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Part I
The voice of economy
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Introduction to Part I
The first six chapters track the development of persuasive representations of the “national economy” and “world economy.” There are three conceptual stages: (1) the splitting of human activity into “economic” and “non-economic” parts, (2) the collecting of the “economic” parts into a representable “national economy”, and (3) the confecting of a “world economy” summing across those “national economies” and structuring the empty spaces between them. Each stage builds atop the previous stage and absorbs its assumptions.
Anyone can build an abstract system. What made this particular system persuasive? What got it the backing of governments and international agencies? How does a project move, in a few years, from being the hobby of a few academics to a tool of a powerful global apparatus? I have tried to surface something of the strangeness and contingency of this project, with particular attention to places like 1930s Palestine and British colonies in Africa where the “nation” of national income accounting did not yet exist.
Chapter 1 examines the economy/household distinction, with special attention to the romantic-rationalist struggle in which that distinction figured. It will be a central argument when we get to the second part of the book that this initial struggle remains embedded in contemporary discourses about economy. Chapter 2 examines a fascinating pre-WWII case, in which both romantic and rationalist tropes figured in the statistical construction of a Jewish economy in British-ruled Palestine. Chapters 3 and 4 bring the focus to Keynes and Britain, and aim at a non-technical exposition of some core features of the Keynesian macro framework, and the way those features in turn shaped postwar representations of the “national” and “international” economies. Chapter 5 examines the working out of these ideas in British colonies in Africa, a project important to the globalization of national income accounting.
Chapter 6 turns to the International Monetary Fund and its use of these understandings of national and international economy. Its drama centers on the IMF’s death and rebirth in the 1970s, which transformed it from an obscure technical agency to an ambitious promoter of a new understanding of the international economy.
For reasons of narrative compactness I follow the thread of the development and generalization of national income accounting, and its persuasiveness as a representation of the nation. I will have relatively little to say about academic Economics or economic theory. My interest is in the technical and the representational, and in the moments when this became fraught or difficult, when choices had to be made and skeptics persuaded. Foucault and his legatees have perhaps been too ready to read “Economics” ideologically, too attracted to marquee theorists like Bentham, Hayek, and Becker, too bored by workaday Economics.1 In the Foucauldian literature on medicine and psychiatry, for example, we are used to the idea that routine technical practice mattered. It is this focus that I want to extend.
Note
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1
Love or money
Overview
This chapter tracks the breakdown of Adam Smith’s unitary vision of social life into a split between household and business, and its implications for measurement. The next two chapters will examine the way the split-off “economic” parts were gathered and shaped into a standardized “national economy.”
The household/business split was strongly affected by the romantic reaction to the Enlightenment. Adam Smith (1723–1790), in good Enlightenment fashion, developed a holistic theory that did not hive economy off from the rest of society. Romantic critics found this work tediously dry, lacking in religious faith and feeling, patriotism, and national culture. The rise of modernity over the nineteenth century can be thought of as a breakdown of the Enlightenment project, its partial dissolution into rationalist and romantic streams.
Unable or unwilling to carry on Smith’s holist project, John Stuart Mill (1806–1873) fenced off a limited “business” sphere for the new science of political economy. In this limited sphere many of Smith’s analytical insights could be preserved and extended, even if his larger vision was discarded. This can be interpreted as a retreat, but we can just as easily argue that Mill took advantage of the romantics’ pugnacity to re-found political economy on narrower and easier ground. In any case, the twentieth century was bequeathed a sentimental division between a loving and self-sacrificing household sphere, and a competitive and rational business sphere. For twentieth-century modernists this division became not just a background assumption, but an imperative: once you accepted household/business as an essential divide, as a condition of civilization, then you had to take care lest either compartment contaminate the other.
The exclusion of housework from contemporary measures of national output is often regarded as a scandal. What this chapter shows is that this exclusion – scandalous or not – is baked into the cake. The exclusion of love is the constitutive taboo upon which a visible “economy” has been brought into being.
Smith, Coleridge, Mill
In his 1759 Theory of Moral Sentiments (1976), Adam Smith worked out a psychology based on sympathy. Socialized humans judged the actions of others, and learned that others judged their behavior. As they came to understand this interplay of assessment, people developed a deep and abiding interest in behaving in ways others would find admirable. The result was a Stoic ethics updated for the eighteenth century, stressing dignity and self-restraint.1 Smith’s 1776 Wealth of Nations (1979) thinks within that ethical system. Smith is routinely quoted about appealing to the self-love of “the butcher, the brewer, or the baker” to get our dinner, but the less-recognized context of that quotation is the contrast Smith was drawing between commerce and begging. Begging embarrasses everyone. Commercial transactions are ethically better because both parties keep their dignity. For Smith the “other” of commerce is feudal servility (and feudal generosity). So, assuming as Smith did that people are already well socialized, “self-love” lets people manage their own affairs without unduly troubling others (Muller 1995). Whether or not you find this ethical vision persuasive, for our purposes the important fact is that Smith developed a single psychological theory to explain people’s actions across all spheres of life. He proposed no separate market psychology. In Stoic fashion Smith approached wealth, trade, and production as integral parts of a single social and natural order.2
The Enlightenment crested with Kant. The European romantic movement that rose after and against it was too disparate (and too romantic) to be easily summarized, but it gathered force from recrudescent nationalism, from religious revivals, from unease over commerce and fashion, and from alarm over the social, moral, and aesthetic effects of the industrial revolution. (Chapter 7 discusses romantic political economy as a positive doctrine.) In Britain it was given particular force by nationalism kindled by the Napoleonic Wars. Poets like William Wordsworth (1770–1850) and Samuel Taylor Coleridge (1772–1834) foreswore their youthful cosmopolitanism for zealous patriotism. They had little patience for Smith and his followers. “What solemn humbug this modern political economy is!” wrote Coleridge in 1833. In a passage that epitomizes romantic political economy, he continued:
You talk about making this article cheaper by reducing its price in the market from 8d. to 6d. But suppose, in so doing, you have rendered your country weaker against a foreign foe; suppose you have demoralized thousands of your fellow-countrymen, and have sown discontent between one class of society and another, your article is tolerably dear, I take it, after all. Is not its real price enhanced to every Christian and patriot a hundred-fold?
(Coleridge 1884, pp. 186–187)
Unfettered markets encourage strife between people and between classes within a nation, dividing people and classes who should be united in common purpose by patriotism, religion, and national culture. This was the standard nineteenth-century romantic critique: self-interest undermines national interest. Smith wanted to build community out of carefully tuned self-interest; romantics thought self-interest was community’s nemesis.
Smith’s key nineteenth-century successor was John Stuart Mill (1806–1873), whose 1844 Principles of Political Economy sought to update and systematize Wealth of Nations. In the 1830s and 1840s, Mill staked out a defensive position against romantic criticism of political economy. In an essay published in 1836, he wrote that
“Political Economy” … does not treat of the whole of man’s nature as modified by the social state, nor of the whole conduct of man in society. It is concerned with him solely as a being who desires to possess wealth, and who is capable of judging of the comparative efficacy of means for obtaining that end. It predicts only such of the phenomena of the social state as take place in consequence of the pursuit of wealth. With respect to those parts of human conduct of which wealth is not even the principal object, to these Political Economy does not pretend that its conclusions are applicable.
(Mill 1948, pp. 137–138)
With these words Mill abandoned Smith’s project of a single psychological theory explaining all human action, and re-founded political economy on a crude and narrow psychological ground (“solely as a being who desires to possess wealth”) that Smith would have emphatically rejected.3 Mill’s rhetoric cleverly appropriated the romantic critique of political economy. Rather than fight the romantics Mill cheerfully conceded their central charge, that political economy assumes selfishness, and used that concession to clear a space in which his science could flourish.
In other words, several moves were open to Mill. He might have tried to rescue Smith’s late-Enlightenment effort to build a single comprehensive social theory (something which, broadly speaking, both Malthus and Marx attempted).4 Alternatively Mill could have abandoned that project completely, and joined the romantics in working everything out from tradition and national culture. Instead he split the baby in half, and thereby became a founding father of modernity.
In an 1840 essay on Coleridge, Mill wrote that Coleridge’s thought “expresses the revolt of the human mind against the philosophy of the eighteenth century” (which would include Smith) (Mill 2006, p. 125). He went on to praise Coleridge at length for his insights into national culture, national character, patriotism, religion, reverence, and feeling. Then Mill’s tone turned:
In the details of Coleridge’s political opinions there is much good, and much that is questionable or worse. In political economy especially he writes like an arrant driveller, and it would have been well for his reputation had he never meddled with the subject.
(Mill 2006, p. 155)
This was an unwarranted affront. By the standards of the early nineteenth century Coleridge’s writings on economic questions were perfectly creditable. They show a capacity for analysis and an ability to make distinctions and follow complex arguments.5 Though by no means a first-rank economist, Coleridge was hardly a “driveller,” and his economic writings rank no lower in coherence, clarity, or reference to evidence than the political and cultural writings Mill so generously praised.
Mill, therefore, responded to the romantic assault on political economy not by joining it, and not by rejecting it, but by opening the modernist split: a society divided into separate compartments with distinct rationalities and distinct sciences. The combination of generous praise and condescending dismissal of Coleridge marked a new boundary.
Marshall
Mill’s most important successor as a field-defining political economist was Alfred Marshall (1842–1924). His Principles of Economics was first published in 1890 and went through eight editions, the last in 1920. Marshall kept Mill’s assumption that the sphere of “economy” was split off from other parts of life on psychological grounds – by people’s intentions and states of mind. But he made several new moves.
First, Marshall historicized the splitting-away of economy from other parts of life. Primitive society, he argued, had been divided between one’s own community, to whom one had duties and obligations, and strangers, to whom one was hostile.6 Modernity, in his view, put an end to hostility toward strange...
