Capitalism and Democracy: Property, Community, and the Contradictions of Modern Social Thought
Samuel Bowles and Herbert Gintis
Basic Books, $15.95 (cloth)

The Battle for Human Nature: Science, Morality and Modern Life
Barry Schwartz
Norton, $17.95 (cloth)

THE American Marxist swims upstream. Workers here have somehow never mustered the outrage expected of them. Nor has the collectivist Marxian rhetoric of oppression and exploitation much penetrated our stubbornly individualistic political consciousness. As a force for economic and social change, the American Left is stalled, not to say dead in the water.

Now, two of our most thoughtful Marxian economists have attempted to chart a new course. In Democracy and Capitalism, Professor Bowles and Gintis tell us that the traditional Marxian class analysis simply cannot explain recent developments in Western liberal democracies. In its place, they offer an account based on a deepening conflict between property rights of capitalists and personal rights of workers. Capitalists, impelled by their search for profits, find it necessary to exert ever more control over workers. Yet the state has granted workers a burgeoning list of personal rights that sharply constrain these efforts at control. A series of accommodations, most recently the welfare state ushered in by Keynes, has served only to postpone the ultimate confrontation.

The tension between personal and property rights, Bowles and Gintis suggest, may be resolved in one of three ways. The first they call “Global Liberalism.” It represents a triumph of property rights in which the increasingly international scope of important markets all but eliminates the sovereignty of the nation state. A country can control pollution or regulate safety if it likes, but only at the expense of its competitive position in world markets. In the end, market imperatives crush any real hope for democratic institutions.

Their second scenario they call “Neo-Hobbesian Liberalism.” Along this path, market forces will be replaced to a large extent by hierarchical institutions of direct control, both public and private. Neo-Hobbesian workers will cede many of their newly won personal rights as they begin to appreciate how costly it is to exercise them. Not only does this solution bode ill for democratic institutions, Bowles and Gintis tell us, but it will reduce productivity as well. Robbed of a true sense of participation, workers will be ever less committed to the goals of the firm, their behavior ever more costly to monitor and control.

The third solution—”Postliberal Democracy”—is the one the authors urge upon us. Because the capitalist economy “regulates the distributional, appropriative, political, cultural, and other projects of various social actors,” the preferred social order will subject production and investment to democratic control. All of us, even children, will have much greater say over the things we learn and do. The politics of getting will give way to the politics of becoming. Postliberal Democracy, in short, is what we get if the existing movement toward expanding personal rights prevails over the “tenacious and no less expansionary claims of property rights.”

IN his very readable essay, The Battle for Human Nature, psychologist Barry Schwartz suggests similar problems with, and ways of reforming, the market system. He begins by observing that the unprecedented freedoms enjoyed by the current generation have produced not euphoria but frustration and angst. Faced with a cornucopia of things we can do, many of us yearn for a clearer sense of what we should do.

To help us see why things have gone awry, Schwartz calls our attention to the unified portrait of human nature that has emerged from modern economics, sociobiology, and learning theory. These disciplines teach us that homo economicus, fragments of DNA, and lever-pushing pigeons are of a single stripe—each relentlessly out for number one. And because we increasingly perceive that we are self-interested by nature, we become more and more inclined to believe that we should be that way. “Scratch an altruist and a hypocrite bleeds.”

Schwartz counters that selfishness is not an essential element of human nature; rather, it is a product of the unique social environment of the past two centuries. Whereas man’s earlier social environments fostered cooperation and community spirit, societies organized around private markets encourage rivalry and ruinous competition.

Some readers may object here that Schwartz’s portrayal of the sociobiologist is a straw man. The sociobiologists, after all, have themselves long since discovered the importance of culture. Indeed, they have even tried to explain specific cultural practices as attempts to resolve the conflict between individual reproductive interests and the interests of the larger group. Fair enough. But since culture is so often underemphasized, there seems little harm done.

Following the late British economist Fred Hirsch, Schwartz notes the bitter irony of the market’s effect on behavior: the very selfishness that exchange-for-profit brings out in people threatens to render the market system itself unworkable. Without trust and good will, markets quickly cease to function.

Schwartz’s remedy is to renew Michael Walzer’s call for the maintenance of distinct spheres of social life. We must make a determined effort to prevent the encroachment of the market into education, health care, religion, friendship, the criminal justice system, and other non-economic spheres of life. Only by so doing, he explains, can we maintain the values needed for society to exist. Human nature can and should be different from the picture painted by economists, sociobiologists, and learning theorists, Schwartz tells us, and it is our challenge to forge the institutions that will bring out the best in us.

There is obvious merit in both of these books. Bowles and Gintis are surely correct when they lampoon the neoclassical economist for insisting that people’s preferences are given at the outset. The things we do clearly shape the kinds of persons we become. This complicates traditional welfare economics greatly and, as they persuasively argue, strengthens the case for democratic control over activities long thought to be strictly private.

Schwartz, for his part, strikes a resonant chord when he says that fragmented, repetitive tasks diminish us as human beings. And it is easy to believe, with all the authors, that as a community we would do better to have more variety and direct participation in our work.

YET both books miss something essential about why the workplace has evolved in its current form. Although Bowles and Gintis depart refreshingly from the Marxian litany in several ways, they insist on seeing this particular issue in traditional exploitation terms. The profit-hungry capitalists foist alienating working conditions upon the defense-less worker. To the neoclassical economist’s objection that the labor contract is voluntary, they respond that it is so only in the sense of a person who voluntarily sells himself into slavery: “… institutional arrangements resulting from freely contracted exchanges may  subvert the very conditions of their legitimacy; that is, the equality and reciprocity of participating individuals.” In the same vein, Schwartz argues that the modern factory system evolved not on the basis of efficiency, but from the capitalist’s desire to control the worker.

The exploitation argument, I believe, helps account for why so few Americans take the Left seriously. Milton Friedman’s immediate rejoinder, as Bowles and Gintis anticipate, would be to ask “Why doesn’t some greedy capitalist reorganize the workplace along more humane lines, and thereby have his pick of the most able workers?” After all, if workers really do value more humane conditions, they will be willing to work for less, and this would enable the innovative firm to expand at the expense of its rivals. Or, more directly, why don’t workers organize firms of their own and adopt whatever methods of production they see fit?

Bowles and Gintis respond that the capital market would discriminate against worker-controlled firms because they lack collateral and represent an unproven way of doing business. But this response simply will not wash. Thousands of worker-managed firms start up each year and at least some of them survive. If participatory management consistently led to fifteen per cent higher productivity, as Bowles has claimed elsewhere, why would lenders discriminate? And even if they did, a firm with that kind of cost advantage could rely exclusively on internal funds for expansion and still eventually dominate conventional firms. What could stand in its way? Lacking satisfactory answers to these questions, proponents of the conspiracy theory of workplace organization are destined to continue losing their debates with Milton Friedman.

Worker-managed firms, it seems, are not more efficient. And if workers are apparently unwilling to bear the extra costs of this form of organization, in what sense can we continue to insist that there should be greater variety and democracy in the workplace? The hint of an answer to this critical question is implicit in Schwartz’s discussion of the importance of economic position. As Fred Hirsch emphasized, an increasing share of national income is devoted to the purchase of positional goods—goods that are sought not just for their absolute qualities but because of how they compare with other goods. Education is the quintessential example: the desirability of a school is defined almost exclusively in terms of how it ranks against other schools. Vacation homes at the seashore are positional goods, more basic forms of housing are not. A Mercedes sedan is a positional good, a Ford Fairmont is not. Travel to Europe is a positional good, money placed in a savings account is not.

If economic position is important, as powerful evidence suggests, we may grant all of Milton Friedman’s assumptions about the competitiveness of the labor market, yet still conclude that the community would be better off with greater variety and participation in the workplace. The argument is simple. Contrary to Bowles and Gintis, the division and specialization of labor leads to increased productivity, just as Adam Smith claimed. At the same time, it makes work less pleasant (something Smith also recognized). The optimal degree of specialization is thus the one for which the utility of the higher wage exactly compensates for the disutility of the last bit of specialization.

But if workers care not only about absolute but also about relative wages, competitive labor markets will not lead to optimal specialization. Since greater specialization leads to higher wages, the worker  who seeks workplace variety must accept a lower standard of living for his family. As a group, workers might well be willing to make that trade. Yet every individual worker confronts the temptation to accept greater fragmentation in order to buy a home in a better school district. For many parents, this temptation will prove irresistible.

The laws of simple arithmetic, however, tell us that only ten percent of our children can occupy seats in the top tenth of the educational quality distribution. In the familiar stadium metaphor, each spectator leaps to his feet to get a better view of an exciting play, but in the end everyone’s view is no better than if all had remained seated. Similarly, when all workers get paid extra for accepting fragmented, alienating working environments, the rankings on the economic totem pole remain the same as before. What any one worker acting alone could accomplish, workers acting in unison cannot. In the end, the positional treadmill gives rise to excessive specialization.

THE solution to the problems posed by unfettered markets, the authors tell us, is to insist on greater democratic control over working conditions and other important aspects of social life. As Bowles and Gintis make clear, the personal rights movement has been a powerful force in Western liberal democracies. It is much less clear, however, that the competing pull of individual self-interest will give way easily to moral exhortation. And while people may indeed want more control over their work, it is by no means obvious that they want that control to come in the form of expanded government regulation.

There is, moreover, something troubling about the distinction Bowles and Gintis emphasize between personal and property rights. Americans place great value on being able to contract freely with one another about how to employ their labor and property. Isn’t this freedom as much a personal as a property right? Finally, it is not clear that the imperatives of international markets would even permit a substantial expansion of costly government regulation.

If voluntarism is destined to fall short, and if our appetite for additional governmental controls is limited, where do we turn? The positional diagnosis suggests a concrete policy change that will make the environment much more hospitable to nongovernmental democratic reforms. The problem with the unfettered market, once again, is that it does nothing to constrain the largely futile chase for position. Since the difficulty is that positional consumption is misleadingly attractive, the simplest, most direct solution is to make it less attractive by taxing it. The simplest such tax would have two main features: (1) it would have a large standard deduction—the first, say, $10,000 of a family’s consumption expenditures would be tax-exempt, thus sheltering basic non-positional expenditures and making the tax progressive; and (2) specific, major non-positional budget items such as savings, medical expenses, and insurance, would also be exempt.

When we tax positional goods, we eliminate the most fundamental distortion in private markets and thus open the door for people to make their own decisionsabout what the workplace should be like. Under the current system, workers who want a more democratically controlled workplace must pay the price of failing to provide as well as they could have for their families. If we tax positional consumption, however, and use some of the proceeds to assure reasonably equal access to educational  opportunities and other important positional resources, then we alter the terms of trade. The move to a more participatory workplace would lose much of its positional penalty. And people would become much freer to devote time and energy to nonmarket aspects of their lives.

By itself, of course, the tax system cannot build a moral world. But it can surely help create an environment that is less hostile to cooperation.