Economics and Its Discontents - Jedrzej Malko

8/18/2019 Economics and Its Discontents - Jedrzej Malko

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ATROPOS PRESS

new york • dresden


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General Editor:

Wolfgang Schirmacher

Editorial Board:

Giorgio AgambenPierre AlferiHubertus von AmelunxenAlain BadiouJudith BalsoJudith Butler Diane Davis

Chris Fynsk Martin Hielscher Geert Lovink Larry RickelsAvital RonellMichael SchmidtFredrich UlfersVictor VitanzaSiegfried ZielinskiSlavoj Žižek

© 2015 by Jędrzej MalkoThink Media EGS Series is supported by the European Graduate School

Cover art: Adam Borowski

ATROPOS PRESS New York • Dresden

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all rights reserved

978-1-940813-77-6


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E conomics and Its Discontents


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Acknowledgements:

I am grateful to many for their invaluable discussions, insights, and

Borucki, Prof. Vivienne Brown,

Prof. David Hawkes, Prof. Jerzy Jedlicki, Jakub Krzeski, Dr Bartosz

Prof. Germano Maifreda, Krzysztof Pacewicz, Tadeusz

and to Aleksandra Piejka, my love, for taking their time to

read the early manuscript of this book and help me refine the argument. I

am also very grateful to Elena Rozbicka for proof-reading the manuscript

cover idea.

I would like to express my gratitude to the internet communities of

anonymous pirates and intellectual property thiefs who break copyright

laws and let academic books and articles into circulation. Without you I

would never have been able to do my research.

Finally, I would like to thank my family and my dear friends for the

support they gave me while I was working on these pages. Also,

apologies are in place for all those times I lost myself in the library anddidn’t show up when I should have. I owe you one!


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Contents:

Chapter 1…………………………………………………………………..…………..11

In which the purpose of this study is outlined.

Chapter 2…………………………………………………………………..…………..13

In which the analytical approach of discoursive materialism is explained.

Chapter 3…………………………………………………………………..…………..19

In which the myth of barter is debunked.

Chapter 4…………………………………………………………………..…………..23

In which the concept of debt regime is introduced.

Chapter 5…………………………………………………………………..…………..29

In which the violent beginnings of the institution of money are recalled.

Chapter 6…………………………………………………………………..…………..35

In which it is shown how Greek economic discourse was shaped by opposing political

factions.

Chapter 7…………………………………………………………………..…………..41

In which it is argued that the existence of a longing for the good old days doesn’t mean

that they have ever existed.

Chapter 8…………………………………………………………………..…………..45

In which we point out that economic growth is relatively new phenomenon.

Chapter 9…………………………………………………………………..…………..51

In which the interplay between religious and economic discourses is introduced.

Chapter 10…………………………………………………………………..…………55

In we recognize the institutional character of private property and visit time when it was

of secondary importance to constellations of power.

Chapter 11…………………………………………………………………..…………61

In which it is argued that the issue of usury was so dire because it violated the logic of

arithmetical justice and endangered interests that hinged upon it.

Chapter 12…………………………………………………………………..…………67

In which, by acknowledging the significance of Arabic economics, we pretend that this

study is not so Eurocentric.

Chapter 13…………………………………………………………………..…………71

Which puts Friedmanite monetarism in an appropriate, medieval, context.

Chapter 14……………………………………………………………………………..77

In which a transition from feudal to capitalist Europe is sketched.


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Chapter 15…………………………………………………………………..……….. .83

Which shows how the market became a space of spontaneous order and how exchange

ceased to be arithmetical.

Chapter 16…………………………………………………………………..…………87

In which it is shown how money became capital.

Chapter 17…………………………………………………………………..…………91In which we s ee that the Italian R enais s ance didn’t give rebirth to humanity;

nevertheless it left offspring in the form of modern bookkeeping.

Chapter 18…………………………………………………………………..………..99

In which historical, static patterns of consumption are explained, and then their

breakdown, as well as legal attempts to defend them are presented. Chapter 19…………………………………………………………………..………..107

In which we study an economic school that has never existed.

Chapter 20…………………………………………………………………..………..115

In which the emergence of population as an economic subject is considered.

Chapter 21…………………………………………………………………..………..119

In which the synthesizing effects of bodily and organic metaphors are explained.

Chapter 22…………………………………………………………………..………..125

In which the relationship between Protestantism and the rise of capitalism is discus sed.

Chapter 23…………………………………………………………………..………..129

In which it is explained that supposedly secular liberal political economics are more

sacral than the economics of Aquinas ever were. Chapter 24…………………………………………………………………..………..133

In which two main outlooks on international commerce are outlined.

Chapter 25…………………………………………………………………..………..145

Which shows how perilous passions were turned into legitimate interests.

Chapter 26…………………………………………………………………..………..149

In which iconoclasm as a mode of critique is critiqued.

Chapter 27…………………………………………………………………..………..153

In which an example of iconoclas tic argument from seventeenth-century E ngland is

presented.

Chapter 28…………………………………………………………………..………..157

In which we see that economic freedom was instrumental for the market equalizing

machine.

Chapter 29…………………………………………………………………..………..165

In which we see the roots and fruits of the scarcity figure.


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Chapter 30…………………………………………………………………..………..173

In which it is shown how liberal political economy was used to legitimize nineteenth-

century economic genocide.

Chapter 31…………………………………………………………………..………..179

In which a time is shown when everyone understood that economic and political

freedoms aren’t the same.

Chapter 32…………………………………………………………………..………..183

In which we see that classic liberals were rebellious pro-statists.

Chapter 33…………………………………………………………………..………..191

In which impact of banking on the regime of debt is inspected.

Chapter 34…………………………………………………………………..………..199

A short but important chapter which shows how economics is blind to the political nature

of money and its disciplining effects. Also, a chapter in which the worthlessness of the

radical notion of value is outlined.

Chapter 35…………………………………………………………………..………..205

In which it shown how intellectual property was established by business fighting business

in British courts.

Chapter 36…………………………………………………………………..………..211

Which argues that Adam S mith was not the father of economics .

Chapter 37…………………………………………………………………..………..215

Which shows that socialist and liberal economics are not that different.

Chapter 38…………………………………………………………………..………..221

Which inspects a few important tropes of labor struggles.

Chapter 39…………………………………………………………………..………..229

In which essential shortcomings of Marx’s economics are outlined.

Chapter 40…………………………………………………………………..………..239

Which explains why the “working class” can never win the “class struggle.”

Chapter 41…………………………………………………………………..………..245

In which we take look at the so-called “marginalist revolution.”

Chapter 42…………………………………………………………………..………..249

In which psychological premises and logical tautologies behind the figure of homo

economicus are ins pected.

Chapter 43…………………………………………………………………..………..257

In which the historical role of historical schools of economics is outlined.

Chapter 44…………………………………………………………………..………..265

In which mathematicization of economics and its use of abstract theorizing is criticized.


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Chapter 45…………………………………………………………………..………..273

Which shows why Keynes was no Keynesian.

Chapter 46…………………………………………………………………..………..279

In which it is explained why in the twentieth century the enthusiasm for central planning

was shared on the both sides of the Iron Curtain.

Chapter 47…………………………………………………………………..………..283

Which shows that economic game theory is a war game.

Chapter 48……………………………………………………………………………291

In which modern consumption is studied as a field of power and domination.

Chapter 49…………………………………………………………………..………..299

In which the sad frutilessness of the postmodern left is explained.

Chapter 50…………………………………………………………………..………..307

Notes ……………………………………………………………………………………311

Bibliography………………………….………………………………………………353


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Chapter 1:

In which the purpose of this study is outlined.

Already too many spectres have haunted the people, and for too long

the people have unreflectively worshipped various spectres. Countless

manifestos have fruitlessly promised to lead the people on the road from

serfdom, out of the dark tunnel of necessity, and into the daylight of

abundance. And yet, few people have asked: what is this spectre? Andhow is it possible that the more unwaveringly it promises to unchain the

people, the heavier are the shackles which ultimately bind them?

There is an urgent need for a narrative on economics that will allow

us to grasp the role it has been playing in the constellations of power

throughout the ages. An attempt at such an analysis is the main purpose

of this study. It should be noted that at no point is it postulated that all

historical power struggles could or should be reduced to the realm of

economy. The cognitive value of bringing all dimensions of social reality

under one common denominator is negative. The search for any one

prime mover, the true and hidden structure, or some general logic of

history is always harmful. The attraction of simple answers lies not in

what they reveal about the world, but in how much they hide from us,

making life less complicated than it should be. That said, one doesn’t

have to fall into traps of crude economic reductionism to acknowledge the

role economics plays in modern systems of power. On the contrary, it is

hardly possible to analyse the economics of power without appreciationfor the power of economics.


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Economics and Its Discontents 12

Political struggles that shape worldwide economic infrastructures are

largely informed by economic discourses, and the legitimacy of the

decisions that affect the lives and livelihoods of billions of people and,

ultimately, the natural environment of this planet are often derived from

this or that economic doctrine. What’s more, in the course of this study it

will be shown that today economistic narratives, figures, and modes of

thinking have contaminated areas of life whose economic nature until

recently had not been considered self-evident. Economics has burst its

banks and spilled over a terrain so vast that today we don’t even speak

about society, culture, and people, but rather about social capital, cultural

capital, and human capital. Resources to be invested with hope for a nice

rate of return.

To challenge the status quo one has to first understand it. Without

untangling the relationship between economics and other discourses,

cultural formations, and institutions, there can be no meaningful response

to problems arising at the multiple tangent points between politics,economy, and economics. Hopefully, this study will productively

contribute to a debate on such a response, providing some insight into the

basic dynamics of mainstream economics and its pivotal motifs. This

historical perspective is meant to provide a much needed context for the

most present issues. Only if we really grasp the fact that there has never

been a critical difference between the main schools of economics, if we

appreciate how much they are alike and recognize the synthesizing logic

with which they operate, will we be able to cut through the threadbare

and barren debates between left and right and work out a truly fruitful

understanding of political economy.


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Chapter 2:

In which the analytical approachof discoursive materialism in explained.

In the past two or three decades, it has been often claimed that the

discussion on economics is changing. The rigorous modernist claim that

economics is a positive, norm-free science has been challenged numerous

times. Klamer argued in 1990 that “seeing economy as a discourse and

exploring its rhetorical dimensions, to which their works inspire, seems to bring new life to the conversation about economics.”1And indeed, some

discoursive analysis of the economic genre has been applied. Economists

are not completely unaware of what poststructuralist theory has to offer,

and they occasionally employ the devices of (a kind of) literary

deconstruction or (a rudimentary) genealogical analysis. To name a few

examples, there were attempts to apply poststructuralist critique to

Marxist thought,2 to treat neoliberalism with Gramsci,3 to show

foundationalism of liberal doctrines4 and to apply rhetorical analysis to

Friedman5 or Keynes.6 Henderson pointed to the potential benefits of

conceptualising economics in literary terms,7 while Klamer made a case

for appreciating the discursive and rhetorical dimensions of economics.8

McCloskey published several interesting books on the latter subject. All

in all, economics is supposed to enter a “tempestuous season.”9

Yet, this tempest seems to be ultimately a sort of dry thunderstorm,

both in economic discourse and discourse on economics. Possibly it

shouldn’t be surprising that mainstream economists couldn’t care less for

some philosophical, epistemological quibbles. But not only the

“interpretive turn” hasn’t reached mainstream economics,10 but the

challenges formulated on the margins of the discourse usually utilize

poststructuralist arguments only as a way to establish themselves as the


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new orthodoxy. It seems that the trench warfare between different

economic schools continues, while all sides slowly learn to use new

stylistic armaments. And as will be shown later, it is hardly a new thing in

the history of economics.

No comprehensive critique of economic genre has been formed yet. I

would argue, that without providing a more general framework for

thinking about economics, the cognitive value of discoursive analysis will

be lost and will deteriorate into the very blind instruments of power it

seeks to dismantle. Whilst deconstructing economic knowledge is

certainly indispensible to understanding it, it needs to be a part of a much

bigger project. Otherwise it may be that studying rhetorical devices used

to established legitimacy for this or that theorem will end up just another

way to publish an academic paper. The sole claim that “economists have

become to some extent prisoners of their tools” 11 is as much true as it is

analytically barren.

Such comprehensive critique of economics must be based on a study

of its history. Without proper historical context, it is simply impossible tograsp the dynamic of power struggles on a systemic level. Debord warns

that:

The precious advantage that the spectacle has drawn from the outlawing ofhistory, from having condemned the recent past to clandestinity, and fromhaving made everyone forget the spirit of history within society, is aboveall the ability to cover its own history of the movement of its recent worldconquest. Its power already seems familiar, as if it had always been there.All usurpers have wanted to make us forget that they have only justarrived.12

The analytical value of the idea of the spectacle will be discussed later

(Chapter 27), but for now let us concur that oblivion of the past ensures

that the present remains unchallenged. Even if one tries to do so, without

the knowledge of the past he or she is stuck in the vicious circle of


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repeating the same age-old arguments in the same age-old debates and

making the same “groundbreaking” discoveries as had been made

countless times before.

Therefore, to a significant extent this is a historical study.

However, it is neither a history of ideas nor is it purely a materialistic

history of economic practices. As hopefully will be illustrated by this

thesis, a proper examination of social phenomena needs to abandon the

timeworn methodological dichotomy between spirit and body (which has

typically expressed itself in the Christian preference for the former or the

materialist for the latter). As Schmitt argues, constructing a contrast

between these two spheres only to dissolve it by reducing one into the

other must result in a caricature.13 Thus, I will be looking for

interdependencies between economic discourses, institutions, and

practices, trying not to privilege any one of them. Study of discourse that

disregards study of practice is rootless and toothless. Study of practice

that doesn’t see its discoursive underpinnings is no study at all.

Vries rightly complains that “historians are prone to labour under themisapprehension that one can answer fundamental questions about a

phenomenon by seeking its origins. There one hopes to observe naked,

innocent acts that reveal the true character of what is later shrouded in

mystery.”14 The search for such original sin is futile. Thus, instead of

giving way to such archaic methodology and looking for points of rupture

that put in motion successive historical periods, I propose to analyze

history as a story about a multitude of discourses, institutions, and

practices that dynamically change their configuration, forming various

power structures. Perhaps it could be described not by a genealogical

metaphor, which suggests themes of evolution, generational succession

and family resemblances, but, if you forgive me this high-flown

metaphor, as a history of constellations. Hardly ever does a really new


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star appear on the night sky or an old one vanish from it, but each of the

myriad stars pulsates with varying brightness, and time after time we

decide to look at a chosen few of them as if they were somehow

meaningfully connected. And, after all, on some level they really are

interconnected, influencing each other constantly by their gravitational

and electromagnetic forces.

For some decades now, social theory has been growing in the climate

of, to use Lyotard’s clichéd expression, incredulity toward

metanarratives.15 It is accepted to study localized politics of resistance,

explore “the lonely struggle of the prisoner in his cell,” 16 to give voice to

groups previously silenced and expelled to the margins. Narratives that

are scaled to a more general level of analysis stink of sorcery, of crude

Marxism, of Enlightenment hubris. But while distrust towards totalizing,

or homogenizing narratives is understandable, it too often becomes an

excuse not to think on a more global and general level. The justified

hostility towards the way of thinking associated with grand narratives is

too easily extended to the object of such analysis. Rejection ofstructuralist approaches too often leads to refusal to analyze global

structures. I would argue that this is the equivalent of throwing the baby

out with the bathwater.

Today, to find our feet in the world, we desperately need narratives

that are big, even grand, along with those that are small and localized. As

long as we remember that they all have their blind spots and limitations,

as long as we resist the temptations of reductionism, they can serve us

well. What’s indispensable in this endeavor is a sort of intellectual

humility that allows for no more than just pointing to some impermanent

tendencies, shaky patterns, and a few cautious generalizations. As little as

this. A much as this.


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This discussion is not to be enclosed within one subdivision of

academic field. It will bring in diverse issues, ranging from the military

conquests of Alexander the Great to Elizabethan theater, from the

scholastic stance on probability to the birth of modern consumer credit.

However, it would be imprecise to say that the approach will be

multidisciplinary. Rather, one can expect from this work an attempt at an

unidisciplinary approach. It is not about bringing together various

perspectives on one subject but proposing an analytical framework that

could be used to further our understanding of various subjects.

The book is structured around 50 short chapters, each of them

tackling a specific topic and presenting yet another side of the problems

at issue. The chapters are organized more or less chronologically,

although that rule is sometimes bent. I recommend that they are read

consecutively, however, the narrative is not strictly linear and at times a

topic touched on in one chapter is picked up in another one. Such links

are usually indicated by the number of the chapter put in brackets. The

argument will proceed in a somewhat discontinuous way precisely because the broadness of the subject at issue renders linear narratives

useless. Perhaps it cannot be cut open with a one-dimensional, however

sharp, argument, but must be entwined by a net-like one. Hopefully, the

insights we are fishing for will not slip through.

Finally, I must acknowledge that the decision to operate on a level of

general analysis in search of systemic interdependencies comes at a cost.

Tackling a wide range of issues means that none of them is fathomed

completely, and many are certainly treated with less attention than they

deserve. This is also partly due to an attempt to make this work as

succinct and to the point as possible. Writing lengthy papers is a threefold

sin: of smugness, style, and lack of consideration for the reader.


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Although I stand by my research and have put a lot of effort into

ensuring that no factual mistakes were made, I accept that in many fields

I remain an amateur. I therefore welcome all possible corrections and

criticisms.

My only hope is that these criticisms will not bring the discussion

back to the level of particulars. Succumbing to the terror of details bars us

from any chance of understanding the world we live in. To say that things

are more complicated is always true, but only at times does it contribute

to our understanding of the issues at stake.

Thus, demolish my arguments all you want, but please, do it in order

to go beyond them and not to step back.


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Chapter 3:

In which the myth of barter is debunked.

Barter (verb)mid-15c., apparently from Old French barater , to cheat, deceive, haggle

Online Etymology Dictionary

Few concepts are more central to modern economics than that of

barter. After Adam Smith proclaimed that “the propensity to truck, barter,

and exchange one thing for another” 17 is inherent in human nature, this

claim has been repeated countless times, becoming “the great founding

myth of the discipline of economics.”18 The existence of barter has been

often presented as a historical fact, usually in narratives telling stories of

the gradual progress of humanity: once upon a time there was barter,

which was natural, but very inconvenient, so people came up with money

to supplant it. “It needed conscious reasoning power of Man to make the

step from simple barter to money-accounting” tells Crowther, who was

editor of The Economist from 1938 to 1956, in his Outline of Money.19

This story has become a sort of common sense understanding.

One can notice that in modern economic textbooks, barter is no

longer presented as a stage in economic history, but rather as a imaginary

figure. Graber collected several instances of this: “To see that benefits

from a medium of exchange imagine a barter economy,” write Begg,

Fisher and Dornbuch. “Imagine the difficulty you would have today, if

you had to exchange your labor directly for the fruits of someone else’s

labor,” propose Maunder, Myers, Wall and Miller. “Imagine,” suggest

Parkin and King, “you have roosters, but you want roses.”20

This move from grounding argument in historical narrative toabstract theorizing surely is linked with the general concession to abstract

reasoning (see chapter 44), but it has another quality as well. Being solely

an abstract figure in a thought experiment, it cannot be falsified with


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historical evidence. This is priceless, because the fact is that there is no

historical evidence that an economy sustained by barter has ever existed.

Anthropologists have “discovered an almost endless variety of economic

systems. But to this day, no one has been able to locate a part of the world

where the ordinary mode of economic transaction between neighbors

takes the form of ‘I’ll give you twenty chickens for that cow’.”21 In the

words of one Cambridge anthropologist: “No example of barter economy,

pure and simple, has ever been described. […] all available ethnography

suggests that there never has been such thing.”22

Of course, there are specific cases in which barter exchange occurs,

and does so on a significant scale. It is a legitimate form of settling

accounts in all capitalist markets. In the 1980s around 40 percent of East-

West trade involved some degree of barter.23 Inmates in many prisons use

various barter systems to exchange items on a black market. However, it

has never been employed as a regular way of handling economic

interactions between fellow villagers. Abundant data on various exchange

systems that could be labeled as barter shows that it only “takes place between strangers, even enemies,” 24 and “all such cases of trade through

barter have in common that they are meetings with strangers who will,

likely as not, never meet again, and with whom one certainly will not

enter into any ongoing relations […] each side makes their trade and

walks away.”25

Confusion about the pervasiveness of barter amongst humans may

have arisen from the fact that many regimes of exchange may appear to

the unaided eye like barter systems, although in fact they are nothing of

the sort. The prevailing system of settling accounts within European

societies, a system that predated capitalist and even feudal modes of

exchange and for a long time co-existed with them, was the system of


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account money, which was “an ideal unit of measure that allows the

evaluation of goods that are exchanged.”26

It existed only in the mind and in writing. It was a measure of value usedfor accounting purposes, and the value of other commodities, includingactual coinage, would be measured against this standard. The system ofmoney of account most common in medieval Europe was that of pounds,shillings, and pence, which was based on multiples of twelve (theduodecimal system), as opposed to ten (the decimal system). It wasintroduced possibly as early as the seventh century, but given prominence by the financial reforms of the Emperor Charlemagne in the late eighthcentury.27

- writes Wood, but account money and object money (see chapter 5) have been used long before the seventh century. It was used in ancient Egypt,

where the unit was grain, whose value was subjected to careful regulation

by administrative authorities.28 One can also see in the Homeric epics that

we all know from school that people measured the value of ships and

armor in oxen, but of course they never actually paid for anything in

oxen.29 Davies argues that because the taming of animals preceded

agriculture, cattle preceded the use of grain as the unit of account

money30 and have occupied a role so central in it’s evolution that

etymologically the term “capital” is a derivative from cattle.31

In early Germanic law codes, a monetary value was assigned not

only to property but to people as well (“wergild”), detailing

compensations due for various degrees of bodily harm, murder, and

manslaughter, somewhat prefiguring modern insurance calculations that

evaluate people’s health in terms of percentages of bodily damage.

Everything and everybody quite literally had a price. For example, fromthe earliest known Anglo-Saxon laws, the dooms of Aethelberht of Kent(602–3) we read that “If anyone lies with a maiden belonging to the king,he is to pay 50 shillings compensation.” But of course 50 shillings would

not have been paid, not just because the economy was largely non-monetary at that stage, but because neither the shilling, nor even the penny, was then in circulation.32


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This imaginary money was used to settle accounts even in seventeenth

century Europe, providing a matrix for economic exchange that had

nothing to do with the direct exchange of goods for other goods and

everything to do with communal debt regimes, which are the subject of

the next chapter.


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Chapter 4:In which the concept of debt regime is introduced.

The debt shall be paid, said Crito;is there anything else?

Plato

Many readers may remember that in the Homeric epics, which

are set in a pre-monetary context, the exchange of gifts plays an important

role in establishing relationships between the protagonists. 33 Another

well-known, or perhaps even the best known, instance of gift exchange isthe one between the Queen of Sheba and Solomon.34 Although the figure

of barter is so well-rooted in economic discourse that sometimes gift

exchanges are presented as a yet another form of barter, 35 ever since

Malinowski’s studies of the Kula ring in the Trobriand Islands and

Mauss’s conceptualization of gift economies, there has been enough

research on the structures of reciprocity that it is generally recognized as

a separate institution, with its own specificities. Modern mainstream

economists may still struggle with the very concept of giving gifts and

consider it a wasteful ritual, hence “any transfer of resources which was

not chosen by the recipient through the market will generally be

inefficient.”36 However, few would argue that gift economies didn’t exist,

or that elaborate gift exchange systems didn’t play important social

functions both within communities and in diplomatic encounters between

them.

For that reason, some radical thinkers look to “gift economies”

as a potential site of resistance to capitalist ordering of the economy.

However, gift systems have never constituted the primary regime of

economic life. They are interesting institutions, certainly worth exploring,

but all things considered, they should be rather treated as phenomena that


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were historically of secondary importance to the distribution of power.

Leaving aside the instances of Mesopotamian kingdoms and ancient

Egypt where circulation of wealth was centrally managed with only an

embryonic market system functioning on the sidelines of a highly

regulated temple economy,37 for a very long time, the majority of day-to-

day dealings were not subject to administrative decrees or to the monetary

market economy, but were part of a social debt regime.

Debt regime can be understood as a system of recognizing mutual

obligations within a given group that ensuries stability and the continuity

of economic exchange by disciplining the parties engaged in it to abide

by their agreements. And the fact is, that long before the establishment of

monetary economy, through the Middle Ages and even far into the

eighteenth century, a majority of everyday transactions operated on the

basis of personal credit, through the use of imaginary account money as

well as with the aid of various tallies, tokens, and ledgers.38 The

commonly repeated narrative of the credit system being a late

development in the history of economic exchange, which supposedlymoved from the most concrete forms (barter) to the most fictitious ones

(financial derivatives), a story about the victory of abstract over

concrete,39 is simply not true. Credit was central to everyday communal

life constituting “a complex and intricate network of personal ties, […]

based on personal agreements, many of which were struck verbally in

face-to-face interactions.”40 And it was central to wholesale trade and

manufacturing as well; “wholesale trade in wool, cloth, wine, tin and so

on […] all stages in the woolen clothing industry […] sales of land and of

rents […] were commonly conducted through extending credit.”41

English merchants, shopkeepers, farmers, manufacturers, and consumershad developed an elaborate credit network based on personal agreements.One historian estimates that by the first half of the seventeenth century, the


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ratio of personal credit to coin transactions was 11:1. This statistic isfurther substantiated by Craig Muldrew’s study of how people insixteenth-century King’s Lynn, a then-vibrant coastal town north ofCambridge, used a wide array of credit contracts, such as sales credit, bills, bonds, and pledges, to mediate their commercial interactions. Thesuccessful employment of such instruments generated an extensive web ofcredit that connected people throughout the community, sometimes ascreditors and sometimes as debtors.42

Discipline was ensured mainly by means of informal social control, and

for a long time operated without appealing to the mechanisms of state

violence such as police or bailiffs. That was especially the case in the

Middle East, where after converting to Islam commercial classes largely

dispensed with the state structures.43

The livelihood of the masses depended in the first instance on

such informal credit regimes and on the commons. The commons can be

understood as an inseparable combination of a social practice and a

resource that was both its condition of possibility and the object of this

practice. It was an institution that forwent the regime of property rights,

in which, for instance, a village cooperative communally used land on

which (individually owned) cattle was herded. Collective management of

the commons ensured that no “tragedy of the commons” (i.e., no

depletion of the common resources caused by unrestrained individual

usage) would occur, deciding on the rules and fines for breaking them,

e.g. “when the increasing number of cattle raised the risk of overgrazing

the pasture, the cooperative issued an ordinance for the pasture […]. It

limited the number of cattle, impounding them if necessary and levied

fines and enforced their collection.”44

The regime of debt was enforced from within but was also influenced

from above. The most important regulations were ones designed to

counter the tendency to accumulate wealth in the hands of a small elite


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and to protect debtors. Sumerian and Babylonian kings typically on

assuming power and sometimes later over the course of their reigns

issued declarations of “clean slates,” voiding all outstanding consumer

credit, returning land to its original owners and freeing the debt-peons. 45

As Graeber notes, “the Sumerian word amargi, the first recorded word for

‘freedom’ in any known human language, literally means ‘return to

mother’ – since this is what freed debt-peons were finally allowed to

do.”46 The Old Testament rule on the jubilee years served a similar role:

every 7 years debt-induced slavery was to be annulled, and every 49 years

all debts were forgone and land returned to its owners. 47 The deeply

political dimension of debt regime was also appreciated by Solon, whose

famous reforms laid foundations placing the political sphere above the

most immediate financial interests of the lenders.48 As Reddy writes:

[Solon] set that society on the road to democracy by decreeing that debtscould no longer be secured against the persons of Athenian citizens.Defaulting debtors who had been sold into slavery were immediatelyfreed; others liable to the same fate were declared free of their debts. Fromthis reform arose that stark distinction between citizen and slave in Athens

upon which civil equality and popular sovereignty were later built.

49

Both in the case of communal debt regimes and the practice of

the commons, there was some room for motives, practices and discourses

that were not strictly economic.

[C]ivic organization in the ancient world gave first place to non-economicrelations, even in the case of commercial enterprises connected to the political-administrative sphere. This gave rise to a sort of personalrelationship between authorities and citizens, due to a “civic sense” in theGreek polis, to ambition and patronage in the Roman Republic, andfinally, in the Roman Empire, to the “benevolence/beneficence” of theemperors, who, whatever they did, were called benefactors 50

In Attic tradition “the city, although being a community, is treated ‘as

a friend’, or, the benefited partner of the euergetic [characterized by

generosity – JM] relationship between two individuals.”51 These themes

of friendship and solidarity were an important part of this discourse of


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benevolence. However, perhaps to the disappointment of those leftist

theoreticians who like to point to the commons as a new utopian project

of social organization that could replace the discredited project of

communism, we have to remember that the commons, as all institutions,

were open to power struggles and practices of violent domination.

Vesting power over one’s access to economic resources in the hands of

the local community made for a very efficient disciplining tool that

ensured one’s compliance with local social, cultural, and religious

hierarchies. Neither social debt regimes nor the commons should be cast

in the role of a horn of plenty that automatically brings about some

version of an utopian future.

Also, some neo-Keynesians utilize this history to claim that debt is a

primordial mode of social being, its essence even, and that granting

government the power to create money means simply reconciling the

political sphere with the underlying economic structure.52 This is perhaps

an interesting, but ultimately a marginal approach. For our discussion, a

more important stance on debt is that taken by mainstream liberaleconomists. And it is an approach marked by a hard-line hostility towards

debt and a utopian vision of a society of individuals free from any

obligations to each other and at liberty to settle all their accounts in cash

(see chapter 34). It is, perhaps, precisely due to this hostility that the

history of social debt regimes has been generally consigned to oblivion,

since if it was remembered, it would certainly give the lie to liberal

economic mythology.


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Chapter 5:

In which the violent beginnings

of the institution of money are recalled.

Money, it’s a crime.Pink Floyd

Although there is nothing universal about money – out of six

“grand civilizations” in human history, the Sumerian, Egyptian, Minoan,

Chinese, Mayan, and Andean, the last two developed highly sophisticated

social structures without any use of coinage53 – today money isinstrumental to the modern debt regime and thus to all economic power

struggles, so it is worth exploring its history.

The first Lydian coins were struck out of electrum – a gold-silver

alloy – during the 7th century, BCE. In Greece, as in India and China,

coinage was probably invented and first manufactured by jewellers, but

soon thereafter it was monopolized by the state. It is often argued that the

biggest force behind the spread of coinage was warfare. 54 The invention

of money correlates in time with changes in the techniques of warfare and

the replacement of old armies made up of aristocratic warriors and their

servants with trained professionals. This new class of mercenaries was

paid salaries, not only the plunder and spoils of war. But plunder and

pillage contributed to the development of coinage as well, as during wars,

large amounts of precious metals, previously stockpiled in temples, were

dethesaurized, as the economic historians like to say; [they were] removedfrom the temples and houses of the rich and placed in the hands ofordinary people, […] broken into tinier pieces, and began to be used ineveryday transactions. […] How? Israeli Classicist David Schaps providesthe most plausible suggestion: most of it was stolen. This was a period of

generalized warfare, and it is in the nature of war that precious things are plundered.55

It is telling that the Phoenicians, the greatest merchants and bankers

of antiquity, didn’t strike coins until they were “forced to do so to pay


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Sicilian mercenaries.”56 Business could be and had been conducted using

ingots and promissory notes. But warfare demanded coinage.

Probably the single most influential event for the popularization

of the institution of coinage was the military campaign of Alexander the

Great, whose conquests led to “the most rapid extension of any single

monetary system in world history – until the advent of euro in 2002.”57

Not only had Alexander destroyed the ancient Mesopotamian debt

regimes and dethesaurized gold held in their temples, but he also ensured

that his coins were the only legal tender in his empire meaning that all

taxes had to be paid in Macedonian drachmae.58 This meant that civilians

in the conquered lands found themselves in a position in which they had

to accept payments in the currency of the conquerors. When Alexander’s

army was fully engaged in Asia Minor, the total cost of his campaign

reached daily payments of some half a ton of silver. 59 This meant around

120,000 drachmae transferred every day into a multitude of private, often

armed, hands. Unsurprisingly, the coinage soon became accepted both as

a concrete instrument of exchange and its abstract structure. As Davieswrites:

Coins followed – indeed accompanied – the sword; payment for troops andfor their large armies of camp-followers was generally the initial cause ofminting. Only the best was good enough for an all-conquering army, andwhat was good enough for the army, even if at first accepted throughcompulsion, was soon universally accepted by everyone with alacrity.Although armies could always take, or “requisition”, whatever theywanted, payment in good coinage was a better way of getting eager co-operation.60

From that time, control over coinage became one of the first priorities to

be assumed by any conquering army, even until this day, with the British

Authority money in the Second World War or dinars issued by theCoalition Provisional Authority after the Second Gulf War.

Issuing money always performed not only an economic role, but a

political one as well. Austin and Vidal-Naquet show that “in the history


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of Greek cities coinage was always first and foremost a civic emblem. To

strike coins with the badge of the city was to proclaim one’s political

independence.”61 Emblems and symbols struck on coins were arguably

“by far the best propaganda weapon available for advertising Greek,

Roman or any other civilization in the days before mechanical printing

was invented.”62 And today, quite a bit of political energy is still

mobilized around issues of currency sovereignty, for instance in

European countries in which adoption of euro is debated, or in Central

and Southern American countries which adopted the US dollar as their

official currency.

Wherever state coinage was imposed, it had to prevail over

previously existing systems of exchange consisting of the abstract

account money, social debt regimes, and finally, object money

(sometimes described as “primitive money”). Davies gives us a whole

alphabet of items used as object money:

amber, beads, cowries, drums, eggs, feathers, gongs, hoes, ivory, jade,kettles, leather, mats, nails, oxen, pigs, quartz, rice, salt, thimbles, umiaks,

vodka, wampum, yarns and zappozats, which are decorated axes – to name but a minute proportion of the enormous variety of primitive moneys63

Setting aside the issue of gold being also a kind of object money used

successfully (and without calling it “primitive”) by leading capitalist

countries up until the twentieth century, it should be noted that the most

successful object monies such as manillas – which were metal bracelets

used as currency in West Africa – were in circulation even after the

Second World War, and it took a long and painful struggle to displace

them with British pounds.64 In fact, an indispensable part of the European

colonial enterprise was always a long and painful struggle to enforce new

forms of discipline by drawing people into the cash-nexus and

supplanting local exchange systems with state-money. It usually involved

some sort of poll tax that had to be paid in cash, 65 and penalization of the


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traditional rituals of gift exchange and conspicuous consumption. For

instance, the 1927 Revised Statuses of Canada stipulated a penalty of no

less than two months in prison for engaging in “any Indian festival, dance

or other ceremony of which the giving away or paying or giving back of

money, goods or articles of any sort forms a part.” 66

However, it always takes power to establish a monetary regime, and

sometimes invaders found it impossible to achieve. At times shortages of

coinage and other problems with establishing a generally accepted

monetary system led colonists to officially recognize as currency object

money of the conquered peoples. For an instance, in the seventeenth

century, wampum was made legal tender in several American colonies,

making strings of beads both a currency in dealings with indigenous

communities and among the colonists themselves.67

As monetary regimes are so closely interconnected with the political

powers upholding these regimes, an essential part of a great number of

modern revolutionary movements was the creation of revolutionary

money. Two great revolutions of the late eighteenth century, the Frenchand the American, were financed by experiments in creating inconvertible

paper money:

The first action of the second Continental Congress [a convention ofdelegates from the Thirteen Colonies that started in 1775, soon after breakout of the American Revolutionary War – JM] was to create an army.Armies have to be paid for and the Congress had no taxing powers. Ittherefore arranged for the issue of $2 million of Bills of Credit in June, andanother $1 million in July. […]. Needless to say the Bills of Credit werenot “as good as gold” but moral persuasion was used to induce people toaccept them: Any person who shall hereafter be so lost to all virtue and regard for hiscountry as to refuse the Bills or obstruct and discourage their currency orcirculation shall be deemed published and treated as an enemy of the

country and precluded from all trade and intercourse with its inhabitants.(Resolution of 11 January 1776)68

Eventually, there was a complete default [of the revolutionary money].Thomas Jefferson said that the public feared that this would shake theConfederacy to its very centre, but instead:


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Their annihilation was not only unattended by tumult but was everywherea matter of rejoicing and congratulation. Their great services as a supportof the War were known and felt by all and all knew and felt theirdestruction was a certain public good…. In Rhode Island—anobstreperous little commonwealth—some Continental bills were buriedwith the honours of war. They were enclosed in a special repository, andover this a eulogy was pronounced as over the remains of a departed friend and benefactor.69

The close relationships between war, debt, and money will be studied

later on (chapter 33), but for now, let us note that exposing the bloody

origins of coinage shouldn’t be taken as a proof that it is an essentially

violent, oppressive institution. It seems to me that this is the mistake

David Graeber makes in his otherwise captivating account of the social

history of debt. The narrative on money that dominates economic

discourse today is one that sees money as a sort of atemporal, natural, and

neutral thing. Liberalism sees it often as primary to political institutions,

while mainstream economics doesn’t see it at all (chapter 34). 70

Therefore, the challenge lies not so much in condemning money for its

gory genesis, but rather in putting it in a historical context, seeing it as an

institution and exploring the functions it played in the power struggles

through the centuries. Economic reflection shouldn’t be concerned simply

with the politics of distribution of money in a given society, but muat

rather recognise the political dimension of the institution of money as

such and study the various effects different exchange systems have.


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Chapter 6:

In which it is shown how Greek economic discoursewas shaped by opposing political factions.

economy (noun) from Greek οἰκονομία,

literally; management of the house, law of the houseEtymology Online Dictionary

The first Greek text on economy is Hesiod’s poem Works and

Days, in which he argued against the admiration for war and martial

virtues and praised the new ideal of peaceful husbandry.71

The mostimportant principle of Hesiod’s household economic teaching is the

traditional, timeless order which:

shows itself in the careful division of work according to the season. [e.g.]Wood must be brought from the mountains in winter, and even the age of people and animals is taken into account in the division of labor—the 40– year-old is the youngest able to dig a straight trench and not just lookaround.72

Other themes of his teaching were care, which should be applied at

all times, and neighborly reciprocity. He warned that profit can confuse

the senses and bring out aggressive behavior in people. Nonetheless, he

recommended that one should seek to increase household profit and

engage in sea trade on a limited scale.73 Hesiod also advised that since sea

trade is hazardous, a man’s entire property should never be risked on a

single ship’s excursion,74 thus voicing around 700 BCE the intuition for

whose mathematical formulation Harry Markowitz earned a Nobel prize

in 1990.

After Hesiod, bits and pieces of economic reflection can be

found in philosophers such as Heraclitus and Democritus, but certainly

the fullest and also most successful Greek economist was Xenophon. HisOikonomikos became a best-seller for generations, not only in Ancient

Greece, but also in the Roman empire and long afterwards.


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In the 15th century, it was streamlined into a separate Italian economic

discourse,75 but was influential on its own as late as 1652 (date of

publication of Blith’s Dedication to the Nobility and Gentry)76 or even

1727 (Bradley’s translation of Oikonomikos under the title of The Science

of Good Husbandry).77 Xenophon emphasized the same principles as

Hesiod, praising order (“nothing is useful or fine for human beings as

order”78) and diligence.79

In both Works and Days and Oikonomikos the household was

conceived as a private sphere that was understood without reference to

the local or national economy. However, this doesn’t mean that the

Greeks were not capable of a more macroeconomic analysis. For

instance, Isocrates’ Trapeziticus treats the specific situation of the

Athenian economy, with its fiscal and monetary problems.80 And

Xenophon’s less known work, Ways and Means, also shows a general

orientation to the economy of the whole polis and proposes a series of

policies to promote trade, strengthen manufacturing, and attract capital

from abroad.

81

In a proposal that could be called proto-Keynesian, if wewere interested in such retrospective readings of history, he argues for a

proactive stance of the polis in promoting industrial entrepreneurship and

tries to calm objections that public initiative will have adverse effects on

private business.82 In his other work, Cyropaedia, he describes the

division of labor, linking it (as Adam Smith would do later) to the size of

the market.83 And Aristotle’s abstract conceptualization of the geometric

exchange matrix proved essential for scholastic economic theories

(Chapter 15).

There is a general tendency in economic historiography to exclude

analyses critical of a given economic order from its body and focus solely

on theories that accept it either openly or implicitly, by assuming that it is


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morally neutral. Thus, the bulk of Greek economic theorizing is

disregarded as moral philosophy and not strictly economic theory. 84 But,

of course, all economic theories are, explicitly or not, moral and political

philosophies as well. And the fact that the elite of Greek philosophy

shared a distrust of economic motives and were wary of commerce does

not mean that they didn’t theorize about them.

Probably the most hostile attitude towards commercial society was

Plato’s. He conceived economic activities as morally degrading and the

profit motive as unacceptable. He especially held retail trade, which in his

eyes was an unproductive speculation on goods, in contempt. He argued

that politics must be purified from the polluting effects of the commercial

mentality or otherwise, when “the desire for more growth has reached its

technical limits, the feverish mentality of the opulent city sets loose the

spirit of war with other city-states.”85 Therefore, in The Republic he

envisioned a society whose economic activities are regulated in great

detail by a cast of ascetic philosopher-kings. If trade is left to be

determined by hedonistic demand it will lead to a new ordering of theworld, based on a “calculation, that could be handled mathematically and

that [would] replace the traditional ordering of life forms according to

various dimensions, with a one-dimensional measurement,” 86 alienating

people from moral ideals and destroying the natural environment in the

process.87

Similarly, Aristotle goes into great lengths to describe mis-

development of the polis into a commercial society animated by the

“chrematistic spirit”:

For him [Aristotle], the development of a monied market economy that prospers on commercial exchange between socially unrelated individualsand that is moved by a chrematistic mentality, would adversely affect thetraditional values of the community and gradually undermine the publicspirit of the polis and of its citizenry.88


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However, Aristotle was slightly less hostile to commerce than Plato.

Indeed, he married Pythias, a daughter of Hermias, the powerful banker

who ruled the polis of Atarneus and a close friend of Aristotle.89

Philosophically, as always, he recommended the golden mean as the

answer to economic problems. In his eyes both poverty and excessive

wealth can be equally corrupting, and the possession of wealth as such is

not something negative. However, as the gain motive theoretically can be

infinite (and in practice often is), it cannot be treated with the golden

mean solution, and thus is inherently harmful.90

Also, Isocrates and Gorgias, Sophists who are usually treated as

technocratic pragmatics, considered the commercial spirit it to be the

source of injustice and corruption.91

There has been a long-lasting dispute on whether the Greeks

employed the notion of linear time at all (or perhaps it was a Judaic

invention, and the Greeks followed a “more natural,” cyclical vision of

time?), and if so, whether it told a story of advancement or maybe of progressive decadence. There are numerous examples in support of all

three options,92 and arguably this debate can be only resolved by

discarding the idea of the homogenous “Greeks” to whom one or another

world-view could be ascribed and acknowledging that there were

numerous tensions in Greek culture, one of which concerned the issue of

progress.

The aforementioned authors (apart from Hesiod) all wrote in a

rapidly changing social environment in which two political prospects

contended for primacy: a commercially growing society based on trade

against a traditional and static society based on agriculture – merchant

classes supported by democratic structures against an aristocratic culture

supported by the elites – the nouveau riches against the traditional


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establishment.93 The lines of demarcation, as always, were not clear, but

one can see these two tendencies in the political discourse of Classical

Athens.

In Ancient Greece, this tension between “perfect gentlemanship” and

the commercial spirit, between “love of honor” and “love of gain”, was

perhaps overcome only in Sparta, where citizens were forbidden to have

anything to do with money-making, leaving economy in the hands of

enslaved helots.94 In The Human Condition, Hannah Arendt liked to

romanticize Ancient Greece as a place where public life was free from

lowly economic concerns, which rightly belonged to the private realm. I

would argue that she misreads some of the philopohical writings that

constituted a conservative defense of the power held by the elites for the

general climate of the era. For all Arendt’s originality, this mistake is

surely of the most trite in the historiography of ideas, it almost falls in the

realm of cliché.


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Chapter 7:

In which it is argued that the existence of a longing for the good olddays doesn’t mean that they have ever existed.

I remember the time when a man who was atolerable workman in the fields had generally,beside the apartment in which he carried on hisvocation, a small summer house and a narrow slip of a garden, at the outskirts of the town,where he spent his Monday, either in flying his pidgeons, or raising his tulips. But those gardens are now fallen into decay. The little summer-house and the Monday's recreation are

no more. John Thelwall, year 1795

Two of the tropes that appeared in the Greek debates described in the

previous chapter made a terrific career in economic discourse. Namely,

themes of nostalgia and moralistic anti-consumerism.

One of the most widespread myths of the pre-modern cultures, the

myth of the lost Golden Age, was also an important part of Greek culture.

Originally, goods were abundant and people could obtain them without

much effort, but eventually human pride and desire for knowledge led

them to disobedience and a conflict with the gods. The consequent godly punishment sentenced humanity to life of suffering and poverty, made

possible only by painful labor. In this respect, the biblical story of the fall

from Eden closely resembles Greek mythology. Interestingly, these myths

may have reflected actual historical developments, telling the story of the

Neolithic Evolution, which by introducing new agricultural technologies

enabled the birth of civilization as we know it, but at the same time most

likely drastically degraded quality of life.95


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In any case, in many ancient texts:

there is considerable nostalgia for the solidarity of the frugal agriculturalsociety, content with its poverty. This mythical model is contrasted withthe society of the time, in which trade had introduced a love of easy richesand, along with it, selfishness and a disdain for moral values. Roll remindsus that the biblical prophets expressed this nostalgia because they werewitnessing the decline of the tribal economy and the rise of private property, which also brings trade, the division of labour, class distinctions,and poverty. A similar process took place in ancient Greece.96

In Dicaearchus of Messana (c. 350 – c. 285 BCE) we find the first

formulation of the theory of economic stages. History moves through a

series of phases, each characterized by one main type of production.

However, in his eyes, this was a theory of the decline of man and not of

his progress.97

Also, in Book I of Aristotle’s Politics, we can find a discussion on

the dynamic of the decay “from an economy based on natural art of

household management towards an acquisitive system stimulated by the

profit motive.”98 He makes a distinction between a natural and legitimate

procurement of goods in order to live well and an unnatural management

of goods oriented towards profit and the limitless increase of one’s estate.

Regress from the Golden Age is said to be fuelled exactly by yielding to

such low and artificial motives. One can see that this argument works

only when a divide between natural and artificial needs is introduced.

Natural is legitimate, limited, and simply good. Unnatural is artificial,

threatening, and luxurious. Of course, these criticisms are necessarily

divorced from any historical sense, as they fail to see that all traditional

and natural goods were once considered unnatural novelties.99

Nevertheless, they have found a place in the economic and politicaldiscourse for good.


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As Perrota notes:

The opposition between natural and “artificial’ needs (and consumption)has had an enormous success. It was repeated in the Middle Ages, by StThomas among others. In the modern and contemporary age it has become, and still is today, the main argument of all the critics of increasedconsumption, of all those who are nostalgic for the simplicity – real or presumed – of the past. With this function it was adopted by the moralistsof the seventeenth and eighteenth century; by Rousseau; by all kinds ofUtopians in the nineteenth century; by the Marxists Baran and Sweezy inthe 1960s; and, lastly, by many advocates of a conservationist reduction incon-sumption. Today this distinction is still part of the common culture ofso-called “anti-consumerism.”100

At times the division between acceptable and unacceptable

consumption was voiced in explicitly political terms; for instance, Plato

argues in Republic against unregulated economic development by

warning that it leads to rising social inequalities and discord, whose effect

is that eventually “the State falls sick, at war with herself.”101 (For more

on political regulation of consumption patterns see chapter 18.) But

generally, the natural/artificial division was part of a moralistic discourse

that sought to influence individuals for the sake of their own moral

standing. If the “original affluence” was lost due to the sins of pride and

greed, then perhaps it could be regained by turning away from worldly

pleasures. Thus, affluence can be achieved only through individual

restraint and asceticism.

This idea has been repeated countless times over the course of

history. Xenophon’s Socrates proclaimed that being controlled by the

“harsh masters” of gluttony, lust, and foolish ambitions is no better than

slavery.102 Plato, of course, voices the same argument for moderation and

restraint. The Stoics warned that one should never rely on more than isabsolutely necessary (which, in their view, included possession of

slaves).103 Also, early Christians drew on the Stoic tradition, and the more

radical passages of the gospel, to campaign for indifference towards


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earthly goods. In the Middle Ages, the Aristotelian division between

natural and unnatural wants was picked up by Thomas Aquinas, who

explicitly repeated his calls for moderation.104 Aristotle was used as a

major point of reference long into the sixteenth century,105 and later, the

same tropes can be found in Montesquieu 106 and Adam Smith,107 and in

the twentieth century, in Keynes.108 Marxist critics, even though they rise

above the level of crude moralism, in their treatment of consumerism as a

sort of false consciousness brought about by the media complex to

manipulate consumers into buying things they don’t really need or truly

want, also often presume this dichotomy between natural and artificial

needs.109

It will be seen in this work that the themes of nostalgia for the lost

serenity of life and the moral discourse of individual restraint, often

working in pair, are recurring elements of economic discourses through

the centuries (Chapters 10, 18, 48). And in any case, this longing for the

good old days seems of little analytical value. Nostalgia appears to be a

constant trope in European culture, working rather as a mode ofexperiencing the present than as an approach to understanding the past. It

can and often is mobilized by political (especially, but not exclusively,

nationalistic) movements, but it is doubtful whether it can become a

valueable feature of any analytical framework that would improve our

understanding of power struggles.


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Chapter 8:

In which we point out that economic growthis a relatively new phenomenon.

It's a zero sum game, somebody wins, somebody loses.

Gordon Gekko in “Wall Street”

The conservatism of the Greek elites and their ascetic ethics should

be put in the context of pre-modern economy, the most important

characteristic of which was, perhaps, that it didn’t know economic

growth. Product per capita was generally static. Until the eighteenth

century, all societies were caught in a Malthusian Trap, in which

increases in output translated into larger populations but no significant

increases of wages or quality of life for the masses. Clark notes that

the average person in the world of 1800 was no better off than the average person of 100,000 BC. Indeed in 1800 the bulk of the world’s populationwas poorer than their remote ancestors. The lucky denizens of wealthysocieties such as eighteenth-century England or the Netherlands manageda material lifestyle equivalent to that of the Stone Age. But the vast swathof humanity in East and South Asia, particularly in China and Japan, ekedout a living under conditions probably significantly poorer than those ofcavemen. The quality of life also failed to improve on any otherobservable dimension. Life expectancy was no higher in 1800 than forhunter-gatherers: thirty to thirty-five years. Stature, a measure both of thequality of diet and of children’s exposure to disease, was higher in theStone Age than in 1800. And while foragers satisfy their material wantswith small amounts of work, the modest comforts of the English in 1800were purchased only through a life of unrelenting drudgery.110

The perception of steady progress through the ages comes from a

cultural overrepresentation of the lifestyles of small elites, which indeed

have been progressing, but constituted only a margin of the population.

Jane Austen may have written about refined conversations over tea servedin china cups. […] While even long before the Industrial Revolution smallelites had an opulent lifestyle, the average person in 1800 was no better offthan his or her ancestors of the Paleolithic or Neolithic.111


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As Malthus himself noted, “the histories of mankind that we possess are

histories only of the higher classes.”112

Economic activities in this pre-growth era were largely governed by

tradition and custom. “It isn't the knowledge or the ignorance of the

farmers that causes some to be well off and others to be poor,”113 says

Xenophon. This knowledge didn’t need to be written down or codified, as

the rules of economic conduct were considered to be obvious. 114 For

centuries the rhythm of economic life was set by weather cycles. Periods

of famine were interlaced with periods of relative abundance, and the best

one could hope for was a stable comfort of living.

In such an environment, consumption patterns were very different

from the ones we know today. The greater hazard to a community’s

interests lay not in scarcity, but in surplus, as its unequal appropriation

endangered the social cohesion of the group. Hence, in pre-growth

economies, one can see so many rituals of collective feasting, destruction

of goods in potlatches or religious sacrifices, and finally, burying goodsin the ground as treasures.115 Some of these rituals have survived to this

day, e.g., the Christian customs of Easter feasting can be tracked directly

to old Slavic rituals of gluttony. On the other hand, traits such as

entrepreneurship or willingness to take risks were often considered to be

unsavory or outwardly threatening in pre-growth economies.

The Catholic condemnation of usury certainly was instrumental in

securing the Church’s economic and political interests (Chapter 16), but

one can also argue that in a pre-growth economy it contributed towards

securing social (albeit feudal) cohesion. Following Piketty’s “r>g

argument”,116 that whenever rate of return on capital is greater than the

rate of growth, inequalities must rise, it is easy to see that when g is 0,


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any return on capital must result in a concentration of resources and an

increase in economic inequality.

The static economy accommodated static economics (Chapter

11). When economic growth was unthinkable, exchange was understood

as a zero-sum game in which the profit of one party must cause the loss of

another party. This is why Aristotle states that trade “is justly discredited

(for it is not in accordance with nature, but involves men's taking things

from one another).”117 By definition, the accumulation of wealth led to

the impoverishment of others and therefore was immoral. This was the

meaning of Augustine’s warnings that “the superfluities of the rich are the

necessities of the poor” or that “you possess what belongs to others when

you possess more than you need.”118 Mass enrichment was not possible.

As Aristophanes observes in Plutus, a society can have general affluence

only if it is built on the enslavement of some other group.119 The

moralizing discourses described in the previous chapter are best

understood this context, perhaps put in the most concise terms by Seneca:“The objects of your desire […] cannot be transferred to one person

without being snatched from another.”120

In Malthusian economies, wages always tended to be low, no matter

how much people worked or how productive they were. Good times

could last only for short periods of time triggered by a new technique of

production, intensification of labour or, most famously, as a consequence

of famines, plagues and wars, which by decreasing the numbers of

mouths to feed could temporarily bring higher real wages to those who

survived the purge. But as the population grew, individual incomes fell

back to subsistence levels. In this situation, the only possible welfare

policy that could be implemented was one of work prohibition. In the


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long run, it didn’t affect the production per capita and wages, but

improved life quality by increasing leisure time. This was precisely the

economic impact and social importance of the Catholic prohibition of

work on Sundays or the Judaic Sabbath.121

Finally, we should note that recently the very notions of economic

growth and gross domestic product (GDP) as its measure have come

under harsh criticism. Simplifying it a bit, GDP is an estimation of the

total sum of money spent in a given economy within a given time. The

conventional approach to it is that the higher GDP per capita, the more

developed the economy and the happier the people. This alleged identity

is so far-fetched that even some mainstream economists, such as Nobel

prize laureates Joseph Stiglitz and Amartya Sen, argue that GDP “may be

a poor measure of well-being, or even of market activity,”122 as it fails “to

capture some of the factors that make a difference in people’s lives and

contribute to their happiness, such as security, leisure, income distribution

and a clean environment – including the kinds of factors which growthitself needs to be sustainable.”123 Thus, in recent years a number of other

approaches to measuring economic and social progress have been

developed, such as the United Nations Human Development Index or the

OECD Better Life Index, that take into account factors such as life

expectancy, education levels, or quality of the natural environment.

However, none of these attempts have gained significant standing in

mainstream economic discourse.

Another criticism of relying on gross domestic product

measurements can be the “gross” part of the formula. GDP is the ultimate

economic aggregate, which amasses all economic activity in a given

country and unifies it in one figure. This can have a dangerous effect,

creating a perception of economy as a unitary entity in which all internal


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tensions are synthesised out of existence. This is not inconsistent with the

historical purpose of national accounting. From its very beginnings, it

was devised with the aim of providing knowledge not about quality of life

issues but about the total military potential of a given country. William

Petty’s 1665 estimates of Britain’s production were to provide an

assessment of British resources available for the Second Anglo-Dutch

War, while Davenant’s 1695 measurements were explicitly called “An

Essay upon the Ways and Means of Supplying the War.”124 And the GDP

itself was chosen over indexes that would be more focused on wellbeing

than simply total output in 1942, when the US Government needed a

basis for planning their military expenses during the Second World

War.125 This was done despite the fact that the economists who devised

the GDP formula explicitly stressed the need for relying on other

measures:

It would be of great value to have national income estimates that wouldremove from the total the elements which, from the standpoint of a moreenlightened social philosophy than that of an acquisitive society representdisservice rather than service. Such estimates would subtract from the

present national income totals all expenses on armament, most of theoutlays on advertising, a great many of the expenses involved in financialand speculative activities.126


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Chapter 9:

In which the interplay between religiousand economic discourses is introduced.

Remember the Lord your God, for it is he who gives you the ability to produce wealth.

Deuteronomy 8:18

To claim like Foucault127 that economics is an atheistic discipline, a

discipline without God, is an easily made mistake. Nevertheless, it is

undoubtedly a mistake. It is a godly discipline in many respects. Some

scholars argue that economics should be simply understood as a branch of

religion.128 Such arguments are probably meant to shake our faith in the

scientific legitimacy of economics, and may be valuable as such, but it is

doubtful that they really further our understanding of economic

discourses and practices. One can always describe one discipline in terms

of another, but such pleasures of redescription are vulgar. When

Encyclopedia of the World’s Religions included dialectical materialism in

its directory,129 it was undoubtedly a way of discrediting Marxism, but

the cognitive value of such a move was, at best, vague.Therefore, it is our job to study economics not as religion, but to

explore the interplay between the two. One can see three main (though

often overlapping) dimensions of this interplay: first, there is explicitly

religious discourse on economy; second, there are ways in which

economic discourse shaped religious dogmas; and third, there is

economic discourse that is not strictly religious, but uses religious figures

and formulas as a way of establishing its legitimacy.

Many examples of religious discourse on economy can be found in

the holy texts of all three Abrahamic religions. The ancient Persian

discourse on economic justice and equity filtered by the rabbinical

tradition appears as one of the main topics in prophetic books, with

Amos, Micah, and Isaiah articulating radical critiques of economic


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development that creates social inequality and fails to provide for the

poor and the weak.130

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Economics and Its Discontents - Jedrzej Malko