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A human economy approach to development

Money buys the machines that control people’s access to work. Humanity’s task is to reverse that order.

Keith Hart
20 May 2016
open Movements

The openMovements series invites leading social scientists to share their research results and perspectives on contemporary social struggles.

We are at the end of a cycle that started in the second XIXth century. During this cycle, including in the XXth century, the left was governed by the ideology of progress and economic determinism. After the collapse of the so-called ‘communist’ countries, the question of the relevance of a new left for the XXIst century was raised. Different elements are necessary to answer it, the growing number of citizen initiatives all over the world (that is the subject of the launch text by Laville), the ambivalent experiences of left governments in South America (second subject raised by Coraggio). The analysis of these complex background issues opens up new perspectives for collective action and emancipation (to follow, third and fourth texts by Wainwright and Hart) and the structural crisis of European social democracy (fifth and sixth, closing texts by Hulgard and Lévesque). Very different from those of the traditional left; this week’s opinions and debates are also to be found in detail in Spanish (Reinventar la izquierda en el siglo XXI – Hasta un dialogo Norte-Sur) and French (Les gauches du XXIe siècle – Un dialogue Nord-Sud ). Jean-Louis Laville, economist and sociologist, supervised 'Les gauches du XXIe siècle – Un dialogue Nord-Sud' (Bord de l’eau, 2016).

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Original poster for Charlie Chaplin's 1936 film Modern Times. Wikicommons/ Some rights reserved.Ronald Coase won a Nobel prize in economics for inventing the idea of transaction costs in "The nature of the firm" (1937). Shortly before his death at 102, he and Ning Wang announced a new journal called "Man and the economy". Their manifesto "Saving economics from the economists”, was published in the Harvard Business Review (2012):

In the 20th century economists could afford to write exclusively for one another (….) The reduction of economics to price theory is troubling enough. It is suicidal for the field to slide into a hard science of choice, ignoring the influences of society, history, culture, and politics on the working of the economy. It is time to reengage the severely impoverished field of economics with the economy. Market economies springing up in China, India, Africa, and elsewhere herald unprecedented opportunities for economists to study how the market economy gains its resilience in diverse societies. But knowledge will come only if economics can be reoriented to the study of man as he is and the economic system as it actually exists.

There is plenty of resistance within the economics profession to the dominant model of rational choice in “free” markets.This plea echoes a movement of economics students a decade ago, calling itself “post-autistic economics”, which later became the real-world economics review. Meanwhile, the legions of heterodox economists multiply. So there is plenty of resistance within the economics profession to the dominant model of rational choice in “free” markets. Several priorities stand out: to reconnect the study of the economy to the real world; to make its findings more accessible to the public; and to place economic analysis within a framework that embraces humanity as a whole. The “human economy” approach shares all these priorities.

We draw inspiration from and seek to contribute to the tradition of economic thought, but we are open to other traditions. The Human Economy programme at the University of Pretoria started out with only loose guidelines in 2011. Our aim was to build a conversation, among ourselves and with other specialists, ultimately with the general public. This conversation is as much based on empirical investigation and comparison as on developing a theoretical and methodological framework for planning research.

Our first basic method is inspired by the ethnographic revolution that launched social and cultural anthropology. This was the first sustained effort by a class of academics to join the people where they live in order to discover what they do, think and want. Second, the economy is always plural and people’s experience of it across time and space has more in common than contrastive terms like “capitalism” or “socialism” would suggest. This approach addresses the variety of particular institutions through which most people experience economic life. Third, our aim is to promote economic democracy by helping people to organize and improve their own lives. Our findings must therefore be presented to the public in a spirit of pragmatism and made understandable for their practical use.

All of this is compatible with a humanist view of the human economy. It must be so, if the economy is to be returned from remote experts to the people who are most affected. But humanism by itself is not enough. 

Globalization is not irreversible, but we do have to extend our normal reach to address its contradictions. The human economy must also be informed by an economic vision capable of bridging the gap between everyday life (what people know) and humanity’s common predicament, which is inevitably impersonal and lies beyond the actor’s point of view (what they don’t know). A variety of methods are drawn from philosophy, world history, literature and grand social theory. Globalization is not irreversible – a similar phase of financial globalization and mass population movement around 1900 ended in war, nationalism and economic introversion -- but we do have to extend our normal reach to address its contradictions.

Emergent world society is the new human universal – not an idea, but the fact of our shared occupation of the planet crying out for new principles of association. We urgently need to make a world where all people can live together. Small may be beautiful and a preference for initiatives grounded in local social realities is essential, but large-scale bureaucracies are also necessary if economic democracy is to embrace the movement of the world we live in.

Since 1800 energy production has grown at twice the rate of population. Many people now live longer, work less and spend more than they did before. But the distribution of this extra energy has been grossly unequal. A third of humanity still works in the fields with their hands. Americans each consume 400 times more energy than the Ugandans. The hectic dash of humanity from the village to the city is assumed to be driven by an engine of economic growth and inequality known as ‘capitalism’. But several social forms have emerged to organize the process on a large scale: empires, nation-states, cities, corporations, regional federations, international organizations, capitalist markets. We urgently need to make a world where all people can live together.

We need more effective social coordination at the global level and the drive towards local self-organization is strong everywhere. Progressives denigrate the dominant bureaucratic institutions while promoting small-scale self-organized groups and networks. Yet no future society could dispense with the principal social forms that have brought us to this point. So we need to work out how states, cities and big money might be selectively combined with citizens’ initiatives to promote a more democratic world society. A first step would be to stop viewing the economy exclusively in national terms. A first step would be to stop viewing the economy exclusively in national terms.

Many activists in this field, not to mention more radical groups, will not consider working with states and firms. Yet the French revolution was backed by the shippers of Nantes and Bordeaux, the Italian revolution by the industrialists of Milan and Turin. Kenya’s world-leading experiment in mobile money, M-Pesa, was launched by a subsidiary of Vodacom. Hewlett-Packard has developed research stations in outlying areas to make computers accessible to the world’s “poorest four billion”.

Popular economy

The notion of a “popular economy” has emerged in Latin America since the 1990s, bringing new coalitions (peasants, urban informal workers, unions) into an alliance with progressive governments. Brazil under Lula introduced a community banking system combining microfinance and complementary currencies. The government of Uruguay has sponsored a “3C” alternative circuit for SMEs based on invoices. South Africa is speeding up SMEs’ access to liquidity through an Invoice Clearing Bureau.      

This dialectic of small-scale humanism and large-scale institutions may be illustrated by a composite portrait. Lindiwe is a middle-aged Zulu woman who once worked in a factory and is now a domestic servant in Durban. She rents township accommodation from the municipality and travels to work in informal minibuses (“taxis”). She looks after her mother, who is crippled and receives a state pension, and her brother's young daughters, since he has AIDS. Her teenage sons are unemployed and drifting into crime and drugs. Her husband disappeared long ago. She sells cosmetics to neighbours in her spare time, shops at local stores and once a week in a supermarket. She attends a prosperity church, has joined a savings club there and owes money to loan sharks, but doesn't have a bank account. She has only a peripheral connection to “South African capitalism”. Note that religion has always done a better job of linking human subjects to a world of objects.

Note the complexity of Lindiwe’s economic arrangements and the variety of sources she draws on. She understands her own life better than anyone else. But there are questions she doesn't know the answers to: Where have all the men’s mining jobs gone? Why did all the factories close? Why are the schools failing? Why has a Black government done so little to reduce poverty and inequality?

A human economy approach must somehow bridge the gap between Lindiwe’s life and a world driven by forces she cannot know. This implies a huge effort of research and public education. Note that religion has always done a better job of linking human subjects to a world of objects; and her spiritual community already does that for Lindiwe.

Given our preference for anchoring economic strategies in people’s everyday lives, their aspirations and their local circumstances, the intellectual movement that defines our research is one of extension from the local towards the global. We can’t arrive instantly at a view of the whole, but we can engage more concretely with the world that lies beyond familiar institutions. The chief way of achieving social extension has always been through markets and money in a variety of forms.

Lindiwe could not juggle the plethora of institutions and activities she relies on without money. Money and markets are intrinsic to our human potential, not anti-human. Of course they should take forms that are more conducive to economic democracy. Her unanswered questions are grounded in circumstances she knows well, while opening up to broader perspectives. It helps to recognize that money and markets span the extremes of human existence: they link us to the universe of our social relations and give precise definition to our most intimate circumstances. As Simmel suggested, money reflects our human potential to make universal society.

An economy that guides what people do

The principles of an “economy”, conceived of as a specific strategy, must be discovered, articulated and disseminated. To be useful, an economy should be based on general principles that guide what people do. It is not just an ideology or a call for realism. The social and technical conditions of our era -- urbanization, fast transport and universal media – must underpin any inquiry into the principles of human economy. We do not assume that people know best, although they usually know their own interests better than those who presume to speak for them. As Simmel suggested, money reflects our human potential to make universal society.

In origin ‘economy’ privileged budgeting for domestic self-sufficiency; ‘political economy’ promoted capitalist markets over military landlordism; ‘national economy’ sought to equalize the chances of a citizen body. Perhaps ‘human economy’ could be a way of envisaging the next stage, linking unique human beings to humanity as a whole. It would then be a sequence of social extension, “house-market-nation-world”. The Pretoria Human Economy programme is a new node in an international network that would advance economic democracy through academic research, social initiatives and public outreach. Based in Southern Africa, we participate in dialogues about how to build a better world.

Finally, a contemporary political context adds point to the human economy idea now. Coase asked why, if markets are efficient, any self-employed person would choose to work in a collective rather than outsource what they can’t do themselves. Oliver Williamson takes what is internal and external to the firm to be entirely flexible and extends this idea to relations between corporations and governments. The Fordist phase of internalizing transaction costs is over, not least because the digital revolution has cheapened the cost of transferring information reliably. This does not mean that corporations have ceased to be large and powerful. Of the 100 largest economic entities on earth two-thirds are corporations and, of those, half are bigger than all but 8 countries. Moreover, we are witnessing a drive for corporate political independence which would leave them the only citizens in a world society made to suit their interests.

This is the logical conclusion of the collapse of the difference between real and artificial persons in law, granting business corporations the legal standing of individual citizens. Thomas Jefferson identified commercial monopolies (“pseudo-aristocrats”) as a powerful threat to democracy — mere human beings cannot compete with organizations of their size, wealth and longevity.

Coase and Williamson imagine a world where companies control the marketing of their brand, outsource production, logistics and much else and internalize government. Why rely on governments for conflict resolution? After all, corporations also have to handle conflict resolution internally. Why have state laws, when what the world needs most is moral law? Corporate Social Responsibility is a major field for negotiating changes in the relationship between firms and society. What kinds of political mobilization could challenge the power of corporations at every level from the local to the global? Based in Southern Africa, we participate in dialogues about how to build a better world.

The human economy idea may have its origins in small-scale informal activities and a humanist ideology, but effective resistance to a corporate takeover will require selective alliances between self-organized initiatives on the ground and large-scale public and private bureaucracies. It will also require the development of global social networks.

For the human predicament is impersonal; there are powerful anti-humanist forces in the world we share. So we must build bridges between local actors and the new human universal, world society. To be human is to depend on and make sense of impersonal social conditions in order to act effectively. Individual rational choice does not come close to approximating this situation. In the struggle with the corporations, we need to be very sure that we are human and they are not. The drive for economic democracy will not be won until that confusion has been cleared up.

Human beings need to feel “at home in the world”. The twentieth century opposed state and market as two principles that came into ruinous conflict, whereas they are indispensable to each other, even if they leave out people much of the time. “Society” bridges these extremes and, following Marx, people, machines and money matter most in our societies, even if the order of their priority is the opposite of what is desirable. Money buys the machines that control people’s access to work. Humanity’s task is to reverse that order.

How to cite:
Hart K.(2016) A human economy approach to development, Open Democracy / ISA RC-47: Open Movements,19 May. https://opendemocracy.net/keith-hart/human-economy-approach-to-development

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