Abstract
Gene Sperling, former director of the National Economic Council under both President Obama (2011–2014) and President Clinton (1997–2001), was an economic advisor on multiple American presidential campaigns. This book follows the tradition of such writers as Amartya Sen and Martha Nussbaum, who advocate a “capabilities approach” to economic growth, which subordinates the utilitarian objective of aggregate output to the Kantian one of ensuring the substantive freedom for each individual to live a meaningful life. For Sperling, this is so by advocating a version of economics that stands for something more than the expansion of production of commodities ad infinitum.
For him economics should not confuse means and ends, a tool, economic growth, should instead serve a purpose other than uncontrolled growth for its own sake. Instead, economic growth should serve the purpose of providing for life a sense of meaning, that is one of moral purpose, self-fulfillment, and emotional security. In other words, economics should not follow a simplistic utilitarian notion that could be interpreted to mean hedonism written large.
For him, the results should be the capacity to care for the family without economic deprivation (security), the right to a life of active striving that requires fairness in divvying up economic opportunities, no doubt for some people for a meaningful life in general, but in particular for a life of moral purpose so that one is not ashamed of the means used for making a living (I will add for others for the opportunity to become famous and be forever admired by others; for still others, the opportunity to become rich), and economic participation without feeling domination and humiliation. These should be the ultimate economic realities, not living a life of hedonistic escapism, nor merely one of consuming commodities for the mere reason that there is no other way of life available (though he may have some difficulty in convincing some others that is not the purpose of life).
Implicitly, he is opposing the conservative argument that liberty in the service of economic growth (through economic competition, that is) trumps equality (a basic minimum opportunity for happiness) as the goal of economic growth. What is at issue are the tradeoffs between liberty and equality, individual and collective ends, and between work and leisure.
Fred Hirsch in his classic book Social Limits to Growth (1976) made the point that ever-increasing output will never satisfy individual wants, because in a post-subsistence economy, such wants are both culturally determined and often the result of status rivalries (keeping up with or surpassing the Joneses), rather than material scarcity. There is often an educational arms race that can also be used for purposes of obfuscation, using the old double standard to hide the fact that a person is being hired because of social connections, because a working-class person with the same degree but without the same social influence would not be hired. The result is the common practice of “positional” competition, not to show one’s competency, but merely to have greater status, rationally evaluated or not, over rivals. Pierre Bourdieu in Distinction (1986) made much of such competition. The economist Tibor Scitovsky, in The Joyless Economy: The Psychology of Human Satisfaction (1992), makes the same point that when there is endless “positional” competition simply to look better than rivals, there will be no time available to spend developing more personally enriching, and enjoyable “life skills.”
These issues are implicit in Sperling’s book. But first let me refer to some other books to put some of these ideas in perspective. For example, there is Thomas Piketty, Capital and Ideology (2020). This book follows up on his earlier writing on maldistribution of income pretty much around the world, with this book on the ideological justifications for this over time, giving a historical basis for understanding the justifications for such economic systems as slavery, imperialism, the private property regime that rose to prominence after the American and French Revolutions, and the private property regimes of the present, including the rationales for democratic socialism.
It is true there are countries where the major sources of wealth were in the past, resulting in both inherited wealth and inherited ownership of income-producing assets, and these same countries as well as others newly arrived on the stage of the world economy may in addition through economic development produce situations where the major advantages also come from access to future streams of wealth. This comes from not only inheriting family wealth and assets but because of growing up in families that can provide access to prestigious educations and influential social connections. These latter situations reflect the income-producing possibilities that come from having prestigious jobs. These jobs may be economically efficient, they may also merely be places on a bureaucratic chart so that the wealth coming to the bureaucracy and thus to its members may reflect the oligopolistic power of the firm they work for.
All kinds of oligopolies, monopolies, and government bureaucracies can have these economic effects whether they are efficient or not, in some ways creating economic value, and in some ways sucking out the economic value created by others. Then there are countries where the sources of wealth are recent, such as the petro-monarchies of the Middle East, but access to these assets is restricted, because though lip service is given to the value of competitive economics, in reality the legal systems of modern states tend to favor economic concentration. The case of the petro-monarchies is unusual and somewhat legally archaic because of the lack of political as well as economic democracy.
Economies in the First World tend to have other sources of outrageous and maldistributed profits, not through monopolistic access to raw materials, but through legal protections of other sources of oligopolistic and monopolistic power. This can be the result of patents and copyrights, ownership of land (always in short supply), the protection of economic intermediaries that may in effect run a protection racket because government refuses to provide the service more cheaply and efficiently; insurance sometimes fall in this category as well as occasionally utilities and sources of transportation, and the workings of the financial services industry that foster economic bubbles over certain assets such as shares of stock and commodity futures as well as fostering the workings of investment firms such as hedge funds and private equity firms that often specialize in such economically destructive investment strategies as stripping firms of assets in order to pay themselves huge sums as management fees. To be even more efficient, they may reduce the wages of workers to bare minimums and have investment strategies whose sole purpose is to create oligopolies and monopolies.
Regarding the function of modern law in creating wealth but also inequality you may want to take a look at Katharina Pistor, The Code of Capital: How the Law Creates Wealth and Inequality (2019). In fact, there is a whole wealth defense industry involving the work of accountants and lawyers primarily that uses legal loopholes to the maximum when it comes to tax avoidance, for example. That such loopholes exist reflects their success as government lobbyists as well. In terms of creating massive economic inequality, all of the above seem to play a role.
Thomas Piketty is a researcher at the Paris School of Economics, and to give you a feel for how the Paris School of Economics has philosophical perspectives on values so that they deal with issues less commonly discussed by American economists—though of course here in the United States, there are still a few exceptions—let me refer you to a book by his fellow researcher there, Daniel Cohen, Homo Economicus: The (Lost) Prophet of Modern Times (2014). Cohen is quite explicit that a mother who cares for her child only out of duty rather than out of love would probably not be a very good mother, though no doubt efficiency counts for something there also, but to expand on this a business whose philosophy is to serve customers out of love may not pay attention to efficiency or make enough profit to stay in business, all of which would defeat its purpose of benefiting its customers.
Cohen gives the example that airlines that own their own terminals tend to be more efficient than those who subcontract out this function, though the latter nevertheless tend to make bigger profits, I expect because their workers are paid less. A neo-classical economist would claim this is impossible, that economic competition would guarantee that poorer performance would result in a loss of customers, that there can never be slack in the relation between supply and demand. But obviously, in the real world, there is. James Kwak, who teaches law at the University of Connecticut Law School, makes the same point in Economism: Bad Economics and the Rise of Inequality (2017).
Cohen, I admit, writes with style and verve, and for an economist is remarkable for paying attention, not to theoretical model building, but to the practical effects, not only of price levels and distribution of income, but to some of the social conditions and relationships that bring this about, like rising oligopolies and the increasing financialization of the economy that leads to economic bubbles, and then crashes. He also makes the point: “In a famous maxim, the banker John Pierpont Morgan explained at the start of the previous century that he would not trust a company whose boss earned twenty times more than his employees” (2014: 31–32). Now 300 times more than such employees is not uncommon.
Thomas Piketty also succeeds in tying economics to the contingencies of real life. In this recent book, he places all of the above distinctions, and a few others, in a historic and economic perspective. Unlike some Marxist economists, he does seem to favor a democratic socialist approach to economics, though that may be putting him more into a box than he would appreciate, though I doubt the social democrats in their Scandinavian political parties would complain about his approach. He does not put government ownership of the means of production on a pedestal neither for its own advantages nor because it is considered the final actualization of democracy and thus of the final stage of economic evolution resulting in workers owning themselves the means of production. What is clear from the mass of his writings and his communications with the press is that he favors better financial regulation, more social insurance, and more progressive taxation.
Thus, he emphasizes more equal distribution of the economic product, rather than the traditional Marxist goal of owning the means of production. He also heavily emphasizes the various ideologies dealing with not only economics but the control of society in general that have developed in various places and times, ideologies that reflect philosophies of life, moral yearnings, and also the wishful thinking and outright mendacity sometimes used by various groups competing with each other.
In other words, this book is his sophisticated, not really Marxist, approach to describing the ideological rationalizations that result from class conflict, but also other sources of conflict, in our time. He ultimately is describing why there is so little ability to compromise, to work toward the res publica, the common good, or for even conceptualizing the common good, in our time. In a sense, he is attempting to fill in this hole in our political, and economic, consciousness, through a massive historical, and comparative in a sociological sense, analysis.
He early on makes the point that the rise of inequality in the recent world economy (starting around 1980) reflects the declining income share of the middle class, though the poor in certain Third World countries have benefited, rising from their very low base, and even more so have benefited the very rich around the world, the proverbial one percent. His interpretative framework can be described as follows: All human societies need to make sense of their inequalities, and the justifications given in the past turn out, if studied carefully, to be no more incoherent than those of the present. By examining them all in their concrete historical contexts, paying close attention to the multiplicity of possible trajectories and forks in the road, we can shed light on the present inequality regime and begin to see how it might be transformed. (2020: 29)
In other words, this book is his history of inequality regimes.
If not evolutionary in a Marxist sense, he nevertheless produces an implicit typology of regimes, starting with some that are rather feudal, though what he emphasizes is the political power of nobles and priests, their replacement by societies that put ownership of private property on a pedestal, supposedly increasing social equality is one goal but it is usually sacrificed to foster economic growth, and usually economic stability is considered more important than equality or economic growth especially by the wealthier classes who tend to have more political as well as economic influence (the relation between the two being a major source of analysis in this book).
He concludes with a discussion of the decomposition of political parties in many countries where elites have broken down their somewhat unity into educationally derived elites, whose identities are primarily based on their cultural interests as having priority over calls for alliance with working-class groups who have concerns for greater economic equality, and business groups whose identities are primarily based on concerns for preserving their wealth (low taxes), and preserving the economic system that is the source of their economic wealth and their social wealth.
For both elite groups, this is so with as few changes as possible, again, with limited interest in alliance with working-class groups who have their own concerns for preserving not only their economic interests but also their own particular senses of community (which sometimes has nativist connotations). Piketty discusses how there is a tendency for working-class interests to be squeezed out of politics nowadays by both the left and the right, limiting them to be spectators to the competitions of these two elite groups, which I should add is the traditional definition of oligarchy.
A book that complements Sperling’s book, the author won the 2018 Leontief Prize for Advancing the Frontiers of Economic Thought, is Mariana Mazzucato, The Value of Everything: Making and Taking in the Global Economy (2018), who teaches the economics of innovation and public value at University College London. She argues that it is far too easy for people in the market economy to get rich by extracting value from those who naturally create value, not by adding to it themselves. If this sounds like a standard Marxist complaint, it is similar to their concept of the labor theory of value, though she does not go so far as to say that capitalists add no value that the state could not handle better. Of course, she doesn’t agree either with the neoliberals that the state creates almost nothing of value, so that whatever they provide, competing businesses can provide it more efficiently, which, for her, is just as out of touch with reality as is the Marxist opposite claim.
For her, the state facilitates the workings of the marketplace, partly by keeping providers of goods and services honest, and stepping in on occasion to provide subsidies (ideally to help the poor, though it is sometimes used to help the rich), and occasionally to provide goods and services directly when there are obvious economies of scale. This is classic liberal economics, if not neoliberal economics.
What she does not like is the financialization of the modern economy which undervalues the public sector of the economy, and uses financialization to create economic bubbles and to subsidize rent-seeking by inefficient intermediaries in the economic process, such as speculators like private equity firms who, because of poor government regulation and lack of effective economic competition, strip industries of value and lead them not to market success, but more often than people realize, after paying themselves enormous management fees, lead these firms they invest in to bankruptcy.
What she emphasizes in this book is the distinction, easily fudged by economists and economic record-keepers, between rises in prices that reflect increases in goods and services that result in increases in the standard of living, and rises in prices that is called in economic theory rent-seeking because it reflects either sheer power, such as arising from ownership of property that is then rented out, monopolistic economic power including the power of government to impose taxes, and necessary intermediaries in economic processes that may abuse this power to make extortionate profits of the sort that insurance companies have sometimes been accused of.
All these economic intermediaries may facilitate economic efficiency among the producers of goods and services or may merely use their intermediary positions between the producers of goods and services and their customers, to extract value from the economy rather than to add value. Their positions of power sometimes take the form of direct monopolies when they decide to produce products themselves. However, there are also indirect monopolies and oligopolies when they are intermediaries necessary to facilitate economic transactions who then can prevent economic transactions from taking place unless their extortionate demands are met. Sometimes in this latter situation, this takes the form of economic bidding that results not in increases in goods and services, but merely in ever-rising prices for the limited amount of goods and services already in the marketplace. Real estate bubbles often take this form.
It can happen that there is very little that can be called goods and services in play as when there are ever cascading rises in stock prices, as money chases money as prices go up for these pieces of paper merely because there is an economic casino in place and the excitement of the chase after money sometimes supersedes any interests in actually producing goods and services. Thus, sometimes money is created without reflecting an underlying value in goods and services that may in turn be created because of increases in customer demand since there is additional money in the economic system and now there are real profits, rooted in real goods and services, to be made from what had been before paper profits. But sometimes the result is merely inflation and rises in prices for the goods and services already in the marketplace. That is the danger when the government merely prints paper money, but that is also the danger when certain financial instruments be they stocks and bonds, or more exotic ones such as securitized debt instruments, become the outlets for the gambling inclinations of investors who pay little attention to the underlying economic structures of the entities that produce these instruments, but merely wish to take advantage of the economic bubbles being produced that drive up the prices of these instruments.
Again, that is why she particularly distinguishes what economists often fail to distinguish, the difference between prices and values since economic bubbles may cause prices to rise in sectors of the economy without producing any serious rise in the overall standard of living through increases in goods and services in the economy at large. Also, when problems are not prevented such as when diseases are not cured because the medical industry is doing a bad job of developing cures, that is not treated as a net loss of economic value, since opportunity costs (based on missed opportunities) are not easily measured in official statistics, but when low-quality or overpriced treatments are the result this boost in paid services is treated as a net gain to the economy. This just illustrates some of the inherent weaknesses of our economic statistics that cannot distinguish between price and value.
She also mentions the notion of John Maynard Keynes on socialization of investment where investment in infrastructure and innovation (capital investment) should be done by public utilities, public banks, or cooperatives in order to direct public funds toward medium- and long-term growth rather than short-term returns. This is particularly an alternative to such financial engineering as stock buybacks that increase short-term stock value, often at the cost of stripping the assets of companies and so not investing in the long-term health of the company.
Regarding her suggestions on how the public can claw back the rents that are given out to oligopolies who enjoy the profits when the groundwork is done by the government: These ways might include: capping prices of publicly developed medicines; attaching conditions to public support, such as the requirement that profits be reinvested back into production rather than invested in speculative share buy-backs; allowing public agencies to retain equity or royalties in technologies for which they provided downstream funding; or by making income-contingent loans to businesses as we do for students. (2018: 223)
This leads us to some of the issues dealing with economic morality discussed in Sperling’s book, something that should inherently distinguish between prices and values.
His book is popularly written and reads like it was written by an advisor to politicians, which he is. I like Sperling’s book, but it does have a lot of the qualities of a news magazine article, with lots of name dropping about the politicians he has come across or has had dealings with. There are lots of statistics to prove his point that economic statistics of the gross domestic product sort don’t explain people’s suffering, and he uses many human interest stories to make the point that economic stories should not be just about numbers, but about people’s lives.
This book is a lot more entertaining and a lot less analytical than Piketty’s or even Mazzucato’s about what markets can and cannot do. His book is about raising the consciousness, and consciences, of people, it is closer to journalism’s use of scholarship than to university-based scholarship (with its sometimes irrelevancy), and it is about arousing the public to stoke his claims and potentially their claims that economics is about maldistribution of happiness, not just maldistribution of wealth.
After the section of his book on dignity as requiring security for the family (true, just individual competition with other individuals makes sense in an economics textbook but not in a society), opportunities for self-fulfillment, and freedom from being the patsies of others (let me reiterate, especially to be free from the whims of bosses), he goes into a section on what governments can do, unlike the neoliberal claim, which is almost nothing. He gives many examples of possible government subsidies for the poor.
Dignity’s core meaning has connotations of acting to respect others, producing not only emotional security but also their self-respect, the major method being not showing favoritism or disrespect such as for the rich who can offer economic benefits if they are played up to over the poor who can’t. Obviously, the golden rule of “do unto others as you want them to do onto you” is a method for preserving other’s dignity. Yet Sperling’s many examples of how people feel hurt in present-day America have connotations of all kinds of circumstances that produce unhappiness, a threat to one’s feeling of dignity certainly. That is the core of the economic and political perspective of this book but without discussion of everyday dignity, that is to say the methods of politeness and decorum that maintains other’s dignity that is the traditional cultural method of maintaining respect for others. Thus, the lack of dignity in the tabloidization of social media and even news programs appealing to the prejudices of their niche audiences is not discussed.
In effect, this book, by discussing overall methods for preserving life, liberty, and the pursuit of happiness, stretches the definition of dignity to the outer limits of social experience. Which is a good thing, but he is less detailed in coming up with solutions. In that sense this is a political book: it has somewhat the feel of a political speech filled with anecdotes, statistics, and human interest stories to illustrate a general political program, a program that encourages public discussion of injustices, but not really detail-oriented enough to discuss economic solutions (though the book is called Economic Dignity) to any great degree. He does believe, however, in government subsidies, and tax incentives, now to be shared more with the poor, and not with the rich, and their corporations, who don’t need them.
I expect the reader will come away with the impression that this book has much of the feel of a policy paper written by a Washington, D.C. think tank, filled with anecdotes, statistics that are cherry-picked to support a political position—in this case the position held by the mainstream Democratic Party that more intervention by the government to provide a safety net for the poor is necessary, and something he doesn’t really discuss, but he doesn’t show great opposition to this either, a backup to corporations that are in trouble, implicitly including the too big to fail corporations especially in the financial industry, since he doesn’t deal with any detail about those policy initiatives of President Obama, his boss, who did just that. In general, this book is without the scholarly detail of logical analyses of assumptions leading to policy analyses, that are challenged by competing assumptions and competing policy analyses, that are both evaluated according to empirical data, except that much empirical data in such books are often of poor quality and merely irrelevant, showing correlations rather than causations. Thus, his book has its virtues, but he is not competing against the scholarly books mentioned above, even though in fact the initial assumptions on what is required for “the good society” held by him and by the other authors are essentially the same.
Nevertheless, one can learn from his book, if not gain ironclad proof for his politically driven positions that are for the most part reasonable, though his arguments are not filled out, but preliminary, for he doesn’t really debate the political right and their arguments against overweening government (too bad they aren’t so concerned about overbearing big business). Though his book does not take the form of a sustained intellectual critique, for example of classical economic theory, the series of examples of problems and wrongheaded policy in the economy is often right on. For example, he makes the point it is absurd that stockholders who often have stock in any one company as merely one part of a general stock portfolio to be considered in law to be vital stakeholders in the company, while the workers whose whole lives are dependent on the wages they get from that one company are considered not stakeholders at all from the point of view of the law governing responsibilities of top management. That theory in the law is changing, but I would say not fast enough.
I am not here to criticize consciousness raising. It is where politics starts. Nevertheless, intellectually, this book is vitally concerned with examples of injustice, which is what he means by an attack on personal dignity, but not really an analysis on the successes or failures of the field of economics in a sustained and analytical way, though he does attack the Republican Party’s ideological coopting, some may call it misunderstanding, of economic theory.
Some may say Sperling’s use of Democratic Party talking points is similarly ideological, which doesn’t make him wrong in his polemic, though a few points that he doesn’t cover can still be raised. There is a contradiction between Sperling’s belief that there are a lot of high-value white collar jobs waiting to be created, and the late anthropologist David Graeber (he was denied tenure at Yale, and thus forced to get his later position at the London School of Economics, and there is a whole story behind that) who, in his book Bullshit Jobs: The Rise of Pointless Work, and What We Can Do About It (2018), makes the point that many, particularly white-collar, jobs are pointless, and have no reason to be other than some scheme of top management to engage in image management (these jobs function like the servant class for the old aristocracy). Graeber refers to such job functions as flunkies who make their superiors feel important, goons who oppose other companies’ goons (e.g. lobbyists), duct tapers who temporarily fix problems that could be fixed permanently, box tickers who fill out forms that aren’t very useful, and taskmasters who supervise people who don’t need supervision. To them can be added management consultants who “borrow your watch and then tell you what time it is.”
I suppose Sperling is trying to be a very good management consultant, and in many ways he succeeds, for he emphasizes that the jobs he wishes to be created will not be pointless, but it would be useful if he really did more than just preach to the choir. The same can be said to vendors of Republican talking points. So many of his ideas on “the good jobs of the future” are good ideas, like government fostering retraining of displaced workers and improving worker voice as stakeholders in their firms, but so are the complaints of managerial waste which he touches upon, but not really much more than that, even though like in so many societies some of America’s managers are hard-working contributors to the common weal, and some are more like a leisure class aristocracy, supported economically by the people beneath them. As to the percentages of each, I will let other people decide, though America is not really like 18th-century France, and Piketty’s book helps explain why. As for a more analytical and philosophically sophisticated approach to the concept of dignity, you may want to take a look at Michael Rosen, Dignity: Its History and Meaning (2012). He emphasizes that dignity can be rooted in a radical communitarianism so that its justification is one’s status in society; it can be rooted in a radical individualism so that one’s personal interests is the source of one’s dignity and should not be evaluated by any broader values than this, both extremes I would say resulting in nihilism since the ultimate response in both cases is not rational judgment as much as no judgment at all by people of other members of society. He does also mention that dignity can be “behavior, character, or bearing that is dignified” (2012: 54) so that dignity can be respect for a process and not merely for an end result.
Here, I will make my own point that all these books help answer the question “how did neoliberalism come to replace liberalism?” Liberalism of the sort praised by Adam Smith emphasizes the way markets bring people together, to haggle over prices, but also to share common interests, including sympathy, an aversion to cheating, and a desire for everyone to get along as opposed to winners destroying the livelihoods of losers. Liberalism believes both government and markets have a place in a functioning society as an example of checks and balances in society. In fact, liberalism tends to distinguish between markets that function pretty much independently of government oversight, and sometimes intervention, and markets that require a reliance on professionals who bargain for their clients just because their clients do not have the knowledge, foresight, and often emotional stamina to bargain for themselves.
Neoliberalism believes that markets can replace governments, except to the extent that minimal governments are necessary to enforce the outcomes of markets. These same markets are about endless evaluations, not necessarily to make better products, but increasingly to evaluate and control employees, and when they can customers, like what the tech industries increasingly try to do to us.
The relation between markets and justice is that markets can be a check on tyrannical government, when used appropriately, but government can be a check on tyrannical markets. This is especially so of exploitive markets that produce speculative profits from the economic bubbles induced by the financialization of the economy, bubbles that often crash leaving in its wake bigger oligopolies, more billionaires, and the mass of people a lot poorer. Neoliberalism has produced a school of thought that believes that markets are not descriptions of complex social processes but are actual social entities that produce prices that reflect infallible and rather simple interactions of supply and demand. It can be usefully compared to the liberalism that preceded it, that—whatever its faults—took for granted that economic processes have a certain complexity to them that involve competitions, but also involve social processes reflecting power distributions among individuals and groups, as well as institutional settings that reflect not only power but also norms and morals that impinge on value-setting that should be part of the cost-setting process. Thus, neoliberalism relies on prices while liberalism relies on values, which may mostly reflect the pure competition that most economists love, but certainly not always. The economics books of the future may end up resting on their laurels, like so many of them did in the past, or may end up complaining that intellectually things have gotten much, much worse with the simplifications of neoliberalism. That is if we don’t take these issues more seriously now, as all these books do, each in their own way.
