Thursday, August 18, 2016

The two insurgencies

The Twin Insurgency by Nils Gilman is an excellent article that succeeds in explains both the plutocratic insurgency (gated communities, off-shore accounts) at the top, and the “criminal” insurgency (drug cartels, arms smuggling) at the bottom as part of the same process of rejection of a modern social state.

I find the discussion compelling even if no single aspect of the article is new (that is, was not argued before). But it is putting them together in a coherent whole which represents the strength of Gilman’s piece. A person who flies in a private jet and opens an offshore account in the Bahamas to avoid taxes and a people- smuggler in Mali both react to the withdrawals of the state and both, by their actions, ensure that that withdrawal will persist.

There are two things on which I would like to expand on Gilman. First, the role of ideology, and second, the interaction of the plutocratic, criminal and political worlds.

Why the “criminal” or deviant globalization occurred is, I think, best understood (as Gilman writes) as a product of the weakening of state capacity. But this is not all. I would also include the ideology of enrichment by any means. Deng Xiaoping put it best  when he said that “to be rich is glorious”; he might not have added by “any means” but this is how the message was understood. At its extreme, the message was understood as such in transition countries, especially in Russia and Ukraine, that engaged in massive stealing of state assets by those who were close to the governing circles. This has continued for almost thirty years: it is only that the kleptocratic groups change depending on who is in power, but the differences between the way that Khodorkovsky and Rotenberg, Pinchuk and Poroshenko have become billionaires are non-existent. In those countries, we see mafias becoming the state and we see the seamlessness between the three worlds, plutocratic, political and criminal, at its clearest.

But what made this possible was an ideology that argued that “society does not exist” and that the only sign of success is material success. Being rich mattered socially more than before simply because other forms of competition (meaningfulness of a job, contribution to society etc.) were declared irrelevant. Success became easy to measure because every success, whether in Olympian swimming, software code or journalism, was translated into a single metric: money. Just observe how every athlete, professor, economist, journalist who, for whatever reason, becomes at one point known, immediately converts that notoriety into cash: appears in ads, charges speaking fees. (Even Gorbachev ended up in a Louis Vuitton commercial. Federer has sold everything from watches to underwear.)

This concentration on money as a common dominator of success makes comparisons between people much easier because we do not need to be bothered by figuring out success of two individuals in several dimensions. If all dimensions are folded into one, it is simple to tell success from failure. This also occults the way money is made, or makes it irrelevant since the important thing, in a unidimensional world, is to have it.

Combined with increased commercialization of activities that have hitherto remained outside the market (see my Commodification post) and with globalization that allowed everybody to see and almost experience what was the desired consumption pattern of the rich, it led to moral equivalence between the ways wealth is made. I do not argue that it was an entirely new development because historically wealth was acquired in even much more brutal ways than today (e.g. slavery) and once acquired was quickly “washed” of its original stain. What I think was new was the broad societal acceptance that the way wealth is made does not matter.

That societal acceptance is in turn based on cynicism about the overlap between the three circles I mentioned before: business, crime and politics. Businessmen were often criminals (and vice versa) and both interacted with or even became politicians. One could go on listing such phenomena endlessly, from those in Russia and Ukraine to Berlusconi in Italy, Thaksin in Thailand, the entire political establishment in the Philippines etc. But a recent piece, published in the latest New Yorker, unwittingly brought this aspect to light and allowed one to see how it functions in rich countries where state institutions have  ostensibly not been destroyed.

In an article about Trump’s family (mostly, about his daughter and son-in-law) we learn about the contacts between the son-in-law’s father and the Clintons. The father was one of the largest donors to Hillary Clinton’s senatorial campaign, and to express gratitude for the money she got, Hillary Clinton came to a private dinner the father gave. The father later ended up in jail for fraud and extortion. Moreover, we learn also that Bill Clinton was speaking, for significant “compensation”, at some of the events organized by the same funder.

The striking thing here is not what the author of the article somewhat naively wants us to focus on, namely the links between the wealthy New York-based families of the Trumps and the Clintons, but the ease with which business, criminal and political worlds merge into one. And we can be sure that this one example could be multiplied by ten or more. It was a shameless use of either past political office to rake in enormous money (the Tony Blair and Bill Clinton approach to politics) or the use of future political office to sell favors in exchange for funding (which is done practically by all politicians) that has conveyed the message from the top that any activity should be leveraged into money and that all means to get money are fine.

It is therefore I think massive corruption at the top and ideological change that have empowered the so-called deviant globalization. If president of a country can sell favors, why cannot a drug lord sell his goods? If the rich can open thousands of accounts containing billions of dollars in tax havens, why should a small hotelier in Greece pay taxes? If the law applies selectively, then you need to carve out your dominion where you will be the boss. This is how the extra-state areas of which Nils Gilman writes have come into being.

The essential point to take is that the two insurgencies go together: without plutocratic-criminal insurgency at the top, there would be no deviant criminal insurgency at the bottom. The only point on which I might differ from Gilman is that he applies the adjective “criminal” to the bottom insurgency only.

Sunday, August 14, 2016

Commodification again—a response to Diane Coyle

In a very nice post published today Diane Coyle, commenting on my blog on Commodification (published yesterday) takes me to task for the following sentence:

“The most obvious case is commodification of activities that used to be conducted within extended families and then, as we became richer and more individualistic within  nuclear families. Cooking has now become out-sourced and families often do not eat meals together. Cleaning and child-rearing have become more commercialized than before or ever.”

I should have added a number of other activities: fixing the roof, doing kids’ homework, car repairs, gardening, and this quintessential US activity of raking the leaves.

It would have been, perhaps clearer, that I did not have in mind only activities predominantly done by women but also by men.

Now two points remain to be explained.

Was this increased commodification? Unambiguously, yes. It is simply a definitional issue. Activities that were conducted within families and went uncompensated entered the sphere of the market:  helping kids with their homework got outsourced to a tutor, cooking meals went to McDonald's. So that part is purely factual and definitional.

The second, more difficult, part is, does it represent an improvement (however you want to think of an “improvement” )? I would say in most instances, “yes”. When I was a little boy, my mother had to wash my fathers’ shirts in a back-bending and back-breaking position running them over by soap and water in a bath-tub. Was this fun? No. It was both hard and humiliating. Was the washing machine, and later ability to outsource the cleaning of shirts to a professional cleaner, a great progress? Unambiguously, yes. In addition, as Diane mentions, it enabled women to lead professional lives which they could not if they had to spend entire days cooking and washing. (This is by the way, why I also agree with Robert Gordon that the inventions of the 1930s-1950s had a much more dramatic effect on our lives than the current IT inventions.)

But the great material progress and great improvements in welfare (mainly for women who used to do most of these thankless tasks) created also trade-offs in some cases. Families today eat fewer meals together, not only because they are busier, but because cooking has been outsourced, to the MacDonald’s for the poorer households or to Cosi for the richer or to fancy restaurants for those in the top 1%. (Moreover, these meals are taken by individual household member one by one,, “I go to the MacDonald’s at 1 pm, you at 2 pm”). There is greater marketization, greater specialization and probably greater output (certainly greater recorded output), but we do lose something in not having a place and time when family gets together.

The same can be said for the outsourcing of help to children with their homework. In the past it used to be, and was often ridiculed in theatre plays, that only rich families would hire a multitude of tutors to help their kids get good grades. This has spread, as societies have grown richer, along a large part of the income distribution, sometimes to ridiculous extent (not only homework, but SAP preparation classes and special life coaches for teenagers). When a teenager used to have a problem, it was dealt by parents, or at most by a teacher. Now, the teachers ask parents to hire professional help so both the parents and the teachers wash their hands of the problem. The issue has become “institutionalized” and “commodified”. All these things weaken personal links and replace them with purchased services.

There are many similar examples.

There was recently a graph circulated on Twitter showing the percentage of kids aged 25  living with parents in various countries in Europe. Predictably, the percentage was the lowest in rich, Nordic countries. This simply confirms people’s general preference to be left alone and become individualistic as they get richer and can afford it. They are obviously happier living alone than with their  parents. I was too. But I cannot overlook the fact that it yet further diminishes personal ties. If you live alone, thousands of miles from your parents, you are unlikely to display the same empathy when your father gets sick as if you lived together. (Now when many people live together and the space is very limited  perhaps you may wish for your father to die quickly because you would have an extra room for yourself, but I think it is a rather extreme example).

To make it very clear, I wanted to make two following points. On a pure factual side, I do not think there is a serious argument disputing that as societies get richer, the sphere of commodification extends. (I saw that first hand when I worked on African household surveys where a number of activities that are routinely monetized in rich economies had to have their values imputed in Africa, for otherwise we would grossly underestimate consumption of people in many African countries.)

Second, while in many cases, greater commodification has made our lives better and responds to a definite choice of people, it has also in many cases weakened personal ties and in some cases made us more callous because our knowledge that any pesky little problem can be solved by throwing money at it made us less concerned about our neighbors and family.  

Therefore, as we live increasingly in a commodified environment where interactions (and I relate this to my points on the gig economy and flexibilization of labor) become one-off deals, I  see a shrinking space where we can exercise “nice” cooperative behavior. As we end up all becoming just “agents”  in one-off deals, there would be zero place for niceness. Now, that would be both a Utopia of wealth and Dystopia of personal relations.  

PS. On a personal note, when I moved to New York almost three years ago I discovered a very liberating, but also somewhat disconcerting, thing: if you have enough money and a wireless connection, you can dispense with real people. (This was liberating because I hardly knew anybody in New York; it was disappointing because I realized that I do not need to make much effort to meet anyone).  Now, this ambivalent freedom was made possible by technology (wireless) and higher income, and perhaps my overall happiness increased. But I am aware that, if I look at inter-personal relations, it has not been a gain.

Saturday, August 13, 2016


In a recent, still unpublished, paper that John Roemer kindly shared with me,  Roemer envisages (and calls for) a change in the modern advanced capitalist economies such  that cooperative behavior rather than single-minded profit-maximizing will become more common. Roemer nicely distinguishes cooperative behavior from altruism; actually one can behave very cooperatively out of pure self-interest because in repeated games “nice” behavior will be rewarded. I thought that it was a very clever point although I am much less sanguine than Roemer that we are moving toward a “gentler” and more cooperative ethos.

I see several factors working against it. The first is the increasing commodification of many activities. The most obvious case is commodification of activities that used to be conducted within extended families and then, as we became richer and more individualistic within  nuclear families. Cooking has now become out-sourced and families often do not eat meals together. Cleaning and child-rearing have become more commercialized than before or ever.

The growth of the gig economy further commercializes either our free time or things we own. Uber was created precisely on the use of free time: limo drives had  extra time that they could use to drive people around and make money. So, now anybody who has some free time can “sell” it by working for a taxi company or delivering pizza. A portion of the leisure time that we could not commercialize (simply because it was so short and discrete) has now become marketable. Likewise, our apartment that in the past might have been given for a week without compensation to family and friends have now become assets that are rented out to foreigners, for a fee. The opportunity cost of not delivering pizza or not renting your apartment on AirB-and-B is quite steep. But that opportunity cost used to be zero. Commodification has made it positive.

Commodification of what was hitherto a non-commercial resource makes each of us do many jobs and even, as in the renting of apartments, capitalists. But saying that I work many jobs is the same thing as saying that workers do not hold durably individual jobs and that the labor market is fully “flexible” with people getting in and out of jobs at a very high rate. Thus workers indeed become, from the point of view of the employer, fully interchangeable “agents”. Each of then stays in a job a few weeks or months: everyone is equally good or bad as everyone else. We are indeed coming close to the dream world of neoclassical economics where individuals, with their true characteristics,  no longer exists because they have been replaced by “agents”.

The problem with this kind of commodification and flexibilization is that it undermines human relations and trust that are needed for the smooth functioning of an economy. When there are repeated games we try to establish relationships of trust with people with whom we interact. But if we move from one place to another with high frequency, change jobs every couple of weeks,  and everybody else does the same, then there are no repeated games because we do not interact with the same people. If there are no repeated games, our behavior adjusts to expecting to play just a single game, a single interaction. And this new behavior is very different.

After being away from New York for a couple of months, I came back to discover that many of the people with whom I thought I was playing these repeated games, in restaurants where I go, in the apartment building where I live, have simply changed. Some new people have appeared who treat you when you come to your favorite restaurant (understandably) as a complete stranger. Then from your own side you do not have much of an incentive to behave “nicely”,  to send the signal of cooperative behavior, because you know that these new people too will soon change. Investing in being “nice” is costly: it takes effort and is justified by the expectation that “niceness” will be reciprocated. But if the person to whom you are nice will not be there in a month, what is a point? it is a waste of effort to be “nice”.  

The same reasoning, of course, is made by the other side: why should he care about you if he is already eyeing his next gig?

Increasing commodification of many activities, the gig economy and flexibilization of labor market are just a part of the same change; they should be seen as a movement toward a more rational, but ultimately more  depersonalized, economy where most of interactions will be one-shot contacts. Holding of many  jobs and the shortness of interactions make investing in cooperative behavior prohibitively expensive. This Is the key reason why I am less optimistic than others that we are moving toward a society with a more collective, or “nicer” ethos. Actually, I think we are moving in the opposite direction.

Now, this type of complaint is not new. Very similar complaints were voiced when manufacturing and Fordism replaced artisanal production. Things seemed  to have gotten worse and very depersonalized. But the output increased and all of us became richer. The same thing may be happening now: using our apartments as temporary hotels and our leisure time to drive taxis will increase nation’s output. But we should not be ready to believe, I think, that it will help our inter-personal relations.  There is a trade-off.

Sunday, July 31, 2016

Time to ditch Rawls?

The seminal work in political philosophy for the era of globalization is John Rawls’ “The law of peoples” (LoP). It was written in 1999. I was attracted to it in the early 2000s as I was then already working on global inequality which was a totally new topic, entirely ignored, in economics. The only thing that came remotely close to it in economics was the Heckschler-Ohlin-Samuelson trade theorem whereby wage inequality should go down in poor countries and up in rich countries when they engage in trade. But this was such a small part of globalizations: it dealt with wages only and left out other types of income; it left out capital flows, development aid, migration, outsourcing. None of that was discussed in economics (and mostly still is not) in a global framework as opposed to 2-country 2-goods very limiting framework. But political philosophers have thought more about it.

In the late 1990s, John Rawls turned his attention from how a single nation-state should be organized (as in his Theory of Justice, ToJ) to how the world should be organized. Obviously, it had to be done at a very abstract level and, as will be seen, that abstract level comes very close to the situation Rawls (and the world) seemed to face in the 1990s. But, and it will be my key point here, that situation has dramatically changed in the past 20 years so that the abstract sketch of the world made by Rawls is no longer  compatible with what we see today and thus the recommendations Rawls drew from that sketch are irrelevant.

In LoP, Rawls abandoned the metaphor of individuals meeting behind the veil of ignorance to agree on an a priori basis on the principles of justice in their societies. That rule still holds, according to Rawls, in individual societies but not in the world of nation-states whose representatives (but not individuals themselves) meet to agree on the principles that would guide their (inter-societal) relations. 

Rawls has five types of societies:  liberal (these are the same societies with which his ToJ is concerned), consultative hierarchical societies, “burdened” societies, outlaw states (notice: not societies) and benevolent absolutisms. We can drop the last because they never play a role in LoP (I never understood why; perhaps Rawls just did not know what to do with them). Both liberal and consultative hierarchical societies are well-ordered societies (meaning that within each of them the principle upon which they are based are reinforced by peoples’ daily actions); they respect each other and the (different) principles upon which each is based. Burdened societies cannot become liberal because they are held back by their poverty. Outlaw states just go to war (for basically no reason; they just, like in a Hollywood movie, seem to like being troublemakers).  

So the rules then become relatively simple—and some would even say simplistic. The well-ordered societies, though different in their internal structure, can coexist at peace because they respect each other, and liberal societies do not try to impose their norms on consultative hierarchies. They do not try to export democracy. 

Second, liberal societies have a duty to help the burdened societies but only as far as they require to become liberal, which, in Rawls’ view, takes place at a very low average level of income. After that point, even huge differences in incomes within the group of well-ordered societies are no ground for continuation of international aid. In other words, there is no reason for Norway to help Bangladesh because they are both well-ordered. 

Finally, Rawls is against migration as a right or against migration as a way to alleviate global poverty and inequality. Countries (that is, organized peoples) have control of their territory and they alone decide whom they want to accept. They can accept refuges that flee persecution but not economic migrants (which is by the way consistent with Rawls’ general underplaying of the importance of income for our happiness).

So, this is the sketch: liberal societies reaffirm their liberal principles daily, they live in peace with hierarchical societies, the do not export democracy, they help only the poorest countries and this very moderately, and they do not allow economic migration. 

As you can see, this is why I was attracted to Rawls: unlike economists he does present a coherent sketch of the world and economic rules.

So why do I have a problem with Rawls’ taxonomy now?

Let me list several changes that have happened during the past two decades and for which I just do not find a place in Rawls’ taxonomy.

Liberal democracies do not affirm the principles of liberalism, as Rawls expected, neither domestically nor internationally. It is inconceivable for Rawls, if these societies would be working well, that they would, as in the US now, generate a third or more of “malcontent” population that clearly does not believe in liberal principles nor is willing to affirm them in their daily lives. Far from it. This, plus the pervasive role of money in electoral politics, lower tax rates for capital than labor, neglect of public education etc. imply that domestically so called liberal societies are very far from Rawls’ idea of liberalism. The difference is so great that we cannot, I think, speak of the discrepancy any longer as the expected difference between an abstract idea and what exist in reality. These societies belong to an entirely different category.

Moreover, in foreign policy, as became clear with the Iraq war, they act like outlaw states since they break the fundamental rules on which the international community is founded, namely absence of wars of aggression.

Thus, “liberal” societies are both non-liberal (in the Rawlsian sense) domestically and act as outlaw states.

The benign consultative hierarchies that Rawls had in mind probably in order to fit Islamic societies in his scheme are practically non-existent.  The Middle East is either in total chaos or in the grip of absolutist dictatorships like Egypt, Saudi Arabia and the Gulf sheikdoms.  Thus they are not well-ordered societies in Rawls’ terms.

There is no place in his taxonomy for the multi-county non-state organizations like ISIS. A general theory that has no place for organizations that do not accept current state borders is clearly incomplete. (This is an issue on which Rawls is especially weak because he takes borders as given, which is, as he wrote in the wake of the break-up of the USSR, Czechoslovakia, Ethiopia and Yugoslavia, rather odd).

There is also no place for what is now called illiberal democracy, namely a society that has most of the accoutrements of a liberal society (elections, political parties, NGOs), and yet where only one party or one leader ever wins elections and where the media and the judiciary are directly or indirectly controlled.

Migrations, driven by economic reasons and thus by global inequality, does not have a place in Rawls. But they do exist in real life where economic migrants from Africa and Asia into Europe or Mexico and Central America into the United States number millions. But the theory that says that this should not happen is of no use when these things do happen.

Finally, Rawls grossly underrated the importance that people attach to income and wealth for their happiness. Importance of pecuniary incentives has only increased with globalization since income differences have become more visible.    

The changes over the past two decades have been, I believe, so remarkable that the typology offered by Rawls has lost its relevance. But if the typology does not fit reality then the recommended relations between the different societies, based on this typology, do not have any relevance. his is why I think it is time to either ditch Rawls or revise him very thoroughly. A job for political philosophers.