Re: HOMESTEAD: Ray Carey's Democratic Capitalism

["Keith Wilde" <keithwilde@sympatico.ca>]

Very interesting comments, John.  I hope that comments in a difference font will transmit.

 

Keith

 

----- Original Message -----

From: "John Médaille" <john@medaille.com>

To: <homestead@cog.kent.edu>; <HOMESTEAD@cog.kent.edu>

Sent: Tuesday, July 26, 2005 10:02 PM

Subject: Re: HOMESTEAD: Ray Carey's Democratic Capitalism

> At 07:22 PM 7/26/2005 -0400, Keith Wilde wrote:
> Keith,
>
> A very interesting review. I shall certainly read Carey's book. A couple of
> points.
>
> On binary economics, despite my own disagreements with that "science," I
> think there is a point to speaking of economics as *binary*, even if not as
> Kelso used the term. A proper study of economics involves both production
> and distribution of the things produced.

 

I agree with your principle, but as you seem to acknowledge, that isn't what Kelso meant by "binary" as I understand him--and his current expositors.  There must be other ways to emphasize the importance of distribution than mixing it up with a word that has become associated with the productive process (two factors).

 

You might say that this is so
> self-evident as to be trivial. Alas, it is not so among economists. I offer
> as evidence the very popular economics textbook, "The Economic Way of
> Thinking," now in its 10th or 11th edition. The book does indeed have a
> chapter on distribution, but only to show that distributions are automatic
> and beyond the reach of any human intentionality. Or as the authors put it,
> "Because income isn't really distributed by anyone, it can't actually be
> redistributed. No one is in a position to apportion shares of the social
> product." (285) Wages, unlike profit, are the automatic result of supply
> and demand curves, beyond the ken or control of any human.

 

This is a stunner, and shows how out of touch I have become with contemporary economic fads.  Is this really a standard text?  My latest edition of Samuelson's was the 8th, and I am pretty sure that it retained his comment that the neoclassical interpretation of factor compensation (distribution) as put together by John Bates Clark was, like Adam Smith's invisible hand a "purple  passage", meaning that is too perfect in its internal logic to be fully representative of reality. I wonder if the last sentence above is from the book, or is it your own exaggeration?  The last time I looked, one of the currently "most e-mailed articles" from the NYT electronic edition is about the success of Costco, which is challenging Wal-Mart with a policy of much higher compensation to 'associates'.  Carey directly disagrees with your statement, of course, in asserting that there are many American companies that focus first on the contentment of employees as the most important element in their productivity and profitability.  This is the management perspective as contrasted to the exploitive financial power.  Note that Carey is very aware that it is extremely difficult for enlightened management to pursue this policy due to the ascendent power of the financial sector in having banished the regulatory safeguards that are essential to the vaunted blessings of the "free market".  The authors of your text appear to have consigned a century's worth of political economic rationale to the dustbin.

 

Only production
> is interesting to the authors of this text, and I think they are not alone
> among economists in thinking this way. But in truth, both "supply-side" or
> "demand-side" economics are rather silly. By definition, these economists,
> whether supply or demand side, treat of half the science, like a doctor who
> will only treat the left side of the body. This is a tradition that goes
> back to J. S. Mill, who said that while the laws of production "Partake of
> the character of physical truth," the laws of distribution are "of human
> institution solely" and could be made "different, if mankind so chose"

 

I really do wonder about the orthodoxy of your text.  Insufficiency of consumer demand is a venerable understanding in economics literature, going back to Marx and Mill at least, and much emphasized since the basic principles course has incorporated both a micro and a macro side.

> Mill's position only apparently contradicts Heyne's; both concentrate the
> useful part of the "science" of economics on production, while leaving
> distribution either to social decisions (Mill) or an automatic effect of
> the production process needing no separate study.

I don't know Heyne.  Did you possibly mean to write Keynes? If so, your comment seems wrong.  Keynes' focus was on idle capacity and insufficient demand.  His solution was income from employment, but that doesn't make it an emphasis on production.

> My point is that whether or not one thinks economics are Kelsonian, one
> ought to think of them as binary.

 

But that is a twist of Kelso's meaning and associates economics with his term, thereby contributing confusion.
>
> The title of Carey's book echoes Michael Novak's "The Spirit of Democratic
> Capitalism." As chance would have it, I have just written a critique of
> that tome for my own book. Carey and Novak mean opposite things by
> "Democratic Capitalism." Carey means (I suspect) that capitalist firms
> ought to be democratic, while Novak means that they ought NOT to be
> democratic. In Novak's words, ""To organize industry democratically would
> be a grave and costly error, since democratic procedures are not designed
> for productivity and efficiency." (128)

 

A useful distinction. Carey does categorically disagree with Novak as quoted. The nature of contemporary industry means that it cannot be productive and efficiency unless it is democratic in his sense.
>
> The odd thing about "independent productiveness" is that, were it true, it
> would make employee ownership well-nigh impossible; the price of a share,
> assuming somebody would be willing to part with something so valuable,
> would be a thousand times what a worker earns. But then the whole problem
> of ESOPs is that they can only work as a re-distributive tool if the
> current owners are willing or compelled to dilute their ownership, that is,
> sell them below below market rates. If sold at market rates, than nothing
> is redistributed, only the form of ownership changes. The market is Pareto
> optimal, which is Italian for "nothing really changes."
>
> And a final point. Could it be that everyone must talk about  financial
> parasites because no one is willing to talk about usury?

 

There is more to "ultra-capitalism" than simple usury. Also, I think that "finanicial parasites" (possibly my term rather than Carey's) is more immediately descriptive to contemporary ears than usury, which has a medieval religious flavor.  I'm pretty sure you are going to enjoy the book.
> >
> John C. Médaille
>
> "A dead thing can go with the stream...
> but only a living thing can go against it."
>         -G. K. Chesterton
> http://www.medaille.com/distributivism.htm
> john@medaille.com
>
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