[PEN-L:6028] Re: Stiglitz Bites Bullet: Poverty Increasing

[knowware@xxxxxxxx (Tom Walker)]

Sam Pawlett wrote:

>Reuters ran a story today summarizing the findings of a recent World
>Bank Study. (the annual development report?):
.. . .
>" Despite the significant gains in development, the gap between the rich
>and the poor is widening and if you look at many countries income
>distribution is worsening, increasing the social pain of economic
>failure. Nowhere are these problems more evident than in the former
>states of the Soviet Union"
>
>Comment: What does he mean by "development"? If poverty is increasing in
>all of the areas studied, what does that say for develpment? or the
>meaning of the term "development" that the bank works with?

Pardon me for recycling part of a message I just sent to a friend, which has
some obscure references to contract costing in it. But I promise that as you
get to the end of the message, you will discover a slightly different take
on "development" then what we're used to hearing.
____________________________
What I'm writing about is a "most of what you think you know is wrong"
version of the history of the second half of the twentieth century. You were
there when we discovered the double-counting error in the OCAW costing
formula. I couldn't believe it when I found it. I spent a week wrestling
with the math to try to figure out what _I_ was doing wrong. Then, after
doing documentary research, I satisfied myself that it was the OCAW formula
that was wrong and not me.

You were there. Unless I'm imagining things, you understood the
double-counting error. You weren't at the TURB forum where I presented my
paper on contract costing, but I told you about it. Believe me, the
reception was hostile. Go figure. Do you think people reacted that way
because 1. they couldn't understand what I was saying or 2. because I was
telling them "most of what you think you know is wrong"?

The double-counting error in the OCAW costing formula is small potatoes. But
it is a microcosm of the larger problem that I'm working on. To understand
that larger problem requires a reframing of the world history that you grew
up with and think you know. You and I grew up during something called the
"cold war", supposedly between "the communist bloc" and "the free world". As
we reached maturity, we realized that the "communist/free world" dichotomy
didn't jibe with our own experiences and so we revised the way we framed
history. That revision was provisional.

>From where we stood, terms like "american imperialism" and "class struggle"
allowed us to make more sense of the world than did terms like the "free
enterprise system" and the "communist conspiracy". Then came the
Reagan/Thatcher years and the cold war revisionism that produced Orwellian
subtleties like "freedom fighters" vs. "terrorists" and "totalitarian" vs.
"authoritarian" regimes. Then the left withered and Eastern Europe imploded.
Our conceptual building blocks came tumbling down at the touch of a
transparently invidious word game. No matter how hard we try, we can never
rebuild an understanding of history based on our old, provisional revision.
Nor should we want to.

I have gone back to the old dusty archives -- the "British Museum", so to
speak -- and retrieved a new revision. This revision puts the communist
bloc, the free world, american imperialism, class struggle, authoritarianism
and totalitarianism in an entirely different light. It is not a conspiracy
theory, but . . . most of what you think you know is wrong.

For starters, "neo-liberalism" didn't suddenly burst on the scene in 1979
with the election of Margaret Thatcher. Hayek's and von Mises's critiques of
socialism was hard-wired into both post-war, East Bloc "socialism" and the
"Keynesian welfare state".

The key players in this drama were VON MISES, who argued in 1920 that
socialism was "impossible" on philosophical grounds because without a price
system based on free market exchange and the profit motive, a central
planning agency of the state couldn't make rational allocations for capital
investment; HAYEK, who was a student of von Mises and extended some of his
epistemological arguments; Lionel ROBBINS, who as head of the London School
of Economics brought Hayek to England in 1932 and fired the "scientific"
shot across the bow of welfare economics (that is to say, economics
concerned with public policy); Oskar LANGE, architect of the post-war East
European system of accounts, who conceded von Mises' main argument and then
went on to demonstrate how a central planning agency could better "simulate"
a free market than could monopoly capitalism; and Paul SAMUELSON, who along
with Abram Bergson developed another response to von Mises, from the
perspective of a monopoloy capitalist welfare state. Bergson, you may be
interested to note, went on to become the chronicler of the inevitable
demise of the Soviet economic system.

Despite their very real differences, what we imprecisely call "Keynesianism"
and "Soviet-style socialism" were both satellites to von Mises's
(subsequently Hayek's and Robbins') polemic against socialism, which Robbins
cunningly reframed as a polemic against "non-scientific economics". It's
maybe not all that surprising that when the orbits of the two satellites
collapsed, they both fell back on their common centre of gravity -- Austrian
neo-liberalism.

It seems to me that most opponents to neo-liberalism imagine the
desirability of something akin to a "Keynesian welfare state plus
participatory democracy" or "Langean central planning on a democratic
foundation". Neither of these "alternatives" is credible because each would
require the return to an orbit around the same von Misean centre of gravity,
which is itself the source of the problem. The centre will not hold.

The von Misean system is founded on a demonstrably false conception about
work time. That false concept also happens to be, in theological
terminology, a "satanic" conception of time.

There is, however, a genuine alternative, an alternative people can't see
because they can't see past the dried-up husk of their dead-end
pseudo-alternatives. There is a hidden marxism that isn't the marxism that
either the soviet or the western professors taught. There is a hidden
marginalist economics that isn't the marginalist economics that the MIT and
Harvard professors teach. That hidden marxism and hidden marginalism are
both about the politics of labour time, not time as an issue or rallying cry
for some other, "real" politics of position, but time AS politics.

"the limitation of the working day is a preliminary condition without which
all further attempts at improvement and emancipation must prove abortive."

In closing, I'd like to juxtapose the above words of Karl Marx with the
following excerpt from a speech on "Economic Development, Planning and
International Cooperation" delivered by Oskar Lange at the Central Bank of
Egypt in 1961. Lange, you'll recall, designed the accounting systems for the
post-war "actually-existing socialist economies", the Uniform Chart of
Accounts. During the 1930s Lange was a professor at the University of
Chicago and editor of Econometrica. At the time of delivering the speech, he
was chairman of the Planning Committee and the Economic Council of Poland.

"What is the essential of planning economic development? I would say that
the essential consists in assuring an amount of productive investment which
is sufficient to provide for a rise of national income substantially in
excess of the rise in population."

My entire argument can be summarized as being about the radical,
fundamental, irreconcilable incompatibility between Marx's "preliminary
condition for improvement and emancipation" and Lange's (and, by extension,
Samuelson's) "essential of planning economic development".

(see: http://www.vcn.bc.ca/timework/satanic.htm for more on "my entire
argument")

regards,

Tom Walker
http://www.vcn.bc.ca/timework/covenant.htm