Spiritual Remuneration

Has Modern Professionalism been Captured by Statism and Privatism?

I feel the need to post a caveat to anyone feeling that they might just be able to glance through this and pick up the gist: the thinking behind it is rather condensed and may require some familiarity with the conceptual framework that informs Rudolf Steiner’s economic thinking (though I believe the ideas stand by themselves). I have kept the short title ‘spiritual remuneration’ because I couldn’t think of a better one, but it may be misleading … a more clunky title might be more descriptive ‘how to pay for people whose work is not focused on physical production’. Oh ... and it is rather long!

Intro

In the previous post I described the need to make a distinction between goods, rights and ideas. When one does this, it becomes apparent that if one were to describe things accurately one would see that it is only goods that are actually sold. In what follows, the description is ‘as if’, which is to say it looks counterfactual, but the phenomenon observed is the same one, thus prompting the question “which description is truer? The conventional consensus or the ‘counterfactual’ explanation”. Can human labour (or anything other than a good) really be sold, notwithstanding our certainty that we do that constantly? And if not, where does that leave current explanations and the arrangements built on them?

Goods Are for Sale

Let us for now accept that only goods are actually sold. Only those who produce tangible goods receive the remuneration by which they can live, which is to say, in this scenario, they receive in exchange the goods which they need. Everyone else will need to persuade the producers of goods to share the proceeds of their work. Of course this is what actually happens in as much as we all live from the tangible produce of the world, not just those who actually produce it. How does this happen?

Background: an agricultural scenario

Let us begin with an archetypal self-contained agricultural community and then see whether the underlying economic dynamic, as it can be seen working there, is in fact any different from the circumstances of today’s economic life.

Rights for Goods

The normal thing will be for people to expend their labour agriculturally in order for the goods by which they live to be produced. Anyone who is part of that community who is not spending his time labouring and is therefore not engaged in production will need to live by what the others produce. What he offers to the community will need to be recognised as of value, for them to be willing to support him in this way. Priests, doctors, educators, accountants, lawyers all fall into this category - they are not directly productive, but work indirectly by developing the cultural life of the population at large. They win ‘the right’ to share in the harvest by virtue of the fact that there is recognition for the contribution they bring. By their work, which involves not expending labour on land, but using their intelligence to ‘improve’ labour, they gain rights which can be seen as a form of token that can be used to claim goods.

Class and Category

This may begin to look like a class analysis - manual workers and cultural workers - but this is not meant, even if there is some correspondence (as also exists, for example, in the distinction between trades and professions). A category analysis is intended, focusing not on the person but the category of work, and with the added caveat that no work is exclusively manual or intellectual, but each is a blend of both. In the same way one can see that today trades and professions are no longer distinct. A tradesman can work professionally and a professional can know the tricks of his trade. There is an element of manual and intellectual application in every task.

Right and Might

To this crude picture could be added the fact the governance arrangements may involve the deployment of force, or that those who are primarily concerned with cultural production may, through their spiritual psychological and physical aptitudes, dominate the manual workers, whether benignly or malignly. The weakness or ignorance of the population, by which it can be oppressed, might in itself be a sign that it lacks real cultural development.

Rights Allocate Goods

In the foregoing scenario there was a transfer of goods from those who directly produce them to those who, while they are not themselves productive, play a role which is recognised by their community and for this they receive the right to partake of the available harvest, whether by gifts, tokens, or forceful commandeering. Before we go into detail, it should be emphasised that though this description of labour (being expended on nature or improved by intelligence) might appear like an artificial construct, it is in fact the underlying reality upon which our economic relationships are based.

The same question today

The situation today may look quite different, but the essential point remains: there are those who produce things and those who do not; or work that is directly productive and work that is not directly productive. When one grasps this simple though incontestable truth and sees that a transfer must always occur between the two, then the question arises “ by what mechanism is this transfer made?”  How are resources (meaning goods in particular) transferred from those who produce to those who do not (or at least not directly).

Modalities of transfer

Below I briefly describe various modalities of transfer (perhaps overlapping) before asking what is appropriate in our time:

Forced Transfer

There is a gradation here between tribute, protection and tax levies. In essence the transfer is involuntary and there may not be anything offered in return, such as scutage (a kind of feudal protection). The recognition of the right of the collector is that they have the might to enforce their demand.

Customary Transfer

Where pure tradition operates, handing over some of the proceeds of ones work is simply an aspect of normal practice. Tithing often falls into this category.

Patronage

Although it is most often associated with the wealthy benefactor (who has already accumulated the right of disposal of the proceeds of the work of others), the principle is simply that one person further the endeavours of another (normally artistic) by providing their means. Whether there is a quid pro quo (such as ‘glorify me in your poems’) is secondary.

Recognition of Mutual Advantage

When everyone in the community pays for the doctor or the fire service, it is because they see that it is in their direct interests to do so. It does not mean, however, that they expect to get sick or have their house burned down - indeed the measure of the effectiveness of the doctor might be that people do not get sick, or that their house does not burn down.

Moral Obligation

The fact that one shares with those who cannot produce may encompass everything from feeding elderly relatives to giving alms to the poor.

State Allocation

The primary means by which all of the reallocation described above is achieved today is through the state.

Independent from the State?

One might argue that there are plenty of people whose work is almost entirely spiritual (meaning not expending labour on nature toward producing a physical good) but who are completely independent from the state. For example lawyers, doctors, bankers etc and everyone else today who does not depend on monetary transfers from the state, but is nevertheless engaged in intangible production.

The Ideal Independent

 A person who works independently can either sell what he produces (in which case he falls economically into the category of a manual worker) or sustain himself by virtue of the fact that he is pre-funded. We could either say that he receives unconditional donations or that his work is pre-paid by a third party.

So if we look at those cultural workers who do not fall into the above category but who are also not dependent on the state for their direct income then the question still arises: by what means do they receive their income? For the sake of clarity lets call this category ‘modern professionals’

One-at-a-time private versus forever public

To provide some background to answering this question, let us first of all look at the person on the furthest pole from the agricultural worker, namely the researcher (aka scientist, thinker, inventor). The point is to clarify what the essential feature of this kind of work is (it is of course obvious that a farmer produces food and a builder produces houses). Whereas the  result of the agriculturalist’s work is  tangible goods which are consumed ‘one at a time’ by ‘one-person-at-a-time’, the result of the researcher’s work is new understanding and ideas. As should be clear from the previous post, an idea is rather different from a good: it cannot be sold, it can be shared by many people at once and it is enduring. It can be seen from this that it is in the essential nature of cultural work to create a public benefit, which is enduring (unlike bread) and not limited to one person’s benefit (unlike bread).

Professional = Public

The better educated person (in the broad rather than the narrow sense of education obviously) creates a benefit to society at large through his enhanced capacities. Put another way, one can choose to use one’s capacities for more or less societal benefit. I would make the further argument that anyone who is part of a profession has entered a societal compact, that is what being in a profession means: one undertakes a responsibility to something higher than oneself, one professes this responsibility (the origin of the word ‘professio’ indicates an avowal or public declaration). In the religious context this is clear when one joins an order, and the original professions were the church, law and medicine.

Two Compromises        

 In most people’s minds modern professionals, as a group of people, far from having the problem of having to wonder where their income is to come from, are faring well. They do not have to scratch around for grant funding as a means of acquiring rights to the proceeds of production. Why is this so?

In what follows I make the argument that they have compromised in one (or perhaps both) of two ways: firstly by privatising their activity (which is essentially a form of self-seeking) and secondly by making a compact with the state which enables them to operate a vested interest.

1) Privatising the Ideal

The argument I make is that the true profession works in the the way described above, for humanity. In the modern context however (and perhaps it was ever so), professionals are likely to see their work not so much in terms of their professional ethos and mission but in terms of how they provide a private benefit to their clients. Their expertise is for sale. By providing a private benefit rather than a public benefit, they reveal that the primary intended beneficiary of their work is themselves and they tailor their work to suit the will of the person who funds it, rather than remaining independent from the funding.

2. The States Handmaiden

 The kind of work that modern professionals do tends to mean that they operate ‘under licence’ from the state, whether as doctors, lawyers or bankers etc. Banking is a good example of this - banking services can only be offered under the jurisdiction of the state. The consequence of this is that the money system (which is really a banking / bookkeeping system) becomes a thing of the state. Given that these essential services are licensed (directly or indirectly from the state), this creates a guaranteed source of income for those working in this area.

Another aspect of this is that the services offered by modern professionals tend to be required by the state in various forms. When a house is built the state requires certain certificates and regulatory compliance with its building practises. This creates a guaranteed source of income for those working in this area.

Another aspect is that the training in these areas is commonly not only prescribed by the state (in terms of standards) but funded by it. The result is that there is a form of cultural closed shop. For those who adopt the culture which the state furthers, they have better access to the positions that they will then go on to occupy. A trivial example might be a museum curator.

Jobs for the boys

While the modern professional economy is nominally independent, all of these factors operating together create a jobs for the boys culture which avails itself both of the self-seeking aspects of human nature which is epitomised in selling private benefits and of the kings’ shilling phenomenon whereby would-be, or should-be, independent professionals are actually in hoc at some level to the state. The more willing we are to sell our own ethos for an income the less we can see that the necessary (but intangible) things we all have to bring could be funded otherwise. When everybody is ‘at it’ then nobody gets a choice in the matter!

Independent and Mutual Economy

Instead of an economy powered by the logic of privatisation (self-seeking) and external authority (the state) we need an economy of mutuality and independence. This can occur when we realise that applying the tangible model to the intangible realm does not work. So when musicians could sell records piece by piece, that was fine. But when their music becomes separable from the medium in which sell it (by digitisation etc) a problem arises which never arises with a loaf of bread. The problem stems from the fact that the intangible operates differently to the tangible. The logic of the intangible virtually forces us to see that the economics of bread is not the same as that of music.

In the former case the benefit goes to the individual consumer (and the producer receives a direct token in recompense per item). In the latter case the benefit is not restricted to one person and because the value cannot be tied down in a tangible item, the producer cannot secure recompense on a piece by piece basis.

The solution we have adopted to date is to attempt to shoe horn the economics of the intangible into the tangible. This has not worked (or is only working to the extent that we have massive licensing operations). The fact that we treat the intangible realm as if it were a version of the tangible may go some way to explaining the reason why we do things the way we do them today (thinking we are paying people for their labour, to name but one example) but it does not mean that the intangible world thereby becomes a version of the tangible, adopting its logic and so forth.

At some point the penny needs to drop or better said the light needs to come on … we pay for bread by buying it (typically after it has been produced), we pay for everything that makes bread possible (which is to say our broader cultural life) by pre-paying the people whose work is concerned with cultural development whether artists, researchers, thinkers, priests, accountants etc … Then they will find their true vocations and realise that their work is for humanity and we will realise that we are the beneficiaries of what they do. Our age has reached the acme of individualism, now we need to remember that we are societal creatures too and for our continued development must look to what we owe.

In Summary

• Professionals (aka spiritual workers) are all those who do not produce physical goods
• By its nature their work is humanity wide.
• Because they cannot finance their life from free donations, allowing them to do their work independently, they end up doing the bidding of either the state or whoever pays them (which of course is different from working where they see the needs are).
• The professional ethos is thereby compromised by the role of the state and the role of private money (which is proxy for the will of the funder).
• Anyone wishing to undertake a form of work that does not result in tangible goods for sale will be challenged to institute a form of remuneration that leaves them free to follow the intuition of their calling.

The degree to which society at large is able to create such ‘free’ arrangements is perhaps a measure of something, as too is the degree to which they are absent. I am convinced that a recognition of this phenomenon would go some way toward unravelling the muddled thinking that is behind the current crisis.

Of Apples and Ideas

This posting is a prelude to an exploration of how society provides recompense for the production of goods in comparison to how other work is afforded.

Modern economics (and society at large) treats goods, rights and ideas as if there were no difference between them. They are allocated according to the market, which is to say there is a bidding process mediated by the price mechanism.

There is of course a difference: goods are produced for consumption, rights are the means by which relationships are mediated (1) and ideas orientate our consciousness. The question is whether this difference should affect the way we treat them - do we need to allocate rights differently to the way in which we allocate apples. In order to address this it may help to point out that how we describe things may in itself help or hinder our understanding by clarifying or obfuscating the arrangement we think we have in place.

Goods: Apples / Cars / Houses?
Take the example of the difference between an apple and a car. While it may appear that both are goods, a car is more constrained by the rights life than an apples is (where one can park it, how fast one can drive it etc). Although the difference may not appear distinct, one should be able to see that in buying an apple one is not receiving a right so much as taking a good into ones possession for consumption; with a car, by contrast, one could argue that one is acquiring the exclusive right of use of the vehicle.

Now consider the difference between a car and a house: when one buys a car one doesn’t expect to be able to keep it on the forecourt of the showroom, nor to be able to live in it; when one buys a house the expectation is that one has bought not just the bricks and mortar but the right for it to remain on the land on which it stands. In reality one is buying the right of exclusive use but also taking on the obligation to maintain it and pay property taxes etc.

Rights of all kinds
Different kinds of rights are treated differently. For example, land rights can be passed on in perpetuity (as long as they can be asserted) where as copyright expires after a period of approximately a lifetime. It is not just because the object of one is tangible and the other is intangible: shares (which are rights connected with corporations) are also not usually subject to expiry. Other kinds of rights, such as the right to free speech or electoral voting rights, are non-transferable and non-saleable.

Ideas
When one moves to the realm of ideas it soon becomes clear that these by their nature are non-transferable, an idea can be shared but this is no guarantee that it will be understood. Ideas cannot be owned and there is no protection in law for them - it will always come down to a matter of design, or application or right of use. If they could then the idea of calculus would be someone’s property

How do the economics of ideas operate then? A mathematician has mathematical ideas, but somebody wanting to learn about mathematics would not simply be able to buy the ideas. They could try to learn themselves and once understood make use of them; in this context the mathematician could help them learn by bringing ‘insights’. People with expertise can provide their insight.

A physical good can be sold: its significance is mediated by possession and consumption.

A right, which is afforded by the community to individuals, can be treated as if it were a good but it has more the quality of a license. We differentiate between rights by treating some more like goods (land rights) and some more like social relationships (the right to trial before a jury).

An idea, when grasped, can be shared but not bought. The person providing insights can be paid, but the idea was not thereby bought. There is no ownership of ideas.

Financial Schizophrenia - The Fallacy of Decomposition

I recently wrote critically about the fallacy of composition, meaning the idea that individual ‘economic’ acts do not add up to social economy because what is true for a part may not be true for the whole.

To make the question live, lets consider the current practices and arrangements in relation to financial literacy. Surely it is axiomatic that an economy consisting of financially literate people will be a healthy economy … indeed one way of defining what financial literacy essentially consists in would be to say that it is the understanding which leads to socially functional financial behaviour. Put the other way round, the global financial crisis must be a reflection of our societal financial illiteracy.

Unfortunately this logic is not applied among those for whom such considerations ought to be paramount. Instead the operating thesis is simply as follows: financially literate individuals are those who cleverly use their understanding of current arrangements to ensure the best outcome for themselves. But best here means best on an individual level, in isolation from wider events, and based on the idea of saving the most (which is tantamount to capital valued in the abstract). On the societal level a completely other set of considerations are thought to come into play. Responsibility for keeping the whole show on the road is given to policy makers who, notwithstanding the narrow perspective of this view of financial literacy, have to put matters rights when the actions of individuals don’t add up, normally this involves legislating, regulating, penalising and reallocating resources. The same person might in his private life be pursuing ‘policies’ who natural consequences on a societal level will be financial turmoil, while in an official capacity endeavouring to apply the correctives that allow society to avoid breakdown. Can this really be called financial literacy? Isn’t this just financial schizophrenia? Its like throwing rubbish onto the street and then being outraged by the mess there, while at the same time declaring that the responsibility for keeping streets clear of litter cannot be undertaken by anyone but an officially designated street warden.

So what kind of financial literacy would really add up to a whole? More to the point is whether an expanded conception of what it means to be financially literate is beyond humanity-at-large. You would be surprised about how many people, when responding to this question, reveal that such matters are beyond ordinary people. My response is that not so long ago writing was considered beyond ordinary folk, but as soon as people were given the opportunity to learn (and literacy became part of the curriculum) the consensus changed, so is it really so far-fetched to imagine that in the not so distant future we will all be able to practise double-entry bookkeeping based on the balance sheets of our own situations?

Global Economy or The Fallacy of Composition? A threshold question.

Global Economy - the single closed economic domain that humanity inhabits

The Fallacy of Composition - the fallacy of inferring that a property of parts or members of a whole is also a property of the whole

When a university supervisor argued that my thinking was flawed because I had failed to take account of the fallacy of composition, she meant that an individual cannot act in a social way because what is ‘social’ for the individual is not ‘social’ for society. Individuals ‘economic’ acts do not add up to a functional economy because what is true for the part is not true for the whole. It is easy to see how she arrived at this reasoning. The individual takes account of his own circumstances but in order to reckon with wider circumstances, one needs to move a level ‘up’ and in so doing the logic by which events operate may change. Seen from the logic of an individual perspective, one course of action seems appropriate; seen from the logic of a  societal perspective a different course is needed.The argument is an old one in economics, going back to Mandeville’s Fable of the Bees and particularly emphasised by Keynes’ Paradox of Thrift.

The the fallacy of composition focuses on an interesting phenomenon. What is it that shifts when one changes ones perspective from a purely individual to a societal perspective and how in fact does one do this (if indeed one can), given that there is a threshold of some kind that the fallacy of composition identifies. The fallacy relies on the idea that the two perspectives are incommensurable.

It is probably obvious that I do not accept the assumptions of those who use the so-called fallacy to argue that individuals must necessarily behave in a way that is societally anti-social, though I understand that this is often used a stick with which to beat the marketeers.

But why mention it at all?
The rounds of ‘austerity’ which European states are seeking to impose and the arguments about their effectiveness are gradually bringing the point home that the consequence of everybody being ‘austere’ at the same time will not be a ‘saving’ for everybody. My saving will be your lost income and vice versa. Economically speaking it does not make sense to act according to oneself only, one needs to look at how one’s actions affect the larger picture and then think how those greater circumstances will, in turn, play back into one’s own.

The circumstances alluded to are primarily financial, that is to say they relate to our expectations of future events and there is a reflexive relationship at work here. George Soros, though he does not claim to be the originator of the idea, is the great proponent of reflexivity; you can hear him describing it here, for example. The essential point is that we are thinking participants in economic life and it is our thinking that will shape the economic landscape we are attempting to take hold of. The objectivity that one finds inherent in natural phenomena is found to be subjectively co-determined in the economic realm.

So who is on the other side of this reflexive relationship? With whom does one need to do metaphorical business. The simple answer is: everybody else! On the other side of each individuals economic activity is the global economy - not local or even national economy. The problem for proponents of the fallacy of composition in economic life is that between the two worlds is a knowledge threshold. The individual is held not to be able to do more than represent his own essentially ‘private’ perspective. The conventional solution is to bring in either the market or the state as the compensating element. In the first case, the selfishness of the individual is held in check by everybody else’s selfish activity and the whole result is, if not social, the best moderation of selfishness achievable. For those who deprecate the market and therefore champion the state, the selfish individual must be regulated by the oversight of those who can take a societal perspective because they represent, not their own interests, but a democratic mandate to socialise the individual. We are then left with two choices - global markets representing the aggregated myopia of individual selfishness or a global state (for such is concerted economic governance by treaties between states) representing the views of those who call themselves leaders and would regulate others.

But is the idea so far-fetched that an individual might choose to adopt a societal perspective, not instead of a purely individual one but as a complement to it? Do we not just need to step out of our own circumstances and see our actions from the perspective of the effects they will have on others too? Furthermore, can this be done alone or does it need to happen in association with others?

 That may sound like a moral injunction but one could also ask whether in fact that is not the conclusion that one is forced to come to when one begins to look at the world in terms of balance sheets. Balance sheets are meaningless until they are related to the wider circumstances in which they find their correspondences. But as soon as they are placed in such an interconnected context they afford the closest representation we can conceive of what constitutes economic reality, a reality that can be seen both from within one’s own point of view and looked at from outside, as it appears to others.

It may not be ‘rocket science’ but there is a little ‘magic’ in the way we touch on this ever shifting boundary that we experience between ourselves and economic life at large. It is not fairy dust or magic wands we need to reveal to ourselves how this threshold is to be negotiated, but the simple expedient of accounting, used as an instrument of economic perception and providing us with the possibility to perceive both individually and through a ‘social brain’.

 Yes we have the choice to act in isolation, but increasingly those who think in such terms will be challenged to maintain the reality of the world they think they live in.

The Money Saving Muddle - Part 2

While I accept that anyone on a limited budget will want to make every penny count, the ‘money-saving’ culture is about something else also. It represents an almost obsessive religious fervour with paying the least one can, for the sake of it. And it is this principle, as a principle, (not the constraints faced by somebody who is hard-up),  that, although it masquerades as prudence, actually masks a brutal kind of egotism.

For what does the money-saving idea exemplify other than that one prefers to keep rather than share one’s resources, that the ‘money’ does not go to the other person but stays with oneself. To put it more radically it is the principle of impoverishing one’s neighbours, whether they are the producers, whose hard work goes into making goods available, or one’s fellow shoppers who must by logic pay more every time you pay less for a group-buy, a voucher or some deal.

I was therefore pleased to note when recently one of the money-saving sites had the following to say:

the higher costs for funding the vouchers are merely displaced, pushed on to those without internet access or the time to take advantage. …Vouchers have also killed spontaneity - drop in to Pizza Express on a whim, without vouchers, and you effectively pay a surcharge, a rule that now applies to vast swathes of consumer life in the UK. …  just when I thought there was nothing more to dislike about money-saving vouchers, one of our journalist discovered this: Online money savers wreck charity bake plans by exploiting 'free bread for a year' offer I have a hope that this whole coupon rush is just a fad, some nightmarish, misguided consumer experiment that will run it's course.

What is the effect of low-pricing? One just needs to look around one at the high-streets today which are occupied by ‘money-saving’ chains, or compare the quality of goods bought now to good produced 50 years ago. What happened to all that ‘money’ that was saved? It has made day to day life much more expensive because the land has been mortgaged … think the process through, or track it out in the accounts, and you will see to what extent the prices we pay today are a reflection of a need to make repayments on loans that were taken out at a level pressured by the need to lend ‘saved’ money at interest!

True Prices

When we feel confident that our needs will be met from the future then we can let go in the present what has come from the past. Then the rain will come. We need circulation not  stagnant dams and parched deserts. We will be glad to pay the true price for what we buy, the price that the other person can really live from, knowing that when we ask for what we need, he will be thinking the same way.

I-Work - a response

Simon Luke Breslaw responded as follows to my recent post - it’s quite long so I am posting his response and then adding my comments in the comment box. Overall Simon seems to add weight to my argument by showing how entrepreneurs and employees are differently related to the work they undertake, if employees were to become entrepreneurs there is no reason why they wouldn’t work in partnership to create productive associations, even still using the framework of the company

Very nicely argued, Arthur! I'm [not] totally convinced though. Are the activities of entrepreneurs not distinct from those of employees, regardless of whether the individual employee has undergone a change in perspective or not? To my mind, entrepreneurs work with capital in a realm of freedom, free from hierarchy and with the aim of realising new business ideas. Their progress towards realising these ideas is measured by the balance sheet.
In contrast, employees operate within in a realm of solidarity, where their work contributions are made possible (at least in a world where income security is not an issue) through their willingness to be associated with the aims of an existing business. Although employees are free to choose whether or not to be associated with the activities of an existing business, the terms of that association (or employment) must be such that the employee agrees to abide by certain organisational rules and organisational hierarchy in regard to decision-making and their work contributions. The organisational rules, although negotiable, are determined by the needs of the company and what the company feels that a particular employee is able to offer. I can't see an aeroplane factory operating in any other way.
Employees do not have the freedom to tell the company what they want to contribute because if their demands do not tally with the aims of the company, they simply won't be hired or they will be fired. In other words, it's the explicit objectives of the company that are capitalised, not necessarily the personal aims of the employee. This helps to take the egotism out of both the entrepreneur's and the employee's aims by socialising them.
Through their employment, employees endorse the aims of the company. Employees agree to help realise the company's aims by partially subjugating their own aims. In an ideal world this would happen out of a spirit of solidarity, as opposed to the need to secure an income. There may be many cases where an employee's personal aims fully match that of the company, I admit. However, the progress an employee makes towards realising his or her personal aims is not measured by a balance sheet but by a large set of other variables, including non-financial variables. An income is merely the prerequisite that enables individuals to realise their personal aims. My personal aim might be to go climbing in the mountains as much as possible. Unless I agree to the rules and objectives of the Alpine Club that has hired me as a mountain guide, I won't be able to realise my non-financial aim of climbing mountains as often as possible because I won't be employed and therefore won't secure an income.
Employment can be a positive thing in helping to curb the egotistical objectives of individuals by forcing them to subjugate their own aims to the social aims of an organisation. Depending on the perspective and situation of the employee, this subjugation may be forced or agreed to voluntarily out of an enlightened social understanding.

The Money Saving Muddle

I recently received a letter from the local council informing me that rather than regularly sending letters by post they would like to notify me of certain information by email. They then invited me to help them ‘save money’ in this way. But what were they really saving? If they had said they would like to save resources, or save paper, or save the postman’s time,  this would have been understandable but in their  muddle of monetary thinking they are no doubt convinced that it is ‘money’ they are saving, whatever that might be!

From an individual’s perspective such an aspiration might appear to make sense but from a societal perspective it does not add up. A visitor from another planet, upon being told that humanity was embarking on a money saving exercise would hardly know what this meant. A local council is surely representative of society as a whole (rather than one entity I competition with others). Economists often talk about this with the tag-line ‘the fallacy of composition’ but another way to describe it would be to point out that if humanity were to consolidate its balance sheets the monetary components would all cancel each other out. Society, aka, humanity cannot save money. Anyone (be it an individual or an organisation) representing a societal point of view, should not therefore be talking of saving money  because all they can mean is that it should be in one persons ‘pocket / account’ rather than another’s. It  may have changed location but nothing else has changed … or been saved. Why this talk of, this addiction to, the notion of saving money?

Can we not strike out the abstraction and be concrete again - save resources, save effort, save time even … but don’t say that because the ‘money’ is in your pocket rather than someone elses, that it has been saved!

The Demonisation of Debt

Don’t look at pornography and don’t get into debt is good advice from any parent, surely? But how much scrutiny can such moral homilies stand? Indeed if there is anything that has unified politicians, economic commentators, and the general public at large it has been the ‘problem’ of debt; and there the matter is left to rest, as if we are at least all agreed on one thing.

But stop! While debt may be inappropriate in certain circumstances, and from an individual perspective can be crippling, we need to look from an economy-wide perspective. Debt is of course just one side of a relationship, but we hear much less about the problem of credit, which is of course its corollary. Indeed the moral homily continues: spend less and save more. But what is saving but being a creditor and therefore being co-responsible for the debt that some other person is carrying. To be more forthright, we should place before our eyes the creditary nature of ‘saved’ money which is an accounting identity made explicit when one looks at bank balance sheets. The very banknote you carry in your pocket is the debt that someone else owes you. How virtuous is that?

Let’s put it another way. When I give classes on financial literacy I ask young people to draw up their balance sheets, as an exercise in trying to understand how a balance sheet shows the way in which we are related to the world around us. I ask them if they are carrying any debt and they normally say they are not. Then we talk about how future liabilities and the things we expect to have to pay for.

It becomes clear that although these may not have been made visible they do amount to quite a lot. For the most part these are things that we cannot avoid paying: tax, rent, insurance, food, medical costs etc. Or to take another example, as citizens of the country we are liable for the national debt, the bank bailout, the maintenance of the military-industrial-medical-educational complex. If a young person were to calculate their liabilities or monetised costs that they cannot reasonably avoid over the course of their lifetime would it still be true to say that they are not carrying debts. To put it another way, the young are already massively indebted, in large measure by virtue of the arrangements that preceding generations have put in place. So how fair is it, how much sense does it make then to turn around and tell them not to go into debt, while not at the same time understanding the dynamics of what one is describing oneself!

I-Work: The Path of the Sovereign Individual

“The employee is dead, long live the entrepreneur”

I look forward to the day when a public figure can stand up and announce: ‘we are all self-employed now’ because in a world of self-employed people, the playing field would be level. Not in an absolute sense but in the sense that we would be peers and partners, understanding what it means to have taken responsibility for something. That does not mean that employees cannot feel responsibility for their work and it is not my intention to sow animosity. However, the person who ‘carries’ the balance sheet and who has both to make his own final decisions and bare their consequences, is technically and experientially in a different place from the person who gets told what to do and then takes home wage at the end of each day. The camp-follower can never know what it means to be a guide. Can every human being guide himself, at least as an expectation and an ideal? Or does society ‘work’ because some people need to be told what to do while others are in a position to tell them.

A self-employed person is someone who has chosen their own path and taken responsibility for what they produce or offer to society at large. Is there any reason why this could not be all of us? The advantages would be immediately apparent. A person who manages his own balance sheet has a very direct interest in how to offer the best service. You won’t find a self-employed person shutting up shop just because it is 5pm as the last customer hurries to get to the door, nor do the self-employed take sickies, waste their resources or carry out futile tasks because it is their ‘job’ to do so.

There are two aspects to self-employment. The first is an inner one. It requires initiative to take something on, to feel responsible for it and to maintain it. The other aspect is external - one’s legal status (which is also a tax issue). It is a moot point whether one can be made self-employed ‘from outside’, whether this can cause an inner re-orientation. Let’s imagine it can! Is there any reason why people currently employed by a company cannot change their contracts of employment such that they become contracts not of ‘employment’ but simple agreements between parties. The company would still exist as a contracting entity but the individuals working within it would all be sovereign ‘service-providers’.

The obstacles to self-employment (in law and in tax arrangements) are not insuperable. In the first place they exist largely as a reflection of our culture’s attitude to working independently. Secondly, even as they exist today, laws are the subject of much misconception - the thinking behind the law is that a person is self-employed when he IS self-employed in fact and his working context just reflects this. Unfortunately (and this is a problem across the board with the way the law is casually understood), a common interpretation of self-employment is to see whether the working practice falls within revenue guidelines, a tick-box approach that pays no heed to the spirit of the law.

So let us assume that we can all be self-employed. Outwardly not much will change - we can continue working in our existing roles, but inwardly a complete reorientation will occur. No longer will anyone work for a ‘boss’, everyone will work according to a contract that they themselves devise with their counterparty. The only question will be whether the contract is being fulfilled or not. The energy wasted on complaining about one’s workplace and colleagues will need to find another outlet - as the author of one’s own arrangements it will be harder to point the finger.

The more strongly this image lives, of people organising their own working life, however modest or humdrum, and having the satisfaction of being their own masters, the more one wonders why the prospect faces such resistance. Of course one can argue that society’s resources are already nicely carved up by the vested interests of corporatism, the state-sector, unionised labour and other allied bodies in such a way that the single individual will never be able to make progress without joining up with the big players. Perhaps that is so and perhaps in the long run ideas and imaginations remain what they are while life, without paying them heed, runs its own course.

A self-employed person must stand or fall on his own merits, there is no safety net or place to hide. Because that is so, one quickly comes to realise that the ‘fate’ of the self-employed is not an individual matter but a social one. He depends on recognition from the rest of society to capitalise his activity, commission his work, and pay the true price that will enable him to live by what he does.

The question is whether as a society we value people doing their own thing and working together in free association, or whether we think that a more regimented approach, governed by industrial leaders, is more conducive to productivity, creativity and the social good.

From Gold to Golden Rule - Citizenised Central Banking

Keywords:

absence of gold, active balance, articulated money, auditorial versus marketised / statist central banking, beyond gold, central banking role of temples, descent of the sceptre, differentiated demand, double independence, dynamic instability induced by asset sales, economic sovereignty, emancipation from external constraints, financial literacy, financial self-knowledge, financial stability, financialism, function vs institution, 'golden rule', imperfect information, individuation, inherent regulation, mediating between poles, monetary authority, signaling methodology, window into thinking.

The whole paper is available from Arthur Edwards – contact ame (at) cfae.biz

Abstract:

Citizenised central banking[1] is the idea that monetary policy functions currently carried out by the central bank will become embedded in the behaviour of individual citizens. At the same time, humanity’s historical reliance on gold will be superseded by such behaviour becoming informed by the golden rule, namely, “over the economic cycle, the Government / Citizens will borrow only to invest and not to fund current spending”.[2]

Today in contrast, monetary policy is generally considered to be the responsibility of government. The state exercises its influence primarily by setting policy objectives for a central bank (controlling authority). The bank aspires to collect appropriate and diverse information from the market, while itself remaining above the ‘fray of self-seeking’,[3] thereby it aims to achieve an enlightened overview enabling it to issue pronouncements on behalf of those it represents. The assumption is made that, by taking this task upon itself, it can come to a sounder judgement than would individual citizens, who act alone and with less perfect information. Thus its role as a benign authority, whereby it overarches other actors, is predicated on the central bank acting as an agent of the wider public interest. This idea rests on the image of a central monetary authority striking one note to suit a diversity of needs, a central decision-making function that aims to unify the separate actions of individual agents. Today, this conception is affected by the phenomenon of global financial markets that now overshadow the capacity of nation states to assert their sovereignty in finance. Increasingly they must listen only to what the market dictates. Thus, decision-making is made subject to an overriding interest greater than simply the central bank acting for its citizens and is placed at a further remove from those on whose behalf decisions are taken. Arising through the course of the 20th century, what does the appearance of this seemingly all-mighty phenomenon, 'financialism', indicate? When central banks are effectively usurped in this way, the assumption is that there is no higher authority than the wisdom of the markets because, presumably, the market represents collective judgment over and against individual judgement (a kind of democratisation of economic decision making). But is that so, or would it be truer to say that the market does not represent judgements, which imply an overview of the whole, but the playing off of vying interests, which are inevitably partial?

If it is a sense of the whole that matters, can one not envisage a role for the individual whereby he grows beyond his merely partial interest to think also of the whole economy as such? In the absence of gold, how might the 'golden rule', not now applied only by a chancellor of the exchequer but by every economic citizen, achieve the discipline necessary to maintain the economy in balance? Through informing his actions with a better understanding of the relationship of spending to investment, could not each individual enact monetary policy at the micro level, as it were, so that our combined actions summed to what is currently effected by the central bank on our behalf? This would involve displacing the 'might' of the market with the 'light' of articulated money,[4] in which through accounting the means of exchange and store of value functions of money are distinguished from one another, so that the citizens consciously together bring about economic balance rather than, as now, leaving this to the vagaries of the market.

[1] The term is from Christopher Houghton Budd - used in seminars.

[2] From UK HM Treasury Website

[3] The image is from Capie, F., Goodhart, C. and Schnadt, N. (1994, p.91):

[4] Gormez, Y., Houghton Budd, C., (2003: p. 18):

Ethics With Everything

A Talking Economics Evening in Stroud - June 5th

Writing from the World Economics Forum in Davos last year, Times columnist Gary Duncan wryly commented that it was a case of ‘ethics with everything’ as if in the business community today one dare not stand up and speak without shouting out one’s benign intentions. The ever increasing number of ‘ethical’ companies bears witness to this phenomenon, ‘ethical’ here meaning that the word ‘ethical’ is somehow used in conjunction with the company name viz The Ethical Property Company, The Ethical Travel Guide, The Ethical Partnership and so on … but such an observation is not intended to belittle the word, rather to put the question: what does ethical mean?

Writing in Associative Economics Monthly June 06, Mathias Bolt Lesniak an entrepreneur from Norway describes the approach behind that associative economics Quality Guarantee Mark that leaves the responsible individual free to ‘define’ ethical, while opening himself up to a process of accountability:

Attempting to run an ethical business requires that you put your own decisions under great scrutiny. Whatever you do, it should have positive implications. Society as a whole and coming generations should benefit from your actions, and in the long term that means you too. A business cannot call itself ethical without working actively on where and what it spends its money. …Whether you are still ethical now becomes your subjective definition, but subjective definitions are dangerous. The danger is that you cut down too far, and define ‘ethical’ as something too imprecise. As a sole proprietor, associative economics gives me a control function for my own definition of “ethical”, and it gives me a conscious way to become better at what I am doing. By opening up my economy to others, I make public the reasons for my definition.

A like approach might be to say that behind any ethical activity, an ethos must be present. Already one can sense in the word ‘ethos’ a less prescriptive mood. Ethos could be taken to mean character: every person or organisation has character of one kind or other. The character may be of a more social-mission-fulfilling or a more profit-maximising kind. If one makes a mild caricature of the charity and the public corporation – one might be tempted to say that in one or the other case the invested capital can either stand for a declared social good or it can mechanically devote itself to ever increasing returns, with the corresponding ethos arising from the logic of the aim it chooses in its design. Here then is the crucial question – whether or not one can purposefully design an ethos; not only saying what the ethos is but demonstrating the veracity of the claim. This is surely only a matter of spelling out what lies behind the business activity (whether it be a corporation or a charity or a state or a sole trader) and enshrining the idea within a legally binding construct such that it can neither be displaced by the expedience of management nor by the power of capital. If this were to happen then the desired ethos would be able find a suitable body in the company, providing an orientation for all who work for it … and if everybody were able to do this, then presumably no one would deny the idea of ethics with everything? Who knows, they might begin to celebrate it - after all, why not?