The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers (37 page)

The economics profession echoed the Federal Reserve in not displaying much appetite for checking speculative behavior. Both economists and the Fed typically seemed to confuse speculative excess with financial innovations that supposedly promoted efficiency. This misguided association of rising asset prices with a strong economy might seem natural for the financially minded people who run and advise the Fed. But with all the regulatory tools at its command, the Federal Reserve, with its army of economists, would have been able to discover other mechanisms to rein in speculation without traumatizing labor. Direct regulation of dangerous and deceptive financial practices
would have been a better tool for managing excessive speculation than manipulation of the money supply. The Fed, however, has another, class-based agenda, and it is unlikely to apply the same kind of treatment to wealthy speculators that they impose on workers.

The Absence of Normal Discipline

Firms at the highest reaches of the economy are largely immune from the Procrustean pressures that plague the rest of society. Management has no need to justify its actions because it is accountable to nobody, except the stockholders—and, all too often, managers take advantage of their stockholders as well. The vast majority of individual stockholders—the presumptive owners of the corporations—are almost as powerless as ordinary workers in terms of corporate governance.

Even higher on the economic pyramid rest the financial markets. There, the movers and shakers of the financial world enjoy the maximum possible amount of flexibility. These speculators can drive industries, or even nation-states, one way or another, according to their whims. The maneuvers of the financial sector, however, add a strong dose of irrationality to the influence of greed. Everyone else must adapt to their bets.

In this stratosphere of big business, survival depends less on efficient methods of production than on access to people of power and influence. Probably the best investment that big business can make is in purchasing the compliance of powerful politicians:

The timber industry spent $8 million in campaign contributions to preserve a logging road subsidy worth $458 million—the return on their investment was 5,725 percent. Glaxo Wellcome invested $1.2 million in campaign contributions to get a 19-month patent extension on Zantac worth $1 billion—their net return: 83,333 percent. The tobacco industry spent $30 million for a tax break worth $50 billion—the return on their investment: 167,000 percent. For a paltry $5 million in campaign contributions, the broadcasting industry was able to secure free digital
TV licenses, a giveaway of public property worth $70 billion—that’s an incredible 1,400,000 percent return on their investment.
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Those who celebrate the wonders of the free market are usually silent about this sort of voluntary transaction between business and political leaders. As the great corporations accumulate increasing power, they enjoy unimaginable freedom.

Here, ironically, Adam Smith again enters into the picture. While Procrusteans are quick to quote chapter and verse of Adam Smith, the chapters they almost exclusively quote are from the first part of his book about voluntary exchanges or from his scattered references to the problems associated with government policies.

In fact, Smith had many uncomplimentary things to say about business, especially the kind of business that is rampant today. A not atypical example reads, “The interest of the dealers, however, in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the publick.”
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Or one might prefer:

The directors of such companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.
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The real world of greed and speculation seems far removed from Smith’s imagined voluntarism in the first chapters of his book. Instead, what exists is a whirlwind of irrationality that leaves a trail of human tragedy in its wake—a toll that makes the crude brutality of Procrustes seem quite modest by comparison.

In this speculative hubbub, the people who make the entire system work—the people who just follow orders producing the goods and services on which everybody depends—largely go ignored, except when management finds the need to impose more discipline.

Out of Control

In the long run, even the mightiest corporations face a different kind of threat. When business excessively disturbs natural forces, it risks creating destructive reactions that can engulf even the most powerful. After all, the laws of nature are more powerful than the artificial laws of economic theory. So, while the Procrusteans might believe that their rule is natural, nature pays little heed to the profit imperative.

For decades, much of the business community stubbornly denied the existence of global warming, although today some sectors, such as insurance, are starting to recognize the devastation that this phenomenon can bring to their balance sheets. The costs of meeting the challenge of global warming will be staggering. Global warming is only one of a large number of serious challenges that lie ahead, including the disappearance of cheap oil, the increasing pervasiveness of toxic chemicals, and the alarming scarcity of fresh water around the world. In addition, the explosion of poverty and a transportation system that makes long-distance travel commonplace create an ideal setting for pandemics, for which the world is ill-prepared.
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To meet these challenges, and others we have not yet imagined, will require great skill and creativity. Just as nations have historically scoured the land to find soldiers when serious dangers threatened their existence, so too must society now enlist as much brainpower as it can muster if humanity is going to successfully face the future. Society must go out of its way to nurture people.

Unfortunately, the present Procrustean system based on command and control inhibits the development of the very skills upon which our future depends. Thinking back to the way in which the managers at Tiger Creek thwarted the technological potential of the information technology, we must decide between an obsolete system of control that could spell disaster and a fantastic opportunity for success.

The Procrusteans never tire of describing how the market provides magnificent new technologies that offer splendid opportunities to improve the quality of life. In reality, academia and government-sponsored research are the driving forces for the development of technology
—not the business sector. Even if the corporate sector had developed all of modern technology, profit-minded businesses are still not suited to handle urgent and complex challenges.

Deep down, many people have serious reservations about capitalism. Just consider for a moment what societies do when they face a serious security threat. During the two world wars, did the government trust the fortunes of the society to the free market? No; the federal government took control of the economy so that it could direct the business sector.

The government made the decision to suspend much of the market without much of protest. It was accepted that ordinary business procedures were not capable of meeting the challenge of supplying both the civilian sector and the massive military demands.

In contrast, during the invasion of Iraq, the government privatized much of the effort. Symbolically, the president at the time was the first MBA to hold that office. Despite the relatively small scale of this incursion, this experience should stand as convincing proof of the necessity of a non-business approach to emergencies.

If the Iraq invasion does not dispel faith in the ability of private markets to respond to complex emergencies, then the privatized effort to respond to the devastation of Hurricane Katrina in the Gulf states certainly should. Wal-Mart proved that it could deliver supplies, but by and large the vast majority of private contractors proved more adept at looting the Treasury than complying with the terms of their contracts.

The profit motive becomes abhorrent under emergency conditions. People who profit by charging exorbitant rates for bottled water or electricity generators during emergencies appear to be immoral creatures rather than intelligent entrepreneurs meeting a social need.

The Procrustean Language

Presently, two conflicting trends are colliding. On the one hand, those in control are successfully accumulating more power, solidifying the hold of Procrusteanism. On the other hand, the application of these new powers is producing dismal results, except for the most privileged sectors of society. Once people come to recognize the growing gap between economic performance and the potential productivity of society, the destructive nature of Procrusteanism will, hopefully, become self-evident.

Even so, the ideology of the status quo is so thoroughly ingrained that little progress—or even little hope of progress—appears on the horizon. We can only hope that Frederic Jameson was wrong when he observed that within contemporary society “it is easier to imagine the end of the world than to imagine the end of capitalism.”
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One precondition of moving in a progressive direction is to carefully reframe the imagery of the economy. The problem is that the Procrustean world has created a special language, one that intentionally clouds the harsh reality in which people find themselves, in effect, making the handcuffs invisible and questions of class unthinkable.

The key concepts of this rhetorical façade are freedom and equality. Recall how leaders as far afield as George W. Bush and Edmund Burke, who had little in common except a deep antipathy toward anything progressive, play upon the themes of freedom and equality. But the typical refrains of freedom and equality have a peculiar ideological twist—one that echoes Anatole France’s remark about how the law forbids both rich and poor from begging on the street.

This warped understanding of freedom is not necessarily hypocrisy, but rather what psychologists call “cognitive dissonance,” meaning the ability to maintain two conflicting ideas at the same time without acknowledging the contradiction. People in power often have, or at least develop, an inflated view of themselves, which can make contradictory ideas easier to accommodate.

Late in life, almost two centuries ago, John Adams eloquently wrote to Thomas Jefferson, in words that can be interpreted as describing this Procrustean mindset that speaks of freedom while abusing the authority of the state:

Power always thinks it has a great soul and vast views beyond the comprehension of the weak; and that it is doing God’s service when it is violating all his laws. Our passions, ambition, avarice, love, resentment, etc., possess so much metaphysical subtlety, and so much overpowering eloquence, that they insinuate themselves into the understanding and the conscience, and convert both to their party; and I may be deceived as much as any of them, when I say, that Power must never be trusted without a check.
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Unlike Adams, I am not sure which of God’s laws the Procrusteans violate, but I do know that they are more than willing to violate other laws with impunity whenever anyone effectively challenges their system of control. In such cases, the rhetoric of liberty and democracy quickly gives way to violent repression, typically justified in the name of protecting freedom. If people could break through the veil of indoctrination, they would clearly recognize that the current system is neither efficient nor productive of human welfare.

Perhaps they might even catch a glimpse of the potential for a better society within the harsh confines of the present one—something akin to sensing the power of the partially revealed
Bearded Slave
, struggling to free himself from the rock in which he is embedded. They might even be likely to rise up. In that case, violent repression would be ineffective in preventing people from casting off their invisible handcuffs. Sooner or later, people will look back at the present phase of capitalism with the same disdain that surrounds earlier stages of economic development, such as feudalism and slavery—as a flawed system, inappropriate for a developed society.

Unfortunately, so long as the Procrustean theology goes unchallenged, business will be able to continue to pretend that the economy is a realm of freedom. For example, anything that interferes with workers’ ability to arrive at voluntary agreements is supposed to represent an unjustified intrusion into a perfectly harmonious arrangement. Given this perspective, unions have absolutely no justification, even if every single worker would prefer to have union representation to redress labor’s unequal bargaining position. Instead, in this fantasy world, freedom means that no union could prevent a high school dropout from having the opportunity to sit down and come to an amicable arrangement with a corporate behemoth, such as Wal-Mart—as if such personal encounters actually exist in the real world.

The Procrustean language, however, in painting employers in this charitable light, also betrays the underlying imbalance of power. Employers are said to “give” jobs to workers who are reduced to “taking” jobs. This language suggests that the transaction between employer and employee represents an act of benevolence on the part of the job giver rather than a bargain among equals. Framed this way, the generous giver of jobs—an almost feudal figure—certainly occupies a superior position to the supplicant who is reduced to taking the offerings from the employer. Unlike workers, employers are not expected to be grateful to their workers for their efforts.