Modern levels of the division and specialization of labor cannot be “solved” without inconceivably huge economic and social dislocations.
The Inescapable Tragedy of Postliberalism
Postliberalism offers modern society a tragic choice. I don’t mean that as an indictment of postliberalism. Many choices require that one fundamental good be traded off for another fundamental good. What is an indictment of postliberalism, however, is the pretense of some of its advocates that it requires no tradeoffs, that modern society faces no tragic choice in choosing between economic liberalism (or “neoliberalism”) and postliberalism.
Guido Calabresi and Philip Bobbit did not precisely define what makes a choice “tragic” in their classic 1978 book, Tragic Choices: The Conflicts Society Confronts in the Allocation of Tragically Scarce Resources. I would identify three elements as necessary for a social choice to be genuinely tragic: the choice requires a tradeoff between fundamental human goods, the human goods are incommensurable, and the people who benefit from one choice are not the same people who bear the cost for that choice.
While postliberals criticize liberalism along a broad front, a regular feature of their criticism of economic neoliberalism are observations about the impersonalism and anonymity of modern market economies.
Postliberals like John Milbank and Adrian Pabst in the Politics of Virtue propose to re-humanize economic exchange by reinvigorating local production and re-personalizing market exchange. Setting aside the practical issue of how one moves Western economies wholesale from where they are now, integrated into a global supply chain, to a future where they recreate local production and more-personal markets, one can nonetheless concede the attraction of doing so. I appreciate weekend “farmers’ markets,” and I like knowing the people with whom I trade. In the past, every grocery store was effectively a market of and for local farmers. And everyone knew everyone else, and interacted repeatedly, both socially and economically.
But these experiences are increasingly on the margins in most of our lives. While we may pick up a few pieces of fresh produce at the farmers’ market on Saturday morning, most of us no longer purchase much of our food at the mom-and-pop grocer down the street, even if it has not yet been replaced by a 7-Eleven. Instead we shop at huge, national chain supermarkets. There we are lucky to see the same employees more than once, and nothing in the stores encourages the cultivation of personal relationships.
Neoliberal market exchange, however, is not simply about groceries. It’s about the status economic exchange has in our lives writ large. It shapes not just our work relationships but many other aspects of our public and private life. It’s about the vast majority of our purchases, and the necessary, inevitable anonymity of those who make and sell those goods and services.
My beef with the postliberal criticism of modern economies is not the claim that we have lost something significant in the transition from local, more-intimate and more-personal economies to the large, anonymous economies we have today. While we clearly have enjoyed enormous growth, it came at a steep social and cultural cost.
What bothers me about the postliberal criticism is the widespread papering over the costs of returning to those economies, as if a broad return to economic localism and personalism would bring only benefits, and impose no great costs. Even more vexing is the suggestion that creating a postliberal economy would actually increase economic prosperity and incomes across the board.
For example, in The Politics of Virtue, Milbank and Pabst argue that “re-localization of the economy” would spur an increase in “real wealth,” that is, in overall economic prosperity. So, too, they claim that increasing the national minimum wage would have only a “small negative impact on employment.” These same increases in minimum wages would instead have a “very large positive impact on the poor,” with “higher household income, lower personal debt, more consumer spending, higher tax revenues and lower spending on in-work benefits.” Indeed, a higher minimum wage “in turn offers scope for tax cuts for low-income families and small businesses.”
Similarly, Milbank and Pabst claim that “paying higher prices for locally produced goods . . . raises real wages in all trades.” Indeed, creation of an Italian-like (!) “civil economy” would even decrease the number and magnitude of business cycles.
Even conceding the significance of the social benefits Milbank and Pabst seek to promote, we should recognize that they do not frame them as tragic choices. Rather, in the best tradition of Madison Avenue, their postliberalism offers it all: social solidarity and a bigger economic pie to boot—not just the proverbial chicken in every pot, but a resurgence of community as well.
Yet far from promoting greater economic prosperity with only “small negative” impacts on employment, the social benefits they seek to recover can only be had with a huge downward shift in Western, even global, prosperity.
To be sure, even if costs are sizable, the gain might be worth the loss. Wilhelm Röpke emphasizes several times in A Humane Economy that the significance of a social commitment to the teaching that “man does not live by bread alone.” This teaching is what Milbank and Pabst seek to implement in spades. (Not that Röpke should be conflated with Milbank and Pabst. The latter criticize Röpke for being too mild in his policy suggestions.)
The problem, though, is that local production and personal exchange cannot sustain a world of 7.9 billion souls without a significant decrease in living standards.
The problem is that both left-wing and right-wing postliberals make the wrong diagnosis. They blame the market for the anonymity of modern production and exchange when in fact the anonymity of production and exchange is caused by specialization and the division of labor. “Re-embedding” markets in social life—even getting rid of them entirely—can’t eliminate the need for modern levels of specialization and the division of labor, at least at current levels of production and consumption.
This is the upshot of Adam Smith’s famous dictum, “the division of labor is limited by the extent of the market.” We read this and think that Adam Smith argues that thicker markets cause an increase in the division of labor. But “the market” here simply stands in for the number of consumers, whether those consumers live in a market economy or not. Smith’s dictum simply means that a larger number of people who desire a particular good or service provides a platform that allows a greater division of labor.
This insight is as true for a non-market economy as it is for a market economy. Simply consider any system of production and allocation sufficient to sustain life for all the world’s people. This system can be a market system or a non-market system, or a combination of both. How could the world achieve current levels of production without the level of the division of labor and specialization that we see today?
The implication is clear: if production and exchange of goods and services are going to be re-localized and re-personalized to any significant degree, production necessarily must decline significantly as a result.
Indeed, we need not go that far back in the past to glimpse the magnitude of the tradeoffs necessary to recover earlier levels of economic localism and personalism.
Consider: The 1950s were hardly the heyday of economic localism and personalism in Western nations. If anything, this was the decade that supercharged globally-anonymous production and exchange. Yet according to the OECD study, GDP Per Capita Since 1820, per capita GDP in the U.S. in the 1950s was scarcely one-third of what it was in the 2010s (in constant dollars).
Or go back just two more decades. Per capita GDP in the U.S. of the 1930s was scarcely one-fifth of what it was in the 2010s.
Go back a little further to the turn of the century, when the U.S. experienced a much more local and personal economy. Per capita GDP was less than one-seventh of current GDP.
To be sure, these numbers would be altered by the advent of modern technology. But we can’t press that argument too far: even the development of modern technology depends critically on an “extent of the market” that extends across the globe, permitting high levels of specialization and the division of labor. And it is from those features that economic anonymity proceeds.
The point isn’t that associational benefits of economic localism and personalism could never be worth the cost. The point is that achieving those associational benefits to any significant degree isn’t simply a matter of shaving a percentage or two off current per capita GDP. It would require huge decreases in modern living standards.
Hence, the “tragic choice.” We can’t recover both economic localism and personalism to any significant degree and still maintain anything close to modern living standards.