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Individualism has little place in industrial society: John Kay looks to Rousseau

August 18, 2011

A good article yesterday by John Kay, in the Financial Times no less, suggesting the continuing relevance of Rousseau.  What’s going on today in capitalism is not in its essentials very different from the problems which have been debated since the very beginnings of the industrial revolution and it’s important to re-awaken an historical perspective within our sleeping “post-modern” culture.  Many of us, even on the left, assume that individualism is a natural part of human nature and especially so of American nature.  This is not so, it’s historically derived and as Kay demonstrates, it has little place in industrial society.

Kay notes that “Rousseau was an early and incisive critic of the idea that self-interested behaviour would necessarily work to the benefit of all” and then compares the gang-like means the aristocracy of old used to gain wealth to the liberal economic theory of marginal utility which in industrial capitalism becomes little more than a “justification for the culture of … entitlement from possession”.

I think it’s worth quoting a good bit from this article since it presents quite well the inappropriateness of  individualism in an industrial society where cooperation and teamwork are far more important.

Two broad economic theories describe the allocation of income and wealth. The power theory states, broadly, that people get what they grab: from the forest, the markets, or the shop window. The distribution of income reflects the distribution of power. For most of history, this was plainly true – the landlord took what he could from the tenant, the baron what he could from the landlord, and the king what he could from everyone. The sixth Duke of Muck was rich because the first Duke of Muck had been an especially successful gang leader. The alternative theory is that what people earn reflects their marginal productivity – how much they personally add to the value of goods and services. The marginal productivity theory has many attractions, especially to those who are well paid: if what they receive is a product of their own efforts, their rewards are surely well deserved.

Collaborative organisation was only occasionally necessary in an agricultural society in which there were no asset-backed securities and no electrical goods in the shops. But in a complex modern economy, as in the deer forest, production requires the involvement of many. Adam Smith marvelled at the resulting efficiency in his description of a pin factory. But if, as Smith described, one man wrought the iron and another stretched it, who could say what was the marginal productivity of each? And what was the marginal product of the chief executive of the pin factory, or the person who hedged the foreign exchange exposure on the unfinished pins, whose contributions the Scots savant unaccountably failed to mention?

If the pin factory really did increase the productivity of the factory by a factor of at least 240, as Smith claimed, there was likely to be a surplus when the wage earners had received whatever their marginal product was. And when it came to dividing that surplus, the distribution of authority within that pin factory would be crucial. That distribution would surely favour the CEO. Since the CEO wrote – or at least commissioned – the pin factory’s annual report, the moral and economic argument could be turned on its head. If you were paid a lot, that showed that you contributed a lot. What the recipient earned was, by that fact alone, justified. So the ethic of just reward through effort gave way to the culture of present entitlement from possession.

Kay brings classical thought forward and attacks the façade of fairness that the economics profession gives to what is little more than feudal-like greed and power.  I think the world will be in, or teetering on, crisis as long as we remain within our culture of entitlement from possession.

From → Wealth & Poverty

7 Comments
  1. Tom Hickey permalink

    “Entitlement due to possession” aka “right to property” as natural or human right is at the basis of most of the nonsense that passes for “capitalism.” Some take the so-called right to property to its extreme in claiming that taxation is confiscation. That is were the nonsense of “entitlement due to possession” becomes obvious, for it equates capitalism with anarchy. But the irony is that the power of the state is required to protect private property. So then the argument become that the sole purpose of the state is to protect individual security and private property.

    It doesn’t take much sense to see that this is bonkers.

  2. Bonkers but the bedrock of old time liberal thinking.

    • Tom Hickey permalink

      Coming out of feudalism, maybe it made sense. But in terms of capitalism, anyone who has played monopoly knows where this leads. “Neo-feudalism,” as Michael Hudson calls it.

  3. And the government has the military and intelligence power to give it a go. Ever greater concentration needs ever greater force. Liberalism won over feudalism via revolutions; wonder if there’s any way to stop the neo-feudal variety without a revolution… The key difference this time is there’s at least formal democracy and the average person isn’t a peasant this time.

  4. Tom Hickey permalink

    What concerns me is the erosion of constitutional protections in the US, the establishment of an interior ministry (DHS), and the rise of the national security state complete with “total awareness.” All the pieces are in place to impose totalitarian rule, making overt revolution difficult if not impossible. There is very little public outcry heard about this, even though it essentially ends the American experiment in liberal democracy.

    A Chinese leader was recently asked about what he thought of American democracy. He said it was too early to tell how it would work out.

    In think that the system is going to have to collapse of its own weight from within, and the rest of the Western neoliberal states are in about the same condition as the US. I foresee the global depression deepening and widening. That will be a destabilizing influence in which anything becomes possible.

    Add to that global warming, resource scarcity and competition from emerging countries, and rising pollution levels, including nuclear, and this is an explosive mix. We could lose a significant swath of world population in the coming decades.

    What will emerge from that cataclysm is anyone’s guess. Not an encouraging picture to paint, but that is the way I see things unfolding on the present trajectory.

  5. Couldn’t agree with you more, Tom.

    Have you ever read Jack London’s Iron Heel? About the oligarchy that takes over the US and rules for about 500 years. Wrote in early century but very relevant today.

  6. Tom Hickey permalink

    Never read it, Jim, and didn’t know about it.

    Many spiritual luminaries have predicted a period of travail in which a significant portion of the the population would be lost, following by a new golden age. No time frame though. But if global warming and nuclear pollution are involved, several centuries at least seems right.

    See, for example, Meher Baba, “The New Humanity,” Discourses, 6th ed, vol. 1, p. 17 fol.
    http://discoursesbymeherbaba.org/v1-17.php

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