Stumbling and Mumbling

Alienation & doublethink

“The right side lost, but the wrong side won”. I was reminded of John Le Carre’s assessment of the Cold War by a recent exchange in which Allison Pearson claimed that she knew “hardly anyone” who knew somebody who’d had Covid only to immediately say that her whole family had had it.

This seems nonsensical. But it’s not. It reminds me of what happened in the former USSR, where the conflict between the reality of day-to-day life and the imperative to conform to ideology led to an Orwellian doublethink. As Timur Kuran has written:

The individual citizen’s mind was divided into two layers, one “pragmatic” and the other “ideological”. The former layer contained the practical information necessary to get things done, derived mostly from experience…The latter consisted of abstract information, drawn primarily from public discourse. (Private Truths, Public Lies, p218)

People had to present different personalities. Kuran cites one Russian who said after the collapse of the USSR that he had six faces – one each for his wife; his children; close friends; acquaintances; colleagues; and for public display. There was, says Kuran, a sharp distinction between public and private opinion.

Ms Pearson was practising just such doublethink. Her public persona in the griftmedia required her to present an ideological face and downplay Covid, but her lived experience in her private life dictated otherwise. In that exchange she jumped from one face to another.

That she had to do so is the product of our latter-day media, well described by Sarah Ditum. She says she would look for “something that I could be mad enough about to write 600-800 fiery words on it.” But, she says, some of this writing “had a dishonesty that made me feel ashamed”. As with Pearson and Soviet citizens, there was a public persona and a private one.

It’s not just journalism that produces such doublethink, however. Tony Yates tweeted yesterday:

I teach models with optimizing consumers, and spent 1/1000 time buying a new washing machines as I have so far spent sourcing a second hand 2nd bike.

Now, you can perhaps salvage some rationality from this particular example (see thread). But there is a general point there – that many academics have taught about optimizing consumers whilst knowing that such beasts don’t exist in reality. Students, Deirdre McCloskey has written:

Come to believe (until experience drives the madness out) that economics is about a certain mathematical object called an “economy”. They have no incentive to learn about the world’s actual economy. (Knowledge and Persuasion in Economics, p173).

Again, we see a conflict between the public lie of academics telling their students about optimizing behaviour, and the private truth that they know people behave otherwise.

The point broadens. In Bullshit Jobs, the late David Graeber described the “spiritual violence” caused by a paradox – that our sense of self-worth is tied to working for a living, but we hate our jobs. Our jobs require us to pretend. Not just the pretence of grifter journalism or teaching about rational behaviour, but the pretence that managerialist waffle is meaningful or that bullshit jobs are actually worthwhile. Most of us, to some extent or other, must wrestle with the dissonance this causes.

This is of course not a new observation. Here’s Marx in 1844:

What, then, constitutes the alienation of labor?

First, the fact that labor is external to the worker, i.e., it does not belong to his intrinsic nature; that in his work, therefore, he does not affirm himself but denies himself, does not feel content but unhappy, does not develop freely his physical and mental energy but mortifies his body and ruins his mind. The worker therefore only feels himself outside his work, and in his work feels outside himself. He feels at home when he is not working, and when he is working he does not feel at home. 

In capitalism, even well-paid, comfortable jobs – perhaps especially well-paid comfortable jobs – require a denial of ourselves and of reality, that we adopt a different personality.

Which brings us back to Le Carre. One good objection to Soviet communism was that enforced widespread dishonesty. People had to deny fundamental truths which thwarted their true natures and hence their freedom. That’s why the right side lost the cold war. But capitalism does the same thing. Which is why the wrong side won.

Restraining capital

Martin Wolf argues that Milton Friedman was wrong to claim that the only social responsibility of business is to increase profits. I agree with him, but I fear he under-rates two important facts: historical context and class power.

Friedman thought (pdf) that profit maximization promoted the social good only under two conditions.

One, stressed by Luigi Zingales, is that markets must be competitive. Where this is the case, corporations have little power to egregiously exploit consumers or workers. In fact, they must maximize profits or go bust - and going bust is rarely in the public interest.

The second is that profit-seeking is only socially desirable so long as the firm “stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” This echoes Adam Smith, especially as interpreted by Jesse Norman (pdf) – that a well-functioning market economy depends upon social norms.

However, things have changed since the 1970s so that even if Friedman was right then, he no longer is. There are four, inter-related developments here.

First, markets have become less competitive, as Thomas Philippon has shown.

Secondly, social norms have eroded. In the 1970s, pharmaceutical companies did not deliberately sell addictive opiates as they do today*. And whilst misreporting of earnings was rare in the 70s, it is more common (pdf) today, albeit less so than a few years ago.

Thirdly, firms are makers and not just takers of the “rules of the game”. As Martin says, they successfully lobby for favourable rules. The US healthcare industry alone spends over £500bn on lobbying, and employs five lobbyists for every one Congressman. Which is just profit maximizing behaviour. If it’s cheaper to campaign for handouts or lax regulation than to develop good products then profit maximization requires that firms do just this. The upshot is that as Martin Gilens and Benjamin I. Page say (pdf):

Economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence

Fourthly, trades unions have greatly declined. In 1970 firms faced a countervailing power which inhibited them from cutting workers pay and conditions or jacking up CEO pay. Today, they no longer do so.

Now, these developments have been more pronounced in the US than in the UK or Europe. Their overall effect, though, Is to remove the conditions in which Friedman’s claim made sense. Which leads to Martin’s conclusion:

The challenge is to create good rules of the game, via politics. Today, we cannot.

That word “cannot” is important. Creating better rules of the game isn’t primarily about technocratic fixes such as rules again lobbying, breaking up the tech giants, raising banks’ capital requirements or (in the US) reforming healthcare. Any fool can have good ideas.

Instead, the issue here is power. The same forces that empower big corporations to make the rules also empower them to inhibit reform – or even to reduce the chances of a reforming government being elected at all; some of these forces are of course not under the deliberate control of specific capitalists but are rather emergent processes.

A lot of technocratic politics and economics is idle fantasising: “here’s what I’d do if I were king”. It misses the point: how do we achieve the power to restrain big capital?

Centrists criticise the left for failing to see that good ideas are useless unless you win elections. But we can turn this jibe around. From the point of view of restraining capital, there’s a difference between winning office and winning power. As I’ve long complained, technocrats are too often blind to the realities of capitalist power.

The challenge for anybody wanting a healthy capitalism, then, is how to achieve the power, the leverage, to do so? Insofar as capitalism operated in the wider public interest at the time that Friedman was writing (which of course is a matter of dispute) it did so because it faced countervailing power. Today, it no longer does so to the same extent.

Here, the left has an insight, if not a successful application thereof – the need to build an anti-capitalist hegemony, something which can only be done outside of parliamentary politics.

There’s general agreement that non-parliamentary action can create such hegemony. Rightists who complain about “wokeness” allege that the left has just done this in cultural domains. Perhaps a better example, though is Brexit. Farage and Ukip were negligible as a parliamentary presence, but achieved their aims anyway.

Neither of these hegemonies, however, have greatly challenged capitalist power: although Brexit is not in the material interest of some segments of capital, it has the redeeming virtue of having deflected blame for stagnation from capitalism onto the EU and migrants.

Which leaves the question: is it possible to create an anti-capitalist hegemony, and if so how? Technocrats have been insufficiently interested in this question.

* Corporations did, however, produce thalidomide and DDT, though the adverse effects of these might have been partly unintended.

News versus emergence

From an economist’s point of view, there are two big facts about the public finances. Fact one is that the government is now being paid to borrow. 20-year gilt yields are minus 2.5% which means that for every £100 the government borrows it must repay only £60 over the next 20 years. Fact two is that record government borrowing is, by definition, the counterpart of the fact that the household savings ratio hit a record high in Q2.

Many political journalists, however, underweight these facts. Laura Kuenssberg talks of the nation’s credit card being maxxed out, whilst Matthew Parris rages at those of us who have the temerity to criticise her.

Which poses the question: why is there just a gulf between political journalists and economists here?

I suggest it’s because political journalists and economists see the world differently. The news is usually about the day-to-day events of what individuals do and say. A lot of economics, however, is not like that. It is the study of emergence, of states of affairs which arise from decentralized human action but not intention. This isn’t just true of economics, but of the social sciences generally – which is why there are great limits upon what you can learn about history and politics from biographies alone.

Take, for example, the long-term decline in interest rates since the 1990s. This reflects a slowdown in economic growth in western economies – a fall into what Larry Summers has called secular stagnation. There are several possible (and non-exclusive) explanations for this. Maybe a falling rate of profit has reduced incentives for firms to invest and expand. Perhaps a shortage of safe assets and increased risk aversion has depressed demand. Perhaps there are fewer (pdf) big innovations to drive growth. Maybe the 2008 financial crisis has had a long-lasting scarring effect on animal spirits. Maybe firms have finally wised up to William Nordhaus’s finding that the returns to innovation are generally small. Or maybe the fear of competition from future technologies is deterring investment today.

For my purposes, all these explanations have some things in common. All are the result of countless decisions by countless individuals. They cannot be traced to the action of any single policy-maker. And they are gradual processes. At no stage in the last 20 years could we have said for sure: “the world economy has today entered a new era of permanently slow growth.”

These processes get overlooked by journalists who are focused instead upon precise day-to-day events and the actions of identifiable persons. News is one thing; emergence another. And so journalists’ are insufficiently awake to the downtrend in interest rates.

Government borrowing is also an emergent process. It is at a record high this year because household savings are at a record high: the lockdown and fear of catching Covid-19 has kept us out of gyms, pubs and restaurants. None of us, however, thought: “I shall save more and so cause the government to borrow more”. But that is the aggregate result of our actions. And the same economic weakness that arises from increased private savings also justifies the Bank of England’s buying of government bonds – which is another reason not to worry about government borrowing.

Both government borrowing, and the ease of financing it, are the result of emergent processes - processes which even good journalism under-rates.

Of course, political journalists can be forgiven for overlooking economic processes. Except that economic events shape political ones.

Anti-Europeanism, for example, has been a longstanding strand in UK politics: the Sun’s notorious headline “Up Yours, Delors” is now 30 years old. But in the late 90s and early 00s, the Tories were punished harshly in elections for their obsession with the EU. So what changed?

The economic climate, that’s what. Ben Friedman has shown that economic stagnation fosters intolerance and nationalism – perhaps because a sense of national decline leads to a yearning for the past. And Thiemo Fetzer and Nick Crafts have shown how austerity contributed to Brexit. It is wrong to treat public opinion merely as a datum; it is shaped by the economy – often in ways we can only identify with hindsight.

Emergent processes set the climate. But journalists who focus only on the day-to-day weather miss this. And so they worry unnecessarily about government borrowing – and mislead their viewers and readers, some of whom are politicians.

Now, I am emphatically not making a purely partisan point here. Emergence doesn’t only give us stagnation and Marxian exploitation. Hayek regarded the spontaneous order of a market economy as a benign form of emergence. And the decline in global poverty and disease in recent decades has also been (partly) an emergent process. Journalists’ bias against emergence also leads them to neglect these. And again, in doing so they mislead the public: people are unduly antipathetic to markets and under-estimate the extent to which living conditions have improved for billions.

The news, then, is not the whole truth. It is in this sense, rather than simple-minded partisanship, that the BBC is biased.