Tag Archives: capitalism

Taking ideas seriously

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In preparation for delivering the 2021 John Urry lecture at Lancaster University on Thursday, I’ve been re-reading the book that introduced me to his work, Economies of Signs and Space, co-authored with Scott Lash. It was published in 1994, but being an economist, and therefore more ignorant of the other social sciences than I ought to be, I had only just found it when I wrote my 1997 The Weightless World. The commonalities in our ideas were striking – more so to me now than I recall them being 25 years ago, although I cite the book.

These included the intuition about the increasing salience of time and space – both books have a ‘cities’ chapter – fragmenting production systems, the importance of the cultural industries, the deficit of institutions lagging behind economic and cultural change. But above all the increasing share of value assigned to the intangible or weightless. They write: “What is increasingly produced are not material objects but signs,” and note the “increasing component of sign-value or image embedded in material objects.”

The lecture this week will pick up on these insights – I think I and they were pretty prescient – to talk about what it means to have an economy of ideas, but will also talk about the need to re-focus on the material foundation of this economy: giant warehouses and energy-guzzling AIs. Oh, and human brains.

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The history – and future – of American capitalism

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Reading Jonathan Levy’s Ages of American Capitalism: A History of the United States has been quite a commitment: over 700 pages of text, plus notes, in hardback. The sheer weight militated against my taking in the grand sweep if its ambition, as I had to read it sitting at home propped on cushions. Nevertheless, it was well worth it.

As the title suggests, the account is organised into different ages: commerce (early days from late 17th century, and the role of slavery); capital (post Civil War to Fordism and the Depression); control (New Deal & postwar golden age); chaos (1980 on). The organising idea is the changed relationship between state and business in each of the eras, but importantly that the state, and political decisions, always ultimately determined the character of capitalism. The private sector – titans such as Morgan and Ford – clearly made a massive contribution to shaping US industrialisation through their business model choices, union-bashing and personal force of will; but they were not writing the story of capitalism on a blank sheet of paper. Government decisions and political forces constrained them and tamed them. And in each of the eras, there were distinct political visions, starting with the conflicting Hamilton and Jefferson visions.

This political economy framing made the final section the most interesting to me, given the many straws in the wind indicating that the 2020s will prove another junction between eras as belief in the “Magic of the Market” (Chapter 19) evaporates. This isn’t to say the Biden presidency will form the template for a new era – and indeed the book stops with the post-GFC recession – but rather that the Reaganite/Thatcherite order has become a disorder.

As in any Big Book, there are lots of interesting details and eye-catching turns of phrase. The superior logistics of the Union Army for example, involving vast military contracts for provisions and even railroad-building: “A highly functional political economy of corruption helped the Union win the war.” The early signs of the importance of the changing geography in US economic development as NASA and companies such as IBM opened facilities in Alabama in the late 1950s, signalling the rise of the sunbelt. The role of JP Morgan in creating forward-looking corporate valuations in the late 19th century merger movement.

There are points at which it seems like the book isn’t 100% in control of the economic terminology. For instance, Levy frequently uses a phrase about deposits ‘pyramiding into New York’ as if it’s a technical term of art. And there are a few scattered graphs that don’t add much to the words – the reproduced paintings are better illustrations of the points being made, be it about the frontier or 1960s consumerism. These are minor quibbles.

The book ends: “I have emphasized that American capitalism is an especially forward-looking economic system, in which expectations of the future play a prominent role in determining the present.” I think this statement is always true, and that it’s the balance between optimism about the future and nostalgia for the past that shapes an economy. The same page later lights on what is particularly distinctive about the US: “its pronounced historical amnesia.” And as Levy concludes, now is the moment for a better imagined future to come into play. Over to the politicians, Biden and the not-yet dormant spectre of Trumpism.

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From Hobbes to Locke – and back again?

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I’m a fan of Deirdre McCloskey, but accept that her writing style is a bit marmite – it’s always clear but she has a rather arch tone which some readers don’t like. Some of her books are also rather long, and the three in her terrific Bourgeois Era trilogy, The Bourgeois Virtues, Bourgeois Dignity and Bourgeois Equality, fall into this camp. They repay the time required, drawing as they do on McCloskey’s extensive reading and research (to get a flavour of how extensive, look at some of her posted course syllabi here).

Now, however, anybody unwilling to commit the time to the whole Bourgeois Era trilogy can read instead this new summary version by McCloskey and Art Carden, Leave Me Alone and I’ll Make You Rich: How the Bourgeois Deal Enriched the World. Where Acemoglu and Robinson’s Narrow Corridor takes inspiration from Hobbes, this book is inspired by Locke, and argues that liberty is the key to the great enrichment of the past two and a half centuries.

At a time when the mood – and reality – of the times is swinging toward state intervention in the economy – and rightly so, given the potentially Hobbesian world to which the combination of market power and pandemic have brought us – it’s all the more important to keep an open mind and take these arguments from economic liberty seriously. Don’t be put off by the blurbs on the back from Stephen Davies of the IEA and Matt Ridley. Besides, the sweep of McCloskey’s historical knowledge is such that the book is just a good read (if you like the tone), and a fraction of the length of the trilogy!

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Burning platforms

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In 2011 the CEO of Nokia, Stephen Elop sent a memo to staff comparing the business to a burning platform from which it was essential to jump in order to change course. He was referring to the disruption of Nokia’s revenues and profitability by Apple and Android smartphones, and he was right. Rebecca Henderson’s Reimagining Capitalism in a World on Fire is essentially arguing that most of the world’s businesses are on burning platforms, if only they knew it. Either the disruption of climate change consequences, or of social insurrection due to inequality – or, as it turns out, the effect of a global pandemic, though the book predates this – will destroy capitalism. Unless businesses across the board change their ways.

I got the book as it was one of the FT Business Book award shortlist titles I hadn’t yet read (I don’t fancy the ones on Netflix or Instagram, but have read & enjoyed all of Deaths of Despair, If/Then and The World Without Work). Henderson clearly has vast experience of engaging with businesses of different kinds, and much of the book is about the success stories – those that have re-engineered themselves to become oriented toward purpose rather than profit. The examples include Unilever and Aetna, described in some detail, as well as old chestnuts like the worker-owned John Lewis and Mondragon, and a range of smaller companies, and industry initiatives like the move to purchase sustainable palm oil.

The book has a good term for what’s needed to make the kinds of changes described in these examples: architectural disruption. As Henderson acknowledges, many more businesses are still oriented toward short term profit and share price rather than long-term social purpose – even though the purpose-driven businesses ultimately do far better in conventional terms. She identifies some key barriers, among them the necessary big internal re-organisation and culture change. Becoming a purpose-driven and high productivity business requires a high level of trust within the firm, and many managers are unwilling and able to embark on this programme.

There are external barriers too: the short-termism of some investors, the difficulties of getting co-operation among businesses, and the political and regulatory context. So reforms to corporate governance and finance (including proper risk-measurement and accounting), and to the political climate of ideas will be needed in addition. List all that’s needed and it can seem daunting. But we’re all on a burning platform. My guess is that several forces will converge to bring about change – millenial employees demanding better, political upheaval given the state of the world, and un-ignorable consequences of the damage to nature. Whether the change will happen fast enough is another matter.

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Deaths of despair

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Many people will be familiar with Anne Case’s and Angus Deaton’s work on deaths of despair – the increase in death rates in the United States due to suicide, (legal and illegal) drug overdose and alcoholism, and the fact that life expectancy in the US has now declined for three years in a row. The research is brought together in compelling form in their new book, called Deaths of Despair and the Future of Capitalism.

The scale of this slow disaster is staggering. “In 2017158,000 Americans died from what we call deaths of despair… That is the equivalent of three full 737 MAXs falling out of the sky every day with no survivors.” “Opioids prescribed by physicians accounted for fully a third of all opioid deaths in 2017 and a quarter of the 70,237 drug overdose deaths that year. This overall number is greater than the peak annual number of deaths from HIV, from guns or from automobile crashes. It is greater than the total number of Americans who died in Vietnam. The cumulative total from 2000 to 2017 is greater than the total number of Americans who died in the two world wars.”

Much of the book is concerned with descriptive analysis of the patterns within these totals. The short answer is: white, working age people with no college degree. While on many indicators things are worse for African-Americans, the trends have been improving for them. Education stands out strikingly as a key differentiator. While the adverse trend is most noticeable from around 2000, for Americans with high school education only things have been getting worse, in terms of despair, in every cohort for decades.

The figures here are for the US, and some of the causes are US specific. Its racial legacy from slavery is unique. Its appalling “health care” system stands out as a major culprit – the costs, the perverse incentives it creates, the lack of coverage. But not only healthcare. The pharma industry is portrayed as a rent-extracting machine. The authors criticise the FDA for approving opioids for general prescription, particularly OxyContin: “The FDA was essentially putting a government stamp of approval on legalized heroin.”

However, it may be that the US and its particular form of weaponized capitalism is only an extreme and early version of something happening elsewhere. The education divide – whose causes and consequences I think we still need to understand in the round – is manifest throughout the western economies. The skill-biased technical change, the “assortative mating”, the concentration of good jobs in big cities, are all occurring throughout the west. Life expectancy gains in the UK have halted and reversed for some groups, and the recent Marmot Review highlights serious inequalities and challenges. Interestingly, the trends seem to be more adverse in English-speaking countries in general. But not unique.

When you consider the harm a number of other industries are doing to us, their customers – highly processed and sugary foods and drinks, finance, tech, as well as pharma and alcohol – it’s perhaps surprising there hasn’t been even more of a backlash against modern capitalism. The final section of the book runs through the broad economic trends behind the adverse outcomes for the once-robust white working class, and lists what could be done. Each item on this list is a major challenge, not least politically – reform US healthcare, anyone? But it extends also to improving corporate governance, anti-trust enforcement, higher minimum wages, improving educational outcomes. The system is broken and every bit of it needs fixing. This is a sobering – and essential –  book.

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