Friday, 8 July 2011

Note on the Theory of Civil Society - from Martin Wolf Exchange

"WE hold these truths to be self-evident: that all human beings are created equal..." The American Declaration of Independence gives pre-eminence to the 'equality of opportunity', not that of 'outcomes'. Civil society is a system of needs that can regress to the Hobbesian state of nature where "life is nasty, brutish and short", which is why public institutions are needed to protect Life, Liberty and Estate. The Founding Fathers do not question, nor will neoclassical economics ever consider, HOW or WHY in-dividuals come to possess their Estates, their wealth.

Only two years later, the French Revolution and its Universal Declaration of the Rights of Man will stand this notion on its head. In the Rousseauan notion that "man is born free yet everywhere he is in chains", the French Revolution will call for a radical re-foundation of existing civil society by political means, through the State. This is the Rousseau-Hegel-Marx line.

Nor does Max Weber, the founder of modern sociology, meddle with this historical question. Weber focuses on the greatest Founding Father, Benjamin Franklin, as the Paragon for his great study of the relationship between 'The Protestant Work Ethic and the Spirit of Capitalism'. Weber explains that this bourgeois ethic does not question the ORIGIN of wealth but simply attributes its possession, ex post facto, as mundane real concrete EVIDENCE of the blessed state of its possessors. Wealth is a sign of Divine favour. And the 'creation' of wealth through the delay of pleasure, through the ascetic Askese mentioned below, is a sign of the CALLING (Weber's 'Beruf') of its proprietor. This is what Marx denounced with derisive force as "Accumulate! Accumulate! That is Moses and the Prophets!"

This was the entire basis of Schumpeter's theory of economics. Schumpeter regarded as fundamental Bohm-Bawerk's theory of interest and profit as the delay of gratification, as the reward for the investor's 'waiting' on the immedite consumption of wealth. (By the way,THAT IS THE 'VIRTUE' that Martin Wolf derides in surplus economies such as 'Chermany'!) Whereas neoclassical economics is incapable of explaining in its strict theory of exchange of endowments in the market HOW these 'endowments' were obtained, Schumpeter can perceive now that it is the 'calling' (Beruf) of the 'entrepreneur' that permits the creation of new wealth through 'innovation' and 'market competition' whereby old wealth is superseded by the new through a process of "creative destruction".

And the beauty of this process is that it 'explains' not only the phenomenon of economic 'growth' (entirely antinomic to the neoclassics), but also and above all the phenomenon of economic CRISIS. Provided that the Rechtsstaat (the State of Right) limits itself to ensuring the regulation of the market mechanism, the free exchange of 'endowments', crises are a necessary moment of a capitalist economy, and so are 'business cycles'.

It also allows Schumpeter to dissect the identification of Classical Political Economy of all WEALTH with LABOUR. We can finally talk of a Hobbes-Schopenhauer-Schumpeter line. I will leave a consideration of its rather obvious 'apories' (historical inconsistencies) for a later intervention.

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