By Sumanasiri Liyanage –
Dr. W A Wijewardena’s article, Is Capitalism Immoral: Not at All Says Atlas Network’s Tom Palmer, turns me back to my pet subject, the history of social and economic thought. Some economics departments in Sri Lankan universities have already dropped this important subject while others are downgrading its significance in the course structure. Dr. Wijewardena was referring to a talk given by Tom G Palmer at the Sri Lanka Chapter of Bastiat Society. I must confess I have never heard of Tom G Palmer or the Sri Lanka Chapter of Bastiat Society. Nonetheless, it seems clear that the whole idea of this talk as well as Dr. Wijewardena’s article is to offer legitimacy to capitalism and its latest phase, neoliberalism, including the undefined economic policies and strategies of the present government. It is true that capitalism and neoliberalism are not synonyms. Capitalist mode of production (CMP) has gone through different phases in its history since the formation of capitalist world market in the early years of the 19th century. If I refer to Ernest Mandel’s periodization, until the 1970s, it went through three phases, namely (1) the free market capitalism; (2) the phase of imperialism; and (3) the late capitalism. When the late capitalism based on Keynesian economic policies encountered a generalized crisis after in the mid and late 1970s, CMP had to restructure it by transforming socio-economic and political landscape in favor of capital. Its first experiment was conducted in Chile under Pinochet after killing democratically elected Salvador Allende and destroying the strong trade union movement in Chile preparing the ground for ‘Chicago Boys’ to introduce their policies. Although the operation was not that severe because of the socio-cultural and political setting, the basically the same approach was adopted later under Thatcher and Reagan in the UK and USA respectively. I define this new phase of CMP as neoliberalism. Its prescription for the Global South was forcefully presented in the form of so-called Washington Consensus. Of course, it does not imply that neoliberalism is a homogenous project. On the contrary, it took different forms in different countries. Hence, whatever Mahinda Rajapaksa government claimed, it had followed these basic principles of neoliberalism. West had detested MR regime not because of its economic policies but mainly because of its foreign policy.
Although Dr. Wijewardena is not explicit, it appears that he essentially agrees with Palmer’s notion of capitalism that is consistent Frederic Bastiat (1801- 1850), a French economist. Let me discuss Bastiat’s economic theories in the remaining part of this essay. His major works are Cobeden et la Ligue (1845), Sophismus Economiques (1847) and Harmonies Economique (1850). The latter was translated into English under the title Harmonies of Political Economy (1860). Why is this new interests in this less known French economist? Why not Henry Carey, an American economist, who had also presented similar views on the capitalistic economy? Is it because of the fact that Carey was a protectionist and favored state intervention in trade?
To understand Bastiat’s theories, it is necessary to situate them in a proper historical context that may need a longer essay. For the sake brevity, only two main developments are listed. The bourgeoisie had finally gained the political control over the landlords who exercised political power in the early modern period. This process was facilitated by the revolution of 1830 in France and the electoral reforms in England in 1832. The climax of this development in England was the passing of Corn Laws in 1846 that marked a victory for ideas of David Ricardo, great classical economist. Parallel to this development, England witnessed the rise of Chartist movement and France, revolution of 1848. These two changes had marked a rise of the working class movement as a new threat to the bourgeois rule in Western Europe. The rise of the struggle against capital and the emergence of socialist ideas led to the decomposition of classical economic theories advanced by Adam Smith and David Ricardo. This context was very well described Mrax in the following words: “From that time on, the class struggle took on more and more explicit and threatening forms, both in practice and in theory. It sounded the knell of scientific bourgeois economics. It was thenceforth no longer a question whether this or that theorem was true, but whether it was useful to capital or harmful, expedient or inexpedient, in accordance with police regulations or contrary to them. In place of disinterested inquiries there stepped hired prize-fighters: in place of genuine scientific research, the bad conscience and evil intent of apologetics.” Preface to the Second edition of Capital, Vol. 1) Issac Ilyich Rubin notes: “Henceforth the epigones of the classical school would have to make one of two choices: either refrain, in the interests of abject apologetics, from making a sober and disinterested investigation into the laws of capitalism, or attempt to reconcile an outmoded liberalism with the newborn socialism. Carey and Bastiat travelled the first path, John Stuart Mill the second”.
Bastiat saw the rise of the working class movement and he recognized it as a continuous threat to capitalism unless it was controlled or tamed or suppressed. Hence he wrote that this “ghost of Banquo at the feast of Macbeth” had already sniffed “the smell of revolutionary gunpowder and seen “the pavement of the barricades” (Harmonies of Political Economy. P. 9). He criticized economists for not seeing these threats. Ricardian economics had been interpreted by some contemporary economists to give flavor to socialist thinking. So it had to be confronted head on. That was the task of Frederic Bastiat, “the modern bagman of free trade” (as Marx portrayed him).
On page 13 of his book, Bastiat wrote “all legitimate interests are in harmony. That is the predominant idea of my work”. This vision is complete opposite of Ricardian three-class model of capital accumulation. For Ricardo, capital accumulation and capitalistic development is an outcome of how classes interact in the process of distribution. It is not, for Ricardo, social harmony but disharmony that generate capitalistic development. One class, the class of modern bourgeoisie should win politically, economically and socially over the landlords who exercised power in the previous era of social development. Marx continued, in a way, the Ricardian project to its completion in the context of the class struggle between the modern bourgeoisie and the proletariat. This struggle forces capitalist class to advance capital accumulation both in width and in depth, from formal subsumption of labor to real subsumption of labor by increasing the component capital goods (“dead labor”) in the total composition of capital. So once again the secret of capitalistic development lays not in harmony but in disharmony. (see, Sumanasiri Liyanage, Economic Development: Reflections on the Left Perspective in Marshall Fernando and Shanthakumar (eds). Pathways of the Left in Sri Lanka. Colombo: EISD. 2014)
Why did Bastiat seek to emphasize harmony? Reason is clear. This disharmony in the process of production and distribution gives capitalism is not only its dynamism but also its tendency towards crisis. Hence he wanted to develop a theory that advances the notion that both the capitalists and the workers are not different; they have the same interests; and they provide mutual ‘services’ to each other. Hence, the entire society consists of ‘service providers’ and each receives benefit out of this service provision. In such a framework classes do not exist, nor the class struggle. Hence, the final conclusion is that capitalism is moral. Axiom is tested and proved. Bastiat, like Prof. Pangloss, the teacher of meta-physico-theologico-cosmo-codology in Voltaire’s fiction Candide forced us to believe that this is “the best of all possible worlds”. Observing the situation around us with killing fields, famines, wars and armed conflicts, nearly quarter of the world population with less than two dollars day, mass unemployment, poverty, environmental degradation and incurable diseases, like Candide, we are forced to ask “if this is the best of all possible worlds, then what must the others be like”.
Neoliberalists may argue that “we are in the right directions and we achieve it in the long run”. If the project failed, they still have an excuse, “reforms were not fully implemented, and more reforms are needed”. This was well answered not by a Marxist or a Keynesian but by a neo-classical economist, Dani Rodrik by referring to the failure of Latin American economies in spite of the rigorous implementations of first, second and third round of reforms. (One Economies, Many Recipes)
How do we explain this new attempt to revive the theories of Frederic Bastiat, “a dwarf economist”, (Marx) in Sri Lanka? The reason is clear: this is part of a hegemonic project of neoliberalism under MR 2 regime. In order to implement full blown neo liberalist reforms, it would be imperative to convince the masses through the intellectuals that this project is benefit for all, there would not be exploitation, each will get their due ‘natural’ share of the cake. If hegemonic project fails then coercion will naturally come as it happened in the brutal attack by the police against the peaceful march organized by the Inter University Student Federation. Bastiat if necessary will be followed by Pinochet.
*The writer is the co-ordinator of the Marx School and the Dean, Faculty of management and Finance, SANASA Institute of Business and Development Studies. e-mail: firstname.lastname@example.org