Thursday, June 4, 2009
Giovanni Arrighi: Adam Smith in Beijing (2007)
"Among 'the master economists of the past,' [Adam] Smith may well be 'one of the most widely referred to and most rarely read.' But whether or not this is the case, along with Marx, he is certainly one of the most misunderstood. Three myths in particular surround his legacy: that he was a theorist and advocate of 'self-regulating' markets; that he was a theorist and advocate of capitalism as an engine of 'endless' economic expansion; and that he was a theorist and advocate of the kind of division of labor that occurred in the pin factory described in the first chapter of The Wealth of Nations. In reality, he was none of the above." In The Long Twentieth Century and Chaos and Governance in the Modern World System, Arrighi used his comparative economic history to argue that there were clear signs that America's time as hegemon of the capitalist world system was coming, or had already come, to an end. In Adam Smith in Beijing, Arrighi explores how the rise of Chinese economic power might direct the world system away from the imperialist, unequal, and unsustainable path it has taken over the last four centuries. A reevaluation of Adam Smith's The Wealth of Nations forms the core of Arrighi's argument throughout the book. Arrighi attempts to detach Smith from vulgar conceptions of liberal economics and particularly from his cooptation by neo-liberal economics. In fact, Arrighi portrays Smith as being exactly the opposite of everything he is reputed to be, and as perhaps even a more relevant economist than Marx for understanding the 21st-century economy. Far from supporting the Washington Consensus' neo-liberal "shock therapy" that severely limits the state and banishes it from the market, Smith always "presupposed the existence of a strong state that would create and reproduce the conditions for the existence of the market" and that would intervene in the market to produce socially and politically desirable outcomes. Smith also believed that the wealth of a nation was not infinitely expandable. He argued that the particular social-geographical nature of each country determined a point at which the economy would fall into an "equilibrium trap" and no longer grow. Although changes in laws and institutions might allow a country to break out of that equilibrium trap, new growth would eventually be caught in an equilibrium trap at a higher level. Finally, Smith's praise for the division of labor needs to be understood as praise for the "social division of labor" (the division of tasks between parts of society) rather than the "technical division of labor" (the division of labor within a business). Anticipating the effects of Taylorism, Smith found (as Marx did) the technical division of labor to be dehumanizing and socially disruptive. Writing in the 18th century, Smith praised China for its "natural" economic development while criticizing Europe for its "unnatural and retrograde" economic path. Arrighi points out, "Smith upheld China rather than Europe as a model of the kind of market-based economic development that was most advisable for governments to pursue." Smith found China's economy to be natural because it expanded and improved its own national market largely through agricultural and domestic trade with a relatively small amount of manufacturing added in. What Smith considered Europe's "unnatural" path was what Marx would identify as capitalism. Drawing on Schumpeter's idea of "creative destruction" (which was merely an elaboration of a few claims from Marx's Grundrisse), Arrighi describes how European capitalism advanced through a process that destroyed the social framework within which occurred in order to produce a framework in which even greater levels of growth could happen. Rather than falling into an equilibrium trap, capitalist creative destruction led Europe and eventually the US. on an endless accumulation of capital and power. As Arrighi and Silver argued in Chaos and Governance in the Modern World System, this process has generated a capitalist world system led by a series of hegemons that have grown in territorial size and military strength. The logical conclusion of this capitalist path is a world state, yet Arrighi argues the U.S. has failed to bring this about. The middle of the book takes up an extended critique of the work of the economist Robert Brenner, who has attempted to explain the economic crises since the 1970s as the result of a process of other nations catching up with the U.S. in productive capabilities. According to Arrighi, Brenner focuses too narrowly on profitability in manufacturing and fails to see how the crisis of profitability interacted with a crisis of hegemony (first apparent in the U.S. embarrassment over the Vietnam War) as well as with the shift of the U.S from the supply to the demand side of finance capital. Chaos and Governance in the Modern World System concluded with the fear that the U.S. might attempt to convert its failing hegemony into international dominance. In Adam Smith in Beijing, Arrighi finds his worries confirmed. He claims U.S. international activities since 9/11 are just such an effort to avoid the reality of U.S. economic decline through an increasingly obvious use of economic and military coercion. In particular, he portrays Bush's Project for a New American Century and the war in Iraq as being intended as the first step in an effort to reestablish America in the eyes of other countries as an indispensable political-military power. Ironically, while the war was supposed to give the U.S. a new validity that would eventually help it control the growth of China, it merely directed attention and funds away from any attempt at controlling the emergence of China as a global economic power. Turning to the ascent of the Chinese economy, Arrighi hopes that China might bring about the harmonious "world-market society" envisaged by Adam Smith in The Wealth of Nations. Contrasting China with Europe, Arrighi portrays the former in a rather ideal light, one that should prompt some skepticism. Returning to the distinction between Smith and Marx, China's "natural" economy and Europe's "unnatural" one, Arrighi emphasizes that China has historically had a market economy, not a capitalist one, despite the presence of many capitalists within it. Drawing from Braudel's portrayal of the capitalist class as being built on top of the market, Arrighi argues that in China capitalist priorities and the capitalist class have been restricted by the state and that economic competition between capitalists has reduced their ability to generate surplus profits for themselves. Unlike Europe's focus on overseas trade and the continuous revolutionizing of the conditions of production, which has led it into wars and imperial adventures, China has historically been content to focus on the growth and stability of its domestic market economy. Despite capitalist objections about how the Chinese state has interfered with China's economic development, this economic path worked well in many ways except for the fact that it did not promote the military and imperial capabilities that would have protected China from European countries that had followed the capitalist economic path. Arrighi argues the British-caused opium wars and the attempt to integrate East Asia into the European economic system severely damaged the Chinese market economy and blocked its growth over the last century and a half. But the growth of the East Asian economy and the reintroduction of the market into socialist China in recent decades along with the crisis of U.S. hegemony and economic competitiveness has enabled the reemergence of China as a global economic power. Arrighi argues that although there are exceptions, China has not simply adopted neo-liberal economic reforms. Although a new bourgeoisie has been created through the privatization of state-owned businesses (what Arrighi calls the contemporary form of "primitive accumulation," which is largely made possible by finance capital), China largely has adopted a path of gradual development that does not destroy the strong educational and cultural framework as well government protections that already exist. Rather than seeing a paradox in the combination of socialism and market economy, Arrighi argues "China's economic success was built on the extraordinary social achievements of the Mao era." In particular, China's strong educational system and socialist-based work ethic has made it the provider of not merely cheap labor but "high quality" cheap labor. Arrighi draws from Hayami Akira the idea of an "industrious revolution" (in contrast to the Industrial Revolution) that relies on disciplined and educated labor that makes possible a high level of productivity without fixed capital investments in expensive factories and machinery. Rather than teleologically seeing industrial manufacturing as a superior mode of production that needs to be exported to the rest of globe, Arrighi argues that production based upon the industrious revolution may be a better model to imitate. Industrious production is less energy- and capital-intensive and more capable of being adopted on a global scale than industrial production, which Arrighi argues is available only to a minority group that drains resources from the rest of the globe. Though the U.S. has not developed any clear response to the ascent of the Chinese economy, Arrighi hopes that China may lead the world economy down a new, "ecologically sustainable developmental path."