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Primitive Accumulation: From Adam Smith to Angela Merkel

The Natural Economy of Adam Smith

The choice of Adam Smith as an introduction to a discussion of primitive

accumulation might seem curious even though he inadvertently began the

discussion of the concept. Like a modern astrophysicist trying to understand

the Big Bang, he asserted that "the accumulation of stock must, in the nature

of things, be previous to the division of labour" (Smith 1976, 2.3, p. 277).

Smith, who often unintentionally raised important questions in the course of

his confusion, was asking, what was the original accumulation that set off the

ongoing process of capital accumulation.

Smith's speculation about the economic Big Bang evoked no further comment

beyond his brief mention of the question until 1821, when Robert Torrens,

picked up the story. Torrens attributed original accumulation to individual

initiative rather than dispossession of others:

In the first stone which the savage flings at the wild animal he

pursues, in the first stick that he seizes to strike down the fruit

which hangs above his reach, we see the appropriation of one article

for the purpose of aiding in the acquisition of another, and thus we

discover the origins of capital. [Torrens 1821, p. 70-71]

Marx humorously responded to Torrens: "No doubt this 'first stick' [Stock in

German] would also explain why stock is synonymous with capital" (Marx 1977, p.

291, n. 10), knowing full well that the low hanging fruit of early capitalism

was a violent seizure of other people's means of production.

In Capital, Smith's concept of "original accumulation" appeared as a word

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that could mean either original or primitive. Then in the English translation

of the English translation of Capital "primitive accumulation" first appears.

Of course, throughout history people had taken land that others were

using. The forcible removal of peoples' means of production for the purpose of

commercial gain only came later, after an increase in the urban population of

northwest Europe increased the demand for wool. At the time, the agricultural

surplus in the country was relatively small. In 1520, 100 families on the land

could only grow enough to support 106 families (Wrigley 1986, p. 36). By

throwing most people off the land, a relatively few remaining people could take

care of a large flock of sheep. The cost of their upkeep was relatively small

compared to the market value of wool. The most famous early protest came from

Sir Thomas More's Utopia:

... sheep, which are naturally mild, and easily kept in order, may be

said now to devour men ... when an insatiable wretch, who is a plague

to his country, resolves to enclose many thousand acres of ground,

the owners, as well as tenants, are turned out of their possessions

by trick or by main force, or, being wearied out by ill usage. [More

1515]

Protests, such as More's were moral and ethical. In contrast, Smith was intent

defending capitalism, lest it be tarred with disreputable behavior. He set out

to make the case that primitive accumulation had nothing to do with capitalism.

The core of his ideological project was to present capitalism as a natural

system of voluntary of market relations, which are devoid of conflict, and

benefitted all of mankind.

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Such conflict had no place in Smith's vision of the world. Primitive

accumulation appears in three contexts: Marx's critique of Smith's excessive

emphasis on the division of labor to the exclusion of what Marx called the

social division of labor -- the distribution of labor among separate

workplaces; Smith's pin factory; the invisible hand as a metaphor for

capitalism as an efficient system of conflict-free development.

The concept of the social division of labor is interesting, even within

the context of conventional economics. Conventional economists who address

this subject explore how industries split off and specialize in a way that

maintains the presumptive market efficiency. Such work unintentionally casts

doubt on the typical perspective of economics in which business acts in such a

way that the economic achieves a timeless equilibrium. From Marx's

perspective, primitive accumulation is an essential part in the evolution of

the social division of labor, as was the case when displacement forced

previously self-sufficient peasants to find a way live by wage labor.

In the Wealth of Nations, Smith introduced the invisible hand to his

readers in the course of discussion that is especially relevant for a modern

version primitive accumulation as it is taking place in Europe today. Smith

correctly understood that England's self-interest would be to avoid a formal

empire in North America, realizing that an informal arrangement would provide

all the benefits of empire with a minimum of expense. He did not go so far as

to openly advocate primitive accumulation in North America, but he would have

had to engage in willful ignorance not to have realized the growing settler

economy would have been impossible without it, especially because the

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indigenous people did not share the European idea of property rights. In this

way, Smith unintentionally pointed to an international dimension to primitive

accumulation.

The Ideological Value of Adam Smith

Initially, Smith's Wealth of Nations (1776) was not a particularly popular

book. When Thomas Robert Malthus signed out the book from his college library

in 1789, he was only the third person to have done so. The modest interest was

surprising, given Smith's renown from a more philosophical earlier book, The

Theory of Moral Sentiments. Suddenly, with the French Revolution in 1789, fear

swept through the world of British property owners. The panic suddenly

stimulated demand in Smith's ideological defense of the status quo.

What explains the delay in appreciating Smith's book? After all, the

first chapters of the book successfully portrayed the market as a realm of

liberty and justice, devoid of conflict; however, Smith contradicted much of

what he said in later parts of the book once he addressed more practical

matters. For that reason, virtually every school of economics can find

something to admire in Smith. As Jacob Viner, a conservative University of

Chicago professor, wrote, "Traces of every conceivable sort of doctrine are to

be found in that most catholic book, and an economist must have peculiar

theories indeed who cannot quote from The Wealth of Nations to support his

special purpose" (Viner 1927, p. 207). Liberals, radicals, and even Marxists

often embrace Smith because of his frequent expressions of progressive

sentiments.

Well-read people understood the problem of Smith's inconsistencies. For

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example, Francis Horner, famous member of the Bullion Committee and editor of

the Edinburgh Review, rejected a request to prepare a set of notes on the book.

He explained his refusal in a letter to Thomas Thomson, written on August 15,

1803:

I should be reluctant to expose S's errors before his work had

operated its full effect. We owe much at present to the

superstitious worship of S's name; and we must not impair that

feeling, till the victory is more complete .... [U]ntil we can give

a correct and precise theory of the origin of wealth, his popular and

plausible and loose hypothesis is as good for the vulgar as any

others. [cited in Horner 1843; 1: p. 229]

Horner's fears were mistaken. Popular audiences generally read Smith

superficially as nothing more than a simple defense of laissez faire, mostly

recalling two ideas from Adam Smith: his expression, the invisible hand, and

his delightful illustration of the division of labor in the famous pin factory.

Smith's authoritarian pronouncements, his proposal to control religion, and his

antagonism to big business mostly went unnoticed. As a result, "There were

more new editions of The Wealth of Nations published in the 1990s than in the

1890s, and more in the 1890s than in the 1790s" (Young 2007).

Stumbling into the Pin Factory

In the case of Smith's pin factory, the reader is given a picture of a rustic

workshop in which a handful of workers are able to greatly increase their

productivity because of the division of labor, presumably organized by some

kindly entrepreneur. The picture that Smith painted has delighted generations

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of readers who enjoyed this idyllic explanation of capitalism. In this sense,

Smith was an important figure in obscuring the role of primitive accumulation.

Smith, as a professor of rhetoric and the author of an influential book on

the subject, had a clear grasp of what was required in order to convince

others. In the first part of the book, Smith took care to apply that skill.

His treatment of the pin factory, in particular, was a masterpiece of rhetoric.

Smith informed his readers that he visited the operation, but offered

statistics about workshop's output from plagiarized articles about French

operations -- statistics that were deceptively used. As a skilled rhetorician,

Smith knew the importance of obscuring anything that would complicate his

message -- especially the truth.

Smith's first presentation of the pin factory appeared during a course of

lectures to his students in Glasgow in 1762 and 1763, more than a decade before

the publication of his great book in the midst of his ruminations on class

warfare. The discussion of the pin factory emerged in his lecture on March 28,

1763, while he was explaining the importance of the law and government:

They maintain the rich in the possession of their wealth against the

violence and rapacity of the poor, and by that means preserve that

useful inequality in the fortunes of mankind which naturally and

necessarily arises from the various degrees of capacity, industry,

and diligence in the different individuals. [Smith 1762-1766, p. 338]

In order to justify this inequality, Smith told his students that "an ordinary

day labourer ... has more of the conveniences and luxuries than an Indian

[presumably Native American] prince at the head of 1,000 naked savages" (Smith

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1762-1766, p. 339). But then the next day, Smith suddenly shifted gears,

almost seeming to side with the violent and rapacious poor:

The labour and time of the poor is in civilized countries sacrificed

to the maintaining of the rich in ease and luxury. The landlord is

maintained in idleness and luxury by the labour of his tenants. The

moneyed man is supported by his exactions from the industrious

merchant and the needy who are obliged to support him in ease by a

return for the use of his money. But every savage has the full

enjoyment of the fruits of his own labours; there are no landlords,

no usurers, no tax gatherers .... [T]he poor labourer ... has all the

inconveniences of the soil and season to struggle with, is

continually exposed to the inclemency of the weather and the most

severe labour at the same time. Thus he who as it were supports the

whole frame of society and furnishes the means of the convenience and

ease of all the rest is himself possessed of a very small share and

is buried in obscurity. He bears on his shoulders the whole of

mankind, and unable to sustain the weight of it is thrust down into

the lowest parts of the earth from whence he supports the rest. In

what manner then shall we account for the great share he and the

lowest persons have of the conveniences of life? [Smith 1762-1766,

pp. 340-41]

Smith's train of thought is confusing. First, the law is needed to constrain

the fury of the poor; then the market provides for the poor very well; followed

by the wretched state of the people who worked on the land -- the least

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fortunate of the workers. For his grand finale, after decrying the "small

share" of the poor, Smith curiously veers off to ask what accounts for "the

great share" that these same people have. His answer should come as no

surprise to a modern reader of Adam Smith -- "The division of labour amongst

different hands can alone account for this" (Smith 1762-1766, p. 341). Voila,

the pin factory.

The Harmonies of the Pin Factory

In his description of the simple pin factory, Smith gave readers no indication

that the Industrial Revolution began in Scotland. Instead, he wrote as if it

did not exist at all. In fact, the largest industrial operation in the world

was located within walking distance of the small town in which Smith was

writing his book. This factory, the Carron Works, was producing cannons for

the British Navy, which permitted England to engage in primitive accumulation

around the world. Although the owners were Smith's personal friends, his

readers can find no mention of this important operation.

Smith wrote as if his pin factory was state of the art. It was not. In

fact, the Dockwra Copper Works, founded in 1692, almost a century before, had

an integrated factory, which included at least twenty four benches for drawing

wire to make pins (Hamilton 1967, p. 103).

In 1770, while Smith was working on his book, Arthur Young published A Six

Months Tour Through the Southern Counties of England and Wales. Young was a

prolific observer of agriculture, as well as economic life in general. His

books were widely translated in European languages. This particular book was

already in its third edition by 1772. A careful study of authorities used in

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parliamentary debates found that MPs cited Young far more than Adam Smith

(Willis 1979).

Young described an integrated pin factory, the Warmley Works, founded near

Bristol in 1746, which he recommended as "very well worth seeing" (Young 1772,

p. 170). Indeed, because people were fascinated by modern technology,

industrial tourism was popular. For example, Benjamin Franklin and some

friends engaged in a ten-day long excursion of industrial tourism (Williams

1771). Given Young's reputation, the Warmly Works are likely to have been a

popular destination.

After the factory produced 3-by-4 feet of metal, other machines would cut

these plates into 17 strips. Then, a different machine would cut the strips

again until they were thin enough to be drawn into 17 foot lengths of wire.

Finally, young girls would operate little machines to fashion the pins.

Ordinarily water power would run the machines, but when the water wheel would

not run on its own a steam engine would lift water from the stream to assist

the natural flow of the river (Young 1772, pp. 170-74; Allen 2009, p. 147).

Although Smith suggests that he visited the pin factory, he never

mentioned working conditions. However, the uncited French articles upon which

he relied for the data he used for the pin works were explicit about the

adverse health effects of working there: people died young from pulmonary

ailments (Duhamel du Monceau 1761; cited in Peaucelle 2006, p. 502).

Smith also skirted any discussion of working conditions in the same

section as the pin factory where he also mentions the work of the young boys

who were making nails in the neighborhood. Besides informing his readers that

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the boys were very dexterous, he neglected to add the context in which they

found themselves working there. The Carron Works paid nail makers one guinea

to move nearby to increase the demand for iron rods that would be formed into

nails. This program was successful enough that about 30 percent of the

nation's nail producers were located near the factory (Campbell 1961, p. 79).

Part of the incentive for moving their production near the factory was that the

owners would make arrangements with a poorhouse to supply children to work for

the nail makers. The mistreatment of the boys was an ongoing controversy

(Campbell 1961, pp. 80-81). Because the economy could produce more, workers

could consume more, and perhaps one day, even run their own trifling

enterprise.

The mere rearrangement of work created a great leap in productivity.

Smith told his students that without the division of labor, a single worker

"with his utmost industry, make one pin in a day, and certainly could not make

twenty." But with the division of labor, the output per capita soared to two

thousand. By the time he published The Wealth of Nations, the number more than

doubled to 4,800 pins (Peaucelle 2006, p. 494; Smith 1789, I.i.3, pp. 14-15).

In his lecture, Smith gave his students a more accurate picture of the pin

factory. There Smith explained that if "the same person was to dig the metal

out of the mine, separate it from the ore, forge it, split it into small rods,

then spin these rods into wire ... " they might be able to produce a single pin

each day (Smith 1759, p. 564).

No wonder the workers in the pin facture could produce so much more than

the single worker. Much of their work had already been completed before they

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began. They did not have to mine and process the wire. Smith's comparison is

comparable to giving a person who hangs a masterpiece on a museum wall credit

for the painting or crediting the cashier at a supermarket for producing the

food.

However Smith, the former professor of rhetoric, understood that leaving

out the basis of his calculation, he could capture his readers' attention with

the amazing increase in productivity that results from the division of labor.

Since Smith first published his book in 1776, generations of students continue

to learn about the amazing effect of the division of labor.

In effect, Smith was calling attention to the social division of labor.

Ironically, although Smith generally ignored the social division of labor, the

social division of labor was the centerpiece for his most memorable part of his

book, where with a new social division of labor, the workers no longer had to

make the wire from scratch; they began with wire already in their hands.

The exclusion of the Carron Works adds to the ideological power of Smith's

story. The capital embodied in the pin factory (not what anybody would really

call a factory) is small enough that one can imagine that the workers could

soon set up their own factory. In other words, class does not enter into the

picture. In the Carron Works, no such possibility exists. Finally, in Smith's

idyllic story, readers would not be likely to ask why anybody would choose to

work for wages in such a factory if they could live on their own.

The Slavery of the Market

The classical political economists who followed Smith were no more ready to

address primitive accumulation honestly than Smith had been. The subject had

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been carefully excluded from their published works, but privately in letters

and diaries they not only acknowledged primitive accumulation but recognized it

as a beneficial process without being explicit about who would be the

beneficiaries. However, one exceptional economist before Smith provided a

careful treatment of primitive accumulation.

Sir James Steuart was a remarkable figure in classical political economy,

growing up in the same small town as Smith and the Carron Works. Steuart's

great work, An Inquiry into the Principles of Political Economy (1767), written

nine years before Smith's, was, rhetorically speaking, the opposite of Smith's.

Unlike Smith, the master rhetorician, Steuart seemed to care little about

stylistic niceties, as he admits right from the beginning. Moreover, readers

found the material difficult because Steuart was brutally honest about the

workings of the capitalist economy he saw emerging around him.

Steuart was a great admirer of Sparta. He was not unique in that respect.

Collectivist ideals were common during the Enlightenment. What made Steuart's

use of Sparta unique was not his approval of totalitarian methods, but his

straightforward recognition that these methods could be used to further

capitalist development.

While Steuart (1767; 1: 51) taught that slavery was a "violent method

(for) making men laborous in raising food," he understood that the market,

properly arranged, could accomplish the same objectives that Spartan slavery

promised. In the past, he argued "men were ... forced to labour because they

were slaves to others; men are now forced to labour because they are slaves to

their own wants" (ibid.; 1: 52).

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What did Steuart mean by "wants"? He wrote, "Those who become servants

for the sake of food, will soon become slaves" (ibid.; 1: 28). Thus although

wage earners, unlike slaves, are formally free, Steuart understood that workers

would be subject to an increasingly strict discipline. In this sense,

capitalism seemed to be the next best alternative to a slave society.

Although no other classical political economist would have been so blunt,

this idea was not totally unique to Steuart. For example, Mirabeau, whose work

differed from that of Steuart in many respects (see Chamley 1965, 73 ff),

exclaimed, "The whole magic of well-ordered society is that each man works for

others, while believing that he is working for himself" (Mirabeau's Philosophie

Rurale; cited in Meek 1963, 70). Cantillon's analysis of how feudalism and the

market could lead to the same outcome offered an even closer parallel.

Not unexpectedly, Steuart's insensitive language did not win much

acceptance. For example, one reviewer took Steuart to task on this very point:

In plain English, that by one way or another, men are made slaves by

statesmen, in order that the useful may feed the useless. This is,

indeed, the present state of what is called liberty in England. But,

in fact, they are not made slaves to their passions and desires, for

that is common to all men. It is the hard hand of necessity at

present, like that of the taskmasters in preceding times, which

compels them to work. The hired husbandman has, indeed, one passion

that engages him to become a slave, and to labour; it is the goading

dread of starving that enslaves him, and urges him to toil without

desire. [Reviewers 1767, 127]

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This review should not be read as a refutation of Steuart, but as a

clarification. Certainly, the reviewer's semantics, referring to hunger and

poverty instead of wants, is more informative than Steuart's. Nonetheless,

Steuart's presentation has the merit of reminding us of the power of the silent

compulsion of the market.

Improving Market Slavery

Steuart (1767; 2: 217) realized that the market had many advantages over the

crude Spartan system, but he also understood that it could run amok. In his

words, "The Lacedemonian form may be compared to the wedge .... Those of the

modern states to watches, which are continually going wrong."

As a result, Steuart looked to a statesman to guide the system. This

perspective led him to focus his attention on one overriding question: How

were wants to be structured so that they would effectively enslave people?

Here we come to the heart of Steuart's work. Steuart found himself in a

land where labor had not yet been fully subjugated to the needs of capital.

His agricultural experience was well suited to equip him to become the theorist

par excellence of primitive accumulation. He knew that the traditional

Highlanders had wants, but they were not yet "slaves" to them in the sense that

Steuart used the term. In responding to this situation, Steuart went farther

than any other classical political economist in trying to develop a program to

integrate the traditional sector into the economy.

Steuart (1767; 2: 80) clearly connected his desire to purge the land of

subsistence farming, with the rise of commodity production.

Steuart realized that merely throwing the people off the land would not

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necessarily lay the path for a smooth transition to capitalist social

relations. He recognized the complexity of the underlying dynamic of primitive

accumulation, along with the need to be specific about the nature of this

momentous transformation.

Unlike other classical political economists, Steuart stressed that one

cannot overlook the tempo at which changes are introduced. What may be

disastrous when abruptly introduced might well be beneficial if it could be

accomplished more slowly (ibid. i, pp. 160-61, 284; and chap. 19). In

Steuart's words, "Sudden revolutions are constantly hurtful, and a good

statesman ought to lay down his plan for arriving at perfection by gradual

steps" (ibid., i, p. 111). The recent experience of the countries of the

former Soviet Union also suggests how difficult the sudden transition to

capitalism can be.

In particular, primitive accumulation required much caution. With this

thought in mind, Steuart explained (ibid. i, p. 175), "A young horse is to be

caressed when a saddle is put upon his back." For this reason, he called for

the gradual conversion of corn fields into pasture (ibid. i, p. 181).

Unfortunately, many modern economists, even with the benefit of hindsight, have

failed to take the tempo of their project into account in confidently

dismantling traditional agricultural systems around the world. In addition,

some of the advisors of post-Soviet Russia could have benefited from finding

the warning in looking at Steuart's dusty volumes.

Adam Smith gave comfort to later economists, who were repelled by anything

like Steuart's honesty. According to Smith's laissez-faire ideology, markets

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were naturally harmonious. Force of any kind had no role to play in his

published analysis. However, in private communications Smith displayed a

willingness to resort to force.

For example, in August 1757, a few months after the Militia Act first

authorized raising a militia, a small group of village militiamen demanded a

barrel of ale from an aged clergyman. Later, they demonstrated their

discontent, asking for money. According to an article in Scots Magazine,

participants said they would willingly sacrifice their lives for King and

country but "would not be obliged to quit home for sixpence a day to serve in

the militia" (Mossner and Ross 1977, n p. 22).

Although one might commend these reluctant militiamen for their

merchant-like calculation of the value of their time, Smith's reaction was

harsh. He wrote to a friend, "The Lincolnshire mobs provoke our severest

indignation for opposing the militia, and we hope to hear that the ringleaders

are all to be hanged" (Smith 1757, pp. 21-22). So much for laissez faire!

Economists' Secret Support for Primitive Accumulation

In my Invention of Capitalism, I discussed a wide range of the treatments of

primitive accumulation among the economists who followed Adam Smith. Here, I

will confine myself to David Ricardo, the most sophisticated English economist

of the early 19th century. Ricardo generally limited his economic analysis to

questions of banking and trade. In doing so, he anticipated the approach of

contemporary economists by appealing to extraordinarily abstract analysis -- so

much so that Henry Brougham, a leading financial authority in Parliament and

later Lord Chancellor, rebuked Ricardo's speech in Parliament favoring the

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repeal of the Corn Laws. According to the Parliamentary record, Brougham

responded:

His hon. friend, the member for Portarlington, had argued as if he

had dropped from another planet; as if this were a land of the most

perfect liberty of trade -- as if there were no taxes -- no drawback

-- no bounties -- no searchers -- on any other branch of trade but

agriculture; as if, in this Utopian world, of his hon. friend's

creation the first measure of restriction ever thought on was that on

the importation of corn; as if all classes of the community were

alike -- as if all trades were on an equal footing; and that, in this

new state, we were called upon to decide the abstract question,

whether or not there should be a protecting price for corn? But we

were not in this condition-we were in a state of society in which we

had manufactures of almost every description, protected in every way,

even to criminal enactments, to prevent the raw material from going

out of the country, in order thereby to assist the native

manufacturer.'

(Ricardo 1952-1973: v, pp. 56 and 85).

In contrast to Ricardo's abstract theoretical analysis, Riccardo was quite

blunt about matters touching on primitive accumulation in his private

correspondence. For England, where the labor force had already largely been

saddled with wage labor -- to use Steuart's metaphor, Ricardo recommended large

farms and cheap food to lower the cost of wages. In Ireland, however, he

advocated small farms and expensive food, which makes perfectly good sense in

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terms of the logic of primitive accumulation.

In response to the suggestion of his friend, Hutches Trower, that "no

permanent or substantial good [in Ireland] can be done until all small farms

and small tenancies are got rid of" (Ricardo 1951-1973, ix, p. 145), Ricardo

agreed with the ultimate goal of eliminating small-scale agriculture in Ireland

(ibid.; 9: 153); however, he believed small farms were an effect rather than a

cause of conditions in Ireland.

Ricardo added that he understood that small farms reduced the cost of food

in Ireland. In words almost indistinguishable from those of Malthus, he wrote

to Francis Place:

The evil of which the Irish ought to complain is the small value of

food of the people compared with the value of other objects of their

consumption, and the small desire they have of possessing other

objects. Cheap food is not an evil, but a good, if it not be

accompanied by an insensibility to the comforts and decencies of

life. [Ricardo 1951-1973, xi, p. 56; emphasis added]

Ricardo's (Ricardo 1951-1973. vi, p. 48) fear of cheap food in Ireland was so

great that he maintained: "The evil they (the Irish) experience proceeds from

the indolence and vice of the people, not from their inability to procure

necessaries." In the first edition of his Principles, he repeated the idea

that the population of Ireland might be insufficiently large to encourage

people to work enough:

The facility with which the wants of the Irish are supplied permits

that people to pass a greater part of their time in indolence; if the

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population were diminished, this evil would increase, because wages

would rise, and therefore the labourer would be enabled in exchange

for a still less portion of his labour, to obtain all that his

moderate wants require. [Ricardo 1951-1973; i: p. 100; see also vii,

p. 334]

This section is worth examining in more detail. The relevant portion began:

In those countries where there is abundance of fertile land, but

where from ignorance, indolence, and barbarism of the inhabitants,

they are exposed to all the evils of want and famine, and where it

has been said that the population presses against the means of

subsistence, a very different remedy should be applied from that

which is necessary in long settled countries, where from the

diminishing rate of the supply of raw produce, all the evils of a

crowded population are experienced. [Ricardo 1951-1973; i, p. 99]

The first edition continued, "In the one case, misery proceeds from the

inactivity of the people. To be made happier, they need only to be stimulated

to exertion" Ricardo (Ricardo 1951-1973; i, p. 99, 100) continued:

In some countries of Europe, and many of Asia, as well as in the

islands in the South Seas, the people are miserable, either from a

vicious government or from habits of indolence, which make them

prefer present ease and inactivity, though without security against

want .... By diminishing their population, no relief would be

afforded, for productions would diminish in as great, or even in a

greater proportion. The remedy for the evils under which Poland and

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Ireland suffer, which are similar to those experienced in the South

Seas, is to stimulate exertion, to create new wants, and to implant

new tastes.... The facility with which the wants of the Irish are

supplied, permits that people to pass a great part of their time in

idleness: if the population were diminished, this evil would

increase, because wages would rise, and therefore the labourer would

be enabled in exchange for a still less portion of his labour, to

obtain all that his moderate wants require. Give to the Irish

labourer a taste for the comforts and enjoyments which habit has made

essential to the English labourer, and he would be content to devote

a further portion of his time to industry, that he might be enabled

to obtain them. Not only would all the food now produced be

obtained, but a vast additional value in those other commodities, to

the production of which the now unemployed labour of the country

might be directed.

George Ensor roundly attacked Ricardo for these words. He pointed out that the

English labourer "is no object of admiration." Then he asked: "But how are

these tastes to be excited in Irish labourers? Is it supposed that they are

not like other human creatures? but that they make choice of privations?"

(Ensor 1818, p. 106; cited in Ricardo 1951-1973. i, p. 100n). After the

section came under the critical scrutiny of Ensor, Ricardo changed its tone,

but not its meaning. He wrote, "To be made happier, they require only to be

better governed and instructed, as the augmentation of capital, beyond the

augmentation of people would be the inevitable result" (Ricardo 1951-1973; i,

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p. 100).

Although food was cheap in Ireland, so too was life. British observers

commonly denounced the Irish for their laziness, noting at times their

excessive number of holidays (Mokyr 1983, 218, 222). Yet, for all the talk of

indolence, the people had to go to great lengths to survive. The Irish

collected and dried seaweed for manure. Irish children had to search for horse

droppings on the roads in an effort to coax a few more crops from the soil

(McGregor 1992, 479).

From Ricardo's perspective, the problem was not indolence but a failure to

adjust to the demands of wage labor.

Echoes of Primitive Accumulation?

Skip ahead almost two centuries to the contemporary world. In many ways,

primitive accumulation displays considerable continuity. The confiscation of

land continues unabated in many parts of the world, but on a far more extensive

scale than ever before, without the pretension of a shroud of legalism. The

victims of this practice are frequently indigenous people.

Excessive debt burdens foisted on relatively powerless countries leaves

governments in desperate need of money. Government officials might propose

sweeping people off their land to make way for private business as a means to

some public benefit, such as necessary tax revenues. Although the ostensible

purpose is always presented as beneficial for the country, their leaders are

often people who appreciate well-directed bribery.

In such countries with large reservoirs of society in which capitalist

social relations have not entirely displaced traditional economies, advanced

22

capitalist interests behave in much the way as Marx's traditional primitive

accumulationists -- at least from the perspective of the people victimized by

the process.

For example, in India, the so-called communist government of West Bengal

used a colonial law that permits the government to seize land for industrial

purposes. In addition, the grasping spirit of an emerging capitalist economy

on the make is perfectly consistent with both classical primitive accumulation

and modern capitalist practices.

Something similar occurs in the United States, where the legal concept of

eminent domain allows governments to seize property to be used for some

supposedly public purpose. The legal system justification was to assist in the

development of essential public services, such as roads or bridges. The

application of eminent domain has been extended to cover commercial property.

For example, someone can approach a government with a proposition to take over

a property to build an expensive housing or shopping project on private

property. Although the existing property owners must be compensated, the final

price generally comes nowhere near what the property is worth to its previous

owners. However, this practice is relatively limited in the United States,

perhaps because of the importance of the sanctity of property there.

What comes next is an echo of primitive accumulation, but on an

international scale. This pervasive seizure -- a central part of neoliberalism

-- is not directed at the private property of individuals but rather at the

basis of social welfare throughout the globalized world, typically by using

extra market forces.

23

This especially pernicious form of primitive accumulation is underway on a

global scale is part of an all-inclusive program to remake the entire structure

of the world economy with an eye to improve profits by undermining peoples'

livelihood. It has already progressed very far.

Globalization is an obvious component, but it is only one of many methods

to carry out a modern version of primitive accumulation, which is operating on

an international scale. I recall many years ago overhearing Milton Friedman in

a conversation about the beneficial effect of opening up the United States

economy to trade with China. With many millions of unemployed and

underemployed Chinese, he correctly predicted that American business would

relocate production there to take advantage of cheap Chinese labor there. As

domestic industry would move production abroad, domestic wages were to decline.

Later, with creation the North American Free Trade Agreement, U.S.

business routinely confronted unions with the threat that they would relocate

to Mexico unless workers agreed to substantial cuts in wages and benefits.

Friedman was taking account of one side of a more complex arrangement.

Just as James Steuart recognized centuries ago, pushing people too far into

poverty is self-defeating. Although poverty may be useful in cutting costs of

production by lowering wages, poverty also constricts demand, hurting capital

from the other side.

This contradictory effect created contractionary pressure, which induced

capital to intensify the financialization of the economy to make up for the

loss of opportunity to profit as much from the direct sale of commodities.

A New Kind of Primitive Accumulation

24

Classical primitive accumulation reflected the optimism generated by the new

opportunities that adolescent capitalism offered -- especially the growth of

urban markets in the low lands of northern Europe with a domestic incapacity to

produce enough wool to satisfy demand. This situation opened up a lucrative

export market for England. All that was required was to seize the land that

supported peasants to raise sheep and, perhaps, to become rich. Today, matters

are more complex.

In contrast, modern primitive accumulation reflects a more pessimistic

vision associated with the need to confront serious contradictions of an aging

capitalist system. Of course, judging by the availability of an extraordinary

range of consumer commodities, capitalism might seem to be more vital than

ever. However, because of an even more extraordinary development of the

capacity to produce the same commodities (ignoring environmental and human

costs), relatively few factories employing relatively few workers are capable

of flooding the market with a seemingly infinite supply of their products. As

a result, new profit opportunities are somewhat limited. Perhaps the clearest

indicator of this phenomenon is the growing share of financial profits.

Friedman's delight in the prospect of Chinese peasants defeating the

working class in the United States beautifully caught the spirit of the new age

of primitive accumulation in the face of intensifying contradictions of the

market.

Ironically, the United States had a long history of salivating over the

prospect of opening up China as a market for U.S. production. As far back as

its first Secretary of the Treasury, Alexander Hamilton, China represented "an

25

additional and extensive field for the enterprise of our merchants and

mariners, and as an additional outlet for the commodities of the country"

(Hamilton 1791, pp. 20-21).

Initially, the bloody conquest of the Philippines was intended to provide

a bridge to the Chinese market. Chastened by the horrendous costs of that war,

the United States' colonial ambitions became less ambitious. The new strategy

centered on undermining the old colonial forces with an Open Door policy, which

would make a peaceful way for inroads into world markets. The balance of trade

with China suggests that the United States' over-optimism about a market-based

victory was equal to that which accompanied its rush into the Philippines.

Instead, the direction the imperial dream has largely reversed: the United

States has become the market for Chinese production, but so far the balance of

trade has been tilted largely in China's favor. Of course, the original

salivation has continued without interruption

In contrast, Friedman's vision was one of pure redistribution. The goal

was not to wage war against less developed nations or the established colonial

powers, but against domestic labor. Putting pressure on labor would increase

profits by lowering wages. Even better, unions would lose power, lowering the

resistance to modern primitive accumulation. In this respect, Friedman's

analysis had more in common with Karl Marx than Adam Smith.

Modern primitive accumulation is a central part of the project of creating

a world of hypercapitalism in line with Milton Friedman's worldview. The

Confiscation of Economic Prosperity lays out the relentless way in which the

primitive accumulationists carried out their siege of the public sector.

26

One might be tempted to concentrate on the more superficial aspects of

this class war. For example, despite the importance that Friedman seemed to be

giving to the reduction of wages, lowering wages in only one part of an

extensive program of the primitive accumulationists. Yes, modern primitive

accumulation certainly takes an active interest in doing everything possible to

cripple labor unions and to diminish workers' rights has an entirely different

kind of seizure in mind -- the seizure of the public sphere.

Is it a stretch to claim that the class war of neoliberalism constitutes a

modern counterpart of classical primitive accumulation? Are the Austerians

primitive accumulationists? Karl Marx may suggest an affirmative answer,

judging by a famous passage: "The public debt becomes one of the most powerful

levers of primitive accumulation" (Marx xxx). More recently, Milton Friedman,

reflecting the perspective of the modern primitive accumulationists,

unintentionally echoed Marx, calling public debt a "blessing (Friedman 1988;

Perelman 2007).

Lower taxes not only bloat the wealth of the wealthy; they also increase

profits. However, the overriding goal of the tax cuts was to create severe tax

cuts that would create crises, forcing governments to surrender in a tsunami of

austerity. In the face of great debt, governments direct the burden of

austerity on those less able to support such burdens.

Privatization is the order of the day, preventing governments from meeting

pressing public needs with the justification of the supposed efficiency of the

profit motive. In the case of government-supported privatized businesses, such

as schools, the more privatized operations cost, the more government spending

27

occurs, but money spent in that way is transferred into profits at the same

time it increases the pressure for deficit reduction.

Perhaps the most obvious attack on a public institution is directed at the

Post Office. Private operation of the post office would offer a new source of

profits, but, more important, the Post Office holds very valuable buildings on

prime downtown real estate in most cities. To hobble the Post Office, Congress

made the impossible demand that the postal system set aside enough money to

fund its workers pension and health care costs for 75 years in the future.

Very few private corporations could meet such a demand. This policy has been

very successful because the postal system is presently incapable of meeting

this unnecessary obligation. The privatization of public property is perhaps

most severe in the case of Greece.

As governments surrender traditional roles, primitive accumulation strips

away public supports that serve or protect the interests of most people. For

example, by starving public pension funds of adequate resources to meet their

obligations, they have no choice but to throw their lot in with speculative

private equity funds and hedge funds, leaving them vulnerable to collapses,

such as that experienced beginning in 2007. The result is that the condition

became even worse. Given the fiscal stringency of the time, around the world,

calls to rein in pension benefits have become commonplace.

Modern primitive accumulationists smooth the path toward hypercapitalism

by restricting unions. Lowering wages is a secondary benefit. More important,

undermining unions disempowers people, leaving them less able to resist modern

primitive accumulation.

28

Similarly, by starving higher education of needed funds the need for taxes

falls, but, even more important, colleges and universities have no choice but

to call upon major corporations for support. Universities have no choice but

to remake themselves in a way that serves corporate needs. Liberal arts

suffer, while fortunes are spent on elaborate research facilities producing

results that corporations can monetize. Besides losing much of their autonomy,

universities integrity suffers in the process. Because tuition soars, in part

because of intentional defunding, for-profit colleges seem more reputable,

opening up a lucrative new market. Lacking adequate financial resources,

public transportation cannot afford adequate maintenance and restricts the

services it can provide, laying the groundwork for privatization while serving

to increase the market for private transportation.

Perhaps the most grotesque attack is directed toward public schools. A

combination of defunding together with the drumbeat of propaganda blaming

teachers and their unions for all the ills of public education has been

effective in building up support for privatized-for-profit charter schools,

which can reduce costs by paying teachers less and by refusing to educate

students who might be more difficult to teach, such as disabled students. By

excluding students with learning disabilities or limited language proficiency,

these schools can make their performance look better relative to public

schools, which have an obligation to take on all students. Of course, this

sabotage of public education is supposedly intended to save the educational

system, which is almost universally accepted as a major bulwark of a successful

society. Yes, the modern primitive accumulationists are intent on eliminating

29

regulations and lowering taxes, but the crippling of the public sphere opens up

new markets that offer even greater profits. The ultimate effect of this

hypercapitalism will be a reduction in the ability to serve public needs:

education, health care, environmental protection, etc.

Privatization of social security promises an immense pool of money,

capable of generating enormous fees, which will serve to deplete the funds

available for payment to the supposed beneficiaries. Privatizing Medicare

promises a boon to the insurance companies and medical providers.

Primitive Accumulation as Economic Reform

As if they were making personal sacrifices, the advocates of modern primitive

accumulation trumpet their heroic efforts to save popular programs and

institutions by reforming them, when in reality they stand to profit mightily

from such policies. However, profits never enter into the conversation.

Instead, "reform" becomes the operative word. The stated objective is always

to protect what most people value. In this environment, modern primitive

accumulations present themselves as virtuous and disinterested public

benefactors, behaving as if the world owes them a debt of gratitude for their

willingness to "make the hard choices." Their propaganda bombards the public

at large to convince people that public institutions are inherently

dysfunctional; only profit-oriented operations can work efficiently.

Privatization is the only hope for salvation.

Some of the primitive accumulationists may have deluded themselves into

believing they are actually performing a public service by following the

natural law of the market, or perhaps God's work, as the CEO of Goldman Sachs,

30

Lloyd Blankfein, remarked, perhaps only half humorously.

The brazen actions of the classical primitive accumulationists almost seem

honest in comparison with the effrontery of their modern counterparts. Modern

primitive accumulation obviously differs from its classical counterpart in

another respect. Modern primitive accumulationists are not directly seizing

peoples' means of production. Frequently, their booty is public wealth,

created by the working class. For example, two prime targets for primitive

accumulation in the United States are Social Security and Medicare, both of

which can be described as "earned benefit programs" because of the extent that

workers have directly contributed to them. In this sense, much of modern

primitive accumulation might resemble the theft of the crop rather than the

land upon which it was grown. In both classical and the modern versions of

primitive accumulation, the result is the impoverishment of the masses for the

benefit of a small minority.

Modern primitive accumulation does not usually directly confiscate

property of individuals. Instead, it operates indirectly by eliminating public

benefits.

The immense scale, scope, and intensity of contemporary primitive

accumulation makes the dispossession of relatively few peasants in rural

England a few centuries ago seem almost bucolic. Instead, modern primitive

accumulation threatens entire populations, and even states, worldwide, with a

shocking degree of acquiescence. Modern primitive accumulation even spouts its

own distorted version of morality based on individual responsibility in spite

of the abhorrent irresponsibility of the modern primitive accumulationists.

31

Railroading Economics

David Harvey interprets capital's attempts to solve its contradictions as

merely displacing problems. Perhaps, one should go further in saying that

capital "solves" problems by creating even bigger ones. Looking at the

succession of supposed solutions over time gives the impression of flailing

about -- without any clear understanding about the nature of the workings of

capitalism. As a result, the supposed American dream has morphed into a

nightmare.

In my book, Railroading Economics, I tried to analyze the history of the

U.S. economy in terms of the way such presumed solutions played a major role in

driving the economy into new difficulties, which required new solutions, which

created still newer problems.

For example, by the end of the Civil War in the United States, the economy

was entering what may be called the real industrial revolution, with industry

rapidly developing the technology to harness fossil fuels more effectively than

ever before. By taking advantage of this technology, large-scale production

facilities became almost commonplace. The result was a capacity to produce

commodities that far outstripped the capacity of the population to purchase

them.

Under these conditions, intense competition broke out, so much so that

many industries were on the ropes. Business survival depended upon finding new

cost-cutting technologies, but each advance in technology required an

increasing scale of investment in fixed capital, which increased productive

capacity, worsening the already severe problem of overproduction. The further

32

saturation of markets intensified competitive pressure.

Business reacted by lowering prices, a process that continued until prices

fell towards the cost of producing one more unit. These prices did not include

any allowance for the money sunk into investments in expensive capital goods.

Because that money has already been spent, it does not affect the cost of

producing another unit of output. For example, the cost of filling a seat on a

plane would include the extra costs that a new traveler imposes. In that

sense, the original cost of the plane is irrelevant.

In his presidential address to the American Finance Association, Michael

Jensen offered some dramatic examples of this rapid deflationary process

associated with the Real Industrial Revolution: the Bessemer process reduced

the price of steel rails by 88 percent from the early 1870s to the late 1880s.

During the same period, electrolytic refining reduced aluminum prices by 96

percent, and synthetic blue dye production costs fell by 95 percent (Jensen

1993, p. 835).

Because this intense competition forced prices to decline to a level

insufficient to cover the costs of invested capital, an epidemic of bankruptcy

broke out, creating what was then known as the Great Depression, a name that

was later re-appropriated during the Twentieth Century. This Great Depression,

which soon engulfed the great economic powers, began in 1873 and only ended in

the 1890s.

The leading young economists in the United States were trained in Germany

in a tradition similar to what Karl Marx experienced as a student. The German

economy, with its cartels, seemed relatively healthy, despite restrained

33

competition. The lesson of the depression for these young American economists

was that competitive markets have an ingrained deflationary bias.

Disgusted by the effects of competition, J.P. Morgan initiated a wave of

corporate consolidations, culminating in the creation of United States Steel.

As trusts, cartels, and monopolies began to form, the resulting lack of

competition depressed economic dynamism. However, the fear of renewed

depression eventually subsided. Ignoring the monopolistic structure of the

economy, business became enthralled with free market ideology once again and

economists fell in line.

While corporate consolidation helped to treat one problem, it created

another. Lacking sufficient incentives for investment in modernization,

productivity stagnated, while excessive speculation developed in a few dynamic

sectors, symbolized in the soaring price of stock in the Radio Corporation of

America, the precursor of the later dot.com boom, which eventually morphed into

the Great Depression.

The Golden Age

First, a little historical background will help to put the recent crisis in

context. After the speculative excesses of the proto-neoliberalism of the

1920s culminated in a stock market crash, the Great Depression hit the United

States, along with much of the rest of the world; however, some parts of the

world benefited from the temporary inattention of the great capitalist powers.

Just as was the case before the recent speculative meltdown, investment in

new technologies was relatively limited with one exception: the use of electric

motors in factories. Previously, factories ran on steam power, which depended

34

upon a complex network of belts and pulleys. This awkward system consumed a

great deal of space, which otherwise might have been used for the direct

production process. A good deal of power was dissipated by friction. Finally,

this system was plagued by frequent shutdowns caused by the rupture of the

leather belts, which could not hold up after a period of wear and tear.

The Great Depression was not an unmixed setback for the market economy.

As was the case in the previous depression, business was forced to modernize.

In the process, it discarded an enormous amount of old and obsolete equipment,

similar to the case of the earlier steam-driven belt and pulley power. The

result was a surge in productivity. However, oligopolistic industries, such as

steel, which did not face serious international competition, were an exception.

Here we come to an important contradiction of capitalism. Economists

generally agree that competition is essential for a healthy economy. That idea

resonates in all of their textbooks. Their textbooks also agree that

depressions are a symptom of a sick economy. This distinction between

depressions and competition is at odds with reality. In fact, depressions may

be understood as an intensification of competition.

Alexander Field recently published a valuable book that will make the case

that the Great Depression represented what may have been the most productive

decade in the history of the United States so long as we measure productivity

by output per unit of input. This soaring productivity stands as clear

evidence of the connection between competition and economic collapses.

By the way, economics textbooks also teach that as productivity increases

higher wages will necessarily follow, even though a glance at the current

35

economy around should be enough to disprove that theory without a need to look

back at the Great Depression.

With the economy in shambles, the New Deal became a virtual necessity.

Government programs reduced the degree of competitive pressures by creating new

sources of demand, but not enough to put an end to modernization.

The Depression also increased the future economic viability of the country

by wiping out large amounts of debt. The depression also "paved" the way to

future prosperity by New Deal policies to build roads and other infrastructure,

which helped to reduce the costs of bringing goods to the market. Finally, New

Deal regulation of the financial system helped to bring about decades of

relative financial stability.

The renewal of competitive forces meant that the period was accompanied by

soaring increases in productivity. Although greater productivity meant less

employment, economic modernization prepared the way for a better future. World

War II followed the Great Depression. Just as was the case with the tragedy of

the Depression, the horrors of war had a positive economic legacy. This

sequence of depression and war, together with accumulated savings and a backlog

of demand, set the stage for the longest period of sustained prosperity in

history of the United States, justifying the label of the Golden Age.

A number of post-war conditions lined up almost perfectly. In addition to

inducing a burst of productivity, the Depression wiped out much of the

economy's accumulated debt. During the war, factories that ordinarily produced

goods, such as cars and refrigerators, were converted into military suppliers.

The restricted consumer market created additional savings. With the end of the

36

war, consumers, flush with their wartime savings, could finally purchase

previously unavailable goods. As an added benefit, competitors of the United

States, such as Japan and the European powers lost a considerable amount of

their capital stock. Postwar recovery required major dependence upon the

productive capacity of the United States.

The Golden Age created the expectation of a new normal -- high profits

coexisting with increasing wages. Under such conditions, the competitive

pressures that had been at work during the Depression were no longer active.

In particular, business felt little need to modernize its productive structure.

Instead, it rested on its laurels, while foreign competitors were rebuilding

their industries with modern equipment at breakneck speeds. As the Golden Age

was drawing to a close, the Vietnam War also put serious economic pressures on

the economy.

Confiscation of American Prosperity

The economic vigor that characterized the Golden Age disappeared by the late

1960s. Falling profits, increasing balance of payments deficits, and a restive

labor force were creating a panic within industry circles.

How could profits be restored? Vigorous economic growth did not seem to

be on the horizon. If the economy was incapable of producing a greater output,

capital had to claim a bigger share of the economic pie by means of modern

primitive accumulation. I set out to chronicle the evolution of this process

in my book, Confiscation of American Prosperity: From Right-Wing Extremism and

Economic Ideology to the Next Great Depression.

After a long gestation period, just as the financial crisis in United

37

States was becoming obvious in October 2007, the book finally appeared,

predating the new genre of crisis literature. This book follows the unfolding

of a destructive corporate coup that eventually led to the recent crisis. In

that book and in an earlier book, Manufacturing Discontent: The Trap of

Individualism in a Corporate Society, I tried to document the massive program

of redistribution -- a full-scale class war designed to remake every aspect of

society. As a result, the legal system, the judiciary, the educational system,

the entire regulatory system, as well as the social safety net -- to name only

a few of the targets -- all had to be transformed in order to carry out this

program. To make it worse, this virus of neoliberalism spread throughout the

entire globe.

The crux of the Confiscation book was that this round of primitive

accumulation was bound to be self-defeating, a point highlighted in the final

part of the book's subtitle: To the Next Great Depression. Of course, the

great crash of 2007 was not a great depression, but only a symptom of more

serious underlying problems. Nonetheless, for the time being, capital has able

to regroup, restoring much of its wealth and power, at the expense of society

at large. It did so without suffering any serious political or legal

repercussions for its often illegal actions

One might get the impression that the recent economic turmoil is

responsible for this contemporary wave of primitive accumulation that began

with the end of the Golden Age. What we are experiencing today is part of a

long-standing program that predates the iconic figures of Ronald Reagan and

Margaret Thatcher, who are often credited as the inspiration and architects of

38

modern neoliberalism. The book, like much of this paper, concentrates on the

country I know the best, but many of the abuses will be familiar throughout the

world, especially in Europe today.

The Golden Age, with its unparalleled prosperity, left a trap for the

economy. Just as a depression means an increase in competition, prosperity

means a decrease in competition. During such prosperous times, business can

coast, largely ignoring the need to become more efficient. For example, when

inexpensive foreign cars first began penetrating the US market, the automobile

companies were unconcerned. Henry Ford II famously dismissed the competitive

threat with a comment, "minicars mean mini-profits."

At the same time, in war-torn Europe and Japan, many industries had to be

rebuilt from scratch, meaning that they were operating with the newest and most

efficient available capital goods. In the United States, businesses frequently

rested on their laurels, squeezing profits out of obsolete factories. Over

time, foreign competition overwhelmed many of these companies, leading to hard

times. Profits sagged, causing something between consternation and panic.

By 1971, Lewis Powell wrote his famous letter, a call to arms for

launching a neoliberal project. The Confiscation book follows that

revolutionary remaking of the U.S. economy, which supported a recovery of

profits at the expense of wages, unions, the social safety net, and the last

shreds of decency. This process also dismantled the regulatory system that

helped to shield the economy from some of the worst abuses of capitalism. The

consequences of this campaign became clear with the financial meltdown.

Within a relatively short period of time Europe fell in line with this

39

Anglo-Saxon version of political economy. Europe went even further, saddling

its economy with a structural inability to respond to crises.

In the United States, serious discussion, let alone strong political

resistance, seems almost impossible at this juncture. Modern Primitive

Accumulation is treated as "Sound Economics." The consequences of modern

primitive accumulation are probably more severe in southern Europe than what

the United States has experienced. Ironically, Germany, where some of the most

important innovations in social welfare policies first emerged, has become the

leading enforcer of neoliberalism in Europe. Even more ironically, the German

finance ministry is located in the former headquarters of the Luftwaffe.

A Procrustean Economy

The remaking of the society for the convenience of capital filtered down into

everyday life. In my latest book, The Invisible Handcuffs of Capitalism: How

Market Tyranny Stifles the Economy by Stunting Workers, I use the Greek myth of

Procrustes in which unwary travelers find themselves in an iron bed upon which

their bodies are ether stretched or part of their limbs removed to fit the bed.

The ultimate goal of reform is a world in which justice means the assurance of

even greater profits for business and financial interests at the expense of

society, even if this so-called justice means shredding every last remnant of

humanity that has still managed to survive the onslaught of hypercapitalism.

The scale and scope of this ruthless round of primitive accumulation is so

thorough-going that one might almost imagine the original primitive

accumulationists as rather compassionate. Nonetheless, the world of

hyper-capitalism is Procrustean. Everybody is expected to alter their lives in

40

order to conform to the need for greater profits.

Almost a century ago, during the miners' strike in response to hardships

imposed by England's attempt to reform the economy by returning to the gold

standard, John Maynard Keynes, hardly a radical, expressed the Procrustean

spirit of his time:

like other victims of economic transition in past times, the miners

are to be offered the choice between starvation and submission, the

fruits of their submission to accrue to the benefit of other classes.

[Keynes 1925, p. 223]

A crucial front in the new class war was a strong dose of sado-monetarism to

slow the economy down to create unemployment. The purpose was to keep wages in

check. When Paul Volcker announced his intention to use the Federal Reserve as

an instrument of class warfare -- actually he was not so blunt in public -- he

invited the editor of the Wall Street Journal editorial page, a deputy, and the

features editor to a lunch at the New York branch bank of the Federal Reserve.

Volcker asked his guests, "When there's blood all over the floor, will you guys

still support me?" The deputy editor responded affirmatively, later proudly

recollecting, "There was blood indeed, as overextended Latin borrowers and

American farmers were caught out by a return to a sound dollar. But we held

fast" (Melloan 2003).

This policy was so successful that Greenspan, then Chairman of the Federal

Reserve Board, gloated about the traumatization of labor. Such policies are

ironic, considering that policymakers pretend that all social objectives --

whether higher wages, better working conditions, environmental protections, or

41

even the quality of life -- must give way to the promise of job creation. The

two concluding sections of the in The Invisible Handcuffs chapter on

sado-monetarism attempts to catalogue some of the human and economic costs of

labor discipline.

At his seaside villa in Dubrovnik, Croatia, the Chief Executive Officer of

American International Group Inc. Robert Benmosche, recipient of the largest

bailout of the financial firms in the United States updated Keynes. Benmosche

said Europe's debt crisis shows governments worldwide must accept that people

will have to work more years as life expectancies increase: "Retirement ages

will have to move to 70, 80 years old ... That would make pensions, medical

services more affordable. They will keep people working longer and will take

that burden off of the youth" (Cerni and Tracer 2012).

References

Cerni, Boris and Zachary Tracer. 2012. "AIG Chief Sees Retirement Age as High

as 80 After Crisis." Bloomberg (4 June).

http://www.bloomberg.com/news/2012-06-03/aig-chief-sees-retirement-age-as-high-

as-80-after-crisis.html

Friedman, Milton. 1988. "Why the Twin Deficits Are a Blessing?" Wall Street

Journal (14 December): p. A14.

Hamilton, Alexander. 1791. "Report on the Petition of the Merchants of

Philadelphia Trading with India and China." Communicated to the House of

Representatives (10 February, 1791). In Harold Syrett et al., eds., The Papers

42

of Alexander Hamilton, 27 vols., vol. 8 (New York: Columbia University Press,

1965): pp. 20-21.

Keynes, John Maynard. 1925. "The Economic Consequences of Mr. Winston

Churchill." in Essays in Persuasion, vol 9, The Collected Works of John Maynard

Keynes (ed.) Donald Moggridge (London: Macmillan, 1972): pp. 207-30.