Wednesday, January 21, 2015

The Speenhamland laws and the demise of capitalism (big consequences of small changes)

This week, reading Polanyi's The Great Transformation I found a piece of information that greatly assuaged my concerns about the potential discrepancy between the end I was ultimately aiming at (the overcoming of those features of our current socioeconomic system, which I had characterized as "Digital Capitalism", that I judged more detrimental to human flourishing) and the means I was proposing to support to achieve those ends (the guarantee by law of a Universal Basic Income -UBI for short- for all citizens, irrespective of their age, sex, wealth or potential additional sources of income, whilst leaving all the rest of social norms -property laws, market, exchanges, civil codes, electoral system, parliaments...- essentially untouched).

Of course that doesn't mean I think every single institution of every single country of the West is hunky dory: the electoral college and penal laws (that condemn and disenfranchise up to a 30% of some minority populations) in the USA are vestiges of a barbarous era; the powers invested in the President of France's V Republic are excessive, and make the office too prone to corruption; Spanish monarchy (any monarchy, come to think about it) is an affront to common sense, and its electoral law almost guarantees endogamy and control of the judiciary and the media by the governing party, and thus the creation of a "caste", as denounced by the latest entrant on the political game (which is soon looking like just wanting to get a place at the trough, rather than jettison the trough altogether)... but most of those institutions can (and my hope and innate optimism tell me they all eventually will) be reformed without a major overhaul of the social architecture that defines and supports them, given the people caught up in them are given the opportunity to prosper and think by themselves, being freed from the pressure to toil in makeshift jobs and incentivized to produce material goods the whole of society has no need for, and is much worse off for them being produced.

And of course, the key to a free, critical citizenry that can take the best collective decisions is to redistribute more fairly the total social product to ensure everybody, regardless of capability (including the capabilities for hard work, grit, discipline, self-denial and focus on unpleasurable tasks that are rightly celebrated today, seemingly without realizing they are as much heritable, and thus undeserved, as eye colour or height) has enough to live and (modestly) prosper, and has a much greater panply of choices regarding how to employ his or her time than in pursue of a meager salary in exchange for as many hours as possible of drudgery and degradation. And that is what a UBI would accomplish, without any other change.

What about the Speenhamland laws I mentioned in the title, and the interpretation Polanyi makes of them? The law was an amendment to the Elizabethan Poor Laws, devised in the Pelican Inn of the city of the same name by magistrates seeking to alleviate the problem of rural poverty created by the diminution of common lands (enclosures) and exacerbated by the rise in the price of basic food derived from bad harvests (although some contemporaries blamed middlemen and hoarders for the rise) to ensure every man was paid a minimum (today we would say subsistence) wage, which varied with the size of his family and the current price of bread. The system was in wide use in most of England (in all the early industrializing parts at least), met with great resistance between the landlords (that payed the "poor rates" from which the system fed) and their liberal representatives (both Ricardo and, specially, Malthus thundered about it), which blamed it for the poor productivity of the workers (which found they needn't work that much, as the system would pay the difference between the salary they managed to get, or no salary at all, and what they needed), although it allowed them to pay well below what those workers would require just to stay alive... it finally was abolished by the new poor laws of 1834.

What is, then, the historical significance of this obscure and brief piece of British legislation, and how it is relevant to the contemporary discussion about a UBI? According to Polanyi's analysis, the repeal of the Speenhamland system was an absolutely key element in the creation of a free market for labor, without which Capitalism (with a capital "C") would have never taken off. It was (and here he takes a long and illustrious line of argument in the tradition of Marx and Engels) the capstone of a long struggle to pauperize the mass of the population so they could be exploited by the budding capitalists (so they had no option but to provide, that is to say, their surplus value to be appropriated by the factory owners in what was to become the original seed of capitalist accumulation from which all of the modern capitalist system derives). They were by that legislative act turned in the "industrial reserve army" that ensured wages would be low enough as to guarantee a rate of profit that would make the whole capitalist enterprise attractive. It has to be noted that the Speenhamland system differs from a UBI in a very substantial way: it made for the difference between what the worker earned and what was deemed acceptable to live fr him and his family. That meant that, if his salary were to be below that guaranteed minimum (as most were), he had no incentive to work at all, as he would end up with the same. No incentive other than the social stigma attached to "being on the rates", which after the vast majority of the working population was on them ceased to be an stigma at all. As a UBI is perceived by the recipients regardless of any other source of income they may have, everybody would still have an incentive to work, as the salary received would always imply an increment in his disposable income by the end of the month.

But the key point to take home is that the elimination of a system of guaranteed income was a precondition to create the need not just to work, but to put all of one's life in the market for sale, which is exactly the key feature of the modern system we identified as needing to be overcome (in this post: What should be done IV). So guaranteeing everybody that they would enjoy an income enough to live (without luxuries, but that would eventually allow even for the formation of a family) is the precondition to unravel that labor market, and prevent human life from being considered a commodity. By the way, I felt happily vindicated by Polanyi's contention that it is a conceptual error to consider labor and money as commodities (a view I expounded in this first post Our current socioeconomic system and expanded in this one Of value and wages). When I reached that same conclusion I felt somewhat isolated, as from Marx to Milton Friedman, going through Keynes, every economist worth his salt (including staunch progressives like Krugman and Stiglitz) seems to think its perfectly OK to treat them as marketable commodities, as exchangeable and as subject to the vagaries of offer and demand to set their prices as any other piece of stuff you may think to trade. That has got me thinking why Polanyi has fallen so much out of favor, and how his insights, brilliant as they are have to be rediscovered, as they are conspicuously absent from the discussions raging in the media and in academia about the (possible) end of Capitalism and what to replace it with... but that would probably require a separate post.

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