<br><h3> Chapter One </h3> <b>In Praise of Dissent <p> <p> Discontent and Discourse</b> <p> By most counts, the world is a better place today than it was in ancient times. First and foremost, we have the comforts that come from our greater collective wealth. But even apart from that, we do not live in perpetual fear that another nation's marauding army will come and take away our land and belongings. When we return home from dining out, we do not expect to find that strangers have broken in and occupied our homes. The physically weak do not have to be reconciled to being economically destitute. There are numerous rights of individuals and nations that are presently treated as fundamental and inviolable. We do not have to be on constant guard to defend these rights by force or guile. Others recognize the rights and usually respect them, and when they do not, the community or the state usually enforces them. <p> It would be a tortuous claim to say that we are not, on average, more fortunate than our ancestors. It will be argued in this book, however, that we are not <i>as</i> fortunate as may appear at first sight. The fact that the exploitation of the twenty-first century occurs within the laws and norms of the twenty-first century should not make us oblivious to it. Even in ancient times, what appear to us today as brutal, confrontational behaviors and morally indefensible conquests were more often than not justified using the morals, norms, and practices of the times. When Plato or, closer to our time, Thomas More wrote about a utopian society in which all men were treated well and with dignity, it did not even occur to them that there might be something wrong in leaving women and slaves out of this scheme. When during the seventeenth, eighteenth, and nineteenth centuries Native Americans were systematically separated from their land, occasionally by force but frequently by what on the face of it looked like voluntary transactions—elaborate contracts that the Native Americans usually did not understand, since prior to the arrival of the Europeans they had neither experience of land trade nor written contracts—they were being exploited quite ruthlessly, as their subsequent impoverishment suggests. But it was widely believed that what was happening was lawful and morally justified (Banner 2005, especially 52–53; see also Robertson 2005). <p> Some accounts of these "voluntary" treaties and contracts are tragic, such as when in 1755 in South Carolina more than five hundred Cherokee met with a similar number of settlers. South Carolina Governor James Glen convened the meeting. Gifts were exchanged, and meals were served in silver bowls and cups. The Cherokee were pleased, and declared that the tribe wished to give "all their Lands to the King of Great Britain ... for they acknowledge him to be the owner of all their Lands and Waters" (Banner 2005, 59). The settlers sensed that this was a metaphoric use of language, just a way of being nice to outsiders. This was especially clear when the Cherokee refused to take any payment for their offer. But the offer was too good for the settlers to allow qualms about metaphoric speech to get in the way. To make it into a contract, the settlers persuaded the Cherokee to take a small payment, which they accepted out of politeness. Little did the Cherokee realize that they were about to lose all their land. <p> At one level, deals like the above one were voluntary, but the question must arise about the meaning and significance of voluntary contracts between two parties when one of them does not understand what a land sale means because it has not had any experience of that in its history. Many of the settlers considered the deals to be fair, and so did many of the natives, though of course there were settlers who were out to take ruthless advantage of the simplicity of the natives. When Christopher Columbus and his crew landed in what is now the United States (Bahamas), the Arawaks ran to greet them with food and gifts. They had no idea that Columbus viewed the whole situation as an opportunity. In Columbus's own words, "They brought us parrots and balls of cotton ... and many other things.... They do not bear arms and do not know them for I showed them a sword, they took it by the edge and cut themselves." And having noted the simplicity of these people, he went on to observe that "they would make fine servants. With fifty men we could subjugate them all and make them do whatever we want" (Zinn 2003, 1). <p> Likewise today, when we see the rule of law prevail, property rights as defined by our courts respected, and blatant military conquests decrease in number, we feel that what we see happening in the marketplace and our conference rooms where treaties and agreements are signed is the outcome of fair play. We know that people get cheated in markets and that individuals do get exploited, but overall, when we play by the rules of the market and do not snatch and rob, we believe we are on the right path. Some do get impoverished and some get rich. Well, we tell ourselves, this has to happen, does it not? Would trying to halt this not impede progress and economic growth? We have seen—for instance, in the Soviet Union—what happens when other systems are attempted. But history, such as the cases just discussed, should alert us that even today, there may well be other kinds of unfair contracts and treaties taking place. After all, the exchanges that happen in reality are not just of apples, haircuts, guns, and butter with money, as our textbooks suggest, but complex deals involving long stretches of the future and complicated rights. It is likely that groups are being outwitted in novel ways that will become clear to us only in retrospect. <p> It is arguable that if we measure inequality simply by the income gap between the richest and poorest segments of society, then the present-day world has inequality at a level that has never occurred in human history. This is because the poorest people's condition has remained much the same from ancient times. Their lives are nasty, brutish, and short—to use an abbreviated version of Thomas Hobbes's famous description of life in the state of nature; the poorest people barely get enough to survive. Their well-being is usually determined by the biological subsistence needs of human beings. Even poorer people will not be around to be counted. Wealth, on the other hand, has no natural ceiling. The richest people today can do things that neither Genghis Khan nor Nero could even dream of. <p> It can be shown by some simple back-of-the-envelope calculations that the ten richest people in the contemporary world together earn the same income as is earned by the entire population—close to forty million people—of Tanzania (Basu 2006b). Given that Tanzania has its own share of millionaires and the super rich, it is obvious that if we leave such people out and compare the ten richest people with the poorest people in the world, we would find a gap that should be mind-boggling. What is shocking is that it does not boggle our minds. We usually do not think about these matters, and when we do, for the most part we treat the inequality and poverty as inevitable concomitants of the market system—that grand, invisible machine that coordinates millions of participants in this huge global system, creates efficiency, and helps the world grow richer. <p> Intracorporation inequality has been rising exponentially. In the United States, the average pay of the CEOs of large corporations used to be forty times that of the average production worker in 1980. Ten years later the ratio had climbed to eighty-five, and at the start of the twenty-first century the ratio had risen to four hundred. We have been persuaded to believe that a CEO who earns ten million dollars a year (not an implausible figure when the stock options are added to the base salary) needs that as <i>incentive</i> for their high-skilled job. The presumption is that in case the pay per unit of time for all executives was halved, so that the above CEOs now earned five million dollars a year, they would say, "With such low compensation I will not work hard anymore." It is a sign of our remarkable gullibility and complacency that we buy such arguments. I have tried to demonstrate by constructing a formal model (Basu 2010a) how through the clever design of salaries and benefits, it is possible to create a situation whereby pay can vastly exceed productivity. Quite apart from the inequity of this, it creates a world prone to financial crashes, as witnessed during 2007–9. <p> The complacency that prevails in our societies in the face of such inequity is not altogether spontaneous, though. It is propped up by a large number of people who benefit from the system. These people are a minority of the world's population, but one that matters; it consists of those who have a voice and can make themselves heard, either by paying to have their opinion fed into our laws and regulatory systems, or by being better networked and better embedded in the citadels of power. <p> This is known to all but the most gullible. Yet the complacency also has another prop. It is made possible by legions of economists, plying their daily trades—writing their monthly columns, publishing their annual papers, and putting out their decadal books. This has created a `central opinion': a body of intellectual material that describes how a modern economy functions, and assures us that as a system, the current world economic order, founded on individual selfishness and the `invisible hand' of the free market, is right or, at any rate, the best among what is feasible. It may not always function as it should but as an ideal, it is the right one to pursue and uphold. <p> When I distance myself from mainstream economics, I am aware that there are contemporary economists who share my concerns and would have no problem with my critiques. I am happily reconciled to the fact that the book's novelty value will be limited for them. Nevertheless aided by a majority of practicing economists and economic journalists, the profession's central tendency remains wedded to the view that the current world economic order as supported by the market economy of the industrialized nations is the only viable one not just for now but also in all conceivable futures. Our only task is to implement reforms to keep the existing system well oiled and humming. <p> Occasionally, this complacency gets ruffled. Bewildered by the depth of poverty and riches like never seen before, some people—including some who may themselves be privileged but have the courage to question—feel troubled. They wonder, Are we being duped into thinking that we have hit on the ideal system, our only task being to keep the system functioning smoothly? Anger builds up among these people, and it occasionally erupts in violence or unruly protests, in Saigon, Santiago, Seattle, or the streets of Washington, DC. <p> When those who have long been trod on and those who have empathy for them eventually decide to protest, their actions are often seen as the 'rampages' of 'marauding mobs.' But the inchoate suspicion that these protesters have felt about the existing world economic order is not entirely without justification. They may have failed to articulate their point of view, and their suspicions may have found expressions that appear pathological to the outsider, but their feelings hide an important truth that can be given intellectual foundations. <p> That is the reason for this book. Exploitation, conquest, and property grabbing are alive and well. The manner in which these practices occur has changed. Just as the modern world tries to plug the loopholes of blatant exploitation, and strives to halt plunder and egregious violations of basic human rights, human beings and governments discover newer and less obvious ways of exploiting the simple, the innocent, and the less materialistic. Whole nations, groups, and masses of people are being continuously outwitted and impoverished, not, or rather rarely, through wars and direct confrontation, but through complex financial maneuvers, the discovery of loopholes in the law, and the new opportunities that economic globalization opens up and the lagging process of social and political globalization leaves vulnerable to plunder. The decimated economies of sub-Saharan Africa, parts of Central and South America and Asia, and even some regions of Europe bear testimony to this. <p> One does not always have to go to faraway poor countries to discover the exploited or the outwitted. Even rich nations have large numbers of poor people and the destitute, who sleep in the streets (Jencks 1994; O'Flaherty 1996). As I write this, over forty million people in the United States live with no medical insurance, and close to 10 percent of the nation's labor force is unemployed. <p> Some of these poor people are no doubt less productive than the rich. But one can argue that being less productive should not be deemed reason to be cast into destitution and extreme poverty. Just as most of us would agree that being handicapped should not be a reason for being denied access to cinemas, restaurants, and shopping complexes, and hence we have laws that require public places to have special provisions for the handicapped, it could be contended that being less productive should not be a reason for suffering food deprivation and being denied medical help. <p> Even if we dismiss this line and go with the neoclassic assertion that it is fine for people to earn according to their productivity (and that is what makes an economy function efficiently), the truth is that the poor people of rich nations are not invariably or even typically the less productive ones. There is, for instance, overwhelming evidence that being born into wealth helps one to be wealthy. Human capital acquired by going to elite schools and real capital transmitted from one generation to another through the legal protection of inheritance enables people <i>born into</i> advantage or disadvantage to remain that way, akin to what happens in caste-based societies. Further, people often fail to earn what would be prescribed by their productivity because they are outwitted of their wealth through the use of ever-more sophisticated financial contracts and exchanges. This can create an 'undeserving underclass' in rich countries. <p> All this is kept from coming to a boil through a continuous ideological barrage of written and other media articulation of two myths: that an industrialized nation's markets are free, and that free markets are fair. The legions of economists who dismiss the protesters in the streets of Seattle, Cancun, and Washington, DC, out of court are like those missionaries who accompanied the occupying armies of yesteryears, pacifying rebellion through comforting words, and ignoring the demurrers as misguided and befuddled. As Albert Einstein (1949, 9) wrote in the inaugural issue of <i>Monthly Review</i>, "The priests, in control of education, made the class division of society into a permanent institution and created a system of values by which the people were thenceforth, to a large extent unconsciously, guided in their social behavior." <p> It is not being suggested that all this is happening through some conspiracy of the powerful and the rich. The world has fewer conspiracies than most people believe. There are conspiracies to be sure, but the force of unwitting atomistic action is usually far greater than we realize and in the end becomes the overwhelming force. And this is the force that is difficult to understand and needs serious intellectual inquiry to master. Adam Smith was right about this, and we must hold on to this wisdom even when we reject what in this book I refer to as Smith's myth. What has to be kept in mind is that the absence of a conspiracy does not invariably make the equilibrium that prevails in society benign. <p> There is another view of the invisible hand that shares with Smith the idea that systems can run on their own steam, with no ultimate authority in charge, but the outcome is more malevolent and, on occasion, chilling. This is the vision of Franz Kafka, as immortalized in his unfinished novel, <i>The Trial</i>. Joseph K is caught in a surreal world where he is charged with a crime that he has not committed, and he does not fully understand the basis of the charge. He runs from pillar to post, from minion to minor bureaucrat, to find out what the charge is and who has handed it down, so that he can appeal his innocence. But in the society that K inhabits, there <i>is</i> no central authority or person to appeal to. All individuals in this labyrinthine world go about their limited daily chores, and this gives rise to forces that transcend each individual. In some ways, Kafka's view of our society is more pertinent than Smith's. It is true that Smith had scientific precision in his writing, while Kafka had all the ambiguities of a litterateur. Yet in social analysis, there is at times a need for the latter, and for meanings and messages to be conveyed through a deliberate use of ambiguity. <p> The state of our thinking on the global economic order that breeds complacency has intellectual roots that are deep and need to be excised carefully. That is the aim of this book. It is written in praise of dissent. <p> <i>(Continues...)</i> <p> <p> <!-- copyright notice --> <br></pre> <blockquote><hr noshade size='1'><font size='-2'> Excerpted from <b>BEYOND THE INVISIBLE HAND</b> by <b>Kaushik Basu</b> Copyright © 2011 by Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.<br>Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.