The question is far from rhetorical. Margaret Thatcher, the British Prime Minister during the 1980s, and one of the chief architects of the economic policies that lie discredited on the heap of economic history today, once dared to say that "there is no such thing as society." She added: "there are individual men and women and there are families." That's all. We live in a world of Robinson Crusoes, each maximizing private gains for themselves and their separate families. The sad part about such a view is its potential for becoming a self-fulfilling belief, especially when held widely by men and women in positions of power. It lacks the humility to leave the door open for the possibility that we may be consigning ourselves to the shallows of human nature in believing in our selfishness alone.
The fact that there is such a thing as society is an obvious truth for most people in India and other poor countries, where bonds of community life still prevail in significant measure. Where such community living survives, our emotions tell us of the folly of the Thatcherite view. But for "developed" countries which have been outrun by capitalism for a century and more, the market has subjugated society itself. So it is hardly surprising that the British Prime Minister could say such a thing without fear of ridicule (which incidentally she did not escape from certain quarters). What's more, here in India for at least half a generation now, we have come to live in a world where a good many would nod in approval at the Thatcherite view without fear of ridicule either. What's to be ashamed of in something like self-interest, so much a part of our nature, after all. The world has obviously changed here too.
And if that is indeed the essence of our true nature, there's nothing like a well-functioning free market capitalist economy to maximize each one's happiness. Social welfare, on this view, is little more than the sum total of the welfare of each. So, it is claimed, said the great-grandfather of modern economics, Adam Smith himself.
There's no such thing as a free market
If only one lesson is to be drawn from the grave financial and economic crises sweeping the globe today it is this: there is such a thing as society, after all, well beyond families and individuals. The rise of market society had convinced many experts, especially economists that only individuals and their economic transactions with each other matter. What lay beyond the pale of such relationships were consigned to exceptional cases referred to in the jargon as "externalities" (where third parties are affected by what happens between two individuals) or "public goods" (whereby a good or service cannot be transacted without making it possible for third parties to avail of them, for instance, clean air).
Who dares to see any truth in such a world-view after "the great financial crisis" of 2008? The cookie of free-market capitalism is crumbling rapidly precisely because externalities and public goods, far from being the exception, are actually the rule — even (especially?) in the realm of the economy.
There is a systematic pattern here. In a capitalist economy what is individually rational is all too often socially irrational. Consider the latest example. The great financial crisis has forced each bank into a situation whereby it has to sell many of its assets in order to rescue a battered balance sheet. But the more the number of banks that do this, the faster is the decline in asset prices. And this only accelerates each bank's need to sell assets: as they see the value of their holdings decline sharply, they prefer to hold cash, contributing further to the vicious cycle of asset price deflation, apart from contributing to the massive credit squeeze by increasing the overall reluctance to lend.
By acting in narrow self-interest fund managers could maximize short-term profits for their firm's shareholders for a while, but the damage that they caused to the system as a whole is so large in the long run that (almost) everyone is ending up on the losing side. The (global financial) system itself is a "public good" of sorts, whose survival everyone takes for granted, until the day of reckoning arrives and the pirates realize that they have all been milking a generous cow, which is now exhausted from their depredations. "You don't know what you've got, till it's gone", sang Joni Mitchell.
The failure of "confidence", "trust" and other vanishing intangibles are being diagnosed as among the primary causes of the "systemic risk" which has all but overwhelmed the world's financial system. These are the forces which are making every important graph stoop. The numbers don't matter any more. They were always consequences and it's never more obvious than today. The ground reality is that no one is willing to lend, because trust has evaporated from all transactions involving credit and the future. Grain and raw materials are piling up at international ports awaiting letters of credit which fail to arrive. And with the vanishing of trust, hope — the other immeasurable intangible — is rapidly dying too. We all need a future, after all, to look forward to. Or else destructive despair sets in.
When asked what determined investment in a capitalist economy, John Maynard Keynes had answered "animal spirits". Calculations and numbers are secondary. What we are looking at today is the enormous failure of an obstinate belief, widely held over the past generation among those who control the levers of economic policy in the citadels of global power: society (and hence government) is irrelevant, free markets are all that matter for prosperity. And it will come one day to one and all, if only "we" brave the pain in between and stay the course.
Now we know, once again, that hubris never escapes nemesis.
What is society? The question begs to be asked yet again. A moment's reflection would reveal that even the most famous and powerful of this world ultimately get to know at first hand at most just a few thousand people, some of whose names they might be able to recall on their death-beds. In other words, the human condition is such that our ordinary ignorance of the existence of others is almost infinite. What this means is that the vast majority of transactions and relationships one has in life is with people we do not know, or even do not see.
A society, one might say, can be judged by the quality of its anonymous relationships. If there is good faith and trust, society lives well. If they are absent, it may not even survive in the long run. There is obviously such a thing as society, to be understood in terms of the quality of relationships we form, not just with our "loved ones", but also with those we meet only occasionally, or anonymously, or with those who live far away from us and who we may never meet. If globalization has changed human society in one profound respect it is this: we can no longer ignore how our words, actions and ways of living affect those who are not visible to us on an everyday basis.
The victory of "free markets" has proved to be a pyrrhic one. In the very realm they were supposed to bring "efficiency" and "optimality", in finance, they have destroyed themselves. It is precisely the unregulated inner workings of free (unregulated) financial markets which are now threatening human society itself. Greed was "good", till just yesterday. So said Michael Douglas in the film Wall Street, back in the early 1990s, when this present age of financial buccaneers had just taken off. Today we are rapidly being sobered back to the ancient wisdom, which every Indian child has heard during childhood: lalach buri bala hai (greed is a bad habit). Money does not grow on trees any more, no matter how high the ladder one might take to them.
Sometimes insiders reach important truths, having sipped some of the poison on offer. A decade ago, one of the world's richest financiers, George Soros had acknowledged publicly that
"people increasingly rely on money as the criterion of value. What is more expensive is considered better…What used to be a medium of exchange has usurped the place of fundamental values…What used to be professions have turned into businesses…The cult of success has replaced a belief in principles. Society has lost its anchor."
Soros added:
"The doctrine of laissez-faire capitalism holds that the common good is best served by the uninhibited pursuit of self-interest. Unless it is tempered by the recognition of a common interest that ought to take precedence over particular interests, our present system — which, however imperfect, qualifies as an open society — is liable to break down."
This is now happening, and in a far more severe manner for men of Soros' tastes. We are seeing the rapid unravelling of the "greed is good" age and one hears desperate talk involving recycled concepts like "capitalism 2.0", "sustainable capitalism" etc. Intellectual despair has set in because a whole generation has been taught to ignore the evidence, or to massage the facts before examining them.
Can we?
The enormous crowd that felicitated President-Elect Barack Obama on his monumental victory the other evening roared "Yes we can!"
The challenges that beset humanity today are of a nature, and of an order that require something fundamentally different from the mere positiveness implied in such an incredible statement of collective determination, delivered in an epoch-making moment. The rhetoric of "progress" has accustomed almost everyone to the language of "moving forward". But how do you move forward when you are approaching a steep environmental precipice under the business-as-usual scenario?
The question is not so much "what is to be done?" as "what is to be undone?"
The financial sector is busy "deleveraging". The consumers are reducing consumption and are worrying about how to pay their debts. As they rapidly lose markets — and loans — the corporations are also pruning their ambitions severely, restructuring and often just shutting down or going bankrupt. Cruel as it may sound to the millions being laid off by the month (a comment on the capitalist system), perhaps all this is a blessing in very thick disguise. It is one way that carbon emissions will be controlled.
The excesses of the past have to be paid for, after all. Our era, like no other age in history perhaps, has the enormous obligation to undo most of its (mis)deeds just in order to enable the planet to remain inhabitable for our progeny. Their living standards are obviously going to be lower than ours. The future we had been trying to live off is now at the door. Life is not just about getting more and more rich.
All science knows that life is given to humanity under certain very specific, delicately balanced, environmental and biological conditions. What has grown with the economic growth of recent decades are also crises which will ultimately destroy the conditions of human existence. We should read the Great Financial Crisis of 2008 as a shadow of the far more real ecological crisis which is lying in wait to overwhelm us. The facts are in. We are being asked to fundamentally change our way of life. Half-measures will not do.
The great economic anthropologist Karl Polanyi in his famous book The Great Transformation had concluded back in 1944:
"A market economy can exist only in a market society…A market economy must comprise all elements of industry, including labor, land, and money. But labor and land are no other than the human beings themselves of which every society consists and the natural surroundings in which it exists. To include them in the market mechanism means to subordinate the substance of society itself to the laws of the market."
We have become so used to the abiding realities of the day that we fail to notice that we are all victims of them. The latest financial episodes show that unrestrained capitalism is not even good for capitalists themselves. They are all suffering from unbearable stress and depression, and many of them from the onset of fatal diseases.
The West has given us valuable notions of individual liberties, but none of collective freedoms. Social problems, however, do not have individual solutions. If society has allowed itself to be subjugated by the market an individual acting alone has little choice about following the rules of competitive survival in urban (or rural) jungles. But acting collectively, it is possible to decide whether we are going to continue being a society that serves the market, or whether we will finally make the market serve society. For markets are known, as we are learning every day, to be good slaves, but terrible masters.
These are strange times indeed, when the high priests of the day, the economists, are eager to quote prophetic poets like WB Yeats (The Second Coming), fearing an apocalypse, which has already happened a few times in the recent history of "modern" civilization. But they fear, perhaps rightly, that what may arrive may be something unimaginably worse than all catastrophes seen hitherto.
Let us not just hope that they are wrong, let us live and act in ways which makes it so. Yes we can. But just you and I cannot. If we remember that our grandchildren may still have a chance.
Aseem Shrivastava is an independent writer. He can be reached at aseem62 AT yahoo DOT com.