Miltie’s Naturalized Markets

One of those wonderful San Francisco weekends, full of parties and events that stimulate the mind while warming the soul. Or boil the blood while making you shake your booty!… or all of the above… A couple of my regular readings touched on the recent death of Milton Friedman, the infamous ideological ogre of monetarism and free markets. As Doug Henwood put it in his 20th anniversary issue of Left Business Observer, “you’re not supposed to speak ill of the dead, [but] for him, one can make an exception.” Henwood runs through the highlights of Friedman’s much admired economics and finds them at best unproven and generally unfounded. The consequences of Margaret Thatcher’s implementation of his strict monetarism in the late 1970s was a deep recession and millions of job losses, which Henwood wryly notes, “you’d almost think that was the point of the policy.” Beyond his economics, he had a major role as political polemicist, and in that regard he was “malignant… at the forefront of reaction since he first came on the scene in the 1950s,” ultimately influencing the first 9-11 terrorist, Chile’s Augusto Pinochet (Sept. 11, 1973 coup d’etat overthrowing democratically elected Salvador Allende with deep complicity of Nixon, Kissinger and CIA), via his University of Chicago acolytes…

Paul Krugman, the liberal economist columnist from the NY Times, writes at length about Milton Friedman in the Feb. 15 NY Review of Books. If you need an overview of the 20th century debates in economics, starting with the collapse of markets and their defenders during the Great Depression of the 1930s and the ensuing rise of Keynesianism (essentially a program to save capitalism from itself through government intervention), Krugman’s piece is a good starting point. (The Marxist critique of Keynes was perhaps best made by Paul Mattick Sr., in Marx and Keynes, a long-lost volume of anti-Bolshevik left communist writing.) Krugman is no radical, but he is a humanist-leaning critic of the worst rigid ideological applications of market thinking of our era. He situates Friedman thusly:

“If Keynes was Luther, Friedman was Ignatius of Loyola, founder of the Jesuits. And like the Jesuits, Friedman’s followers have acted as a sort of disciplined army of the faithful, spearheading a broad, but incomplete rollback of Keynesian heresy. By the century’s end, classical economics had regained much though by no means all of its former dominion, and Friedman deserves much of the credit.”

Krugman is an economist himself and in spite of his reasonable criticisms he still lauds Friedman as a great man and a great economist. It’s this kind of liberal enthusiasm for markets and capitalism that just won’t die, and that Friedman and the post-60s period did so much to reinforce. I’m writing at much greater length in my new book about the restructuring of the world economy since the early 1970s, which used ideological monetarism as a justification (even if its strict application was abandoned in practice rather quickly). But I just finished reading Paul Hawken and Amory and L. Hunter Lovins’ “Natural Capitalism,” which is a nuanced and in many respects brilliant analysis of what’s wrong with industrial capitalism, but ultimately fails to follow its own arguments to their logical conclusion, which would imply a break with capitalism, corporations and even wage-labor. At the very least it necessitates a strong reorientation of state policies vis-a-vis economics: “We need, incrementally but firmly, to transform the sticks and carrots that guide and motivate business. That means, in essence, revising the tax and subsidy system–the mechanism that is most responsible for the constant rearrangement of monetary flows and that determines social, economic, and ecological outcomes by applying politically selected subsidies and penalties.” Note that this is not advocating the abolition of state regulation or taxes, nor is it advocating leaving the market to its own devices. This meta-point about the role of the state (a la Keynes) is touched on many times in their book but never fully developed into a program for governance. I think they eschew such a program precisely because of the victory of “free market” ideology of the Friedman variety in the 30 years that preceded the writing of this book.

In Natural Capitalism the authors show their virtuoso talents with rethinking basics of how systems are designed. Amory Lovins has long been famous for his innovative thinking about alternative energy, building design, and much more. Hawken is famous for his garden supply brand, but has been at the forefront of pushing green capitalism, arguing as he does in this book that it is more efficient and profitable to accommodate all the hidden costs and ‘externalities’ than to continue depleting the “natural capital” that is the basis of all life. “When natural capital is no longer treated as free, unlimited, and inconsequential, but as an integral and indispensable part of the production process, our entire system of accounting will change. Prices, costs, and how we calculate value will alter dramatically.” (p. 61)

I object to calling the earth and its inhabitants ‘capital’. Capital should properly be seen as a social relation based on private ownership and the alienation of human creativity from its producers. But that’s a whole long argument that I won’t launch into here.

One of the good things about Natural Capitalism is all the good ideas in it for redesigning industrial processes, and its frank acknowledgement (contrasting to the Friedmanites and other boosters of global capitalism) that the status quo is not only wrecking the natural world, but also wasting the potential of a good life for humans too.

“In the U.S. in 1996, a year when the stock market hit new highs, the Fordham University ‘index of social health’ didnot. The index, which tracks problems like child abuse, teen suicide, drug abuse, high-school dropout rates, child poverty, the gap between rich and poor, infant mortality, unemployment, crime, and elder abuse and poverty, had fallen 44 percent below its 1973 best value.”

Ultimately their vision of transformation involves a broad rethinking of the commodity system to focus on services and flows. A handy example is carpets. Instead of buying a carpet, you would buy a floor covering service. The carpet maker would then have an incentive to make the carpet long-lasting and beautiful, and they would be responsible for fixing holes when they appear, and replacing it when it wears out, which would encourage them to increase its lifespan and durability. One of the effects of this rethinking would be to lower the price of human labor vis-a-vis natural resources, which would encourage employing more workers instead of wasting more natural resources. Obviously in the absence of a reconfiguration of property relations more broadly, this could slide into an even more degrading and exhausting work regime than what we have now. The old mid 20th century fantasies of replacing workers with machines (both a capitalist and communist fantasy) and creating a life of affluent leisure, is discarded in favor of a human work replacing the wasteful burning of fossil fuels. Hmmmm…

Hard to argue with the need to relocalize food production and radically reduce the use of petrochemicals in agriculture. “Around 1948, at the start of the era of synthetic pesticides, the U.S. used 50 million pounds of insecticides a year and lost 7 percent of hte preharvest crop to insects. Today, with nearly 20-fold greater insecticide use–almost a billion pounds a year, 40% more than when Rachel Carson published Silent Spring in 1962–the insects get 13%, and total U.S. crop losses are 20 percent higher than they were before we got on the pesticide treadmill.” (p. 196) So a lot of us are going to find meaningful work in locally growing food without the “help” of chemicals. No argument about that from me…

The natural capitalists want to “make markets work” but refreshingly they are clear that markets should be subordinate to the larger purposes of life (quite the opposite of the Friedman acolytes and the people running most governments in the world the past few decades). “For all their power and vitality, markets are only tools. They make a good servant but a bad master and a worse religion. They can be used to accomplish many important tasks, but they can’t do everything, and it’s a dangerous delusion to begin to believe that they can–especially when they threaten to replace ethics or politics…Economic efficiency is an admirable means only so long as one remembers it is not an end in itself.” (p. 261-62)

Unfortunately, since the 1999 publication of this book, the thinking it embodies has already undergone adaptation and dilution. To wit, a talk given last Thursday night at the Commonwealth Club (a bastion of mainstream thinking) called Capitalism 3.0, in which four speakers addressed a much less developed sense of the ideas that flow from Natural Capitalism. Adam Werbach, the much-vaunted former 23-year-old president of the Sierra Club, is now the “sustainability advisor” to Wal-Mart, and he was noticeably uncomfortable on a panel touting the benefits of a misnamed “social capitalism” (the panel’s moderator was the editor of “Good” magazine, obviously a 30-something man who figured out he can make money by being a capitalist booster). Wal-Mart is now something like a state unto itself, so Werbach argued for working with that corporation on the grounds that it is responsible for such vast resource usage (wastage) and as a market-maker its policies and decisions have huge ripple effects, so if it achieves its goal of 100% renewable energy and 100% green stores (the audience had to laugh), then that in itself would have a salutary effect on planetary ecology. An insufficient but necessary step on the path… Paul Rice of Transfair spoke about his certifying organization’s role in increasing income to Third World farmers and producers, but by the end of the night he sounded the plaintive note that really captures the emptiness of the whole evening’s celebration of ‘social capitalism’: “Wouldn’t it be cool if we could invent a new capitalism in which it was more profitable to do ‘right’?” The CEO of Cliff Bar, Sheryl O’Laughlin, chimed in by first insisting on the inevitability of what we face: “the market is the way it is” and then offering her own plaintive contradiction to her evening’s worth of self-congratulatory boosterism: “What if making a difference to people and the environment were equally important to making money?”… none of us got around to asking her how her executive team would choose among their proudly trumpted “Five Bottom Lines” if they were losing market share, or profits were down… it was obvious that the financial bottom line would always take precedence over any other concerns, and that happy workers, ‘sustainable’ practices, healthy environment, all would be jettisoned as soon as profits hit the skids… still, the audience mostly lapped it up, largely a crowd of young business and enviros all wanting desperately to feel good about doing well…

Lastly, on Saturday there was a fun staged reading of a legal case from 1971 in which Lou Gottlieb tried to deed his land to God in Sonoma County. It was intermittently boring (it was a legal hearing after all) and hilarious to hear the case, especially the amicus curae read by Matt Gonzalez for Frank Solomon, which argued that the courts had no business determining that “god” did not exist, or could not be deeded property because there was no such entity that corresponded to a human or corporate form. Solomon’s original argument went back to the original claims made by sovereign queens and kings that they were claiming the land “in the name of God”… if they could seize all of North America on that basis 500 years ago, why can’t a radical hippie landowner in 1971 give his 30 acres back to God?… as someone pointed out in the discussion afterwards, Gottlieb was clearly trying to hoist the system on its own petard… sadly the courts threw the case out. But there’s a rich vein to explore there, which quickly connects to the Diggers and the Free Movement that was the best of the hippie era, and in its own turn connects back to the original struggles in 17th century England against the original enclosures of common lands… which after hundreds of years has led us to the bizarre arguments of natural capitalists to fix the prices and values of the commons so they can force behavioral changes to capitalism–rather than insisting on a generalized abolition of the reduction of life to property and prices!