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2004 - Scarcity of What and for Whom

2004 - Scarcity of What and for Whom

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monthlyreview.org
http://monthlyreview.org/2004/12/01/scarcity-of-what-and-for-whom
Scarcity of What and for Whom? :: Monthly Review
Mark Hudson more on Economics
Mark Hudson is a doctoral candidate at the University of Oregon in Eugene, specializing in the politicaleconomy of the environment.Michael Perelman,
The Perverse Economy: The Impact of Markets on People and the Environment 
(NewYork: Palgrave Macmillan, 2003), 224 pages, hardcover $55.00.There is no shortage of opinion within the circles of policy and punditry that the free market is, or ought tobecome, the new Atlas. The dominant discourse holds that the weight of the world, and its scourges frompoverty to pollution, can only be borne and transcended through utter reliance on the market. MichaelPerelman’s latest book confronts this position head on, arguing that far from providing a basis for sustainability and health, markets provide and respond to incentives which impoverish, dehumanize,mutilate, and kill workers, and which are leading us further into ecological ruin. Perelman scrutinizes anumber of pillars of conventional economic theory, assessing them under the light of their implications for people and the environment, and emerges with an argument that economic theory justifies an unjustifiablesystem. This requires two separate points. First, the market produces disastrous results for workers andfor nature. Second, economics as a profession has consistently functioned to obscure and apologize for those results.Over the last few decades, beginning most notably with the work of Nicholas Georgescu-Roegen,critiques of the anti-ecological quality of economic theory have become numerous. In this short and highlyaccessible book, Perelman makes two very worthy contributions to this body of critical inquiry. The first isto approach a highly complex set of relations in a way that is straightforward and direct. The second is toexamine critically the disconnection between economic theory and history. In confronting the relationsbetween economic theory, the economy, workers, and the environment, Perelman dares to ask the mostbasic of questions and to judge both markets and economic theory on the basis of their abilities toproduce sane, sensible, and sustainable outcomes and explanations. Perelman’s interrogation of marketsbegins with what he calls the farm worker paradox.The farm worker paradox illuminates how those who produce the things most vital to human survival anddevelopment are compensated the least. In the United States an individual farm worker earns an annualincome of about $7,500. How has economic theory attempted to explain this? Given that economicsclaims to address how resources are allocated in the service of meeting human needs, this would seemto be a central question. However, following a brief flirtation with the problem by Adam Smith, conventionaleconomics from Alfred Marshall onward has dismissed the paradox as an easily explained phenomenon,whereby the market doles out to each person—capitalist or worker—exactly what they put in. That is,mainstream economics “solves” the paradox by claiming that low wages signal low productivity (and thathigh wages, such as those bestowed upon the CEO’s of Tyco, Enron, and the rest, are indicative of tremendous productivity). This conclusion is the result of a long evolution of economic thought,summarized by Perelman, which has systematically attempted to both obscure and justify the socialinequality that is inherent to capitalist organization.In early political economy, the vast difference between workers and owners was attributed mainly to a“natural order.” In this system, it was natural that everybody but a small elite would labor long hours inexchange for their daily crust. For some prominent thinkers and moral philosophers of the eighteenthcentury, the resulting prod of hunger and poverty among the laboring class was a positive stimulus.Robert Townsend, for example, suggested that the wage system was, relative to slavery, a much-improved system for the appropriation of labor:[Slavery]…is attended with too much trouble, violence, and noise, …whereas hunger is not only apeaceable, silent, unremitted pressure, but as the most natural motive to industry, it calls forth the mostpowerful exertions….Hunger will tame the fiercest animals, it will teach decency and civility, obedienceand subjugation to the most brutish, the most obstinate, and the most perverse. (p. 145)The few who were spared the fate of the laboring masses were distinguished by their control ove
 
productive resources, beginning with land. The bloody and conniving histories of land “ownership” werepushed into obscurity and effaced by the laws of individual private property and what Marx called the“fetishism of commodities.”With the development of fossil-fuelled manufacturing and industrialization, there arose a bubblingdiscontent concerning the persistent gap between workers and owners in the midst of skyrocketing“productivity.” Social and economic trends contributed to heightened, class-based conflicts, from theParis Commune to clashes between strikers, National Guardsmen, and Pinkerton agents. Economistsaddressed themselves to these social clashes by turning their efforts toward the refutation of Marx’scritique of political economy and his analysis of capitalism, in order to reassert the justice of the marketsystem. The development of marginal value theory (independently and simultaneously, as the legend ineconomics departments goes) by Jevons, Walras, and Menger, was motivated in all three cases by adesire to undermine socialist tendencies in Europe through the reformulation of value theory. Within themarginalist framework, capital and labor each get out of production exactly what they put in. If, for example, the addition of an hour of labor yields one more dollar in revenue for the firm, the worker getsone dollar in return. If one more machine contributes five dollars to revenue, the capitalist gets five dollarsin return. What could be more just than rewards commensurate with contribution? Exploitation in thisframework vanishes. In the words of then-prominent U.S. economist John Bates Clark,the distribution of income [is] controlled by a natural law, and…this law, if it worked without friction, wouldgive to every agent of production the amount of wealth which that agent creates….Free competition tendsto give labor what labor creates, to capitalists what capital creates, and to entrepreneurs what thecoordinating function creates. (p. 152)Despite the fact that Clark’s “proof” rested on what Perelman refers to as “absurdly unrealisticassumptions,” (p. 152) its comforting message became a “central part of economic dogma” (p. 153).Clark also implicitly contributed to modern economic theory the notion that the distribution of ownership isirrelevant for economic outcomes. Transactions within the labor market are seen as voluntary exchangesno different than those in any other market. The vast difference in power between capitalists and individualworkers disappears, as best summed up by Nobel Prize-winning economist Paul Samuelson’s urging thatwe “remember that in a perfectly competitive market, it doesn’t matter who hires whom” (p. 153). Theridiculous degree to which neoclassical economists have taken this conceptualization of relationsbetween workers and owners is well demonstrated by Perelman’s presentation of the theories of economists like Clark Nardinelli, who proposed, “presumably in all seriousness…that children in thefactories would voluntarily choose to have their employers beat them: ‘Now if a firm in a competitiveindustry employed corporal punishment the supply price of child labor to that firm would increase. Thechild would receive compensations of the disamenity of being beaten’” (pp. 153–154). In other words,agreeing to be whipped into greater effort is simply entrepreneurial initiative on the part of workers.Perelman’s second major contribution is to take a long historical perspective on the interplay betweeneconomic theory on the one hand, and the environmental and human requirements of capitalistdevelopment on the other. His juxtaposition of the rationalizing contortions carried out by mainstreameconomic theorists and the often-contrasting realities—political, ecological, and social—emerging aroundthem is striking. Perelman provides a nice selection of examples pertinent to issues of the environmentand natural resource scarcity. One of these draws on the history of the passenger pigeon to illustrate thedisconnection between market signals and species extinction. In neoclassical theory, when a resourcebecomes scarce, prices are supposed to rise, thereby inducing consumers to use less of it. The marketis thus seen as the best tool for conservation. Perelman, however, notes that passenger pigeons werehunted to extinction (from a population of staggering numbers) between about 1840 and 1900 without somuch as a blip in the price. The reason for this “anomaly” was that passenger pigeons were (a) easy tohunt even as their numbers dwindled; and (b) seen as a substitute for chickens—or more accurately, for chicken (it is the meat that is relevant, rather than the bird)—which was still in plentiful supply. This makesperfect economic sense and is completely unproblematic from the theorist’s perspective. Passenger pigeons are, to the market, indistinguishable from chickens. However, if the relevance of species goesbeyond their place on the dinner plate (and, even more fundamentally, their potential as exchange value)the price mechanism must be seen as an inadequate, indeed a “perverse” instrument for mediating therelations between humans and nature.In probing this disconnection between economic theory and the actual functioning of the economy,Perelman also looks at the reception given by mainstream economists to those among their own ranks

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