Capitalism Alone (5) Outsourcing Morality

In his book called Capitalism Alone, Branko Milanovic says that economic success made more acute the discrepancy between the ability to live better and longer lives and the lack of a commensurate increase in morality, or even happiness.

But this external polish was achieved at the cost of people being increasingly driven by self-interest alone, even in many ordinary and personal affairs. The capitalist spirit, a testimony to the generalized success of capitalism, penetrated deeply into people’s individual lives. Since extending capitalism to family and intimate life was antithetical to centuries-old views about sacrifice, hospitality, friendship, family ties, and the like, it was not easy to openly accept that all such norms had become superseded by self-interest. This unease created a huge area where hypocrisy reigned. Thus, ultimately, the material success of capitalism came to be associated with a reign of half-truths in our private lives (p. 197).

An alternative that would preserve the acquisitive spirit needed for the of commercialized societies but would keep that spirit in check was to internalize certain forms of acceptable behavior through religion... The internalization of desirable behavior, was possible thanks to the constraints of religion and the tacit social contract. It is not clear if societies so dedicated to the acquisition of wealth, by practically any means, would not explode into chaos were it not for these constraints.

Milanovic explains that neither of these two constraints (religion and a tacit social contract) holds in today’s globalized capitalism. Part of the problem is the decline of Christians churches. The other problem is that people have lost connection with each other and are unmoored from their social settings.

Actions are no longer “monitored” by the people among whom they live. Adam Smith’s baker’s immoral business actions would have been observed by his neighbors. But the immoral actions of people who work in one place and live in an entirely different one—with the world of coworkers and that of neighbors and friends never interacting—are inobservable... The doctor can be seen as an upstanding member of the community, quite rightly, from what his neighbors know of him, while in reality he is a criminal.

As the internal mechanisms of constraint have atrophied or died or do not work in a globalized setting, they have been replaced by external constraints, in the form of rules and laws. I do not mean that laws did not exist before. But while internalized constraints on behavior mattered, both laws and self-imposed limits affected people’s behavior. The present situation is characterized by the disappearance of the latter. In cases where we cannot expect the rich to behave ethically or with sufficient discretion so as not to inflame the passions in those who have less, reinforcement of laws is obviously a good thing. The problem is that instead of two handrails to help keep the actions of the rich (or anyone, for that matter) on the right path, we now have only one—laws. Morality, gutted out internally, has become fully externalized. It has been outsourced from ourselves to society at large.

The drawback of outsourcing morality is that it exacerbates the original problem of the absence of internal inhibitions or constraints. Everyone either will try to walk the fine line between legality and illegality (doing things that are unethical but technically legal) or will break the law while trying not to be caught. Breaking the law is not unique to today’s commercialized societies. But what is unique is for people to claim that they have done everything in the most ethical manner possible if they have remained just on the right side of the law, or, if they have strayed into illegality, that it is the business of others to catch them and prove they have broken the law. Internal checks, stemming from one’s own belief in what is moral and what is not, seem to play no role whatsoever.

Outsourcing morality through reliance solely on the law or on rule enforcers means that everyone tries to game the system. Any laws that are introduced to punish new forms of unethical or amoral behavior will always stay one step behind those who are able to find ways around them. Financial deregulation and tax evasion provide excellent examples. There is no internal moral rule, as we have amply seen, that would check the behavior of top banks and hedge funds. Their objective is to play the game as close to the rules as possible, and if the rules need to be bent or ignored, to try to avoid being caught. And if caught, to try, by using a phalanx of lawyers, to find the most recondite and specious nations for this behavior. And if that fails, then to settle (p. 183).

Criticizing the rich or the banks for what they are doing is futile and naïve. Futile because they will not change their behavior, since doing so would risk losing their wealth. Naïve because the origin of the problem is systemic and not individual. A bank might become a most ethical and careful actor, but it would then lose the commercial race with its competitors (p 184).

People who write about the need for more leisure do not realize that societies the world over are structured in such a way as to glorify success and power, that success and power in a commercialized society are expressed in money only, and that money is obtained through work, owner of assets, and, not least, corruption. This is also why corruption is an integral component of globalized capitalism (p. 187).

Laws and regulations cannot make up for lack of morality. In my book God's Economy, I explain how Gods Instructions for Economic Life internalise economic morality to each Kingdom Community.

Capitalism Alone (4) Economic Calculators

In his book called Capitalism Alone, Branko Milanovic says that we have all become economic calculating machines.

The ultimate success of capitalism is to have transformed human nature such that everyone has become an excellent calculator of pain and pleasure, gain and loss—so much so that even if capitalist factory production were to disappear today we would still be selling each other services for money; eventually we shall become companies ourselves. Imagine an economy (similar externally to a very primitive one) where all production was conducted at home or within the extended family. This would seem to be a perfect nonmarket economy. But if we had such an economy today, it would be fully capitalistic because we would be selling all these goods and services to each other: a neighbor will not keep an eye on your children for free, no one will share food with you without payment, you will make your spouse pay for sex, and so forth. This is the world we are moving toward, and the field of capitalistic operations is thus likely to become unlimited because it will include each of us and our mostly mundane daily activities.

He claims that commodification was not imposed on us by companies that want to find new sources of profits. He suggests that we have chosen this change for the perceived benefits.

The truth is that we are willingly, even eagerly, participating in commodification because, through long socialization in capitalism, people have become capitalistic calculating machines. We have each become a small center of capitalist production, assigning implicit prices to our time, our emotions, and our family relations (p.194).

Commodification “all the way down” is a commodification process in which individuals participate freely, and, moreover, it is something that they often find liberating and meaningful. Some may see this as shallow (Does the ability to drive your own car for profit or to deliver pizza at any hour that suits you give meaning to your life?), but it dovetails perfectly with the system of values that sustains hypercommercialized capitalism and that individuals have internalized. This system, as I mentioned before, places the acquisition of money on a pedestal. The ability to trade one’s own personal space and time for profit is thus seen both as a form of empowerment and as a step toward the ultimate objective of acquiring wealth. It therefore represents the triumph of capitalism.

Commodification of the private sphere is the apogee of hypercommercialised capitalism. It does not presage a crisis of capitalism. A crisis would result only if the commodification of the private sphere were seen as intruding into areas that individuals wanted to protect from commercialization, and as putting pressure on them to engage in activities in which they did not want to participate. But most people perceive it as the opposite: a step toward enrichment and freedom.

We can make the following conclusions. First, on a purely factual side, there is no serious argument disputing that as societies grow richer, the sphere of commodification expands.

Second, while greater commodification has made our lives better in many cases and responds to a definite choice by people, it has also often weakened personal ties and sometimes made us more callous, because our knowledge that any pesky little problem can be solved by throwing money at it has made us less concerned about our neighbors and family.

Therefore, as we live in an increasingly commodified environment where interactions are transitory and discrete, the space where we can exercise “nice” cooperative behavior shrinks. When we get to the point where we have all become just agents in one-off deals, there will no longer be any place for freely given niceness. That end point would be both a Utopia of wealth and a dystopia of personal relations.

Capitalism has successfully transformed humans into calculating machines endowed with limitless needs.

To live in capitalism, we do not need the capitalist mode of production in factories if we have all become capitalistic centers ourselves (p. 196).

In my book Government of God, I describe how the structure of society can be transformed by the gospel and Jesus' command that we love one another.

Capitalism Alone (2) Commodification

In his book called Capitalism Alone, Branko Milanovic says that the reverse side of atomization is commodification.

In atomization, we become alone because all of our needs can be satisfied by what we buy from others, in the market. In a state of full commodification, we become that other, we satisfy the needs of people through maximum commodification of our assets, including our free time.

What capitalism does is to give us, as consumers, the ability to purchase activities that used to be provided in kind by family, friends, or community. But to us as producers, it also offers a wide field of activities (precisely the same ones) that we can supply to others.

The most obvious case is the commodification of activities that used to be conducted within extended families and then, as people became richer, within nuclear families. Cooking has now become outsourced, and families often do not eat meals together. Cleaning, repairs, gardening, and child-rearing have become more commercialized than before or perhaps than ever. Writing homework essays, which used to be “outsourced” to parents, can now be outsourced to commercial companies.

The growth of the gig economy commercializes our free time and things that we own but have not used for commercial purposes before. Uber was created precisely on the idea of making better use of free time. Limousine drivers used to have extra time between jobs; instead of wasting that time, they began to drive people around to make money. Now anybody who has some free time can “sell” it by working for a ride-share company or delivering pizza. A portion of leisure time that we could not commercialize (simply because jobs were “lumpy” has become marketable. Likewise, a private car that was “dead capital” becomes real capital if used, to drive for Lyft or Uber. Keeping the car idle in a garage or parking lot has a clear opportunity cost. Similarly, homes that in the past might have been lent out for a week without compensation to family and friends have now become assets that are rented out to travellers for a fee. As soon as this happens, such goods become commodities; they acquire a market price. Not using them is a clear waste of resources. Whereas in the past their opportunity cost was zero, now it is positive (p.190).

This does not mean that everyone will use every free moment to do a gig, or will rent out their home every day that it is empty. Similarly, we do not use every minute of our lives to try to earn money. However, once the opportunity cost of the hitherto free activities becomes positive, we are ultimately led to think of these activities as commercial goods or services. It then requires greater effort of the will to let opportunities go and not succumb to benefiting from them.

Just as there is a logic in the way hypercommercialized capitalism obliterates the divide between the production and family spheres, so is there a certain historical logic in the progression of what becomes commodified. First, agriculture was commodified through the commercialization of surplus production, that is, through a movement out of subsistence agriculture. Then came the commodification of manufacturing activities, especially clothing production. New markets emerged as the goods that had traditionally been produced by households started to be produced commercially. At the origin of the Industrial (and industrious) Revolution in Europe was wage work outside the home and, together with it, the practice of using the wages thus earned to purchase commodities that had previously been produced within the household by these same workers (with productivity much higher under the new system). This is exactly the same that we observe today with respect to services. The commodification of services, and ultimately of free time, is just an additional logical on the road to development.

Personal services are more difficult to commodify because productivity increases are slower than in the production of goods (so the advantages of commodification are less obvious), and the gains from the division of labor are less: the advantage of a delivered meal compared with a home-cooked one is not as clear as the advantage of buying mass-produced shoes compared with making them at home.

The commodification of our economy is easy to get sucked into.

Capitalism Alone (1)

I have just read a book by Branko Milanovic (2019) called Capitalism Alone. I found most of the book rather uninteresting, but towards the end of the book was a chapter that really shifted my thinking. It contains some ideas about what is happening in our modern society that should be disturbing followers of Jesus. These changes are not good, but they are real, and most of us are part of them. If we do not understand what is happening and develop serious alternatives, we could be in serious trouble.

According to Milanovic, the whole of life is being commercialised. There are two sides to the commercialisation of our economy and society: Atomization and Commodification. I will give explanations of these two big words in the next couple of posts.

Milanovic defines atomisation in the following way. It is a situation where individuals become the most important component of society, at the expense of other groupings.

Atomization refers to the fact that families have largely lost their economic advantage as an increasing number of goods and services that used to be produced at home, outside the market and not subject to pecuniary exchange, can now be purchased or rented on the market. Activities like preparing food, cleaning, gardening, and taking care of babies and sick and elderly people were provided “free” at home in traditional societies and, until very recently, in modern societies (unless one was very rich). It was certainly one of the main reasons marriage existed at all. But with increasing wealth, we can purchase almost all of these services externally, and we have less and less of a need to share our lives with others. It is not an accident the richest societies today tend toward a family size of one (p. 185).

It is not necessarily because people in poorer countries love being together, but because they cannot afford to live alone. Living together “internalizes” these activities (cooking, cleaning, and so on) and also provides economies of scale in everything from cooking oil to electricity (that is, utilities and cooking expenses are lower for two people living together than for each of them living alone multiplied by two) But in rich societies, all of these activities can now be outsourced. Taken to a dystopian conclusion, the world would consist of individuals living and often working alone (other than for the period when they are taking care of children), who would have no permanent links or to other people and whose needs would all be supplied by markets, in the same way that most people today do not make their own shoes but buy them in a store. There is similarly no reason why anyone (except the very poorest) would have to wash their own dishes or prepare their own food.

Atomization (which, taken to the extreme, implies the end of the family).

Milanovic explains that this atomization has increased the legal intrusions into family life. Some of these are good and some are bad.

The reason why the family has been the unit that takes care of the old and the young, and exchanges goods and services among its members regardless of who is a net “winner” or “loser,” is because the rules existing within families are different from those holding outside (p.188).

Todays commercialized model lies at the other extreme. The external – world is allowed to break inside not only in the form of the delivery of dinners and cleaning services but also in the form of legal intrusion. These intrusions—such as prenuptial agreements, and the ability of the courts take away children and to control the behavior of spouses toward each other—while in many cases desirable developments (e.g., in preventing spousal abuse), further hollow out the internal tacit compact that held families together. This legal intrusion of society into family life is just another instance of outsourcing. The internal family “legal code” is simply outsourced to society at large, the same way that cooking a meal is outsourced the nearby restaurant. Both types of outsourcing cannot but raise the ultimate question: What is the advantage of family or of cohabitation in a rich, commercialized world where every service can be purchased?

If we are honest, we will realise that we have all participated in this process of atomisation. If we are going to resist the trend, then we need an alternative model for society that is based on loving one another and serving each other.

This atomisation of an economy has three stages. It ends with everything that takes place in the home being commercialised.

One can identify three historical types of interactions between the private and public (economic) spheres. The first is the precapitalist one, where production is carried out within the household. This “household mode of production” was long characteristic of China, all the way into the nineteenth century, when western Europe had already moved to the much more prevalent use of wage labor that defines the second historical type. This second type involves the use of wage labor outside the home (that is, not the putting-out system in which people do piece labor for others inside their own home). It is part of a typical capitalist mode of production with a sharp distinction between the production and family spheres—a distinction that Weber thought was absolutely fundamental for capitalism. Finally, the new hypercommercialized again unifies production and family but does so by folding the household into the capitalist mode of production. We can see this as a logical outcome in the development of capitalism, as capitalism moves to “conquer” new spheres and to commodify new goods and services. This stage also implies substantial improvements in the productivity of labor because only sufficiently wealthy societies can afford to fully commodify all of the personal relations that have traditionally been left out of the market.

As I read this, I couldn’t help wondering if working from home, which has become popular during the lockdown, is part of the third stage that he describes.