The authors previously collaborated on Habits of the Heart. This article is excerpted from The Good Society, published this month by Knopf. Reprinted by permission.
This article appeared in The Christian Century, September 18-25, 1991, pps. 844-849. Copyright by The Christian Century Foundation; used by permission. Current articles and subscription information can be found at www.christiancentury.org. Article prepared for Religion Online by Ted & Winnie Brock.
Economy cannot be separated from government and society. Political economy is thus a moral and institutional as well as a technical term. The democratization of the economy would limit the harshness of the labor market, give everyone who works a stake in the enterprise he or she works in and even in the economy at large, thus reducing both the anxiety and the cynicism that are rampant in our present economic life.
Most Americans know Monopoly as a game: Parker Brothers’ famous entertainment has been a continuous favorite since the Great Depression. The game combines skill with a heavy dose of chance through dice and situation cards. The object of the game is to bankrupt your opponents by buying up so much real estate that they have literally no place to rest that does not require payments to you, now the holder of property all around the board: the monopolist. For a few hours anyone can taste the excitement, risks and rewards of life as a would-be business tycoon. The game gives many children their first sense of the free market.
From the player’s point of view, Monopoly is a free market situation in which no one compels the actions of another. But once begun, the game proceeds according to a relentless logic that is no longer subject to the wills of the players either individually or collectively. In this game, as in the world of Thomas Hobbes, "there is no other goal, no other garland, than being foremost," and the rules are as immutable as laws of nature. In its strict separation of collective discussion and rule-making from competitive play, Monopoly embodies the economic viewpoint known as laissez-faire. The game separates the market from the polity, the sphere of economics from that of politics. It presents as common sense what is actually a historically rare notion: that the market is a self-regulating device whose rules exist independent of common agreements about the conduct of social life.
Old-fashioned laissez-faire in its pure form has fewer proponents today, but it is still conventional, among experts as well as in common discourse, to speak of "the economy" as an entity as though it were quite separate from government and society. Instead of these familiar but, we think, misleading distinctions we shall use the older, more accurate term "political economy." This term implies that economic activity is part of a larger social whole; the economy can be completely isolated from politics only in a game.
The root of the word "political" is the Greek word for city or, more accurately, self-governing community: polis. The word "economy" is also derived from Greek. In its origins it meant management of the household, particularly as this was concerned with production and provision for the household’s members. Political economy, then, refers literally to the "management of the public household"; it suggests that the functions of household management are embedded in the structure of the larger community life and are framed by institutions grounded in law and the mores; and the phrase further implies that the rules governing production and provision ought to reflect the moral claims of justice that order the polity as a whole. Political economy is thus a moral and institutional as well as a technical term.
There is a kernel of truth in the notion, popularized by laissez-faire, that economic competition is governed by rules outside human control. Once market exchange has organized the various components of a society’s efforts at production and provision, the processes of market competition draw all resources in their train, including people and their talents. The market system has become the sea in which all modern societies must navigate. This historical process was greeted with joy by Adam Smith, who believed that the division of labor generally increased society’s wealth and tended to level the disparity between rich and poor. As the industrial era arrived, Karl Marx viewed market processes with dismay. For Marx the end of competition was, as in the game, the monopolistic domination of the many by the few.
In our own century it has become clear that the market, left to itself, does not automatically result in human well-being. The outcomes of market processes, even the rules according to which the market operates, are in important respects the result of human activity, in some cases even of design; and we now know that law, government and the world system of nations are central to economic life. The focus of public deliberation must accordingly be broadened to take in the political economy and how it is institutionalized.
It is remarkable how much of our current understanding of social reality flows from the original institutionalization at the end of the 18th century (the "founding") and how much of that was dependent on the thought of John Locke. His teaching is one of the most powerful ideologies ever invented, if not the most powerful. It promised an unheard-of degree of individual freedom, an unlimited opportunity to compete for material well-being, and an unprecedented limitation on the arbitrary powers of government to interfere with individual initiative. In all these ways it expressed a modern liberal ideal that contrasted with the hierarchical domination and exclusiveness of most of the human past.
In its original context, Locke’s thought was inseparable from his theology and from his stern Calvinist sense of obligation. But by the mid-18th century the secular aspects of his teaching had been detached from his overall vision. What his American followers emphasized was that the right to life, liberty and the pursuit of happiness was exemplified by the solitary individual’s appropriation of property from the state of nature. Government was then instituted for the protection of that property. Once people agreed to accept money as the medium of exchange, the accumulation of property was in principle without any moral limit. All limits on the freedom and autonomy of the individual, other than those he or she freely consented to in entering the (quite limited) social contract, were rejected. Locke attacked the patriarchal family, which had been used as a model for absolute monarchy, arguing implicitly for the rights of women and explicitly for the lack of obligation of children to parents. Limited government, in the Lockean view, existed to provide a minimum of order for individuals to accumulate property. All traditional restraints were rejected, and nothing was taken for granted that was not voluntarily agreed to on the basis of reason.
In our great desire to free the individual for happiness, we Americans have tried to make a social world that would serve the self. But things have not gone quite according to plan. We have made instead a world that dwarfs the self it was meant to serve. Especially in the economic realm Americans find themselves under the pressure of market forces to which the only response seems submission. This is the ironic result of trying to live by the Lockean language of individualism in an institutional world it can no longer describe, and yet the Lockean language still seduces us at every turn.
During the 1980s Americans gambled their future on wish rather than sober reflection. Three times in national elections we voted for a simulacrum of the "American Century," for a candidate who projected a sense of American superiority in the world and ethically untroubled affluence at home, willingly suspending disbelief in the possibility of such a restoration. Belief in the free market was revived; the promise of the game of Monopoly was offered with messianic expectations such as have seldom been heard since the 19th century. In a situation where further advances in democratic affluence seemed unexpectedly problematic, the market metaphor took on singular power. Disillusionment with the welfare state, combined with the weakening of the languages of biblical religion and civic republicanism that traditionally moderated Lockean individualism, led many to take the market maximizer as the paradigm of the human person.
One powerful version of the market paradigm derives from the teachings of Milton Friedman and the school of economics he founded. In the view of Friedman and his successors, human beings are exclusively self-interest maximizers, and the primary measure of self-interest is money. Economics becomes a total science that explains everything. As so-called "rational choice theory," it has invaded all the social sciences—especially political science and sociology. Alan Wolfe, in his book Whose Keeper?, describes how this so-called Chicago school of economics is attempting to become our new moral philosophy or even our new religion:
When neither religion, tradition nor literature is capable of serving as a common moral language, it may be that the one moral code all modern people can understand is self-interest. If social scientists are secular priests, Chicago school economists have become missionaries. They have an idea about how the world works. This idea seems to apply in some areas of life. It therefore follows, they believe, that it ought to apply in all....
Chicago school theorists insist that the tools of economic analysis can be used not just to decide whether production should be increased or wages decreased, but in every kind of decision-making situation. Thus we have been told ... that marriage is not so much about love as about supply and demand as regulated through markets for spouses; ... and a man commits suicide "when the total discounted lifetime utility remaining to him reaches zero." From the perspective of the Chicago school, there is no behavior that is not interpretable as economic, however altruistic, emotional, disinterested and compassionate it may seem to others....
Wolfe cites an extreme example of two economists of this school who argue that a free market in babies would solve many current problems having to do with unwanted pregnancies, surrogate mothers, etc. They hold that women should be allowed to sell their babies on the open market and suggest that the situation would improve if "baby prices were quoted as soybean future prices were quoted." We may not be surprised that the French speak of American capitalism as "le capitalisme sauvae"—savage capitalism.
This savagery was not part of the intention of the nation’s founders. The American commercial republic was conceived as an institutional design that would stir the self-interest of individuals to produce not brutal competition but civilized emulation, uplifting the people’s material and moral standards of life. Like Adam Smith, Hamilton and Jefferson believed in the providential design of nature and in the possibilities of a self-regulating political economy that included not only market and government but an active public life as well. Although many of his latter-day prophets ignore this, Smith taught that the social benefit of the free market would be realized only in the wider public sphere, with the populace actively debating matters of common concern and expressing its will through the state. Opinion circulating among members of a myriad of voluntary associations would produce a collectively prudent public. This public would expand in social inclusiveness as its ethical level rose, gradually elevating the minds of commercial men toward the standard of judgment summed up in Smith’s idea of the "Impartial Spectator," the quintessentially public citizen.
The failure of the American political economy to develop spontaneously along the lines prophesied by Adam Smith has made regulation of the political economy, especially the protection of social life from undue market pressure, a challenge for each generation. On balance the American polity has succeeded, though never very well and never without struggle; in developing institutions that stimulate yet channel market forces and promote, or at least preserve, the space of society and public life. But the achievements of the progressive and liberal movements of the past are now called into question by the general obsolescence and breakdown of the arrangements that were made during the New Deal and postwar years.
Today, we must rise to a new level of economic sophistication and creative institutional imagination. To advance Adam Smith’s hopes for a free society growing progressively more cooperative and inclusive, we must make more conscious efforts to redesign markets for public aims. For market forces are rapidly invading every sphere of society—even the family, that traditional bastion of refuge from the "heartless world." Due to its dogmatic belief that individuals develop independently of the web of institutional life, our Lockeanism makes this hard for us to grasp. It thereby blinds us to that great promise of modern civilization: the mutual emergence of individuality and solidarity in a plurality of activities fostered in a genuine public sphere.
No sphere is immune to market pressures. The following example of religious commodification is taken from a suburban newspaper in the San Francisco Bay area:
The members of St. John’s Lutheran Church have a money-back guarantee.
They can donate to the church for 90 days, then if they think they made a mistake, or did not receive a blessing, they can have their money back.
The program is called "God’s Guarantee" and the pastor is confident it will work.
"We trust God to keep his promises so much that we are offering this money back policy," the pastor said....
The program is modeled on a similar program at Wesleyan Church in San Diego.
Economic ideology that turns human beings into relentless market maximizers undermines commitments to family, to church, to neighborhood, to school and to the larger national and global societies. In Habits of the Heart we documented what this kind of thinking does to our capacity to sustain relationships in every sphere, private as well as public. But the final irony is that this apparently economic conception of human life turns out to be profoundly destructive to our economy itself. If thinking of ourselves as members of a community made us poorer, there would still be many reasons to advocate it; but the fact is that commitment to a community turns out to be a much stronger basis for an effective economy than the individualistic pursuit of self-interest. We have only to look at the case of Japan to see that. Our individualistic heritage taught us that there is no such thing as the common good but only the sum of individual goods. But in our complex, interdependent world, the sum of individual goods, organized only under the tyranny of the market, often produces a common bad that eventually erodes our personal satisfactions as well.
To a degree unique in the industrial world, the United States placed its faith in the capacities of the market system to promote the general welfare. However, we had to construct institutional devices to channel the market’s floods of "creative destruction" away from human habitation—or at least the habitations of those economically and politically powerful enough to make the decisions. The law has been the primary means for this regulation and control of the market’s operations, and the primary institutional creation of American economic law has been the business corporation. The history of the American economy is in large measure the story of the corporation, which has evolved characteristics of private governments. Today some of our largest corporations are multinational, with incomes larger than the tax revenues of many nations.
It was a longstanding principle of the civic republican tradition that power follows wealth; and for that reason a rough equality of property was assumed to be one of the prerequisites of a democratic republic. Alexis de Tocqueville, discerning the first beginnings of large-scale industry in the 1830s, warned that this development might lead to the creation of a new aristocracy, to a new kind of feudalism fundamentally incompatible with democratic equality. Fears of "economic royalism" were endemic in America from the late 19th century through the New Deal. It was clear that business corporations exercised inordinate power at federal, state and local levels. Nonetheless, ever since World War II, with the exception of a brief flurry of concern in the 1960s and early 1970s, we have taken the corporation for granted as a natural feature of our society—subject to regulation, to be sure, but not seriously scrutinized as to its fundamental terms of institutionalization. In large measure this was because the corporation was apparently stable and effective as the provider of technological and economic progress.
Now, however, even at a time of widespread neoconservative and neo-laissez-faire sentiment, serious doubts are being raised about the adaptive and innovative capacities of corporations. Much ink has been spilled to discuss the problems of corporate finance and management in the changing world market. And even more profound questions have been raised as to the legitimacy of the public chartering of a private power that is oriented to private gain and has few public responsibilities. These doubts have always been the foundation of democratic criticism of the corporation.
In designing economic institutions and laws in the postwar era, the United States turned away from many of the active social-justice aspects of the New Deal and toward a system of private consumption and corporate organization that characterized the American Century. We are now at another point of major institutional decision. It is not at all clear that those postwar priorities and institutional arrangements are any longer worth the price they exact. At least some of our citizens have come to see that the present organization of our economic life, including the corporation, threatens not only our democratic government, because of its inordinate political influence, but also our national character and form of life, because of its propagation of the idea of wealth as merely the accumulation of consumer goods. This criticism is only heightened when the corporate economy shows serious signs of malfunctioning even on its own self-defined terms.
Big corporations and small, like individuals, finally respond to the way the market is organized and the sanctions institutionalized in prevailing commercial practice and business law. Here again the root problem is the folly of trying to operate with Lockean principles in an unLockean world. In conditions of general instability, it is dangerous for economic actors, either individual or corporate, to rely nearly exclusively on the short-term strategic logic of a narrowly interpreted self-interest. As the institutional pressures of the economy change, alternative behaviors will supplant this shortsightedness, but this will not happen without a political and legal restructuring of the corporation’s place in the society.
The economic historian Jeffrey Lustig has well summarized the issues: "What is necessary is not an impossible attempt to separate the corporation from its social integument, but to acknowledge their mutual dependence and to ensure that the corporations become socially accountable. The point is not to try an impossible divorce of corporation from politics, but to assure that its politics are consistent with democratic practices. . . ." He goes on to suggest that there is currently a "crisis of membership" in the corporation. When capital and labor, as categories, no longer make as much sense as they once did, it is not clear who in a corporation should have more power than others. Ownership and decision-making power must be shared more equitably in an enterprise that depends on the intelligence and initiative of all its members, not just the "entrepreneur." The corporation must also be held accountable to larger constituencies—the communities that have given it tax advantages and public facilities, suppliers and customers, a general public that expects from it ecological responsibility, ethical practice and fair dealing in return for its exceptional powers.
What critics are arguing for is, essentially, to bring the corporation into full democratic accounting with respect to its own claim to be a "citizen." The legal scholar James Boyd White has argued, "The corporation is and always has been a collective citizen," which should be spoken of as having both the responsibilities and the benefits of that status." To argue that the corporation’s defining objective is "enhancing corporate profit and shareholder gain" leads, in his opinion, to unacceptable conclusions: "To say that a corporation’s only goal is to make money would be to define the business corporation—for the first time in American or English law as I understand it—as a kind of shark that lives off of the community rather than as an important agency in the construction, maintenance, and transformation of our shared lives."
White argues that American corporate law has considerable resources to give us for thinking about the corporation as citizen, resources that are endangered when we define the corporation exclusively in terms of economic gain. The issue is not whether corporations, as much present literature has it, develop better "corporate cultures," or promote more ethical leaders—both of which would be good things in themselves. When any corporation may suffer a hostile takeover at the hands of other business interests that want to exploit its resources for short-term gain, the issue is not just culture or leadership but legal norms, the institutional structure within which corporations can operate. The market could be structured to favor long-term, productive investment over speculative profit, but it is not so ordered, for good Lockean reasons that are now increasingly dysfunctional. We agree with those who believe that only a significant change in the present pattern of institutionalization will enable corporations to be the good citizens that most businesspeople sincerely wish them to be.
To restructure the incentives of the market so as to favor long-term investment over short-term consumption, or to change the institutionalization of the corporation to accountable democratic citizenship, does not at all mean to centralize industry under a government ministry. Neither we nor those we have quoted are advocates of a command or state socialist economy. Still, it is worth remembering that there exists in America a very powerful form of command economy: a large and powerful sector of American business (by some estimates up to one-fifth) is effectively removed from the strictures of the market economy since it does most of its business "on command" with the military branches of the American government. This "Pentagon socialism" not only has all the disadvantages of command economies anywhere but corrupts the American political process. Few congressional districts do not have plants and workers dependent on the defense establishment, which leads to the strange situation where Congress votes to fund fighter planes or missiles that even the Pentagon doesn’t want, because otherwise there would be a loss of profits and jobs in districts represented by powerful legislators.
The new international situation after the cold war offers unparalleled opportunities to redirect the present level of defense spending to other uses. Given the sad state of our highways, public transportation systems and other material infrastructure, as well as the severe needs of our educational system, increased government spending in these areas could take up the slack in declining defense expenditures while contributing enormously to the potential productivity of the United States. But to do something about this requires that we face government’s economic responsibilities directly rather than cloaking them in the guise of national defense.
The most fundamental reform to bring about economic democracy is not in the realm of government spending, important as that continues to be. An increasingly social ownership of corporate wealth is quite different from government ownership. We have in mind not only the kinds of thing that Lustig has proposed, but something like the Meidener plan, proposed in Sweden, in which the general populace participates in the increase in wealth, to which all contribute; a certain proportion of new stock offerings go to the government not for government use but as a source of dividends for the public, at first limited, but eventually providing the protection against complete impoverishment that those with independent incomes have always had. This arrangement would give everyone a stake in the increase of productivity in the economy. Proposals for a guaranteed minimum income or a social wage would accomplish the same thing by different means.
The Lockean ideology and the way our economy has worked up till now have obscured the truth about work: namely, that we are not isolated individuals picking fruit or making money; we are all profoundly dependent on the work of others. Today people know that this is true, but they don’t see it in the economy. They see it in private life—it is one reason the family is still so important, if not as a fact then as an ideal—and they see it in charitable acts. In a democratized economy it would be much clearer that the work each of us does is something we do together and for each other as much as by and for ourselves. Studies have shown that even now, when many workers feel they are constrained at work and their real lives are lived off the job, they are actually happier at work than at leisure. Doing work that is challenging and cooperative seems to fulfill a deep human need. If people felt that the workplace as well as the home really belonged to them and contributed to the good of all, the lingering resentment might lessen.
There is some reason to believe that Americans may be more ready for a major reform in our economic institutions than is sometimes imagined. Many people would prefer a better "quality of life" to a simple increase in personal income. What "quality of life" really means and what a person would agree to in a political situation where one can have little trust that one will be fairly treated are of course open questions. Yet the old-fashioned notion of "a sufficiency"—a secure, modest income, rather than a potentially exorbitant but insecure one, that allows one to form attachments, make commitments, and engage in activities that are good in themselves—is very attractive to many Americans.
The present heavy emphasis on economic opportunity puts a terrific burden on winners as well as losers; for there is the very-present fear that one misstep will have you tumbling down the ladder. This fear will only increase as one comes to realize that for whatever reasons, there are "limits to growth." It is idle to talk of "a sufficiency" as though it were a static reality. As technology changes, sufficiency changes as well. But in a world of tightening competition, organizing American society around an ever more intense competition for affluence—more Hobbesian than Lockean—is not the only institutional possibility. A democratic economy, in which appropriate technology is combined with high productivity and therefore with the possibility of increased leisure, is not utopian in terms of present possibilities.
A highly individuated self is an essential product of a truly modern society. Yet the changes we suggest could go far to relieve the competitive, anxious self-assertiveness of this individuated self, for they would encourage other virtues and competences. For example, feminist critics suggest that women have social and emotional competences that help to cushion the demands and anxieties of the precarious achieving self. In short, we are not arguing for an end to competition and achievement, any more than for an end to the market economy. What we seek is a more socially grounded person in a more democratic economy.
The United States until now has had an extremely unequal distribution of income as compared with other capitalist countries, and even more inequality with regard to property. The American Catholic bishops have pointed out that this is morally intolerable. But the reforms we advocate here do not involve simply a better distribution of income, making the poor richer. We advocate, as the bishops do, a great increase in the participation of everyone in the vitality of a healthy economy. True, this participation would enable us to rebuild the institutions of the underclass, not just allow individuals to escape it; but most important, it would mean a richer public life, making a satisfactory life for all of us, including the high achievers, dependent less on our own success and more on a healthy society.
Above all, this means a change in the meaning of work, a lessening of its pure utilitarianism, a recovery of the idea of work as a calling. Interesting work, work that we know contributes to others, is its own reward. It would be utopian to try to disentangle achievement and material reward altogether, but some weakening of the connection is the only way we can introduce an alternative to the Lockean pattern. As Christopher Jencks has said, we must reduce the "punishments of failure and the rewards of success." We know that this cannot be done without a great deal of conflict. Yet the reason for doing it would not be just to help the deprived, or any "class." The change we favor would help the successful as much as anyone, giving them what is presently slipping beyond everyone’s grasp, a form of life that is intrinsically meaningful and valuable. It will, of course, take an extraordinary exercise of political will to achieve so major a transformation in our ideology and our institutions.
Whatever the specific reforms—and we would expect a period of experiment to see what forms are most effective—the major benefit in the democratization of the economy would be to limit the harshness of the labor market, to give everyone who works a stake in the enterprise he or she works in and even in the economy at large, thus reducing both the anxiety and the cynicism that are rampant in our present economic life. To be truly beneficial these changes would go hand in hand with increasing productivity and declining work hours, reversing recent trends, so that family, community, and civic concerns might flourish. Genuine democracy has always required a degree of leisure. A democratized and productive economy might at last give some genuine leisure to the demos itself. These considerations point toward the development of a democratic administrative state able to support and extend a vital public sphere, rather than supplant it.