The Civil Economy Perspective for a Participatory Society Stefano Zamagni[1] 1
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Enhancing Socio-Economic Integration: The Civil Economy Perspective for a Participatory Society Stefano Zamagni[1] 1. Introduction and purpose One of the most penetrating dangers of our time was described by the 20th century writer C.S. Lewis as “chronological snobbery”, that is, the uncritical acceptance of something merely because it belongs to the intellectual trends of our age. Avoiding such a danger requires both intelligibility of res novae and moral commitment. Across the globe we are seeing two parallel developments unfold, which undermine the realization of a truly participatory society both within and across the nations of the world. First of all, a growing concentration of wealth and a centralization of power which divide societies along old and new lines. Secondly, the division between the “winners” and “losers” of global integration and technological progress is threatening to derail growth. In his Introduction to the present volume, Pierpaolo Donati writes: “We are asked to outline and implement a kind of society that can ensure the full participation of all its members, not simply in terms of compensation or compassion for the most disadvantaged, but in terms of a just and sustainable societal configuration in which people have the opportunity to pursue a good life for themselves and for everyone else”. In what follows, I will speak in favour of the civil economic paradigm as a concrete and original way to cope with the intellectual challenge posed by Donati. To this end, I deem it proper to consider a few stylized facts characterizing the present time. Firstly, the political system has not yet been able to significantly modify the financial institutions responsible of the present crisis. Under these conditions, there is no guarantee that in the next 15-20 years another bank and financial crisis will not occur. In his latest book,[2] Alan Greenspan writes: “Our highest priority going forward is to fix our broken political system. Short of that, there is no viable long-term solution to our badly warped economy”. It is a fact that the economic machinery continues to operate in an intolerably unfair way. Inequality has become endogenous to the system and this not only generates economic costs (e.g. speculative bubbles, decreasing rate of investment; consumption distortions), but, above all, it gives rise to social and human costs. Indeed, an inequality rate exceeding a certain threshold reduces health and increases mortality rates.[3] In recent years, neither economic theory nor empirical evidence have been able to confirm the presumed trade-off between equality and efficiency, as exposed in the classic work by Arthur Okun.[4] In 2014 the IMF produced empirical results showing that greater equality is associated with faster subsequent medium-term growth, both across and within countries. So, there is no economic justification to endorse inequality. On the contrary, fairness is so central to humans that one can infer that it has evolutionary roots (Brosnan and de Waal, 2003). The probable reason is that cooperation was crucial for the survival of the tribe. Evolution favoured the propagation of those traits that predisposed us to value fairness. In spite of the widespread prevalence of this disposition, the notion of fairness is not firmly integrated into mainstream economics. It remains well behind concepts such as efficiency, even though there is no evidence that the latter is more important to us than the former. Secondly, the scaffolding of the present-day market system tends to erode some of the values that support our civilization. Indeed, the Schumpeterian process of creative destruction applies not only to firms and to inputs of production, but also to the very values that gave rise to market capitalism in the first place. In particular, the present market system tends to empower the strong over the weak and to make people believe that greed is the appropriate way of incentivizing economic agents and achieving the best results. However, this is a mere ideological approach to the problem. It is revealing what Mark Carney – the governor of the Bank of England – declared at a PASS workshop in July 2014: “Just as any revolution eats its children, unchecked market fundamentalism can devour the social capital essential for the long-run dynamism of capitalism itself”.[5] Thirdly, the point above deserves further consideration. F. Hayek’s The Road to Serfdom had an enormous impact on the evolution of the spirit of the times as far as economic thinking was concerned. Especially on M. Friedman’s thinking. Through his two books Capitalism and Freedom (1962) and Free to Choose (1980), the founder of the Chicago School of Economics amplified Hayek’s impact. The efforts of these two Nobel laureates culminated in M. Thatcher’s and R. Reagan’s determination to “roll back the state”, at the end of the ’70s. The result was a concentration of power in the hands of an elite that had never been seen before. The accumulation of great fortunes undermined the political system not only through lobbying and campaign contributions, but - 1 - also by discouraging people from political participation. “From 1998 through 2010, business interests and trade groups spent $28.6 billion on lobbying compared with $492 million for labor, nearly a 60-to-1 advantage”.[6] As underlined by J. Komlos,[7] the general point is that the concentration of riches enables the elite not only to engage in conspicuous consumption that makes the rest of the population feel inferior, but also enables them to “buy” economists as well as politicians.[8] That defines another road to serfdom. Hayek’s mind was closed to the possibility that there were multiple threats to individual freedom. He feared exclusive state power and failed to see that any concentration of power can become a serious threat. He believed that as soon as one abandons laissez-faire, one is on a slippery slope and there is no turning back. Yet, there is an alternative to both extremes, as I will indicate below. Meanwhile, let us recall Pope Francis’ warning: “A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules”.[9] Fourth, and as a consequence of the above, global capitalism as a model of social order, has increasingly assumed the characteristics of a religion, since it posits an overarching goal for human life and seeks to pursue it on the basis of a specific concept of human being. One is reminded of the prophetic essay by the philosopher Walter Benjamin,[10] where the author clarifies that capitalism serves to satisfy the same worries, anguish, and disquiet formerly answered by religion. Today, the masking of the ideological nature of global capitalism takes place in two ways, as posited by P. Williams.[11] On the one hand, decisions with moral content are presented in technical terms (e.g.: human rights have to be limited for the sake of efficiency). On the other hand, technical arguments are put forward as genuine moral alternatives (e.g. the market versus state alternative is presented as if it were an ideological question). I do believe that it has become urgent to try to de-mask the ideological nature of the global economic order. Let us recall that ideology consists in labelling as “order” what is in fact a complex pattern of hierarchical, asymmetrical power relationships. The path from ideology to idolatry is a short one. Fifth, climate change and environmental degradation (in particular the loss of biodiversity) threaten to reverse the recent noteworthy achievements in the fight against poverty. The World Bank estimates that the proportion of the world’s population living in extreme poverty has declined significantly, from 37.1% in 1990 to around 9.6% in 2015. However, the poorest people in the world face grave and imminent risks from global warming. The very life support of the poor – including the ability to grow food and to access safe water – is under dire threat. Finally, social science – and specifically economics – still lacks a fully fledged theory explaining how a traditional society plagued with endemic poverty can evolve towards an advanced economy. We know how to compare different economic systems and we also know which factors are strategically important for progress. Yet, full knowledge of how to enhance the transition of a given society from an old social equilibrium to a new one is still missing. This is a real paradox of the intellectual life of capitalism, which is still seeking a plausible and rigorous explanation of the rise and decline of market economies. How is it that the market in certain historical periods becomes the dominant system of exchange and allocation of both outputs and factors of production; and how does it manage to supersede non-market systems such as those offered by the state, associations, corporations, and manorial systems? In a recent contribution, van Bavel shows that such a process is neither the result of the detrimental effects of non-market forces, nor of external shocks, of a climatologic, epidemic or military nature. Rather, the causes of that process are mainly endogenous; i.e. they are the effect of the forces called forward by dominant markets themselves and the market elites they created. In turn, dominant groups use their economic strength to acquire status and political leverage that allow them to obtain means of coercion to compensate for the reduction in productive investments. This explains why and how the dominating rise of factor markets is self-undermining. Success in terms of economic growth enables a few market elites to privatize and accumulate financial assets, natural resources and machinery. Over time, this leads to social polarization and a reduction in welfare for those who are marginalized.