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Book Review: The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers by Michael Perelman

December 29, 2014

The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting WorkersThe Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers by Michael Perelman

My rating: 5 of 5 stars

This book has my highest possible recommendation. I think it should be required reading for all people, especially those who adore Adam Smith (but probably haven’t read the breadth of his work).  Although Perelman does not invoke the term pseudoscience (as “pseudo-science”) until page 195, this book is a scathing critique of neoclassical economics as a religious and faux-scientific discipline, and he ties it all directly back to Adam Smith, and back even further to the Greek myth of Procrustes. Although I have been a fan of the Greek myths since childhood (and Edith Hamilton’s Mythology was required reading when I was in fifth grade–she glossed over him in two uninterested, antiseptic sentences that didn’t grab enough attention of fifth grade boys (albeit most of those who were assigned to read this had been using a reading textbook intended for seventh graders, so we might have been slightly more mature) to get mentioned in class, and the Theseus story in my fourth grade reader, Golden Voyages [designed for 6th graders], started with him volunteering to be sacrificed to the Minotaur), Procrustes was new to me when he was introduced in the classical mythology course I took as an undergraduate student.  The best analogy I had of Procrustes at the time, as a film student, was my railing against the reformatting of films for different sized-screens, which  seems to have lost, as people watch squashed images on their widescreen TVs, and I did not even create the analogy, but repeated it after I read it.  “Procrustean” is a very good term for my right-wing cyberbullies.  Who but a Procrustean would tell someone with a master’s degree, scoliosis, multiple herniated discs, neurogenic bladder, bilateral sciatica, and bilateral plantar fasciitis to work in a retail/food service job, hard physical labor, or that they should have majored in their weakest subject area (mathematics), in spite of excelling in other disciplines, simply to meet employer demand?  I am not a human calculator, and no amounting of cutting or stretching will ever make me one.  Troy Van Voorhis, who is now a physics professor at MIT, and I were the stars of my middle school academic team, which had three nearly-undefeated seasons (our few losses were controversial, including the coach of the other team insisting that Troy didn’t give the answer to the last question of the game in a timely fashion, which is not what most people heard, which was “Ri–time–p van Winkle.”).  Each player was allowed in no more than two of four rounds, so we never played the same round.  He had the edge on me because I was eventually banned from answering the calculation questions, on which I was ably assisted by Josh Horstman, a math whiz (who got a perfect 800 on his math SAT, though I did quite a bit better than he did on verbal) whom I’ve mentioned in an anonymous fashion on this blog when what I was saying wasn’t so praiseworthy.  Back then, my value was seen, but today, those who aren’t human calculators are often seen as of little value as a burger flipper, whether one can safely do the job for an extended period or not.  That was the late 1980s, when Procrustean ideology was becoming entrenched but had not fully supplanted morality in the marketplace.  For a Procrustean, a job is a job is a job, no matter how much it pays or its impact on a person’s quality of life, health, or lifespan.  It is simply an exchange of disutility (work) for utility (purchasing of commodities), in the minds of these pseudointellectuals.  Perelman cites a study by Richard Thaler and Sherwin Rosen discussing the probability of death on the job, citing that there is a downward bias because poor people are more likely to accept dangerous jobs.

If, for example, economists had the capacity to plumb the minds of students who are about to graduate with MBAs from elite universities, they could investigate how much more the students would accept from hypothetical investment banking jobs with an annual 1 percent chance of workplace fatality.  If such a study were somehow possible, the value of ‘statistical life’ would certainly be higher than estimates for the pool of potential jobs for farmworkers.

Thaler quickly realized the weakness of his results.  His friends told him they would never accept anything less than $1 million in return for the increasing their chances of dying by 0.1 percent. Paradoxically, the same friends would not be willing to sacrifice any income to reduce the probability of dying on the job. “How would economists’ subjective evaluation of their own welfare possibly change if they found themselves subjected to the imposition of long hours of grueling physical labor? I think any rational person knows the answer” (124).

And yet I, with my MA rather than MBA, am supposed to take a job with a high risk of dying (as a fast food job would be for someone with a history of uncontrollable back spasms associated with prolonged standing) for minimum wage?  There are some very sick people out there, and we have a system that encourages them called capitalism that should be called Procrusteanism. “Economists seldom realize that, like work, leisure can be productive and that fulfilling work might actually create more utility than leisure. None of that matters within the theory because economists simply assume that work is nothing more than the loss of leisure” (72). “Within this world,” Perelman elucidates us, “an accountant with a college degree could replace a star center on a professional basketball team without a college degree” (109). Overpaid hack Michael Cox thinks it’s great when essential workers, such a firefighters, have to work two jobs to be able to afford to live in New York City. “It gives you portfolio diversion in your income;” implicitly financializing the job market. Cox one-ups Smith by recasting workers as investors. “If only the poor, benighted workers could figure out how to extend the working day beyond 24 hours, they could divide their work among hundreds of jobs. I wonder how Dr. Cox would feel, however, if groggy but well-diversified firefighters arrived to save his house already so exhausted from their other job that they could not perform their duties effectively” (124-5). “Economists presume that work is simply the absence of leisure, and that only the duration of time on the job creates a negative utility. People are free to adjust their hours of work to maximize their utility per hour of work, as if a worker had the choice to take off work forty minutes early in order to maximize utility. Unemployment, even during serious depressions, reflects an increased preference for leisure over work” [based on Robert E. Lucas, Jr.’s Business Cycles: The Yjiro Januson Lectures (118). Joseph Schumpeter sees cycles of depressions and recessions as necessary to competition. He is mostly admired for the phrase “creative destruction,” while his more challenging ideas, such as this, are ignored (131).

“Procrusteanism presents itself as the only way to create prosperity, yet Procrusteanism itself cannot flourish amid prosperity. Prosperity undermines efficiency in a market economy” (130). Drawing on Greg LeRoy‘s The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation, Perelman tells us that the top 200 largest corporations in 2000 “employed a mere 0.78 percent of the workforce even though their sales accounted for 27.5 percent of world economic activity. That business is not particularly good at creating jobs–especially good jobs–should come as no surprise.  Wall Street rewards corporations for eliminating jobs, not creating them. Profits rather than jobs are the highest priority of business leaders” (30-31).  And yet they, like Mitt Romney, proclaim themselves the “job creators” and demand huge tax subsidies as rewards for their nonexistent generosity.  He cites how the work of John Maynard Keynes (about whom he details quite unpleasantly late in the book, which can easily be summed up in one sentence: “Although Keynes looked forward to a time when people could flourish, his vision of flourishing almost seemed to be limited to those already living in a more refined manner” (285).) is wrongly interpreted as advocating more government spending, when what he said was that government is necessary to create sufficient jobs because business does not produce enough investment to keep the economy healthy (262).

Neoclassical economics took a long to to take hold, let alone become mainstream.  That it is a pseudoscience is made clear on page 76.  Although Smith had tied his version of economics to Newton (196), himself the product of a public education, economists like Henry Dunning Macleod made the leap in the 1860s.

Economists quickly (mis)appropriated the mathematics of physics to economics.  In the words of one critic [Philip Mirowski] of this effort, “To put it bluntly, the progenitors of neoclassicism copied down the physics equations and just changed the names attached to the variables.”  Physicists found the economists’ work sadly lacking, partly because the economists’ model allowed for unlimited growth, while the physical system that that they were emulating was restricted by such constraints as the conservation of matter and energy.

In other words, economists love their little equations, but they have no basis in economic reality, which is why their models keep coming up untrue, causing massive growth at the top and massive shrinkage at the bottom, particularly the downward mobility of the majority of the middle class since 1980.

Of course, this is such a religion that it’s the only kind of economics now taught.  At my high school, economics was a twelfth grade requirement taught by an Ayn Randian named Andrew Wiggins, who kicked me off the academic team in ninth grade because I was not showing proper deference to upperclassmen with incorrect answers.  Because the high school academic game, The Brain Game, was shot in the studios of the Indianapolis affiliate, WTHR, they used a really crappy scoring system in practice called Quiz-a-Matic that was far inferior to those we used in middle school, for which we used the same devices in meets and tournaments as we did for practice.  The devices we used in middle school allowed the button to be held down while another person was rung in; consequently, the person who hit first and longest on the other team would ring in automatically if the other person missed and had their turn canceled by the proctor.  Not so with the Quiz-a-Matic–if you held the button down, it disabled the device, and someone was forced to let up so that someone else could ring in.  Since I was a freshman, I was always forced to let up, and in nearly every case, the upperclassman had a wrong answer.  The one I remember getting me kicked out, never to return, was “What language did Jesus preach in?” and I was the only one in the room who had even heard of Aramaic, Mr. Wiggins and the team befuddled about the correct answer printed on the sheet.  I didn’t hold a personal grudge against Mr. Wiggins, and I was, in fact, reading Rush Limbaugh’s The Way Things Ought to Be in earnest at the time I was taking the class until someone had the sense to take it away from me (I forgot where I left off and never finished reading my replacement, which I eventually hid just in case I had guests who might see it and think I still agreed with him), but our school’s academic team did have a pretty lackluster four years, with Troy not on the team by choice and me not on the team by command, all the while, we–North Central High School (Indianapolis, not Farmersburg) was rated the best academic high school in Indiana by Redbook in their state–by-state ratings, which the principal would tout on the morning announcements on a regular basis (upscale rival Carmel, a wealthy suburb immediately to the north, was rated best for sports), so we really should not have had a lackluster academic team.  I mention this seemingly irrelevant anecdote because it fits the mentality of mainstream economists so well.  On pages 70 and 71, he mentions two economists I find stunning were allowed to have their inanities published in a peer reviewed academic journal:  Clark Nordling and Steven Cheung.  So devoted are mainstream economists to the idea that all work is a voluntary, even exchange, a dubious notion if ever there was one, that Nordling claimed in Explorations in Economic History that children working in factories voluntarily chose to have their employers beat them, while Cheung, writing in Journal of Law and Economics, claimed “that riverboat pullers who towed wooden boats along the shoreline in China before the revolution of 1949 agreed to hire monitors to whip them to restrict shirking” (71).  It boggles the mind how anyone could take such notions seriously.  Perelman cautions us that we must take such notions seriously, even knowing them to be erroneous, because so many with wealth and power take them seriously. Perelman goes on to show us how the Chicago School of Economics routinely rejects empirical evidence that does not fit with their dogma, such as the unscientific dismissals of separate studies by David Card and Alan Krueger and Richard A. Lester (not to be confused with the eponymous brilliant comic filmmaker) demonstrating that increasing the minimum wage does not increase unemployment.  Perelman quotes at length from the aforementioned Sherwin Rosen’s scienceless dismissal of Card and Krueger on page 82.  At no point does Rosen cite any specific flaws or errors with Card and Krueger’s data or their analysis of it.  He just cannot accept a study that does not fit his dogma, and Perelman cites Deirdre McCloskey and Melvin Reder who have served on the University of Chicago’s faculty, talking about how closely the school clings to old theories in the face of empirical evidence.  Neoclassical economics is a religion.  Card and Krueger shied away from such controversial work for the sake of their careers (81).  Perelman further cites the example of William Stanley Jevons’s analysis of how working conditions, such as repetitive movements in a factory, have a profound impact on efficiency and productivity.  “Jevons’s ‘sin’ was not that his analysis was imperfect, which it was.  Instead Jevons’s offense was that he opened a window on the imperfection of the emerging economic consensus about economic theory” (97)  Indeed, Rosen lamented that Thaler took his career into behavioral economics, which is more associated with business academia than economics academia, in spite of the name, dismissing Thaler’s later work as wasted on trivialities (107).  Merton Miller, another of the Chicago faculty, refused to even speak with Thaler or Card and Krueger but leveled heavy and vague criticism against the latter pair (107). Circular reasoning, universally recognized as illogical, is a favorite tool of right-wing nutjobs, and economists are no exception. George Stigler, highly admired by the pathological liar Thomas Sowell, who was his student, “and his allies used enough invective to satisfy their colleagues that Lester must be wrong because his data was inconsistent with their theory” (81). “Lester and Card did not fail to convince their fellow economists because of errors in their work. Most economists either ignored their results or, worse yet, rejected them out of hand because they conflicted with their cherished beliefs” (82). “The example of a statistical life illustrates the opportunistic ways economists avoid looking into questions regarding, work, workers, and working conditions except when they can cherry-pick some useful results” (106). “Stigler did not mean the leisure and health of the workers, but that of their employers. CEOS often trade profitability for personal vanity–golf, private jets country clubs. Stigler wants us to ignore waste… [and] declared that unless economists can wrestle waste onto a simple mathematical box, economists must not take such a ‘mighty methodological leap'” (102). “[Harvey] Leibenstein’s sin was to suggest a line of research that would require economists to look at the way things are produced rather than confining themselves to the transactional side of the market” (103). One of my cyberbullies, #Capitalist Ramses ‏@niebais1 on December 18, 2014 said “These new founded economists have never done due diligence on reality. It’s sad to see guys like that publish papers or books.” ( ) He is part of the same religion to which Mr. Wiggins was presumably subscribing, since it’s the new economists who challenge the orthodoxy who are using empirical evidence instead of dogma.

The so-called liberal “media rarely notice deaths in the workplace or the prevalence of poor working conditions…The maximum punishment for willfully violating safety laws is a six-month sentence, half the maximum for harassing a wild burro on public lands” (58). “When such disasters [as Bhopal] occur, workers suddenly come into the forefront–not so much as victims, but rather as culprits who are supposed to bear the ultimate responsibility for the damage. Unmentioned is the nearly forty-year effort by employers to disempower unions left workers and regulators with less opportunity to effectively push for improvements in workplace safety” (60). He notes that the only workers covered in newspapers, in spite of large business sections, are professional athletes that most newspaper readers can’t afford to see at work, anyway, which also fits for almost anyone whose career is covered by the arts and entertainment section of the paper (108). The Wall Street Journal once had an article honoring Bonnie Lovelette Rooks, who was still working as a janitor at a steel factory at the age of 79 because she needed the money to pay for her health care. “The tone of the story was not an expression of sympathy for Ms. Rooks; instead, it exuded and appreciation for the potential of extending working years worthy of Procrustes. Business has good reason to applaud the long career of Ms. Rooks, although she has less cause to appreciate the economic conditions that left her with so much responsibility for an unaffordable medical system” (127).

“Before modern technology was important in production, considerations of labor were of great importance to economic thinking. The early political economists (as economists of the time were known) advocated policies to increase the amount of work, which, in turn, would make the nation more prosperous. Either directly or indirectly, they supported policies to drive people from producing goods for their own needs, forcing them to work for wages. these economists were also unanimous in their support for extending the workday as long as was humanly possible (61). Workers were not thought of as people, and their day-to-day experience was seen as irrelevant; Smith lumped them in with working cattle (62). “Differences of skill or the intensity of work did not often enter into their analysis” (63). Although workers were producing outputs that would have been unimaginable in Smith’s day, their wages were far from commensurate with their productivity. In the shadow of this new form of industry, class lines were hardening. Traditionally, workers had a chance to prosper by beginning as independent artisans and eventually becoming small employers in their own right. In modern industry, traversing the path from shop floor to the main office was unlikely, even with the utmost perseverance” (65). And yet, this myth is ingrained in most of us, at least in the Anglo-Saxon world, from a very young age. “How realistic is Smith’s vision?” Perelman asks us. “In a small island village in which industry only consisted of artisans producing on a small scale, a market society might have worked in the way Smith suggested. In such a world of micro-businesses, the ratio of workers to employers would be small. Under such conditions, young workers could reasonably expect that with diligence and a bit of luck their time as a wage laborer might be relatively short. Such an economy has probably never existed” (159). “[M]any cases do exist in which very bright, hardworking people are able to leverage their talents and opportunities into positions of authority. These exceptions serve to make the existing social pyramid less vulnerable to questions about fairness” (278). These are exceptions that prove the rule. If it were not the rule that such things do not normally happen, the media would ignore it when it happens. “The problem, however,” Perelman explains with the American myth, “is that the ‘normal’ life cycle of labor that Smith imagined precludes a world in which large operations became common. If only relatively few rungs at the top are open to the many at the bottom, how could the typical young worker expect to ascend the ladder of success merely through hard work and diligence?” (160).

Adam Smith, the Procrustean prophet, insisted that individual virtue rather than social influences determine people’s fate.

The truth was (and still is) that members of the lower class had little chance of succeeding in business, even with a high degree of virtue. Today, in California, you can see farm workers sweating in the fields under the 100-degree sun. Nobody can doubt what these people are doing is difficult, but despite their hard work, their chance of material success is slight.

Yet Smith seemed bewildered about why many poor people would express their discontent. The real surprise should be that people accept their lot in life while others wallow in obscene luxury. (188)

“For the most part, talent and strong work ethic alone are rarely enough to ensure success. Successful people almost invariably have received a crucial boost from some preexisting connections. The importance of such connections becomes obvious when well-connected people, no matter how undeserving, enjoy meteoric success” (278). In the United States today, rewards are certainly not commensurate with contributions to society. How could anyone rationally explain why schoolteachers or nurses earn less than advertising executives or stockbrokers? (279)

“The exclusion of work, workers, and working conditions was not simply an accidental oversight. It served an important purpose in defending capitalism from accusation of exploitation. The radical shift from labor to the extreme subjectivity in which unmeasurable consumer preferences became the center of economic analysis scaled labor’s marginalization in the theoretical world of economic theory. Other fields, such as sociology, industrial relations, or psychology might seriously explore questions of work, workers, or working conditions, but economics would not” (86). “In one sense,” Perelman tells us, “the neglect of working conditions in economic theory is ironic… very conservative economists… insist that the discipline of work will improve people’s character. This improvement extends beyond strictly economic welfare to people’s moral and ethical qualities. This belief was a major justification for the ‘reform’ of the welfare system, which was intended to drive more people into the job market. The intended beneficiaries were supposed to be the workers, whose human capital and moral character would improve through workplace discipline. The proponents of this policy never hinted that the inflow of additional workers into the job market would force wages down” (97-98). “Business leaders added that workers actually benefit from long hours because the restriction of leisure makes workers better people” (123). In reality, “Debauchery was not really a central concern for economists. If it were, they could just as easily look up the social ladder rather than concentrating their moral scrutiny on the less fortunate” (124). “Why in the world should anybody believe that only a few bad apples exist within the upper reaches of society, while the rest of the population, which did not cause the problem [the Great Recession], requires strict discipline? (298).

The double standards advocated by neoclassical economists are enormous. Economists such as Arthur Hadley were reading Marx and publicly disagreeing, but advocating “the creation of trusts, cartels, and monopolies, as well as government regulation to protect the railroads [which had been repeatedly going bankrupt] from the ravages of competition. Ironically, these same economists were simultaneously defending and refining mainstream economics rather than the railroads. They published articles and textbooks to ‘prove’ that an unimpeded market economy is both just and efficient. In effect, they produced one kind of economics for political and business leaders and another for workers, telling them why they should accept the market” (68). “Their critics accused economists of being too abstract and remote from the concerns of the real world. Business people rebuked them for not offering practical advice, while workers understood that economists were siding with business in its struggle with labor” (74). “The exclusion of labor was central to making the case that the system was just. Wages were treated as part of a voluntary transaction, just like any other” (79). On the same page, he shows that

[E]conomists still cannot prove that the market system is efficient in the way that most people understand efficiency. Instead, economists define an efficient economy to be one in which nobody can be made better off without harming anybody else. This restrictive definition rules out any consideration of redistribution. To take a dollar from the richest person in the world, who would hardly notice the loss, and give it to a starving person would not constitute an improvement by this standard. In contrast, a policy that would make this same rich person better off by $1 billion would represent an increase in efficiency, even if nobody else got anything. Because nobody else was made worse off, what could be the problem?

This ridiculous argument may be Perelman’s hypothetical, but he demonstrates how Harvard economics professor and controller of the National Bureau of Economic Research, Martin Feldstein argued exactly this point in a paper called “Reducing Poverty Not Inequality.” The windfall for such a rich person would still count as an improvement in efficiency, even if it would harm the (non-market) quality of life for many others. An example would be if the wealthy could use their funds to bid up rents that could drive many people out of their neighborhoods. In effect, then, this new kind of economics became a science of justifying inaction in the face of demands for a more equitable society” (80). This is a real problem in New York City. Gentrification is forcing more and more people into the shelter system who had never previously been homeless, and the reason progressives seem unable to stop it is because this gross inefficiency is seen as the epitome of efficiency by the religious zealots of Procrusteanism. Economic “proofs” that insist that market principles automatically maximize efficiency “depend upon hopelessly unrealistic assumptions,” which results in the allegations that they have not been fully executed (248). It is not possible to prove market efficiency without accounting for time (90).

As examples of atrocious scholarship on the part of mainstream economists, Perelman found only twelve mainstream economics articles on JSTOR from 2004 to 2008 mentioning working conditions, of which only two (the other ten mentioned the phrase in passing) dealt with working conditions even as a minor aspect–one disputing hideous working conditions of child laborers abroad, one stating “that factory working conditions were good,” citing an economist of the mid-nineteenth century (87)! A big part of the problem is that students of economics are poorly educated indoctrinated. “More recent economics textbooks [say] that growing productivity of labor should show up in higher wages. Higher wages, in turn, allow more workers to enjoy more commodities. Textbooks continue to tell this story even though hourly wages corrected for inflation have remained flat for more than thirty-five years, despite enormous increases in productivity” (119). It is shameful that textbook authors are allowed to continue to promulgate this lie. Oxford put an imbecile into its inaugural Drummond Chair. Nassau Senior, misusing data from manufacturers, claimed that reduced time on the job would reduce output without reducing input, thus destroying both net and gross profits (129).

“Whenever facts do not follow the logic of their theory, economists rely on their ingenuity to find explanations. They can always conjecture that preferences have changes. Perhaps, for some reason, leisure is less desirable today than it was in earlier times, thus people would choose to work longer hours for more commodities” (120). Edward Prescott disgraced the Nobel Prize, claiming in “Why Do Americans Work So Much Less than Europeans?” that workers in the U.S., in Perelman’s words, “should work more hours because taxes were lowered, increasing the advantage of work” (120).

“Economists must presume that consumers behave as emotionless geniuses in calculating utility to make their theories ‘work’ and thus justify Procrusteanism” (147). “By assuming consumers made the sophisticated calculations necessary to maximize utility, economists were able to satisfy themselves that they were on solid scientific ground” (85). These assumptions have been disproven by behavioral economists, who, as mentioned, have been marginalized for not reinforcing the dogma (citing Janet Yellen, “Implications of Behavioral Economics for Economic Policy”). “From the perspective of Friedman and Wriston, the behavior of the French regarding the length of the workday was proof that common people are incapable of understanding what is in their best interests (in contrast to the rationality ascribed to them in their role as consumers” (146). In other words, “people behave rationally when it suits our interests, and irrationally when it supports our interests that they do so.” “Yet Friedman and the people whose ideas he echoes would be hardpressed to find an example of a country in which the majority of the people benefited from the dismantling of social controls (146)”. Hence the US, UK, and Japan are not willing to rely solely on markets. Perelman asks some wonderful questions for which the religion of neoclassical economics has no satisfactory answers: “Why would people behave differently in economic and political venues? Are French voters really irrational in preferring a shorter workday? If people are irrational in the political arena, why are they presumed to be rational in the marketplace? Are Citicorp’s traders more rational than the rest of the population? If so, why does the great financial operation return to the verge of bankruptcy? Why not put a straitjacket on Friedman’s Electronic Herd instead of on ordinary people?” (147). “Even in those rare cases when well-meaning economists do trespass into questions of work, workers, or working conditions, territory usually proscribed by the discipline–their work is unlikely to be helpful with respect to workers’ interests. If such work will help the workers’ cause it will be rejected; however, if it can be wielded to harm labor, economists will be likely to embrace it as they did Thaler’s dissertation” (107). For example, he cites Cass Sunstein, who worked with Card, who advocated requiring workers to opt out of 401(k)s as “non-coercive.”

Economists, Perelman concludes, do not study human life; they study the straw man homo economicus. Even though it is necessary to create fictitious obstructions, this cannot correctly be done by eliminating essential aspect of the topic, such as work and working conditions (311).

The heart of the book is two chapters focusing on Adam Smith. Smith was slow to gain popularity, and Arthur Young’s travel writings (several passages from which Perelman compares to Smith) were cited more in parliament than those of Smith (170). Perelman attacks the unjustified reputation of Smith as a humanist. Francis Horner referred to the “superstitious worship of his name” in a letter dated August 15, 1803 (152). Smith’s pithy sentiments wishing success on workers “may have given Smith more of a reputation as a humanitarian than he deserved” (195). Smith primarily demanded the denigration of the worker (191). His free market loving fans ignore the interventionist stance of the later chapters (153). Perelman spends two chapters focused on Smith’s oft-ignored authoritarian side. By comparison of Smith’s letters and early lectures to the text of his so-called masterpiece, The Wealth of Nations, Perelman shows how Smith deliberately distorted reality, such as the claim that the division of his labor increasing productivity by using numbers from an earlier lecture in which the metal ore came from the ground to starting with the wire in the factory, which Perelman informs us is more accurately described as a workshop. This way, he could pretend that the workshop added greater productivity and value than it actually did. Adam Ferguson, whom Smith accused of plagiarism, focused on the negative consequences of the division of labor, creating class divisions and undermining society. “Ferguson’s real sin might well have been to use the pin factory in a way that contradicted Adam Smith’s libertarian vision” (167-8). Perelman is always one to tie economics to religion, and the word “sin” appears multiple times to drive home the metaphor, although I believe I have cited all instances of the term in this review.

“Smith’s idealized workers were not just selling their time on the job, but their lives as well.” Smith ignored alarming reports to the manager of the poorhouse sending boys to apprentice at the nail factory. Perelman cites Roy Hutcheson Campbell’s Carron Company (a history written in the 20th century) and Henri-Louis Duhamel du Moncea, Art de l’épingler (1761), the latter of which Perelman tells us that Smith read, but deliberately excluded all negative elements (169). Smith, Locke, and Temple all demanded work from three and four year-olds (125). The story of Robert Blincoe, an abused boy profiled in a newspaper, was used to pit business owners and landowners, who controlled the price of food, against each other, not to undo an immoral system” (126). Perelman uses writings available to Smith at the time that showed that factory mechanization was already eliminating jobs. “This system replaced two people who had turned wheels in the operation. The displaced workers represented one-sixth of the labor force” (170). Smith’s claim of voluntarism, which persists among capitalists today, is historically and currently false. “After tenants were thrown off their land, they had no option but to enter into factories” (140). “Smith was correct that more subtle market coercion is more effective than crude Procrustean measures. However, he failed to develop his insight more deeply, to realize that harsh measures, whether or not they involve physical brutality, are ultimately self-defeating. The same fate awaits marketplace Procrusteanism” (53).

“Smith’s reference to ‘the monopoly which we have most absurdly granted to the greater part of our own workmen against their own selves’ is also interesting. His observation anticipates the modern move toward outsourcing. But why would someone who advocated the promotion of the interests of industrious workers want to see them undercut by foreign competition?” (173). the mythical invisible hand was supposed to prevent outsourcing. Perelman uses Smith’s words to make him appear to be a compulsive liar with a classist agenda he himself denies. Citing Sarah Jordon’s The Anxieties of Idleness p. 55: “Success above a mere subsistence level [in Smith’s day] was rarely available to members of the laboring classes since they were seldom paid enough to rise in the world” (173), which, as detailed above, is still true, for the most part, today.

This is all before Perelman gets to his second chapter, which he calls “The Dark Side of Adam Smith.” Here he discusses how Smith could not seem to understand why workers would adhere to what was known as the “moral economy” in favor of the market-driven economy and wondered why the poor wouldn’t accept a subsistence wage created for them by the market (180). He seemed clueless and completely unable to fathom why anyone would be upset that they would starve to death without government intervention, and should apparently be happy to die for the sake of the market! Really? People are supposed to work for the market? I thought the market was supposed to work for the people. It’s pure cognitive dissonance to be both a Christian and a capitalist. Is this any significantly different from when Jesus said the Sabbath is made for the people and not the reverse? He wanted to eliminate piecework so workers would not work too hard to make more money.

“Although Smith framed his argument in terms of volunteerism, his voluntarism depended on the acquiescence of people with little opportunity for choice” He pinned his hopes on extra-market coercion. This point is so important that it is repeated almost word-for word two paragraphs down on the same page (182).

“Smith never seemed to notice that rich people might be prosperous, in part, because the state permitted and even encouraged measures to deprive people in the countryside of the means necessary to fend for themselves” (180). “Those who live off their capital rarely understand that their own prosperity could be enhanced by engaging their workers and nurturing their capacities. To do so raises two risks. Acknowledging workers’ capabilites would threaten management’s claim to elevated status. More dangerously, a different management stance could embolden workers to challenge Procrusteanism” (114). Smith saw education for the purposes of socialization and improving productivity, but not for fulfillment (181), and today, “[t]he business version of better education means little more than an improved ability to follow written directions or to write reports for higher management in a clearer manner. A deeper view of education–in the sense of a better ability to make critical decisions (especially with regard to working conditions) is the furthest thing from their mind” (114). This is one example of what makes charter schools such a sham on young people and their parents.

Smith was also disturbed that his goals might weaken vigor for military service (183). Smith approved of businesspeople wielding collective power as a class, but not workers (175). When workers used merchant-like calculation to demand payment for their military service, Smith proved a hypocrite and recommended hanging (187). “Smith even questioned restrictions on the sale of medical degrees” (188).

“Smith abandoned his ideas of labor-based value. He was trying to put the relations between labor and capital in the best possible light. This objective explains why Smith would go to such lengths to obscure the role of technology and large-scale production. Similarly, Smith avoided criticizing government policies to rig the labor market by holding down wages. Such regulations would give the lie to Smith’s vision of the market where people meet as equals” (192-3).

In Smith’s vision, merchants, capitalists, and workers are all seen very unrealistically as merchants, and he marginalized not only the aristocracy as well as “churchmen, physicians, men of letters of all kinds: players, buffoons, musicians, opera-singers, opera-dancers, &c.” as unproductive labor (198-9). Cops should probably be thrown in here, too. But seriously, these are some of the most important of all occupations and require some of the most training. Someone who considers these occupations unproductive labor really should not be taken seriously.

From analyzing The Wealth of Nations, Perelman then scrutinizes the use of the GDP as an indicator of national prosperity. I avoided discussing Simon Kuznets in my review of Thomas Piketty’s Capital in the Twenty-First Century because he came across as a villain all but for Piketty’s admiration of him. In considering the overapplication of the GDP, Perelman’s presentation of Kuznets shows that Piketty indeed has much to admire, for Kuznets himself was quick to draw attention to the limitations of the GDP and thought it useful in only certain circumstances, and had limited value, particularly in peacetime (204). Perelman also tells us, astutely, “Even if economists cold perfectly measure the nation’s GDP, welfare would depend on its distribution. If the bulk of the economy belonged to a single individual and the rest of society lived in misery, an increasing GDP might simply improve the welfare for that one fortunate individual” (205-6). For example, “[t]he surge of women into the labor force has created a substantial increase in commercial transactions, increasing the GDP and creating the illusion of an enormous burst of economic activity” when it is really a decline in social welfare; the effect on the GDP shows the lack of realism of the measure (207), and “Government statisticians treat a lower price at a big box store as an unalloyed benefit for consumers, despite the fact that the poorer quality might accompany the lower price” and then proceeds to note the degenerating quality of service such as phone mazes for customer service. He also goes into how the books are frequently cooked on the cost of a domestic-made component to a largely foreign vehicle” (208-209).

More book-cooking comes in comparison of GDP between countries, as the Bush administration did in comparison with Cuba, because public amenities may be better in low wage countries. The calculation of the GDP is full of flaws that reduce the usefulness of GDP as a measure of well being. Generic drugs, for example, lower GDP but are usually better for the consumer than newer and potentially dangerous drugs (209).

The difference between the Genuine Progress Indicator and GDP shows that both measures are subjective. “[N]eglect of working conditions is unforgiveable whenever people use the GDP as a measure of social well being” (212) Perelman also discusses here the effect of long commutes–a disutility without a utility–on family and friends. Psychologist Harriet Lerner notes, “Our society does not promote self acceptance, and it never will First of all, it doesn’t sell products. Capitalism would fall if we liked ourselves the way we are now” (274). Negativity gets passed around; Capitalists feel the need to diminish others (275) (not unlike my cyberbullies).

“Underlying this market-based liberty is the power of the state–the same despotic state that Procrusteans presumably abhor–but this state–the ideal state of Procrusteanism–is dedicated to the preservation of private property and ensuring that all citizens conform to the laws of the market” (134).

Although Procrusteans appreciate when workers feel the sting of market discipline, they expect generous favors for themselves, including tax cuts, subsidies, and bailouts when their business falters. I short, although both discipline and accountability must be stringent for those who occupy the bottom rungs of society, they are unnecessary for those at the top.

True liberty is unimaginable for the Procrusteans who pride themselves as realistic students of human psychology (138).

“[N]o country has ever successfully developed on the basis of free markets. The developed countries themselves have gone to great lengths to control market forces, especially during their early phases of development” (140). To whit, Perelman gives the example of how the railroads were rigorously controlled by government forces in the 19th century, and the whole of society knew that they were subsidizing the railroad industry with their labors. Similarly, with globalization, “The weaker party is likely to finds its choices determined by coercion rather than by prospect of mutually advantageous trade” (138-9). “[O]nce capitalism gets rolling in these countries, it is always with the help of force and violence, as was true in the developed countries” (142). Imperialism is always destructive, and “Smith denied the value of [national specialization] of increasing the division of labor because it depended on the state rather than the market, invalidated his voluntaristic scheme” (198). Perelman here notes the agriculture doesn’t allow for much division of labor.

Finally, Perelman attacks businesses directly on their worker abuses and general ireesponsibility. “Workers had learned to understand that they were nothing more than objects in the labor market” (89). “[Thomas] Friedman would have done readers a service if he had mentioned that the Golden Straitjacket does not sweep aside all subsidies, kickbacks, and corruption [as he claimed]; only those that impede the control of the multinational corporations. In fact, the multinational corporations remain largely immune from the restraints of the Golden Straitjacket” (143). “They fail to include that the caveat that their own country, which wields hegemonic power, is immune from such consequences.” Walter Wriston ironically promoted the wisdom of the marketplace, but made his company, Citibank, insolvent by pushing loans in Latin America, saved only by massive bailouts and the Fed pumping liquidity into the economy” (144-5) and now forcing legislation into the U.S. budget to protect itself at taxpayer expense. “Business understands the advantage of this new arrangement. Not only can employers shed the responsibility of providing pensions, but they can enjoy the downward pressure on wages, further traumatizing workers in the process. Yet one is supposed to accept all of this as a result of transactions among equal parties” (128). “Even laws that require the employer to maintain a safe workplace go largely unenforced” (108). I love Perelman’s comments on how Reagan advisor John D. Graham said that spending money on regulation instead of vaccinating children is “statistical murder”: “Ironically, I know of no case when the anti-regulators came out in support of any program to actually vaccinate children, perhaps preferring to be able to recycle vaccination as a strawman to wield against all regulation” (106).

He discusses the failures and inefficiencies of the Byzantine hierarchies of General Motors and IBM, which Peter Huber compared to the Kremlin and expected to fail. Instead, they’ve become more powerful than ever, while repeated crashes show them indeed to be failures, the crony government keeps bailing them out. “Despite the inhospitable climate for communication, poor design, outsized executive salaries, and outrageous fuel consumption, blame for the dire straits of the United States automobile corporations fell largely on workers” [I am here reminded of the quote by Malcolm X, “If you’re not careful, the newspapers will have you hating the people who are being oppressed, and loving the people who are doing the oppressing.”] “How dare they demand decent wages, pensions, medical care? In a sense, labor might bear some responsibility for the decline of the automobile industry. Had the United Automobile Workers not agreed to the Treaty of Detroit and demanded more control of the shop floor, the automobile industry might have turned out much healthier” (228). The reason for this is the shift of actual control to Wall Street (229). “CEOs jobs are now mostly dependent on the luck of the stock market, and CEOs are forced to think in terms of quarters rather than long-term gains” (230-231). “Procrusteans’ power makes imaginary wealth seem real,” Perelman tells us on page 235, as he proceeds to describe unjustified rises in stock prices that are reflective of trends that detrimental in the long-term to so many companies. “Driving workers harder rather than building long-term capabilities might produce short-term benefits, but is at a significant long-term cost” (241) borne immediately by the workers themselves–the system is self-destructive and objectifies people. (242)

Perelman addresses further irrationalities on the part of businesses, who often ignore overall cost minimization to focus on cutting back payrolls. He cites Frederick Winslow Taylor’s desire to maximize efficiency. “The human body is not designed to continuously operate at maximum capacity. Therefore, to the extent that management was able to succeed in achieving Taylor’s recommendations, working conditions deteriorated, at least in terms of the toll work took on workers’ bodies” (93). This cannot reasonably be considered anything other than exploitation. Is it any wonder right-wing nut jobs tell me to flip burgers?

The evidence for the belief that unregulated markets=maximum benefit for society “consists mostly of dense mathematical theorems based on unrealistic assumptions and elaborate statistical analyses, backed up by distorted measures of economic success; [it is] a seriously flawed measured that obscures the nature of Procrusteanism by sweeping workers, working conditions, and the promised happiness from more work under a great statistical rug” (222). If people actually become happy from consumption, “the obsessive need for more consumption would diminish and the GDP would suffer” (220).

Perelman cites a 1989 MIT study, Made in America: Regaining the Productive Edge by Michael L. Dertouzos, Richard K. Lester, and Robert M. Solow, “Progressively narrowing of worker responsibility and input and the tendency of management to treat workers as a cost to be controlled rather than an asset to be developed,” a trend totally in-line with Procrusteanism. I am reminded of the time Phil Jacobus had the entire staff of DOTmed prepare for the mailing of the first issue of DOTmed Business News and set us up in an assembly line in the conference room. To his credit, he was participating in the assembly line. As they taught us throughout college was great for brownie points and even promotion, I made a suggestion that would increase efficiency. He told me off for speaking out of turn. After we’d been doing it for a while, he admitted that my suggestion was a good one, but that we were too far along to change it. This guy had a definite control freak mentality that is often wasteful and costly. Perelman cites on pages 236-238 an example provided by Richard Sennett‘s experience in Silicon Valley plants whose workers had no way to handle a disaster because their assembly line abilities had been too far narrowed for them to know what to do in an emergency. Jeffrey Pfeffer is also cited as showing employees are not trained to cooperate in such situations (239).

On 243, he discusses Jaroslav Hašek‘s The Good Soldier Sveijk, in which the title character follows all rules to the letter, and he encourages the behavior in workers. He even cites an example in which Dick Cheney was supposed to save all copper wires longer than three feet and fill out paperwork for each piece, so he simply cut them shorter than three feet and discarded them (245), and cited following company policy to the letter as a way for union workers to gain the upper hand against management. “While such behavior might infuriate management, you can be sure that had an accident occurred during ‘normal’ times, the company would have held the employee responsible for not following policy” (247). The hypocrisy is palpable. Jorge Olivares is not a Sveijk–he often does the bed count at 9:45, when he is supposed to do it at 10:00. Early on in the book, Perelman cites case studies by Bill Watson showing time and again how market forces do not lead to efficient choices, usually because of management’s desire to have power over workers, power that often means more to them than higher profits (33-35). Watson also showed that workers can develop counter-plans, Perelman concluding that “[t]he effort to make workers little more than cogs in a larger system of production was bound to be self-defeating in the long run” and that “stunting workers through more obtrusive management will snuff out the potential for greater productivity–presumably the objective of scientific management” (94).

Perelman deflates many popular capitalist myths. Here are some examples. “[A]uthoritarian relations themselves snuff out valuable creativity. A system more devoted to meeting the needs of the people and less intent on solidifying hierarchy would encourage more autonomy and voluntary collaboration” (259). “The Procrusteans never tire of describing how the market provides magnificent new technologies that offer splendid opportunities improve the quality of life. In reality, academic and government-sponsored research are the driving forces for the development of technology–not the business sector” (269-70). “During the world wars, did the government trust the fortunes of society to the market? No; the federal government took control of the economy so that it could direct the business sector” (270).

Kakistocracy sounds a lot like the Japanese word for scarecrow (“kakashi”). It is, in fact, a Greek term meaning government by the least qualified and most unprincipled, so the two terms seem to fit together (279). Perelman says that it “might be too extreme” to say that we have that now, but “the absurd distortions that Procrusteans impose on society should be beyond dispute”.
Many “causes are devoted to nothing more than instilling Procrustean values in the less fortunate. The wealth that successful people donate–more often than not with fanfare–owes a great deal to the sweat of others, just as the hard work of other makes possible the free time our affluent philanthropists devote to their charities… such donations typically constitute a relatively small share of the wealth that was accumulated from the work of others[.]

Lord Henry Home Kames, a friend of Adam Smith, wrote in Introduction to the Art of Thinking (1789), “If there were no luxury, there would be no poor” (279).

So long as Procrustean theology goes unchallenged, business will be able to continue to pretend that the economy is a realm of freedom… in this fantasy world, freedom means that no union could prevent a high school dropout from having the opportunity to sit down and come to an amicable agreement with a corporate behemoth, such as Wal-Mart, as if such personal encounters exist in the real world [thus making unions unnecessary.]

The Procrustean language, however, in painting employers in this charitable light, also betrays the underlying imbalance of power. Employers are said to “give” jobs to workers who are reduced to “taking” jobs. this language suggests that the transaction between employer and employee represents an act of benevolence on the part of the job giver rather than a bargain among equals. Framed this way, the generous giver of jobs–an almost feudal figure–certainly occupies a superior position to the supplicant who is reduced to taking the offerings from the employer. Unlike workers, employers are not expected to be grateful to their workers for their efforts.

The inequality between job givers and job takers presumably explains why society is expected to shower the generous job givers with so many benefits, such as subsidies and tax write-offs. In contrast, social programs, directed at people who actually do the work, seem to be nothing more than the impositions by ungrateful wretches who are trying to extort excessive benefits from the already overburdened taxpayer–a code word for the wealthy, who, following in the footsteps of Samuel Read, see themselves as the real creators of value. (273-74)

Michael Young, who coined the term “meritocracy,” wrote in The Guardian in 2001 that the concept was abused to create rigid class lines (276).” Perelman suggests that the permissive attitude to corporate leaders is because they are less interesting than celebrities, even though they tend to be far richer (277). Invoking celebrities when talking about the wealthy is a common tactic among right-wingers. Star actors and athletes get paid far less than CEOs of large corporations.

French historian Fernand Braudel states that capitalism is not an economic system because it lives off the social order (311). Toward the end of his study, Perelman acknowledges a limit to his religious metaphor– the analogy to Procrustes has a shortcoming on that the rich are unaffected by the Procrustean bed (309). In his conclusion, he compares farm labor to gardening, and seriously asks the question, what is work? (298-99) Why is it that rich families would never want their children to be farm laborers, yet gardening, which is so similar, is a respected hobby among those with the land to work it? There is no easy answer. On Margaret Thatcher’s “There Is No Alternative” he cites Cornelius Tacitus on a British leader about the Roman victory in Britain, “They create a desolation; they call it peace.” (301) On page 307, Perelman states the need to establish dignity as a factor of production. Capitalists false claim that there is dignity in work to get people to do it. (See

Perelman’s conclusion is hardly as decisive as Piketty’s, around which I built my entire review of his book. Much of it is spent showing that Keynesian economics is not the proper solution, and I think most capitalists would agree with him. For Perelman, solutions depend on a cooperative system with long-term perspective (313), but he is not sure what is right so much as he is sure what is wrong, and leaves that to others (and the book was released shortly before the rise of the Occupy movement). He realizes that this fairy tale of Procrustes has no Theseus (although I am surely not the only would-be Theseus who simply has too little power to create a societal change). The only negative reviews of this book I have found on line make no indication that the reviewer has read the book, and is clearly shilling for capitalism. A big part of the problem is the universities. Economics professors have some of the highest salaries in the education profession, and for what? Ignoring empirical evidence, circular reasoning, cherry-picking data, creating straw man arguments, stealing formulae from physics that have been demonstrated repeatedly to not work for their chosen variables, in short, denying and stifling the search for the truth that is the mission of all universities. The most rational conclusion is that the universities expunge neoclassical economists from their payroll (although this is my conclusion, not Perelman’s). Granted, it is premature for me to base this conclusion on one source, although Perelman has given me plenty I want to read, including Mirowski, Jordon, LeRoy, and a book called Void Where Prohibited: Rest Breaks and the Right to Urinate on Company Time by Marc Linder and urologist Ingrid Nygaard, since I was once fired over the phone by CTB/McGraw-Hill for taking excessive bathroom breaks. I do not see the likelihood of too many universities honoring their mission statement by expellining this toxin, because that would surely cost them the support of the Procrusteans, as described in the above quotes about Procrustean “charity,” which might well cause them to go out of business in spite of the money saved on the professors of dogma. That’s another one of the invisible handcuffs of capitalism, although not one that is explicitly noted by Perelman.

View all my reviews

  1. Someone on Facebook contested the claim “When workers used merchant-like calculation to demand payment for their military service, Smith proved a hypocrite and recommended hanging (187).” I was wrong in saying it was in The Wealth of Nations. The citation is The Correspondence of Adam Smith. eds. Ernest Campbell Mossner and Ian Simpson Ross (Oxford: Clarendon Press, 1977), 21-22.

Trackbacks & Pingbacks

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