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On Pierre Bourdieu Part 3: Habitus

January 2, 2018/14 Comments/in Left Theory /by Ed Walker

The text for this series is David Swartz’ book Culture and Power: The Sociology of Pierre Bourdieu. Swartz says that Bourdieu extends concepts from economics to sociology. Bourdieu writes about various forms of capital the individual might have, and the interests that drive the individual in the pursuit of capital and its use. Capital comes in material forms, as economic resources, as well as symbolic forms, as social capital, cultural capital, religious capital. Bourdieu says that these are recognized as capital when they are “…objects of struggle as valued resources.” P. 43.

Interests are “… defined practically as whatever motivates or drives action toward consequences that matter“. P. 71. Swartz says that for Bourdieu seems the critical interests are obtaining power and wealth, which probably explains the use of economic models. Elsewhere Swartz says that Bourdieu’s framework seems less useful for analyzing the working class or the underclass. P. 82. That makes sense, because the concerns of a large part of society don’t involve gaining wealth and power; other concerns are dominant, such as maintaining their existence.

The use of economic modeling raises the specter of rational actor theory and other axioms of neoliberal theory. Bourdier explicitly disavows rational actor theory. He insists that most human action is pre-reflective, dispositional and tacit, rather than consciously planned and strategized to assure optimal outcomes. The definition of interest is similarly vague. These definitions are more like descriptions. They leave open a space at the center of the theory that serves to remind us that as individuals we are largely inscrutable to others, and perhaps even to ourselves. It also leaves a space for surprise, for the generation of new behaviors by the self. The point of sociological inquiry is to discern regularities in behavior that are invisible even to ourselves, using various forms of observations and different kinds of statistics.

Bourdieu says that just because a scientist can formulate a rule that describes the behavior of a group doesn’t mean that individuals are following a rule. Rather, he says that we follow a practical and informal knowledge that helps us predict which behavior might produce the desired results. Again, that leaves from for individual agency.

Bourdieu says that people form ideas of the way society works and the way they fit into society beginning at a very early age from their families, their friends and their surroundings including people and events. These experiences are internalized, and become the basis through which people understand the world and their own potential. This practical sense of position and possibility is called habitus. Habitus is “the product of class situations, not their cause.”

Habitus, then, represents a sort of deep-structuring cultural matrix that generates self-fulfilling prophecies according to different class opportunities. And Bourdieu’s “cultural” explanation of unequal educational attainment differs from the blaming-the-victim version of culture-of-poverty arguments in emphasizing individuals’ adaptation to limited opportunities rather than the cultural origins of deviant behavior. It shows how structural disadvantages can be internalized into relatively durable dispositions that can be transmitted intergenerationally through socialization and produce forms of self-defeating behavior. P. 104.

This unconscious socialization of the individual turns into an acceptance of the power structures confronted by the individual. It seems natural, so that neither the dominated nor the dominant feel cheated or privileged. It affects the sense of possibilities and establishes the limits of aspiration, and thus limits the scope of actions that seem plausible to each individual. In other words, it cements class relations.

As I was reading, I got the impression that Bourdieu used habitus to make predictions about how people would behave. I don’t think that’s right. Instead, it appears that the point of the concept is to describe how people come to accept the status quo. They learn from experience what results are likely from particular actions, and they internalize the results of those experiences as the world they live in, the world that sets the parameters for the success or failure of their actions. Kids learn beginning at birth what actions produce favorable outcomes, and which produce bad outcomes. They aren’t thinking, these are concrete experiences, not processed by a thinking mind. The learning is pre-reflective, that is, people aren’t even aware that they are learning, because they aren’t able to think about or to understand what is happening. They only see that it is happening, and they think that’s the way things are and will be.

Changing one’s habitus is difficult. Swartz says that change occurs only when the strategies are applied in new situations and they produce unexpected results. In such cases there can be a gradual adjustment to the new circumstances. Action requires some use of capital, mostly social, cultural or economic. People are reluctant to make use of their capital unless they think there is a reasonable chance of success, won’t make such use if the outcome is uncertain. That assessment arises from habitus, which limits the exposure to new situations. As an example, Swartz cites the results of changes in the French education system after WWII. Middle class people were more likely to take advantage than members of the working class who were inclined to “know their place”.

So far I haven’t seen discussion of things done strictly for pleasure. For example, in the discussions of cultural and social capital, there is no mention of the fact that both can be enjoyed purely on their own, without regard to the possible gain of wealth or power. Similarly, there is no discussion of religious behavior as personally rewarding, and there is no discussion of altruism. This is an interesting gap, in part because personal pleasure is an important concern to the Frankfurt School. I wonder whether the omission will be cured later in the book, or whether maybe this is a result of the use of the economic model of competition for scarce resources that frames Bourdieu’s thinking.

On Pierre Bourdieu Part 2: Systems of Domination

December 21, 2017/6 Comments/in Left Theory /by Ed Walker

The text for this series is David Swartz’ book, Culture and Power: The Sociology of Pierre Bourdieu. Swartz says that the central focus of Bourdieu’s work is how in a given culture the systems of domination reproduce themselves in such a way that it seems natural and obvious, so that there is no resistance and so that neither the beneficiaries nor the non-dominant people recognize the forces at work. The hope is that understanding the way these systems operate will give us a chance to affect change that benefits them even if there is a loss to the dominant elites. The need for this should be quite obvious as we watch elites in the US, the UK and other more or less democratic nations slowly drive us to collapse while authoritarian governments survive. Change is not without its own dangers, of course.

Swartz opens with this sentence:

Culture provides the very grounds for human communication and interaction; it is also a source of domination. P. 1.

As an example, Bourdieu spent a lot of energy studying the education sector. He himself was an outsider, born in 1930 to a working class family in a small town in southwestern France. He began his studies in rural schools and only at the age of 19 did he move to Paris to continue his studies, first in a prestigious Lycée and then at the top French school, the Ecole Normale Supérieure, where he studied with and under many of the leading French intellectuals of the day. Although some of his fellow students were from similar backgrounds, including Michel Foucault, most were upper class Parisians. This no doubt gave impetus to his study of the way French intellectuals reproduce their dominance across generations. Swartz explains:

Educational institutions secure partial autonomy from political intervention and economic constraints by establishing their own criteria for legitimation and by recruiting and training their own personnel—that is, by securing control over their own reproduction. P. 77.

This should be obvious. Academia has been reproducing itself this way since it began, and it seems logical and natural that new teachers would begin by learning from experienced and knowledgeable teachers. But it is far from universal, we in the US are in danger of treating it as a factoid, a given, and taking it in isolation. If we did that, we might add the fact that people like to hire people who are like them, so we would draw the conclusion that this is a problem because it tends to exclude people who aren’t like existing teachers in some unacceptable way, such as gender or skin color. Or we might say that it is good because it removes the government from the academy regardless of whatever flaws there might be.

Bourdieu embeds the fact in a theory. The theory is that society is organized to reproduce itself in a natural and unthreatening way, so that members of society, elites and others, don’t see the machine at work and are strongly inclined to accept things as they are. When we see it this way, we ask different questions. For example, we see clearly how legacy admissions to elite universities serve the goal of perpetuating the domination of the elites. Their children get an edge that is invisible to most people; only the smart kid from Enid OK who didn’t get into Yale sees it, and people write her off as bitter. Then legacies get an edge in taking power in government, corporations and other sectors, including education.

A 2011 survey of 30 top universities found that legacies had a 45% greater chance of admissions that non-legacies. Even when legacies are reasonably competent compared to the other applicants, this advantage is a natural way to recreate the dominance of the existing elites. I don’t doubt that Chelsea Clinton is bright, though obviously Jared Kushner is a tougher call. The point is that Clinton and Kushner are certain to reproduce the attitudes and politics of their parents. Their slots at Stanford and Harvard did not go to equally qualified people from non-elite backgrounds, and the same is true of all the slots that went to the legacies. On the other hand, I’m just sure both Clinton and Kushner see themselves as hard-working meritocrats, succeeding because they are special.

But that isn’t all we can see. The elites don’t like the idea that they don’t get to influence academia. They intend to deploy their wealth as they see fit (the link is to my post on oligarchy in democracy, and may be of interest for further links), and aren’t interested in hearing from the rest of us; they don’t want democratic control of anything. Thus we get charter schools that can easily be used to teach kids that society is organized to facilitate the capitalist mode of production and that joyful participation is the way to succeed in life. If you don’t succeed in this way, you are a loser who deserves to suffer. If this schooling is successful, the profits and losses are irrelevant to the rich.

The rich have led the way in bringing business methods into the university. Today the focus is on job-oriented education as a replacement for liberal arts, in other words on vocational training instead of learning to think clearly and objectively. Education, if that’s the word, becomes a consumer object, with the student as consumer. As in business, the goal is to drive down the costs of labor, hence the use of miserably-paid and abused adjuncts. Meanwhile endowments grow repulsively big. We can easily see Yale and Harvard as hedge funds with a few attached schoolrooms, dorms and gyms.

But Bourdieu’s question is merely the apex of a framework. There is a broader and deeper analysis of society that establishes the framework, and makes it easier to apply to a wider range of strategies and rationalities supporting the central point, that societies and especially elites are organized to reproduce themselves and their dominance as covertly as possible. The carceral state is the tool for dealing with the dissidents and the non-conformists.

On Pierre Bourdieu Part 1: Vocabulary

December 10, 2017/24 Comments/in Left Theory /by Ed Walker

The text for this series is David Swartz’ book, Culture and Power: The Sociology of Pierre Bourdieu. I’m starting with a vocabulary of some of the technical words and ideas in the book.

1. Practice. For Bourdieu, practices are the behaviors that people exhibit in coping with their social environment. A simple example is table manners. Manners are taught to us at an early age, and it’s rare that we ever think about them, but they say a lot about us. Emily Post manners are essential for people trying to climb the greasy pole to the C-Suite, just as State Fair eating manners are crucial to political candidates. They’re a necessary but not sufficient condition for entering certain social groups. They also matter in dating, as the charming series Blind Date in the Guardian shows. The paper sends a couple on a blind date to a restaurant and then interviews them about the date. They always ask about table manners. In this one,, the pair went to a Japanese restaurant and apparently tried to shell edamame with their chopsticks, a funny faux pas.

Practices can be complex. How do I interact with higher-ups in my workplace? I don’t have to think about that, I just do it, and it is obvious that I’m not thinking when I do it. One way to describe this is to call it intensive behavior as contrasted with reflective behavior, two terms I learned years ago from an otherwise unreadable book.

2. Capitalist Mode of Production. When I found this term in the book, I knew exactly what it meant, but somehow it made me uncomfortable. After a moment, I realized it was because I associate the term with Marxist analysis, and as a good American boy, I know that all of Marx is evil. But of course, it isn’t. There’s a lengthy discussion of the capitalist mode of production (without the term) in Thorstein Veblen’s book The Principles of Business Enterprise, which I discuss here and here.

Fear and loathing of Marxism is a foundational aspect of neoliberalism; its founders wanted to insure that capitalism would never be threatened by such un-American ideas. But in the intellectual training in France in the 40s and 50s Marxism is a jumping off point.

3. Thinking. Perhaps we all know what this term means intuitively, but there’s more than just self-examination as a way to understand it. I contrast thinking with behaviors that don’t involve thinking, like the practices that Bourdieu studies. Practices are learned behaviors that we emit without being conscious of them. We deploy them as needed in response to the social signals we encounter.

The act of thinking calls on us to become aware of ourselves as thinking. In action, it feels like we are activating a specific part of our mind. Once we start thinking there are various ways to go. One is to ponder an idea, trying to get a grip on it, trying to flesh it out, and generally to meditate on it. Another is purposeful, thinking with a goal. A good example of the former can be found in Plato’s Socratic Dialogs, as Hannah Arendt discusses in The Life of the Mind. Here’s a .pdf; see the two sections starting on page 166.

The latter is what we do when we try to prove a mathematical theorem. We know where we begin, with axioms, theorems, lemmas and corollaries, and a mental image of the problem; and we know to use formal logic. But the choice of steps to take is an art, not a science.

I use the word “contrast” as opposed to define because there are many other contrasting mental states. For example, I could contrast thinking with the kind of mental babble that the Buddhists call the monkey mind. Or I could contrast it with the mental state of practicing a physical behavior.

We live in a complicated society; I think building in complexity is something mammals just automatically do to amuse themselves if nothing else. We can’t comprehend the complexity we jointly create, so we invent mediating concepts to enable us to proceed. The selection of those concepts is an art. The use of those mediating concepts is an art. The Frankfurt School, for example, designed its empirical research around its theoretical concepts as a test of those concepts and as a way of understanding their results. The choice of contrasts is a useful way to add structure to the messy social world.

4. Dialectical thinking. I spent hours reading The Dialectical Imagination, and more hours reading texts about the Dialectic, but I am not comfortable with my understanding. Most of what i read was some version of thesis, antithesis and synthesis, That makes sense in the context of dialectical materialism, because we can see that historically one movement is confronted by another. We don’t have to explain why the second movement arose, except that it arose in opposition to the dominant thesis. In The Dialectical Imagination, it seemed to be a braoder idea, based on negation, which I understood to mean that when working in the context of abstract ideas, the thinker would try to work up an opposing thesis and it’s implications.

In The Life of the Mind, Arendt talks about the dialog of the self with the self, which seems to be a form of dialectical thinking. Swartz adds another idea, from the French philosopher of science Gaston Bachelard. He says that science doesn’t proceed from a priori constructs. It does not begin with atoms or cells, but only comes to them after empirical observation, and changes them as new observations are made.

Rather, the movement of thought proceeds from a limited conceptual framework, which is closed to some important aspect of experience, to the development of a broader framework that includes the previously excluded aspect. In this way, for example, Euclidean geometry was not replaced but rather superseded and regionally situated within a broader non-Euclidean, space-time conceptual space. P. 32.

That seems much closer to what I understood from The Dialectical Imagination. Jay quotes Adorno as saying the true dialectic is “… the attempt to see the new in the old instead of simply the old in the new.” P. 69. I’ll leave this here, but I will be alert to this issue.

5. Relational thinking. According to Swartz, Bourdieu’s approach is to define a term as I did above, in opposition to another term. Concepts have meaning in relation to other concepts. This view appeals to me, because it sets up poles in the space of inquiry, which otherwise would feel too unstructured. At the same time, it doesn’t limit us to other contrasts that may open our minds to other possibilities.

That’s my starting point for working on this new area. We’ll see if it holds up.

Culture and Neoliberalism

November 17, 2017/18 Comments/in Left Theory /by Ed Walker

My last series summarizes the state of my neoliberalism project. It turns out that I have mostly focused on the economics of neoliberalism. Another aspect of the project was to learn how we as a society got caught up in neoliberalism. None of the work I’ve done so far has given me much of an answer to that, let alone the question of how we get out of this mess.

That part was relatively straightforward. I had a basic understanding of how to read and learn about neoliberalism. I have a background in dealing with the actual economy; I knew most of the mainstream economic ideas from College where I took several courses; and from continued readings over the years; and I’m reasonably fluent in college-level math. When it comes to culture as a field of study I’m pretty much at ground zero, and to tell the truth, I was surprised to see the emphasis on culture in Critical Theory. So, this will be a different kind of reading.

I’m going to start with Pierre Bourdieu, a French Sociologist of the second half of the 20th Century. Bourdieu and Foucault are perhaps the best known French thinkers of that period today, as existentialism and indeed most straight philosophy have fallen out of intellectual favor. Their kind of thinking is not that common in the US; we don’t exactly have an intellectual class, and we never really valued the life of the mind. We have a lot of experts and a lot of smart and well-trained people, but they are rooted in specific fields, and the number who think usefully beyond their areas is small. Historically, the intellectual was a recognized class in France, and even today many French politicians aspire to the title. Can you imagine a US politician who wants to be thought of that way? We elect regular folk just bursting with common sense, which probably explains something about our inability to solve problems.

But there is another factor: David Brooks. I read parts of Brooks’ New York Times column regularly as a check on my own ambitions. One common form of column is “I read this article and it proves conservatives like me are right and liberals are killing society.” Here’s a lovely example of High Brooksism. I think wants to say that neoliberalism is a bad theory because it emphasizes the isolated individual and rejects communal and social values, but he can’t because neoliberalism is at the heart of conservativism. Too bad, because it would enable him to criticize Republicans and most Democrats, and it would move him outside the boundaries of “both sides do it” and into an open policy space. But, as he says, people over 56 years old like him are clueless, so we get this absurd conclusion from the incoherent mess above it:

Congressional Republicans think a successful tax bill will thwart populism. Mainstream Democrats think the alienation problem will go away if we redistribute the crumbs a bit more widely. Washington policy wonks build technocratic sand castles that keep getting swept away in the cultural tides.

I absolutely don’t want to be like Brooks with his unmoored rationalizations and his pretense of intellectualism. My goal is to see what other people think and try to make sense of it. To that end, I think someone who sees things from a perspective outside my own culture will give me more distance, as was the case with my earlier readings.

I first heard of Bourdieu some time ago, I don’t remember where or when, but the gist was that his book Distinction: A Social Critique of the Judgement of Taste was a must-read. Now I want to read it, because some of the issues around taste seem important in the US, where all our choices seem to define us. But as with Critical Theory, I’m going to start with an overview of Bourdieu to learn some of his basic concepts. So, the next book is David Swartz’s Culture and Power: The Sociology of Pierre Bourdieu. I’ve started it, and it seems very readable.

I have a couple of basic thoughts to start with, and we’ll see if they hold up.

1. I’m pretty sure that culture isn’t the outcome of the economy, as might be the point of early Critical Theory. It seems likely that people’s natural creativity just pours out. I read The Kandy-Kolored Tangerine-Flake Streamline Baby by Tom Wolfe years ago, and came away with the idea that the people in that car culture, just like the surfers, the anti-war groups, and the disco dancers in Saturday Night Fever were happily living in the shadows of the economy, not straining for success in the broader world, but creating their own milieu with what was at hand. Of course, corporate culture sucked the life out of those cultures, or they died on their own, but the impulse to use the conditions of life in new and inventive ways never dries up. We can watch the process as gaming culture grows up and gets turned into an ESPN sport. I’m sure the kids will be moving on, leaving the olds farther out of touch.

2, When I was growing up, there was this trope about lowbrow, middle-brow and high-brow taste. We have plenty of classifications of people today: tribalists, angry white people, Evangelicals, Berniecrats; personality types like INTJ, and authoritarian submissives; and of course all the marketing categories, like these in Wikipedia. These characterizations feel ad hoc and instrumental, and no matter how fine the segments are, they hardly seem adequate to the complexities of most of the people I have ever met. But we can’t think clearly about a population of 320 million without categories, so some kind of classification seems important.

3. The first book about psychology I read was I’m OK, You’re OK, by Thomas Anthony Harris. I thought I knew something when I was done. Then I read some Freud, Jung, Adler and other actual psychologists (badly, I should add), and realized I had been sucked into a pop psych book. It wasn’t useless, but close. I want to avoid that. More pointedly, I don’t want a system. I think we all come in in the middle, including the Frankfurt School and Bourdieu and Foucault, and try to figure things out as best we can. What I’m looking for is some sort of starting framework that can be used and evaluated and reformed, over and over until it needs replacement by a better framework.

What I don’t want is sloppy, disjointed and internally inconsistent thinking, theories unconnected to data, or random collections of data interpreted ideologically. And no thought leaders, whatever the hell they are. And no David Brooks.

The Slow Death of Neoliberalism: Part 3 The Phillips Curve and Critical Theory

October 16, 2017/26 Comments/in Economics, Left Theory /by Ed Walker

Part 1.
Part 2.

I described attacks on the Phillips Curve in Part 2. This part discusses the history of the Phillips Curve in detail, and concludes with a discussion of the problems revealed by the failure. The Observations are the fun part if this is too long.

History of the Phillips Curve

This section is based on parts 1-3 of The History of the Phillips Curve: Consensus and Bifurcation by Robert Gordon, an economist at Northwestern, published in the 2008 in the journal Economica at p. 10 et seq. (behind paywall, but available online through your local library). In 1958, William Phillips published a paper which as Gordon puts it,

… replaced discontinuous and qualitative descriptions by a quantitative hypothesis based on an unusually long history of evidence. Since 1861 there had been a regular negative relationship in Britain between the unemployment rate and the growth rate of the nominal wage rate. P. 12.

Phillips fitted a curve to data from the period 1861-1913, and plotted data for the remaining periods, through 1957 against that curve to find disagreements. Phillips found that his curve was close across the entire time except for a couple of years that he explains away. Here’s the curve Phillips fitted to his data:

1) w_t = -.90 + 9.64U^-1.39

Gordon says “… the inflation rate would be expected to equal the growth rate of wages minus the long-term growth rate of productivity.” P. 12.

1a) p = w – k

For some reason p is inflation and k is productivity. Upper case letters are levels and lower case letters are rates of change. So equation 1 can be written

2) p = -.90 + 9.64U^-1.39 – k.

Paul Samuelson and Robert Solow discussed the Phillips results in the US context in a 1960 article. They found no similar data for the US, but they did some estimates and suggested that the PC doesn’t fit their data for several periods, and that it can shift up and down. Phillips estimated that an unemployment rate of about 2.5% was consistent with zero-inflation, while Samuelson and Solow think it might have been 3% pre-World War II and was about 5-6% in the early 60s.

With this seal of approval, the idea was incorporated into econometric models in two equations. In one, the PC was embodied and other variables were added, including demand, unemployment, the rate of change of unemployment, taxes, expected inflation and others in different combinations. This result was fed into an equation that calculates inflation based on wage levels, price levels and trend productivity. Gordon explains that

The reduced form of this approach implied that the inflation rate depended on the level and rate of change of unemployment, perhaps other measures of demand, and lagged inflation.

This is followed by a long discussion of the views of the Chicago School, which Gordon dismisses as utter failures. Moving along to 1975, Gordon turns to efforts to modify the Phillips Curve by adding supply and demand shocks. The price of oil shot up in 1973 because of OPEC. The demand for oil doesn’t decrease quickly in the short run, so people spend more on oil and less on other things. The Phillips Curve didn’t predict the results. Gordon says

The required condition for continued full employment is the opening of a gap between the growth rate of nominal GDP and the growth rate of the nominal wage to make room for the increased nominal spending on oil. P. 21, cite omitted.

That means wages must fall, Gordon says, or we have to add money to the economy, but the latter would lead to inflation. What we actually did, he says, was wage rigidity, increased unemployment, and some nominal (meaning not adjusted for inflation) GDP growth. Gordon then developed and published this version of the Phillips Curve:

3. p_t = Ep_t + b(U_t – U_t^N) + z_t + e_t

The second U term is the “natural” rate of unemployment, which I’m not going to take up. The z term represents cost-push pressure from unions and supply monopolies. The e term is apparently a constant but it seems odd that it might vary over time. Gordon explains that this version incorporates inertia, the idea that if there’s inflation in one period, there will be inflation in the next. It also reflects supply and demand issues, like wage and price rigidity.

Gordon then mentions in passing that the wage equation (Equation 1a) is only valid if labor’s share of the GDP is fixed, but it isn’t. Here’s a chart from FRED

That problem, says Gordon, is “fruitfully ignored”. We don’t need to consider wages, we just look at prices. With these changes, we can understand the past by explaining away variations with negative or “beneficial supply shocks” and other variables. Gordon says that Equation 3 is foundation of the mainstream model. There is a related model, the New Keynesian Phillips Curve which is similar except that it incorporates future expectations of inflation, and makes no specific provision for supply and demand shocks. I assume these in some combination are the models used by the Fed, and heavily criticized as discussed in Part 2.

Observations

The concept is replaced by the formula, the cause by rules and
probability. Dialectic of Enlightenment, Horkheimer and Adorno,p. 3.

1. Phillips was working off empirical data when he fitted his curve, data about inflation and the rate of growth of wages. There are some theoretical issues in the preparation of that data. But the only abstract theory he adds to his data is Equation 1a, which Gordon says has a solid base in intuition. At the time he was writing, Phillips would only have seen data supporting that theory. We have new information:

As it happens, and perhaps not surprisingly, Phillips’ Equation 1 doesn’t work on US data. Gordon himself and others start adding things to make the Philips Curve work. They are convinced that there is a link between unemployment and inflation, and that they just need to add the relevant variables from their theoretical arsenal to get it to come out. Some focus on expectations, others on supply and demand shocks, and others add taxes or something else. Once they get those pesky variables set up, it’s just a matter of solving for constants. The point is to fit a curve to the actual data, not to use the actual data to see what’s happening. The concept connected to the real world is gone, replaced by the formula. The cause is replaced by the rules of economics.

2. If we set inflation at 0 in Equation 1a, the rate of wage growth is equal to the rate of productivity growth. As the above chart shows, this relationship broke about 50 years ago. If all the gains from productivity are not going to labor, they are going to capital. Of course, capital takes several forms, for example, housing, agricultural land and other domestic capital. See, Piketty, Capital in the Twenty-First Century, Figure 4.6. When you think about it, it seems almost impossible that some of the gains from productivity weren’t going to capital all along. But in the current economy, it’s obvious that companies like Facebook can provide vastly more services with disproportionally fewer additional employees, few of whom are well paid, so that most of the gains from increased sales go to capital. Or, suppose that manufacturing is outsourced, reducing labor costs. Some of the gains might go to cutting prices but surely some go to capital. Let’s rewrite Equation 1a to reflect this, using γ for the growth rate capital.

1b) p = w + γ – k.

Using Equation 1b instead of 1a, we would have this instead of Equation 2:

4) p = -.90 + 9.64U-1.39 + γ – k.

This equation focuses attention on the changes in the return to capital. That issue never seems to trouble most economists, but the rate of return to capital is the central focus of Piketty’s Capital In The Twenty-First Century. This chart from the Center on Budget and Political Priorities shows that top wealth started on its climb at the same time wages diverged from productivity, which supports the idea that gains from productivity are going to capital:

It also calls attention to the fact that nowhere in Gordon’s paper is there a mention of power, market power, political power, or social power, all of which Piketty talks about. Actually, hidden away in Gordon’s article is a backhanded reference to power. Equation 3 (Equation 7 in Gordon’s paper) includes a term “…z_t to represent ‘cost-push pressure by unions, oil sheiks, or bauxite barons’”. P. 22. Obviously Gordon understands that the power to control the price of goods and services could create a negative supply shock, and the loss of control could produce a beneficial supply shock. P. 25. However, this is not explicit, and it certainly doesn’t deal with our current economy, in which almost all goods and services are dominated by a small number of gigantic companies exercising a significant degree of price control.

The tweaking Gordon describes might work for a while, but as the degree of price control through monopoly and oligopoly power increases, and γ becomes a bigger factor, the tweaks quit working.

3. Let’s put this in a larger context. For many economists, the Phillips Curve is structural. But why would you think so? It seems more likely that the relationship holds in a certain set of social conditions, including legislation and regulation, power conditions, and people’s attitudes. A logical use of the data is to work out the conditions that must exist to make it so. That’s how Piketty approaches his inequality data.

It’s a mistake to use a coincidence to predict the future. It seems to be a particular problem in economics. Even people who seem to know better continue to believe in the Phillips Curve. Here’s the President of the Boston Fed, Eric Rosengren:

A number of papers at the conference highlighted that some of the economic relationships that are frequently assumed to be stable over time have proven to be not so stable as we have come out of the financial crisis. These structural changes mean that if you tried to have a model that was fairly invariant to these changes, or a process that was invariant to these changes, there would start being big misses in monetary policy.

He goes on to explain that we have to raise interest rates because maybe not the Phillips Curve, but when employment goes up, inflation goes up. Rosengren knows there’s a problem, but he doesn’t have any idea of how to cope, so he keeps doing what he thinks he knows is right. It’s another example of Horkheimer and Adorno’s statement in action.

Updated to define γ more exactly.

The Slow Death of Neoliberalism: Part 2

October 7, 2017/62 Comments/in emptywheel, Leak Investigations, Left Theory /by Ed Walker

The Slow Death of Neoliberalism Part 1.

This post focuses on the failings of neoliberal economic theory. Neoliberalism arises out of positivist philosophy, defined in Part 1. Positivism is the theory that the only true knowledge comes from the scientific process.

There are five main principles behind Positivism:

1. The logic of inquiry is the same across all sciences (both social and natural).

2. The goal of inquiry is to explain and predict, and thereby to discover necessary and sufficient conditions for any phenomenon.

3. Research should be empirically observable with human senses, and should use inductive logic to develop statements that can be tested.

4. Science is not the same as common sense, and researchers must be careful not to let common sense bias their research.

5. Science should be judged by logic, and should be as value-free as possible. The ultimate goal of science is to produce knowledge, regardless of politics, morals, values, etc.

Economists created a group of sayings which they put in their introductory textbooks and teach as laws and principles to their students at all levels. For example, N. Gregory Mankiw, economics professor at Harvard, starts his introductory economics textbook Principles of Macroeconomics with a list of ten Principles he claims almost all economists agree are true. Any thoughtful person reading this list will see that these ten statements are either tautological (you can’t do two things at once) or are mere rules of thumb. The idea that you could build a positivist science on this foundation is absurd. But Mankiw disagrees, and so does everyone who took Econ 101 and stopped, and especially so do the elites from our top schools.

It’s not surprising, then, that this version of economics is failing. It cannot perform the basic goal of a scientific theory, making accurate predictions. Economic models have failed and will continue to fail to predict disasters; and there isn’t much hope that they will ever be able to predict anything of interest.

In Part 1 I pointed out that the positivist program can’t be easily adapted to the social sciences. David Andolfatto of the St. Louis Fed agrees, and tells us what we can expect from economics:

But seriously, the delivery of precise time-dated forecasts of events is a mug’s game. If this is your goal, then you probably can’t beat theory-free statistical forecasting techniques. But this is not what economics is about. The goal, instead, is to develop theories that can be used to organize our thinking about various aspects of the way an economy functions. Most of these theories are “partial” in nature, designed to address a specific set of phenomena (there is no “grand unifying theory” so many theories coexist). These theories can also be used to make conditional forecasts: IF a set of circumstances hold, THEN a number of events are likely to follow. The models based on these theories can be used as laboratories to test and measure the effect, and desirability, of alternative hypothetical policy interventions (something not possible with purely statistical forecasting models).

This obvious straw man at the beginning of this quote is typical of the arrogant economist described by Marion Fourcade. But let’s see how well the economist business does at the weak test of effectiveness offered by Andolfatto.

For decades economists taught the Kuznets Curve which they said shows that as industrialization proceeds, economic inequality first rises and then falls.
Thomas Piketty takes up this theory in Capital In The Twenty-First Century, and extends the data forwards and backwards from the early 1950s. Here’s a graph of top decile income share from 1910 to 2010 from Wikipedia.

Looking at that graph through the time Kuznets wrote, the early 50s, it might be read to support that hypothesis. The sudden rise, starting under Reagan and continuing ever since, completely contradicts the hypothesis. That didn’t stop people from teaching it.

The Phillips Curve asserts that there is a connection between inflation and unemployment: as the unemployment rate drops, inflation increases. It’s one of Mankiw’s 10 principles; and it’s deeply embedded in the models used by the Fed to decide interest rates. It’s mostly wrong. Here’s a recent debunking from the Philadelphia Fed, concluding that the Phillips Curve might help forecast inflation in a weak economy, but does not work in an expanding economy.

The Wikipedia Page for Phillips Curve says that:

The original Phillips curve literature was not based on the unaided application of economic theory. Instead, it was based on empirical generalizations. After that, economists tried to develop theories that fit the data.

A 2008 paper, The History of the Phillips Curve: Consensus and Bifurcation, Economica (2008), P. 10, lays out the history in detail. Roughly speaking, it begins with the observation by William Phillips that in the UK there was a stable relation between the rate of wage growth and inflation over a substantial period of time, and deviations could be explained reasonably. This paper was picked up by Paul Samuelson and Robert Solow and turned into the earliest mathematical formula in 1958. Since then there have been a number of occasions where the Phillips Curve failed, and each time economists just grab some more of their existing tools and try to fix it or explain the failure, in each case after policy-makers have gone on as if it were right and forced bad results on the economy and especially the wages of workers.

Here’s a third example. Economists say that the reason wages are stagnant is that productivity is flat, as if there were a relation between wages and productivity. Anyone who looks at this chart and reads this article from the Economic Policy Institute will have a huge question about that.

And that isn’t just the right-wing. Plenty of centrist Democrats make the same argument. And by the way, what does this say about the central theory of free market economics that supply and demand for labor set prices?

As I say here and here, neoliberal economists used their ideology of free markets to influence policy and to change the entire way we think about society without having the slightest idea of the consequences of their meddling because their models aren’t designed to deal with changes in societies or economies. As my examples show, they just keep on regardless of the success or failure of their predictions, and politicians and rich people ignore the failings and continue to follow their foolish advice.

Neoliberal economics obviously fails to measure up to the standards of positivism. It can’t predict anything useful, and it barely is able to explain itself coherently. That’s a problem with positivism too. People are slowly, slowly coming to grips with these failures and the damage they have done. It’s adherents are dying off, and their replacements are into it for the money and the power. Stupid ideas never die, but maybe they will lose their influence.

Updated to correct link to EPI article and chart.

The Slow Death of Neoliberalism: Part 1

October 1, 2017/9 Comments/in Left Theory /by Ed Walker

This is the first of a short series on my long-term project on neoliberalism. The questions I started with were 1. How did neoliberalism become the dominant discourse; 2. Was there an alternative; and 3. How can we move to some other form of discourse.

I started with the premise that the neoliberal project has two prongs, a theory of the person in society and an an economic theory.

The person in society is as a rational actor whose only important role is to get a job producing stuff which provides money to buy stuff based solely on a rational calculation of utility. The work part doesn’t apply to people with money. They just rationally concentrate on getting more money. People with no money and no job are subject to discipline by the carceral state. It doesn’t matter why they don’t have jobs. No work, no money, no freedom.

The economic theory is based on neoclassical economics, with its roots in 19th Century morality and the idea that everything can be stated mathematically. The morality is Jeremy Bentham’s utilitarianism, with a strong dose of Calvinism evidenced by the phrase “the lash of hunger”.

My project and my premise are based on reading books which broadly fall into three categories: theory (Foucault, the Frankfurt School, Kuhn, Mirowski), history (Arendt, Veblen, Polanyi), and economics, (Mankiw’s text, Samuelson and Nordhaus’ text, Jevons, Piketty). The plan was that by placing neoliberalism in a broader context, I could get some idea of how it took hold and what were plausible alternatives.

This post discusses theoretical issues. Neoliberalism is a positivist theory.

Positivism is the view that the only authentic knowledge is scientific knowledge, and that such knowledge can only come from positive affirmation of theories through strict scientific method (techniques for investigating phenomena based on gathering observable, empirical and measurable evidence, subject to specific principles of reasoning). The doctrine was developed in the mid-19th Century by the French sociologist and philospher Auguste Comte (1798 – 1857).

The scientific method is a good way to understand physical phenomena. The key step is eliminating all aspects of the object of study that cannot be measured and accounted for. If you want to know the charge of an electron for some reason, there’s an old experiment for that. In this experiment, that includes measuring the viscosity of air, but it also includes several assumptions that may or may not be accurate; one is that the droplets of oil are spherical.

In the double slit experiment you fire photons at two slits and get interference bands. Some of the photons hit on one of those bands, and others hit others. We don’t know exactly the route that they take between the photon gun and the target, and we can’t predict which band the particle will hit. There is only statistical prediction. So, there are limits to what we can know in the positivist sense. That’s true of math too for other reasons; see Godel’s Theorems.

One difficulty with positivism is what constitutes a proof in non-physical sciences. Obviously we can’t separate things analogously to the way we isolate photons. And we don’t have a way to repeat experiments and we can’t be sure we understand all the relevant considerations or their magnitude at any point in time, and anyway, people change, societies change and context is controlling.

Besides positivism, neoliberalism is centered on utilitarianism. We can see this in the writings of the inventor of marginal utility, William Stanley Jevons, as I note here. We also see it in Pareto Efficiency. These ideas, and positivism generally, are very useful in rationalizing the production of goods and services.

According to the Frankfurt School the theory that positivism provides the only authentic truth is central to the Enlightenment. Ideas and theories that cannot be proved according to the requirements of positivism cannot be taken seriously. The drive to extreme positivism leads us to ignore concepts like love, social cooperation, justice, morals and all intellectual concepts because they cannot be measured and are inconsistent over time and across societies. As an example, Keynes says that “animal spirits” lead development and stock markets. How do we measure animal spirits? Positivism tells us to find a formula to replace those concepts. Eventually it leads us to focus all our energy and attention on production for profit because that is tangible.

Critical theory rejects another underlying assumption of positivism, the absolute separation of subject and object. In order to study something, it must be segregated from other things. When one person studies another, the investigator must treat the other person as an object. If the object changes, we have to assume that the changes are measurable and predictable. In the same way, when the ruler deals with the subject, the kings treat citizens as objects, and employers treat employees as objects.

To put this in our time, Facebook algorithms treat users as objects and the company sets out to draw a picture of the not-exactly-human user so as to exploit it for profit. Facebook also allows others to use its tools to exploit for profit or for other purposes.

Every society has a system for deciding what goods and services it will produce and a system for dividing up the goods and services it produces. These systems cannot be addressed easily in a positivist framework because there is no way to predict outcomes with any certainty, and because we don’t have a scientific way to assess the quality of the current system, let alone a new arrangement. For that reason, the Frankfurt School claims that positivism reinforces the status quo, and cements it for the benefit of the current group of elites.

The effect of this extreme positivism is to reduce or eliminate imagination by focusing people’s attention on the immediate present. The emphasis on work means that people have less time and energy to think about societal issues.

This all seems terribly arid. Or boring, your choice. But it describes our putrid politics. Lambert Strether analyzed the Sanders/Klobuchar vs. Graham/Cassidy debate at Naked Capitalism; I highly recommend it. Here’s Amy Klobuchar, fn omitted:

KLOBUCHAR: [Y]ou can have things available to you like treatment, right, but if it’s too expensive, is it really available to you? And if you see a Ferrari in a car lot, well, it’s available to you, but you can’t really buy it. And that is the problem if the prices skyrocket.

So it’s doing something immediately to stabilize these prices, but then in the long term making sure we can make health care more affordable. Bernie has one idea; I have some others. And we can talk about them later.

As Lambert Strether shows, Sanders can talk about both now, while Klobuchar can’t, and it’s because she can’t imagine that kind of change as a real possibility. She can’t formulate a radically different vision of society. And that’s the problem facing the whole Democratic Party and especially its last presidential candidate.

The Dialectical Imagination by Martin Jay: Conclusion On Labor Day

September 4, 2017/3 Comments/in Left Theory /by Ed Walker

This series has been wonky, even for me. The Dialectical Imagination by Martin Jay is an eye-opening description of the creation of Critical Theory, a way of approaching the social sciences that is still important today, although the forces of formulaic empiricism are gathered against it. The insights of the scholars of the Frankfurt School were remarkably prescient, and are crucial today. They give a nice description of Homo Economicus in Dialectic of Enlightenment, p. 175, long before Friedman and Hayek began their push to create the new human. They were also right about the culture industry and the effect of mass culture. Michael Moore tells a version of this story in his movie Columbine.

But for me, the most important insight is the form that reason took during the Enlightenment. This is from an interview of Michel Foucault in 1978.

… I think that the Frankfurt School set problems that are still being worked on. Among others, the effects of power that are connected to a rationality that has been historically and geographically defined in the West, starting from the sixteenth century on. The West could never have attained the economic and cultural effects that are unique to it without the exercise of that specific form of rationality. Now, how are we to separate this rationality from the mechanisms, procedures, techniques, and effects of power that determine it, which we no longer accept and which we point to as the form of oppression typical of capitalist societies, and perhaps of socialist societies too? Couldn’t it be concluded that the promise of Aufklärung (Enlightenment], of attaining freedom through the exercise of reason, has been, on the contrary, overturned within the domain of Reason itself, that it is taking more and more space away from freedom?

The rationality Foucault is talking about here is the same one the Frankfurt School aimed at: the systematic logic of science and technology, focused by a drive for dominance over nature and over human beings. Our society is controlled by system of mechanisms, procedures, techniques and effects of power that focus that logic and allow it to dominate us. That project is far from complete, but we can see its outlines. The political system supports only one kind of life, a life focused on work. The solution to every problem is “Get a Job”. Schools are focused on jobs training, almost from the outset. Those without jobs are scorned and openly vilified, at least if they aren’t rich.

Businesses are focused on achieving dominance. The goal is monopoly and monopsony power, or at least oligopoly and oligopsony. They lobby for laws that free them from responsibility and give them the widest possible scope to control the lives of workers, and the freedom to screw the worker as it suits managers. They pay off courts and legislators to get their way. They demand trade conditions that permit them freedom at the expense of the rest of us. Those who best succeed at dominance get all the money, and corporations fight efforts to limit their income, even by disclosure.

Dominance entails a related submission. People readily allow the growth of dominance. We tell ourselves that our work is fulfilling, and that we are making a contribution, but just ask yourself how much of your work day is filled with mindless and stupid crap that shouldn’t be done at all. Most of us work for entities which are working towards dominance, and our own work is measured by how much we contribute to achieving dominance for the employer. Those not directly involved in establishing dominance are outsourced. That has led to a two-tier economy, in which people who can directly support the drive to dominance are made actual employees and rewarded, and those who don’t are pushed out into dead-end temp, contractor, adjunct or gig jobs.

A people who once fought and died for a fair share of the productive pie now accept flat wages, grotesque inequality of wealth and income, and slowly decaying prospects for our children. We carelessly threw away the protections our parents and grandparents won for us, 40 hour work weeks, paid vacations, fair taxation, and all those communal benefits from fairly priced colleges and tech training to decent mass transportation.

We all understand the reason for these losses. We just can’t afford this stuff. We can’t pay for essentially free college and technical training. If businesses have to pay fair wages, some foreign company will under-price them and put them out of business. If we tax the filthy rich, they’ll leave for the Cayman Islands and take their jobs with them. If we don’t put in 65 hour weeks, someone else will. We don’t have money for mass transit, so we sit on the road in heavy traffic. We give up our hours to traffic, our money for schooling, and our lives for a company that will dump us when it can.

All this is guided by the formal logic of capitalism, so we understand it. That’s the rationality Foucault and the Frankfurt School are talking about.

Each of these losses makes us less free. Every surrender to the formal logic of capitalism makes us less free. Every bit of information that Amazon and Facebook and Apple and Google and all the rest glom onto makes us less free, easier to manipulate. That’s the rationality of capitalism. That’s what comes of formal logic divorced from understanding and recognition of the wide variety of possible purposes. That’s what happens when the only thing that matters is dominance. That’s what happens when we submit to economic dominance.

The promise of the Enlightenment was that we could achieve freedom through reason. Seventy years ago the creators of Critical Theory told us that was wrong. Today we are learning how right they were.

The Dialectical Imagination by Martin Jay: The Enlightenment

August 31, 2017/1 Comment/in Left Theory /by Ed Walker

Chapter 8 of The Dialectical Imagination by Martin Jay discusses Dialectic of The Enlightenment, written during WWII by Max Horkheimer and Theodore Adorno and published in 1947. I haven’t read the book, though thanks to commenter Neighbor6 I have a copy, so this discussion is all based on Jay’s description. Dialectic of The Enlightenment (my copy is titled Dialectic of Enlightenment, but I will use Jay’s) opens with this:

Enlightenment, understood in the widest sense as the advance of thought, has always aimed at liberating human beings from fear and installing them as masters. Yet the wholly enlightened earth is radiant with triumphant calamity. Enlightenment’s program was the disenchantment of the world.* It wanted to dispel myths, to overthrow fantasy with knowledge.

The footnote references Max Weber’s quote, which I found here:

The fate of our times is characterized by rationalization and intellectualization and, above all, by the disenchantment of the world. Precisely the ultimate and most sublime values have retreated from public life either into the transcendental realm of mystic life or into the brotherliness of direct and personal human relations. It is not accidental that our greatest art is intimate and not monumental.

I think that’s how most of us would characterize the Enlightenment, as closing the door on superstition and opening the door to scientific inquiry. The obvious dark side of this apparently good thing is that nature becomes an object for study and manipulation; and human beings who are part of nature become objects for study and manipulation as well. The point of scientific inquiry moved quickly from an effort to understand to an effort to dominate. Science was primarily directed at supporting the production of goods and services and war machines. Adorno wrote that if Marx had his way, the whole world would become a “giant workshop” P. 259. Philosophy also became an element of the support system for a society based on industrial production. Kant’s effort to generate a morality from first principles failed, but for decades, it provided a basis for the morality that supported the capitalist system. Then the full potential of the power to dominate became clear as Hitler and Stalin achieved total domination and pushed the world into a nightmarish war.

A second problem, beyond domination, is the reductionism of science. As Horkheimer put it, “the formula supplants the image;”. P. 270. All that does not serve the capitalist system, about humans, animals, resources, the atmosphere and the planet itself, all of that is meaningless and is ignored. That includes all those spiritual and communal feelings that hold people together in groups of all sizes. It also includes our fellow feelings with other creatures, our feelings of oneness with the natural world, our gratitude for the bounty of the world, our respect for the beauty and power of the world, all useless and meaningless.

Jay begins Chapter 8 with a quote from Max Horkheirmer

If by enlightenment and intellectual progress we mean the freeing of man from superstitious belief in evil forces, in demons and fairies, in blind fate—in short, the emancipation from fear—then denunciation of what is currently called reason is the greatest service reason can render. P. 253.

Given the results of the 20th Century, Horkheimer can easily be excused for taking this pessimistic view. In any event, the idea of domination of nature became the focal point of the work of the Frankfurt School after WWII as the scholars worked to understand its ramifications. In a way, that work replaced the goal of unifying theory and practice, a central goal at the beginning of the Institute for Social Research, as it became obvious that this was not feasible. It was the last break with Marxism.

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Jay doesn’t explain why the Frankfurt School’s effort to combine theory and praxis failed, and why the scholars of the Institute concluded that philosophy and what they called speculative thought cannot provide a way towards social revolution and the betterment of society, so I’ll take a shot. One of the things I see in Jay’s book is that the scholars of the Frankfurt School believed deeply in the openness of the future. Jay writes:

In fact, the Enlightenment, for all its claims to have surpassed mythopoeic confusion by the introduction of rational analysis, had itself fallen a victim to a new myth. This was one of the major themes of the Dialectic [of The Enlightenment]. At the root of the Enlightenment’s program of domination, Horkheimer and Adorno charged, was a secularized version of the religious belief that God controlled the world. As a result, the human subject confronted the natural object as an inferior, external other. At least primitive animism, for all its lack of self-consciousness, had expressed an awareness of the interpenetration of the two spheres. This was totally lost in Enlightenment thought, where the world was seen as composed of lifeless, fungible atoms: “Animism had spiritualized objects; industrialism objectified spirits.” P. 260.

The scholars of the Institute completely rejected the idea that the world is closed; they saw it as infinitely open, and driven by human action. The world is not a collection of mindless fungible lifeless atoms, operating under simple laws or under the control of God. Instead, its future is open, radically open, open in ways we can’t imagine. Any social theory that could predict the future would have at its root the assertion that the social world, the world we humans create, operates under a set of definitive and permanent rules, like a clock or a computer. If there is no God, if there are no computer program, then how is it possible to create a theory that would lead to a praxis that would lead to a better society?

On the other hand, once we imagine ourselves, us humans, as part of a boundless and terrible and beautiful universe, we open up a vast panorama for action. The goals of that action are set by humans, hopefully through a decent political process, hopefully guided by our best thinking and our best judgment. That process continues even as Republican thugs carry on their war on the entire world. And it’s worth noting that nature, far from being dominated by humans, is quite able to overwhelm us.

The Dialectical Imagination by Martin Jay: Economics in Critical Theory

August 13, 2017/2 Comments/in Left Theory /by Ed Walker

In The Dialectical Imagination, Martin Jay says that economics was not a central part of Critical Theory, but that several scholars of the Frankfurt School worked in the area. One of the leading economists was Friedrich Pollock, especially after the Institute moved to New York. Like the other scholars of the Institute for Social Research, Pollock was trained in Marxist economics. This school mosttly followed Marx in thinking that capitalism would collapse under the weight of its own contradictions. One of those contradictions was that the aggressive accumulation of capital would impoverish the working class, which would then rise up and lead the revolution.

By the early 1900s, it was obvious that the problem of pauperization of the proletariat was at least partially solved, and capitalism didn’t collapse. The leading Marxist explanation was the rise of what Marxists call “monopoly capitalism”, as taught by the Austrian economist Rudolf Hilferding, discussed here. Classical economics treated the economy as made up of many firms (or, as Marx called them, capitals) each too small to affect prices, and all responding to the demands of buyers.

Unlike the classical economists, however, Marx recognized that such an economy was inherently unstable and impermanent. The way to succeed in a competitive market is to cut costs and expand production, a process which requires incessant accumulation of capital in ever new technological and organizational forms. In Marx’s words: “The battle of competition is fought by cheapening of commodities. The cheapness of commodities depends, ceteris paribus, on the productiveness of labor, and this again on the scale of production. Therefore the larger capitals beat the smaller.” Further, the credit system which “begins as a modest helper of accumulation” soon “becomes a new and formidable weapon in the competition in the competitive struggle, and finally it transforms itself into an immense social mechanism for the centralization of capitals” (Marx, 1894, ch. 27).

In this setting, labor itself is a commodity, so that one of the goals of the firm is to drive down wages as low as possible. That was the basis for the assumption that the proletariat would be impoverished: the firm would drive the price of labor to barely enough to support life. The process of capital accumulation in “ever new technological and organizational forms” did occur, as we know from the Gilded Age in the US when trusts and cartels dominated industrial production. That process was eventually slowed down by anti-trust laws and other laws. By the 1970s, antitrust enforcement came under assault, and today we see the results in our own oligopoly.

Monopoly capitalism has its own contradictions. In theory, there is no limit to cartelization, but in practice, there are limits. Technological change is a major force, and occasionally democratic processes interfere with the actions of capital. Another major force is the general distrust of large firms that was common in the early 20th Century, but that seems less of a factor today.

Based on the rise of the Nazis in Germany and the Communists in Russia Pollock thought that monopoly capitalism had reached its limits. Pollock saw Soviet Communism and German fascism as a new form of capitalism, State Capitalism. In both countries, the new regime preserved the forms of private property, but in effect all production was organized to carry out the aims of the central government. The profit motive was subordinated; instead the productive processes was organized to achieve dominance over the population. The state was controlled by a mixture of party members and bureaucrats in Russia, and by the party and a group corporate executives and rich people in Germany. Pollock argued that this was the future of capitalism.

In the US, he might have seen some elements of state capitalism in the following: a) the use of central planning, as in the National Recovery Act: b) the encouragement of technological innovation; c) the use of central banks both to stabilize and direct capital deployment; d) a form of job guarantee, as in the Civilian Conservation Corps; and e) a large and growing military sector. These trends in the US were baby steps compared with Russia and the Axis Powers, but they were real changes.

The Frankfurt School was right about the movement towards monopoly and oligopoly, and it was right about the increasing involvement of the State in this process. They were wrong to think that capitalism would turn into State Capitalism at least in the US and Europe, but in other parts of the world there are forms of the new regime. It’s important to note that not only were they right, but right for the right reasons. Here’s a discussion of the contradictions of capitalism from the New Palgrave Dictionary of Economics that shows the way this happens.

Critical Theory rejected the idea of economic determinism which was characteristic of orthodox Marxists. The Frankfurt School saw economics relations as one aspect of human behavior along with all the different interests and concerns people might have. They rejected the idea that economic relations were determinative of human behavior and therefore of the future, according to Martin Jay.

Pollack wrote that the profit motive “… had always been a variant of the power motive.” P. 155. The power motive drove towards dominance over nature, and because humans are part of nature, it included the drive to dominate other humans. The theory that the fundamental problem with capitalism is that the profit motive becomes entwined with the drive to dominate became a central focus of Critical Theory. They saw its effect in culture and academia. All knowledge becomes instrumental, only useful or even pursued if it can be used in capital accumulation. They argued that nature becomes invisible. The natural world is only useful for its resources, not because humans are part of nature, or because its beauty and terror contribute to our lives. Other human beings become objects, not agents in their pursuit of their own interests. The Frankfurt School was right about dominance, too.