The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers (30 page)

One thing that struck me was that out of all of the countries, there was one particular country that shone in all indicators: education, health, social spending, and that country happens to be Cuba, and it’s the only country that does not take advice from the World Bank and IMF…. Do you stand by those statistics, and if so, what is the reason for Cuba being so outstanding?

M
R
. W
OLFENSOHN
: Well, we don’t cook the statistics, and we put them out so that you can read them. I think Cuba has done—and everybody would acknowledge—a great job on education and health. And if you judge the country by education and health, they’ve done a terrific job. So I have no hesitation in acknowledging that they’ve done a good job, and it doesn’t embarrass me to do it. It wasn’t with our advice, but it wasn’t without our advice either. I mean, we just have nothing to do with them in the present sense, and they should be congratulated on what they’ve done.
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But the World Bank had indeed cooked the statistics. Earlier, both the Reagan and Bush administrations had applied pressure to modify the index to include not just literacy as a measure of educational success but also to add years of schooling as a component. This modification improved the standing of the United States and slightly lowered Cuba’s. Even so, Cuba’s ranking still remained quite high.

The Cuban incident serves as a warning that efforts to improve upon the conventional GDP can raise sensitive issues. Breaking through the illusion of the GDP could help to set society on a path of creating an economy that works for people.

The Economics of Happiness

Most people would expect that an increase in a society’s income would bring about a corresponding increase in happiness, but such is not the case. Instead, students of the subject have learned that “once a country has over $15,000 per head, its level of happiness appears to be independent of its income per head.”
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Basically, once a growing economy has passed through the $15,000 threshold, the standards by which its people measure their condition also increase. Germans and Nigerians seem to be equally happy. A similar equality holds for Cubans and Americans, although the United States government might want to call for a revision of that calculation.
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What explains why increasing prosperity does not bring about happiness? For the typical
individual, economic success does seem to provide happiness. At least, the more income that individuals have relative to others, the happier they are. H. L. Mencken once summed up this phenomenon by defining wealth as “any income that is at least $100 more a year than the income of one’s wife’s sister’s husband.”
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However, if everybody’s income increases proportionately, nobody becomes happier. As Gore Vidal is reputed to have said, “It is not enough to succeed; others must fail.”

German happiness does not exceed that of Nigeria because Germans have higher material expectations than Nigerians do. These expectations rapidly shift as people experience a higher standard of living. Although people in Germany might be getting more material goods, they might not feel much happier so long as they are not doing any better than their friends and neighbors.

Economic growth can shuffle the rankings of monetary success within a community, but for each person who moves up the ladder, someone else moves down. Individuals that ascend may be happier, but those who lose ground in their ranking will be less happy. Such a shuffle in the rankings can lower happiness because downward shifts in expectations are sluggish, and upward shifts are rapid.

For example, if the German standard of living fell to a Nigerian level, Germans would not be indifferent. Similarly, if the Nigerians were brought up to a German standard and then fell back to their earlier level, their happiness would also fall well below where it stands today.

As a result, people’s subjective interpretation of prosperity becomes an ever-receding goal. For example, in 1986 the Roper polling organization asked Americans how much income they would need to fulfill all their dreams. The answer was $50,000. By 1994 the “dreams-fulfilling” level of income had doubled from $50,000 to $102,000.
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After his years on a desert island, Robinson Crusoe understood the basic problem:

It put me to reflecting, how little repining there would be among mankind, at any condition of life, if people would rather compare their condition with those
that are worse, in order to be thankful, than be always comparing them with those which are better, to assist their murmurings and complainings.
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Unfortunately, real people rarely share Crusoe’s insight. Instead, people experience what psychologists call the hedonic treadmill, although a hamster wheel might be a better metaphor. The more people get, the more they want. As a result, the extra happiness, which is supposed to be the reward for hard work and success, will continue to prove elusive.

In effect, then, the whole Procrustean game is a ruse. People are expected to keep their nose to the grindstone, because, as Simon Patten explained, the payoff comes in the form of consumption, which provides utility, which, in turn, translates into happiness.

Adam Smith recognized the problem with the Patten perspective a quarter millennium ago, when he disparaged consumptionism as a “deception which rouses and keeps in continual motion the industry of mankind.” Smith, however, proposed that the hard work required to increase consumption would create better, if not happier people. In fact, if people actually did become happy, the obsessive need for more consumption would diminish and the GDP would suffer.

In recent years, a number of established economists have begun to explore the subject of happiness. For example, between 1991 and 1995, EconLit, a bibliographic service for economics, reported only four papers analyzing data on self-reported life satisfaction or happiness. A decade later, from 2001 to 2005, that number had risen to more than one hundred.
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Daniel Kahneman, Princeton psychologist and Nobel Laureate in Economics, along with Alan Krueger, currently Assistant Secretary of the Treasury for economic policy, and two other colleagues proposed to create “National Well-Being Accounts.”
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Detailed surveys asking people to report on their satisfaction with specific aspects of their life, such as work, are central to their approach.

This work of Kahneman and his colleagues is intended as a complement to the estimation of the GDP rather than a replacement. Such calculations do not pretend to measure the output of the economy.
Nor do they attempt to take account of environmental degradation, as some of the modifications of the GDP propose to do. Instead, the survey approach directly tries to ascertain a subjective measure of happiness.

Not surprisingly, these surveys find that activities that are non-economic, such as intimate relations, socializing after work, dinner, relaxing, lunch, and exercising, ranked highest in terms of satisfaction. Equally unsurprising, the activities that ranked lowest were the evening commute, working, and the morning commute.
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This last result helps to put the above-mentioned surveys of job satisfaction in context.

Such survey results also suggest that economists may have been wise to have avoided any analysis of happiness or working conditions for so long. Traveling along this road inevitably devastates the benevolent pretenses of Procrusteanism. The long hours of work and the long commutes are preventing the creation of the kind of human communities that make for a better life. At the same time, happiness research undermines economists’ scientific pretenses.

One dimension of a society’s capacity to improve people’s capabilities, or even happiness, would have to be the complex network of social relations that provides a healthy framework for human existence. Class distinctions that consign the majority of the population to the degradations common among the lower orders of society prevent the full development of social relations for a large body of people. But economics is predicated on treating people as isolated individuals making their own decisions to maximize their welfare.

Of course, you can define economic statistics any number of ways for any number of purposes, but the popular use of the GDP with its narrow emphasis on commercial activities distracts people from the real issues that enrich life. Since the GDP is wholly inadequate as a measure of human welfare, as Sen brilliantly demonstrated, why do economists still take this statistic so seriously? The reason is not hard to fathom. Economists generally learn to see the world through the eyes of the marketplace. Since economic growth is taken to mean an increase in commercial transactions, it must be good.

Concluding Remark

Under the cover of a growing GDP, the unshakeable Procrustean ideology of economics confidently insists that market forces alone will ensure the maximum benefit for society, and that one need only worry about ignorant meddlers who might attempt to interfere with the magic of the marketplace. The evidence for this belief consists mostly of dense mathematical theorems based on unrealistic assumptions and elaborate statistical analyses, backed up by distorted measures of economic success.

However, the GDP is a seriously flawed measure that obscures the nature of Procrusteanism by sweeping workers, working conditions, and the promised happiness from more work under a great statistical rug. The GDP ignores everything, other than formal education, that expands human capabilities, including that which can allow people to develop their productive potential. In short, the GDP helps to obscure that self-actualization is a major source of productivity as well as happiness.

Even worse, the general acceptance of the GDP as a measure of economic success focuses policy on Procrustean measures, while turning attention from the need to build a better society.

Within this perspective, the recent interest in the economics of happiness is a welcome development, especially if it forces people to look more deeply into the root causes of unhappiness—a class-ridden society that makes a healthy sense of community all but impossible.

The next chapter will explore the destructiveness of Procrusteanism in more detail.

Social Relations of Work

One of Karl Marx’s deepest insights was to understand that capital is a social relation and not just a thing. People who are unfamiliar with Marx’s analysis may be perplexed by the idea that capital is a social relationship, that a factory is not merely a building populated with various machines but also a reflection of the relationship between those who own the factory and those who work in it. People who study the evolution of technology, however, understand how social relations shape technology.

David Noble provided one of the most in-depth analyses of the interplay between technology and the social relationship between employers and workers in his outstanding history of the development of computer numerically controlled machine tools at General Electric. The chief purpose of this new technology was to wrest control of the shop from the skilled workers who had accumulated vast reservoirs of expertise.
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Traditionally, skilled machinists would first operate their equipment manually while shaping a piece of metal. Employers hated the
power that the machinists’ knowledge gave them and tried repeatedly to break it. Frederick Taylor’s first job was in a machine shop, and after he became foreman, he tried to use his system of time and motion studies to wrest control away from the workers. The work the machinists did, however, was too complex and the men too strongly organized, and he was unable to do this. After the Second World War, however, scientific developments begun in the military gave employers the means to finally achieve control over their workplaces. Two possibilities presented themselves. In one process, monitoring machines would record the workers’ moves and then a playback device allowed the machine to automatically repeat the same procedure on new materials, as long as desired. In a second scheme, instead of reliance on the machinists’ skills for setting the machine’s pattern, the responsibility shifted to software programmers, divorced from the shop floor, who programmed the complex removal of metal to form a part that marks the machinists’ craft onto a tape that could then be attached to the machine, which would than automatically do what the worker had previously done.

General Electric believed that “the innate properties of the new material technology would themselves guarantee increased production of high-quality engine parts.”
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But turning these highly skilled workers into mere “button pushers” proved far more difficult than the company had imagined. The new equipment required skilled intervention.

The company’s openly confrontational approach proved counterproductive. Without the workers’ cooperation, the company’s experiment proved to be a disaster. General Electric had no chance of eliminating the inevitable bugs in an entirely new system without the cooperation of workers.

After a prolonged period of turmoil and lowered productivity, General Electric finally realized its dependence on workers’ expertise. Rather than openly acknowledging this dependence, the company resorted to subterfuge. Management pretended to bow to the workers’ demands by changing course and giving them more or less free control of much of the shop floor. Meanwhile, the company paid close attention to what the workers did to learn how to make their skills expendable.

In the end, General Electric was correct in believing that numerically controlled machines had a future, even though the company’s antagonistic stance toward labor made the transition costly. However, the eventual higher productivity of numerically controlled machines was secondary; the driving force behind the introduction of this technology was to gain advantages over the workers.