The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers (42 page)

Thatcher was an exceptional Procrustean in one respect. Her certainty consciously fed off economic theory. More often, people absorb their economic thinking unconsciously. As John Maynard Keynes wrote in one of his more famous passages:

Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval.
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However, even those who happily echo economists’ ideas rarely pay any attention to the unrealistic assumptions on which these theories stand.

Keynes, if anything, was too conservative in one respect about the influence of economics. Even many of the most skilled practitioners
working inside sophisticated financial markets can fall under the spell of economic theory. For example, the sociologist Donald MacKenzie published an in-depth study of the co-evolution of modern financial markets and the academic work leading up to the highly mathematical Black-Scholes-Merton option-pricing model, which analyzed how speculators would behave in an abstract world subject to a number of assumptions.

Relatively quickly, speculators took the emerging theoretical model to be a formula for success. They began to develop investment strategies based on the principles of the model, in effect transforming financial markets to conform to the model. Alas, because the model was not an entirely accurate representation of the real world, it misled the speculators, eventually helping to set off a massive stock market crash in 1987.
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Not only speculators, but economists themselves fall victim to their own theories. In this vein, modern economists have the tendency to classify everything productive as capital. The concept of human capital is a case in point.

The Dead End of Human Capital

Some early economists understood the importance of workers’ productive capacities. Adam Smith, in listing the kinds of fixed capital stock of the country, included machines, buildings used for commercial reasons, improvements of the land, and finally:

the acquired and useful abilities of all the inhabitants or members of the society. The acquisition of such talents, by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expense, which is a capital fixed and realized, as it were, in his person. Those talents, as they make a part of his fortune, so do they likewise of that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labour, and which, though it costs a certain expense, repays that expense with a profit.
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Elsewhere, Smith defined the worker as a “living instrument” and compared educated workers with “expensive machines,” as might be expected from someone who conflated workers and laboring cattle.
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These observations were made in passing and had little effect on the core of Smith’s theory, except to reinforce the idea that appropriate individual behavior would open up the road to success.

For more than a century, those economists who tried to look at workers’ productive capacity followed Smith’s lead in not going beyond vague speculations about how the qualities of the workforce increased a nation’s capacity to produce. Often economists would frame such discussions in terms of crude speculations about the racial and ethnic heritage of the workforce.

Within this aggregated mass, considerations of the potential capabilities of individual workers are nowhere to be found. By the 1960s, statistical models that were explaining the growth of the GDP by increases in capital and labor needed some sort of adjustment. Economists began using measures of education as a reflection of human capital.

In what was called “the most comprehensive effort to develop an estimate of the value of human capital in the United States,”
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economists Dale Jorgensen and Barbara Fraumeni calculated that human capital constituted over 70 percent of the U.S. capital stock.
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But what is this human capital—a term that seems to merge human existence and inanimate objects? Economists tell us that “human capital refers to the productive capacities of income producing agents in the economy.”
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Human capital, of course, is unmeasurable. A similar difficulty of measurement is part of the reason that economists avoid the subjects of work, workers, and working conditions. Economists found a way around the measurement problem by assuming that people accumulated their human capital in schools.

Years of schooling, although a crude and often misleading measure of workers’ capabilities, offer a convenient quantitative measure. This method of calculating human capital emphasizes what has happened—almost passively—to the worker prior to entering the workplace.
People may have accumulated more human capital—for example, by following an educational program—but at the precise moment when the economist looks at the economy an individual’s human capital is fixed.

Consider the fate of a person without education condemned to a career of drudgery. The lack of human capital seems to confirm the appropriateness of the position that person holds, even though education is largely rationed by race, class, and (until fairly recently) gender rather than merit.

This approach to measuring human capital also reinforces the practice of ignoring work, workers, and working conditions, since learning on the job never enters into the picture. The concept of human capital, in effect, dehumanizes the human and collapses everything else into something akin to the sort of inert capital goods that might be found on the factory floor. To the extent that people exist solely as human capital, they should merely adapt themselves to the demands of their work.

Emphasizing the human rather than the capital in human capital would recognize that workers are not merely passive instruments. To do so would mean understanding workers as human beings with hopes and desires who have capacities that go far beyond simply taking orders. That realization would undermine centuries of economic theory, which has studiously avoided looking at work, workers, or the labor process.

The individualistic perspective of human capital makes this concept still more flawed. To begin with, young people who enter the schoolroom are not passive vessels. They are part of a larger community that includes other students, family, friends, and the world at large. These relationships go a long way to conditioning the education that a person receives. In addition, insofar as an individualistic perspective conditions the way education is offered, it becomes less relevant as a measure of productive potential because work is generally a collective activity.

Fleas, Rabbits, and Elephants

Surprisingly, Robert Lucas, mentioned earlier in terms of his very conservative analysis, wrote perceptively about the social nature of human capital formation: “A general fact that I will emphasize again and again: that human capital accumulation is a social activity, involving groups of people in a way that has no counterpart in the accumulation of physical capital.”
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Unfortunately, Lucas was not intending to make a crucial point about “human capital” but merely to justify an abstract model in which each generation could benefit by the human capital accumulated by an earlier generation.

Had Lucas realized the importance of what his words might have meant, he would have understood how workplaces, free of Procrusteanism, might be a valuable source of human development, which, among other benefits, would make the economy more productive. Instead, the concept of human capital reduces humans to just another form of capital.

Besides human capital, economists and some other social scientists drain the meaning of many other parts of life by reducing them to a form of capital. One article even complained of “a plethora of capitals.”
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Another study found sixteen different capitals, including, besides the familiar economic terms—financial, real, public, venture, human, social capital—“religious, intellectual, natural, digital, psychological, linguistic, emotional, symbolic, cultural, moral, political, endogenous, network, family, knowledge, and organizational capital.”
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Gary Becker and George Stigler, two conservative Nobel Prize–winning economists, have actually used consumption capital to indicate consumers’ capacity to engage in more productive forms of consumption.
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Nor should we forget self-command capital.

One should not be surprised that a capitalist society should adopt the investment idiom (as) a dominant way of understanding the individual’s place in society. Personality and talent become “human capital”; homes, families, and communities become “social capital.”
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No wonder that Virginia Woolf, the British novelist, confessed to her
diary after a dinner party at Keynes’s home that she did not know how to invest her “emotional capital.”
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This tendency to try to reduce all dimensions of human existence into capitals helps to reinforce Thatcher’s TINA. Nothing has meaning except as it fits into the logic of the market.

For example, Bill Watson’s coworkers, described in
chapter 2
, counted for little human capital—at least in the way economists conceptualize it. They probably lacked a dozen of the other aforementioned capitals as well. Yet they knew more about the products being produced than the management, which was running the automobile industry into the ground. Unfortunately, management denied them a modicum of dignity and denied the firm the benefit of their potential contributions.

In return, the workers subjected management to their pranks. Although such behavior probably appeared to be nothing more than immaturity to their employers, it was more likely a statement of their humanity. By expressing their creativity in this way, they were stating emphatically that they were much more than human capital.

Just as Watson’s employers shut down the line rather than respect their employees’ humanity, economists, since the time of the rebuke of Jevons, have shut down research regarding the inner workings of the labor process, including workers’ subjective concerns.

Although shutting down an assembly line the way that Watson and his cohorts did might appall good Procrusteans, capitalism itself depends upon far more extensive forms of shutdowns. What is the prevention of sharing music but a shutdown? Musicians deserve to enjoy the fruits of their labors, but is it a law of nature that such rewards come in the form of the commodification of art?

The Federal Reserve practices a more destructive form of shutdown, by manufacturing unemployment, with disastrous human consequences. This kind of shutdown makes Watson’s pranks shrink into insignificance.

Tragically, the Procrustean system shuts down enormous amounts of human potential. Economist Jaroslav Vanek once compared the losses due to interference with the market system with the losses due to
unemployment and the even greater losses due to the prevention of a system of cooperative production to fleas, rabbits, and elephants.
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In effect, Vanek was saying that Procrusteanism puts the world to work producing fleas in a way that slaughters the rabbits and elephants.

Dignity as a Factor of Production

Following the economic practice of considering everything productive as capital, this book is a tongue-in-cheek call to acknowledge “dignity capital,” or dignity as a major factor of production—to adopt the stilted economic jargon for reducing everything to a form of capital.

In contrast to economists’ traditional factors of production—land, labor, and capital—dignity emphasizes the value of individual people as part of society rather than treating them as nothing more than abstract agents engaged in market activities. Certainly, dignity implies breaking out of the narrow confines of a Procrustean economy.

Of course, dignity is not really capital. Indeed, dignity may be the opposite of capital—a form of anti-capital. Unlike dignity, capital is naturally scarce. If you burn a ton of coal, that coal is no longer available. In contrast, dignity, like respect, can be contagious. If I have a sense of dignity, I have no need to demean you; instead, I can treat you with dignity. In addition, a sense of dignity can empower people to resist the entreaties of the market.

Dignity does have something in common with capital in the sense that acknowledging people’s dignity would probably go a great way toward increasing the productive potential of society. Watson’s employers should have learnt as much.

The concept of dignity is not exactly new to economics. Adam Smith credited the displacement of the feudal economy by the market with increasing dignity, although he did not use that term. Certainly, Smith rankled against the remnants of the caste-like hierarchy of the feudal economy he saw around him. He celebrated markets’ potential to rupture the stifling constraints on less fortunate, but deserving people. Surely he hoped that less deserving people, such as those in the
urban mobs that disturbed him so much, would eventually embrace and be embraced by the market system. If so, Smith’s hopes were never completely fulfilled.

Just as Smith’s market did succeed in rupturing feudal society, the time has come for a new rupture—one that would break down the new restraints on human existence created by the corporate market economy. Economists tell the story that the rupture of feudalism elevated the productive activities of mankind from pervasive drudgery to hard work. The next stage in human development will go as far as possible in elevating work to pleasure—the kind of pleasure that scientists enjoy when making a discovery or the thrill that athletes or artists feel after a great success.