community that seems more open-minded about economics than what one often encounters in the typical American research university intent on reproducing graduate students in a narrow and formalistic mode.
Several years after returning from Germany, a presidential election loomed on the horizon. As 2016 evolved it became clear that the Republican Party had been expropriated by a new sort of candidate—one who eagerly preached suspicion, anger, xenophobia, class division, and most importantly, celebrated his innocence and incuriosity concerning the complexities of modern life. Then, as this crescendo was building, the British people succumbed to a simplistic and equally spiteful urge—fueled by lies and illusions of long-lost British imperial grandeur—to quit the European Union.
Something deep and troubling was going on. It was around this time that millions of migrants began working their way north out of the Middle East and North Africa. Problems of poverty and civil strife became standard newspaper stories. The expected calm world of post-Soviet peace and prosperity was now coming apart. I knew it was time to get to work. The original version of the book was called World Disorder. But that focused on symptoms. The anonymous reviewers disliked the title. I then reflected on my 2009 Helmholtz lecture concerning the possibility of an “obsolete economic order.” And that brought me to diagnosis—and thus to possessive individualism.
This long gestation period renders it impossible to acknowledge all of those individuals who have helped me craft, work out, and clarify my ever-evolving views of the world around us—and how we navigate that world. I must be content to express my special gratitude to three anonymous reviewers for finding enough here to urge Oxford University Press to engage this project. And that brings me to Economics Editor David Pervin and his colleague Macey Fairchild—both of whom have been supportive, fair, tough, encouraging, and wonderful. Unlike journal editors—who imagine themselves to be the world’s ultimate guardians of ever-lasting truth who must stand firm against any thought of open-mindedness (I know, I was a journal editor for 44 years)—book editors are a special breed. They indulge our ideas, seek incisive yet fair reviewers, deal with the inevitable differences of opinion that arise, consult the stars, and then they make the difficult calls.
This book challenges deep and firmly held beliefs. I am grateful to David for his faith in the notion that despite all of the attention to social media and digital hoopla, the world still moves forward when individuals hold a precious collection of ideas in their hands and slowly turn the page—pausing, reflecting, going back, then going forward. May the human race never abandon Johannes Gutenberg’s Gift.
