Thursday, 6 December 2012

A New Age of Sabotage

I haven't posted much recently because every time I think of something to say, the extraordinary pace of events makes it sound lame by the next morning: New York under water, Obama re-elected, News International in the dock, rockets falling on Tel Aviv, and that's even before we reach the Mayan apocalypse on Dec 21. However I've finally plucked up courage to wade into the torrent of the miraculous-horrific thanks to a fortunate discovery on the web. In this previous post I confessed an increasing interest in the radical Norwegian-American economist Thorstein Veblen, but that interest was quite narrowly based on reading only three of his works, namely The Theory of the Leisure Class, The Theory of Business Enterprise and his important essay The Socialist Economics of Karl Marx and His Followers. This wasn't just due to laziness but to the difficulty of obtaining many of Veblen's books, which have been out of print for a long time.

But I re-read Veblen's Wikipedia entry all the way to the bottom, and there found links to some recent online editions. The book I'd most wanted was The Engineers and the Price System of 1921, and sure enough there was a link to a free PDF from Batoche Books of Kitchener, Ontario, Canada dated 2001. Reading it was similar to my experience on first reading The Leisure Class — it felt like an important truth about the way society operates that has somehow been lost, obfuscated or concealed from popular consciousness. In Leisure Class that truth was the opposition between predatory and workmanlike economic attitudes, while in The Engineers it's a truth about "sabotage", which Veblen defined as follows:
    “Sabotage” is a derivative of 'sabot' which is French for a wooden shoe. It means going slow, with a dragging, clumsy movement, such as that manner of footgear may be expected to bring on. So it has come to describe any manoeuvre of slowing-down, inefficiency, bungling, obstruction.
[The Engineers and the Price System, p4]
Veblen isn't easy to read because of his repetitious style, his love of playing of devil's advocate which can confuse the unwary, and his straight-faced sarcasm which even extends to the terminology he employed ("sabotage" being a perfect example). He appropriates this familiar term and gives it a technical economic meaning broader than, though clearly connected to, its popular usage. He delighted in thus provoking the economic establishment by mocking and ironic use of terms like "idle curiosity" (science), "captains of industry" (business men) and "parental bent" (altruistic behaviour).

So, a partisan dynamiting a railway line, a striking worker who drops a spanner into his machine, or the ISP who throttles your internet feed because you've watched too many movies this month, are all committing sabotage in Veblen's terms. That is, they are deliberately reducing productivity to achieve some definite end. Veblen defined sabotage more succinctly as "conscientious withdrawal of efficiency" and always employed it in a non-pejorative sense, proposing that:
"...the common welfare in any community which is organized on the price system cannot be maintained without a salutary use of sabotage... such restriction of output as will maintain prices at a reasonably profitable level and so guard against business depression".
This amounts to a claim that the "free market", which neoliberals have managed to raise to the status of graven idol over recent decades, is a sham. Pricing has become a science that creates strange paradoxes: you might naively believe that maximum profit would be obtained by producing the largest amount of some highly-desirable commodity, but that's very far from the truth. Most often maximum profit can be achieved by somewhat restricting supply in order to raise its price.

The archetypal case is of course the De Beers family's rigid control over the world supply of diamonds, but the oil industry is a pretty good example too. For most of the 20th century there was always a large surplus of oil reserves, but oil companies wouldn't pump too much because that would lower the price too far. OPEC was set up for no other purpose than to restrict (ie. keep high) the price of oil. The drug pricing policies of the big pharmaceutical companies are equally instructive examples. Contrary to free-market dogma, companies not only do not enjoy competition but very large companies will go to great (sometimes too great) expense to avoid or subvert it. Sabotage is seen at its most blatant in the energy sector, and recently became a source of great embarassment to David Cameron's plucky little band of free-market adventurers, who can only wriggle and smoulder as the energy companies sabotage their chances of re-election through naked profiteering.

For Veblen the problem with using sabotage to control production is not that it's morally wrong, but that it creates unemployment and waste. Whenever you deliberately curtail production to raise prices you tend to thereby employ less labour:
"The mechanical industry of the new order is inordinately productive. So the rate and volume of output have to be regulated with a view to what the traffic will bear — that is to say, what will yield the largest net return in terms of price to the business men who manage the country's industrial system. Otherwise there will be 'overproduction', business depression, and consequent hard times all around. Overproduction means production in excess of what the market will carry off at a sufficiently profitable price. So it appears that the continued prosperity of the country from day to day hangs on a 'conscientious withdrawal of efficiency' by the business men who control the country's industrial output."
Marx thought that capitalism makes overproduction structurally inevitable, because the extraction of surplus value by owners guarantees that total wages paid will be insufficient to purchase all of the product. For Veblen sabotage is capitalism's mechanism for controlling overproduction, and Keynes later added to this that governments could intervene during crises of overproduction to sustain demand via public works and welfare payments — though he conceded that such measures would only delay the problem, which must periodically recur and drive the dreaded boom/bust cycle. Our current global economic crisis is ultimately caused by overproduction, and more particularly by the cheap credit that was freely ladled out to temporarily hold it at bay. The overselling in the USA of cheap mortgages (still too dear to be repaid) prior to 2007 lead directly to contamination of the world financial system by the resulting bad debt, cunningly concealed inside the sugared pills of complex and unfathomable financial derivatives. This contamination has not yet been removed — despite all the quantitative easing and other fiddles employed over the last five years — and can't be without imposing massive losses on banks, investors and bond holders that might sink the whole ship. With banks unwilling to lend and employers unwilling or unable to invest and hire, it would seem that sabotage is becoming the norm, just as it was in the mid-1930s. And the spread of debt contagion to states themselves, in the shape of sovereign debt, renders Keynesian intervention less and less feasible.

So how then could the current crisis be solved? One solution, advanced by some anarchists and Occupy communitarians is to abandon the pricing system altogether and make everything free. Experience teaches that this leads to massive overconsumption (the so-called "tragedy of the commons") and that eventually goods would ration themselves by some other means. Most of those means — like Mao and Stalin's famines, or our post-war rationing — are not nice, worse in fact than the problem. A similar (and equally doomed) illusion, embraced by almost all of the far Left and some of the far Right, is that this crisis will so impoverish the masses as to cause a renaissance of militancy and the eventual overthrow of capitalism, in favour of a planned socialist economy or corporate state. There's little evidence that this is about to happen in Europe or the USA: political involvement is everywhere in decline rather than rising, with all party memberships falling, while the democratic Right is already successfully pitting hard-pressed employed workers against the unemployed, for example by carefully juggling the levels of tax credits and welfare cuts. George Osborne's recent fable about working people going to work in the morning and seeing their lazy, dole-dependent neighbours sleep-in is a perfect example — it twangs the appropriate raw nerves and smothers Labour's attempts to revive an anachronistic class solidarity.   

A return to that semi-stable state of almost-full employment and fairish wages that prevailed for 30 years or so following WWII, by paying employees better within a market economy at the cost of some forgone profitability, might be the most desirable solution but there are reasons to doubt whether most people would actually welcome it. In our book Cool Rules David Robins and I anatomised the profound change of attitude created by the 1960s counterculture, a collapse of the Protestant Work Ethic to be displaced by an outlook based on individualism, hedonism and withdrawal of deference to authority. This collapse of previously prevailing mores applied just as much to the economy as to the rest of the "fabric of society" (the irrational exuberance and cocaine-fuelled greed of the recent financial boom was of a kind with the orgiastic lifestyles of rock and movie stars). Since the '60s the political Right has been seeking to restore older puritanical rules to society in the so-called "culture wars", but not to the economy, whereas the Left would like to restore them to the economy but not to society. It's hard to imagine that any such restoration is possible at all, but if it were then it would have to be for both.

A return to post-war social democracy in the UK seems unlikely then for at least three reasons:
1) It would require repeal of most of Thatcher's anti-union legislation and renewed agitation for higher wages on a massive scale, which no imaginable Labour government is likely to embrace.
2) The Tories' "anti-scrounger" assault proved quite effective at the last election and may too in the next. You may object that they failed to secure a majority and were forced into coalition, but had the crash been pushing popular sentiment to the Left they ought to have done far worse.  
3) Most crucially, it may be that younger generations are adapting to the current casino economy with all its gross inequalities. A most noteable feature of the last three decades' economy has been a decoupling of reward from effort, visible not only in bankers' bonuses and "fat-cat" managers' salaries but also in the lifestyle and remuneration of sportsmen, popular entertainers and other celebrities, lottery winners, not to mention drug dealers and gangsters. Slavoj Žižek analyses this phenomenon through the notion of a "surplus wage" entirely unrelated to productivity, which gets paid to insiders accepted into certain cliques and professions:
"Far from being limited to managers, the category of workers earning a surplus wage extends to all sorts of experts, administrators, public servants, doctors, lawyers, journalists, intellectuals and artists. The surplus takes two forms: more money (for managers etc), but also less work and more free time (for–some–intellectuals, but also for state administrators etc). The evaluative procedure used to decide which workers receive a surplus wage is an arbitrary mechanism of power and ideology, with no serious link to actual competence; the surplus wage exists not for economic but for political reasons: to maintain a ‘middle class’ for the purpose of social stability."
          ["Revolt of the Salaried Bourgeoisie", London Review of Books, Vol 34 No 2, 26th Jan 2012]

It's therefore possible, depressingly, that our current economic stasis and austerity might become a permanent state of affairs. That post-war period of social democracy was a kind of semi-stable equilibrium in which relatively high wages and welfare provision maintained mass consumption and kept overproduction within bounds, but systems as complex as human economies typically exhibit more than one stable or quasi-stable state, at different levels of key parameters. It could be that we've flipped into such an alternative state, a low-wage, welfare-poor economy that's grossly unequal, with a small hyper-rich elite and a bare majority in poorly-paid and insecure employment, but in which many people are sustained by a slim hope of gaining entry to the privileged ranks of the surplus-waged, by hook or by crook, by luck or by nepotism (like winning the lottery, wangling a local government sinecure, starting an internet business or making it in football, writing a hit tune in their back-bedroom or being discovered as a model).

The world already contains many societies that display almost all these features, currently concealed behind robust growth through exporting to us the things we no longer make. I'm referring of course to the BRIC countries (Brazil, Russia, India, China) which many economists applaud and would have us emulate. There are already signs that stagnation in the Northern hemisphere is beginning to curtail their growth, and what remains will look far from pretty. The whole world economy appears to be converging toward a burned-out condition that in some ways resembles a modern feudalism, with huge local concentrations of wealth that foster corruption of the public and favour private fiefdom. (When a star has burned up all its hydrogen and helium it collapses to become a "Red Dwarf", an irony that might not be lost on ex-readers Black Dwarf and Red Mole).

If that hasn't depressed you too far to read any further, there remains the environmental question. Climate-change sceptics of both Right and Left want a resumption of economic growth — in the Right's case to carry on business as usual and in the Left's to repair the partly-dismantled welfare state — while climate-change believers demand zero growth (or less) to avoid catastrophic global warming. The latter might eventually be prepared to accept, even perhaps to welcome, the sort of static and enfeebled economy that is emerging, which would be an instance of sabotage so extreme it would have Thorstein Veblen spinning in his grave. On the bright side, that Mayan apocalypse probably won't happen.


  1. Nice one Dick. It always brightens my day to be introduced to a new idea (as the "sabotage" concept is for me at least). It's not globalisation so much as its incompleteness which is driving overproduction. Chinese capitalists in particular, while being the most powerful production arm of the global economy, are not plugged into it socially or culturally. So there is nothing which helps them to keep in sabot-shod step with their Western counterparts to help everyone make a decent profit.

    Personally I think the crisis will only be resolved by a really purgative bout of inflation - eventually. I had thought it would have come by now but it keeps being held back by the strength of the neo-con global financial institutions. The dyke will burst eventually and a lot of us will suffer in the flood. But I think ordinary people will be better off on balance because their only asset is their working day and that will keep its value more or less. Us oldies need to consider how to position ourselves though.

  2. Thanks Tim - I agree that a bout of hyperinflation is the only thing that could reset the clock completely, and I've been expecting it too, but I'm coming to think that there's so much at stake that they will sacrifice everything else to avoid it. There hasn't been a hyperinflation in any developed economy since Bretton Woods, only in whacko economies like Zimbabwe.

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