Essay of the Day: Keith Hart’s Manifesto for a Human Economy

Excerpted from Keith Hart:

“Ronald Coase won a Nobel prize in economics for inventing the idea of transaction costs in his famous paper “The nature of the firm” (1937). He has just announced his desire, with Ning Wang, to found a new journal called “Man and the economy”. Their manifesto, “Saving economics from the economists”, was published in the Harvard Business Review for December 2012. Coase argues there that “The degree to which economics is isolated from the ordinary business of life is extraordinary and unfortunate…In the 20th century, economists could afford to write exclusively for one another. At the same time, the field experienced a paradigm shift, gradually identifying itself as a theoretical approach of economization and giving up the real-world economy as its subject matter. This separation of economics from the working economy has severely damaged both the business community and the academic discipline. “.

He continues, “Economics thus becomes a convenient instrument the state uses to manage the economy, rather than a tool the public turns to for enlightenment about how the economy operates. But because it is no longer firmly grounded in systematic empirical investigation of the working of the economy, it is hardly up to the task….The reduction of economics to price theory is troubling enough. It is suicidal for the field to slide into a hard science of choice, ignoring the influences of society, history, culture, and politics on the working of the economy. It is time to reengage the severely impoverished field of economics with the economy. Market economies springing up in China, India, Africa, and elsewhere herald unprecedented opportunities for economists to study how the market economy gains its resilience in societies with cultural, institutional, and organizational diversities (sic). But knowledge will come only if economics can be reoriented to the study of man as he is and the economic system as it actually exists.”

This plea echoes a movement of economics students a decade ago, calling itself “post-autistic economics”, which later took the form of the real-world economics review. In addition, the legions of heterodox economists multiply and an interdisciplinary World Economics Association, formed in 2011, soon acquired over 10,000 members. So there is plenty of resistance within the profession to an economics whose dominant model is one of rational choice in “free” markets. From Coase’s summary and these other developments we may infer several priorities: to reconnect the study of the economy to the real world; to make its findings more accessible to the public; and to place economic analysis within a framework that embraces humanity as a whole, the world we live in. A century ago, Alfred Marshall defined economics as “both a study of wealth and a branch of the study of man” in his synthesis of the marginalist revolution, Principles of Economics (1890). Marshall was Keynes’ teacher at Cambridge, a cooperative socialist who also developed a Hegelian theory of the welfare state.

The “human economy” approach shares all these priorities. Our focus definitely draws inspiration from and seeks to contribute to the tradition of economic thought, but, more explicitly than the currents within economics described above, we are open to other traditions in the humanities and social sciences, notably anthropology, history and development studies. The Human Economy Program at the University of Pretoria has been shaped more directly by another movement of the last decade which now goes by the name of “alter-globalization”. It is the third phase of an international project that originated in the first World Social Forum held in Porto Alegre in 2001. The first phase (2002-2009) was a series of volumes in several languages, produced by a network of researchers and activists in Latin America and France, which aimed to introduce a wide audience to the core themes that might organize alternative approaches to the economy. These books, called Dictionary of the Other Economy, brought together short essays on the history of debate on particular topics and offered some practical applications of concepts relevant to building economic democracy. Taken together they pointed to a new language for addressing common problems of development.

A second phase saw publication of the first English collection in this series, The Human Economy: A Citizen’s Guide (Hart, Laville and Cattani 2010), for which a number of additional authors were commissioned from Britain, North America and Scandinavia. The new title reflected a desire to emphasize continuity with existing practice in a global context of humanity as a whole. The emphasis was on what people are doing already, even if this is obscured, marginalized or even repressed by mainstream institutions. Fifteen countries were represented, but there were no authors from Asia and Africa, where most of the people live. Extension of the international project to the Anglophone West still left a lot to do. It was also clear that the focus on interaction between researchers and activists left questions of research methodology relatively unexplored.

The University of Pretoria program is a new departure in several senses. First, by adding a Southern African node to the burgeoning network of scholars and activists represented by publications so far, it seeks to give greater weight to African and Asian voices and to broaden the geographical range of South-South and North-South dialogue. Second, it is the first coordinated academic research program in the process initiated by the World Social Forum and encapsulated in the series of books mentioned above. Earlier volumes were aimed at a general audience of activists, whereas our priority is to contribute dedicated academic research to the search for greater economic democracy. Third, starting from a core of social anthropologists, the program has extended its reach to include sociology, history, political science, economics, geography, education and agriculture. In the first two years we have appointed 18 post-doctoral fellows from Africa (South Africa, Zimbabwe and Angola), Asia (Nepal), the Americas (Brazil, Jamaica, USA and Canada) and Europe (Britain, France, Germany, Netherlands, Spain and Italy). In 2012 we appointed an inter-disciplinary group of 8 African PhD students from South Africa, Lesotho, Zimbabwe, Nigeria and Cameroon. The majority of these two groups are carrying out research in Southern Africa, but they bring to Pretoria previous and continuing research interests in a wide range of geographical areas.

The Human Economy program started out with only loose guidelines. Our aim is to build a conversation, among ourselves and with other specialists, ultimately with the general public. This conversation is as much based on empirical investigation and comparison as it is on developing a theoretical and methodological framework for planning research. Our first basic method is inspired by the ethnographic revolution that launched social and cultural anthropology in the twentieth century. This was the first sustained effort by a class of academics to break out of the ivory tower and to join the people where they live in order to discover what they do, think and want. Second, the economy is always plural and people’s experience of it across time and space has more in common that the use of contrastive terms like “capitalism” or “socialism” would suggest. This approach addresses the variety of particular institutions through which most people experience economic life. Third, our aim is to promote economic democracy by helping people to organize and improve their own lives. Our findings must therefore ultimately be presented to the public in a spirit of pragmatism and made understandable for readers’ own practical use.

All of this is compatible with a humanist view of the Human Economy. It must be so, if the economy is to be returned from remote experts to the people who are most affected by it. But humanism by itself is not enough. The human economy must also be informed by an economic vision capable of bridging the gap between everyday life (what people know) and humanity’s common predicament, which is inevitably impersonal and lies beyond the actor’s point of view (what they don’t know). For this purpose a variety of methods have to be drawn from philosophy, world history, literature and grand social theory. Globalization is irreversible and we have to extend our normal reach to address its contradictions. Emergent world society is the new human universal – not an idea, but the fact of our shared occupation of the planet crying out for new principles of association. We urgently need to make a world where all people can live together. Small may be beautiful and a preference for initiatives grounded in local social realities is unchallengeable, but large-scale bureaucracies, whether governments or business corporations, are also essential if our aspirations for economic democracy are to embrace the movement of the world we live in.

What after all is the “great transformation” of human history that we are living through? Around 1800 the world’s population was about one billion. At that time less than 3 in 100 people lived in cities. The rest lived mainly by extracting a livelihood from the land. Animals and plants were responsible for almost all the energy produced and consumed by human beings. A bit more than two centuries later, world population has reached seven billions. The proportion living in cities is about a half. Inanimate sources converted by machines now account for the bulk of energy production and consumption. For most of this period, the human population has been growing at an average annual rate of 1.5%; cities at 2% a year; and energy production at around 3% a year. This last figure is double the rate of population increase, a powerful index of the economic expansion of the last 200 years. As a result, many people live longer, work less and spend more than they did before. But the distribution of all this extra energy has been grossly unequal. A third of humanity still works in the fields with their hands. Americans each consume 400 times more energy than the average Ugandan.

This hectic dash of humanity from the village to the city is widely assumed to be driven by an engine of economic growth and inequality known as “capitalism”. But several social forms have emerged to organize the process on a large scale, not all of them reducible to this single term: empires, nation-states, cities, corporations, regional federations, international organizations, capitalist markets, machine industry, global finance and telecommunications networks. There is a pressing need for more effective social coordination at the global level and the drive towards local self-organization is strong everywhere. Special-interest associations of every kind proliferate. Resistance to the unequal society we have made often takes the form of denigrating the dominant bureaucratic institutions — “the state” and “capitalism” being favourites in this regard – in favour of promoting small-scale self-organized groups and networks. Yet it is inconceivable that any future society of this century could dispense altogether with the principal social forms that have brought us to this point. So the real task is to work out how states, cities, big money and the rest might be selectively combined with citizens’ initiatives to promote a more democratic world society. A first step would be to emancipate ourselves from viewing the economy exclusively in national terms.

This idea is not particularly new. It is just that many activists in the SSE (social and solidarity economy) field will not consider working with bureaucracies that they think of as the enemy. Yet the French revolution was partly financed by the shippers of Bordeaux and Nantes, the Italian revolution by the industrialists of Milan and Turin. Kenya’s world-leading experiment in mobile money, M-pesa, was launched by a subsidiary of Vodacom. Hewlett-Packard has developed research stations in outlying areas for some years now as part of an attempt to make computers accessible to the world’s “poorest four billions”. The notion of a “popular economy” has emerged in Latin America since the 1990s, bringing new coalitions (peasants, urban informal workers, unions) into an alliance with progressive political regimes. Brazil under Lula introduced a community banking system combining microfinance and complementary currencies with strong local democratic input. The government of Uruguay has sponsored a “3C” alternative circuit of exchange and credit for SMEs in which national utilities and local tax offices anchor the circulation of unpaid invoices as currency. South Africa is developing a solution to the problem of slow payments to the self-employed by pioneering a clearing system that allows banks to pay 70% of the value of invoices immediately. It doesn’t make sense to go it alone on a small scale, but equally one has to be selective in picking capitalist firms and state regimes to work with.

This dialectic of small-scale humanism and large-scale impersonal institutions may be illustrated by an example, even if the balance here is tipped towards the former pole. Lindiwe — a middle-aged Zulu woman who once worked in a factory and is now a domestic servant in Durban — rents township accommodation from the municipality and travels to and from work in informal minibuses. She looks after her mother who receives a state pension and her brother’s young daughters since he has AIDS. Her teenage sons are unemployed and drifting into crime and drugs. Her husband disappeared over ten years ago. She sells cosmetics to neighbours in her spare time, shops once a week in a supermarket and at local stores the rest of the time. She attends a prosperity church, has joined a savings club and owes money to loan sharks, but doesn’t have a bank account. Note the complexity of her economic arrangements and the variety of sources she draws on, few of them directly part of corporate capitalism. Lindiwe understands her own life better than anyone else. But there are questions she doesn’t know the answers to: Why are there no longer mining jobs for the men? Why did all the factories close? Why are the schools failing? Why has a Black government done so little to reduce poverty and inequality?

So the human economy approach must somehow bridge the gap between Lindiwe’s life and a world driven by forces she cannot know. But, given our preference to anchor economic strategies in people’s everyday lives, their aspirations and their local circumstances, the intellectual movement involved should be conceived of as being one of extension from the local towards the global. We can’t arrive instantly at a view of the whole, but we can engage more concretely with the world that lies beyond the familiar institutions that immediately secure our rights and interests. According to Mauss and Polanyi (especially, but all the founders of modern social theory too), the chief way of achieving social extension has always been through markets and money in a variety of forms.

Lindiwe could not juggle the plethora of institutional factors in her life without money. Money and markets are intrinsic to our human potential, not anti-human as they are often depicted. Of course they should take forms that are more conducive to economic democracy. Her unanswered questions require a new kind of political education, one grounded in the circumstances she knows well, but also capable of opening up to broader perspectives. It helps to recognize that money and markets span the extremes of infinite expansion and finite closure. As Simmel said, money reflects our human potential to make universal society. It is also true, of course, that human motivations for economic action are more holistic than the economists allow for, taking in concerns with well-being and the good life, for example. These have traditionally been shaped by organized religion. A human economy approach must revisit the complex interaction between religion, education and economy too.

The principles of an “economy”, conceived of as a specific strategy, must be discovered, articulated and disseminated. Such an economy, to be useful, should be based on general principles that guide what people do. It is not just an ideology or a call for realism. The social and technical conditions of our era — urbanization, fast transport and universal media – should underpin any inquiry into how the principles of human economy might be realised. A human economy approach does not assume that people know best, although they usually know their own interests better than those who presume to speak for them. The history of the word “economy” is both long and unfinished. Any modern English dictionary reveals the residue of that history in the way we use terms like economy, economical and economize today, referring as they do to order, management and thrift in contexts ranging from household budgets to the world of markets and money.

In origin “economy” privileged budgeting for domestic self-sufficiency; political economy promoted capitalist markets over military landlordism; national economy sought to equalize the chances of a citizen body. Perhaps “human economy” could be a way of envisaging the next stage, linking unique human beings to humanity as a whole. It would then be a synthesis of the various elements in a sequence of social extension, house-market-nation-world, whose typical social units are not replaced, but rather co-exist. We are of course getting way ahead of ourselves. The Pretoria Human Economy program is first of all a new node in an international network animated by a common desire to advance economic democracy through academic research, social initiatives and public outreach. Based in Southern Africa, our aim is to articulate a new perspective in South-South and North-South dialogues concerning a better world. This will be achieved through research and intellectual exchange more than by issuing programmatic statements such as this one. But we have to keep our eyes on the prize. So why not ask where the human economy is situated in a historical sequence of named economic strategies that still co-exist? Appendix 1 contains an expanded list of candidates drawn from economic history, each with its own governing principles.

Finally, there is a contemporary political context that might add point to the human economy idea at this time. Oliver Williamson received a Nobel prize in economics last year for his development of Coase’s theory of the firm. Coase asked why, if markets are efficient, any self-employed person would choose to work in a collective rather than outsource what they can’t best do themselves. Williamson takes this division between what is internal and external to the firm to be entirely flexible, as should be the social division of labour as a whole, including relations between corporations and governments who have maintained an uneasy alliance for a century and a half. The Fordist phase of internalizing transaction costs is over for a number of reasons, not least because the digital revolution has cheapened the cost of transferring information reliably. This does not mean that corporations have ceased to be large and powerful. Of the 100 largest economic entities on earth two-thirds are corporations and, of those, half are bigger than all but 8 countries. Moreover, I believe we are witnessing a drive for corporate home rule which would leave them the only citizens in a world society made to suit their interests. This is the logical conclusion of the collapse of the difference between real and artificial persons in law in the late 19th century (Hart 2005 The Hit Man’s Dilemma: Or business personal and impersonal), granting business corporations the legal standing of individual citizens. As Thomas Jefferson foresaw, how could mere human beings compete with organizations of their size, wealth and longevity?

Coase/Williamson provides the flexibility to imagine a world where companies control the marketing of their brand, outsource production, logistics and much else and internalize government. For example, why rely on governments for conflict resolution? Corporations also have to handle conflict resolution internally. Why have state laws, when what the world needs most is moral law? The discourse of Corporate Social Responsibility is a major field for negotiating changes in the relationship between firms and society. We all know about the privatization of public services, which is another side of that coin. This is a matter of deadly significance and we have to ask what kinds of political mobilization are capable of resisting it.

The human economy idea may have its origins in small-scale informal activities and a humanist ideology, but effective resistance to a corporate takeover will require selective alliances between self-organized initiatives on the ground and large-scale bureaucracies of the public and private kind. It will also require the development of global social networks of the kind from which our Human Economy program drew its impetus. For, as Camus told us in The Plague, the human predicament is impersonal; there are powerful anti-humanist forces in our common lives. So we have to build bridges between local actors and the new human universal, world society. To be human is to be a person who depends on and must make sense of impersonal social conditions. But in the struggle with the corporations, we need to be very sure that we are human and they are not. The drive for economic democracy will not be won until that confusion has been cleared up.”

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