Tuesday, June 21, 2011

C.A. Gregory's Left-Conflationism

I gleaned the following passage from C.A. Gregory's Savage Money: The Anthropology and Politics of Commodity Exchange, a book that is, from beginning to end, a characteristic example of what Roderick Long calls left-conflationism. How different Gregory's "free market" is from the one I advocate (and how completely he misunderstands some of Smith's points):
For [Jerome] Smith the 'over-riding social issue of all time' was Statism. 'Either there will emerge a fundamental change in our conception and actions concerning government in this decade,' he argued, 'or we'll have our investments confiscated and become either employees or prisoners of the state before another decade passes.' He then outlined his political philosophy:
Democracy, does not require elected or appointed intermediaries; pure democracy in fact requires that there not be suchlike. Democracy does exist, it does function (greatly hampered by the state). Its common name is the free market. The free market, to the extent that it is free, is an economic democracy; each bid to purchase is a vote for the product or service wanted, a vote that is weighted by the money amount offered and accepted, to register precisely the transaction price level that will yield a profit for the seller and the buyer.
Here it is, then, a dollar a vote and the more dollars you have the more votes you get. What distinguishes Smith's version of free market anarchy is that these votes will be cast with silver, 'real money', not worthless state paper money. As it turned out, Smith's analysis of the principles determining the relative values of gold and silver was faulty and his prediction hopelessly wrong. Gold has consolidated its supremacy and silver's relative status has fallen. The long term trend in the ratio of silver to gold has moved in favour of gold. For hundreds of years prior to the eighteenth century 12 ounces of silver would buy one ounce of gold; by the mid nineteenth century the rate was around 15. In 1975 it was 36. This dropped to 30 in 1980 as a result of the Hunt's attempt to corner the silver market but has risen rapidly since. In 1990 it was 80 and rising. Gold, then, has been recrowned.
The crisis of 1980 in the silver market exposed not only the invisible hand of the Hunt brothers and the invisible mind behind it, it also revealed the identity of a growing political force: free market anarchism and the philosophy of 'tough shit'. Compare [Stephen] Fay:
 'Tough shit' is not merely invective; the phrase has recently been elevated into a political and economic principle. Although many of its practitioners express it more delicately, the principle is a fundamental principle of libertarianism, a system that has its own political party ... The principle has also deeply tinged the New Conservatism of President Ronald Reagan and Margaret Thatcher. The phrase would, no doubt, never pass the lips of either of them, but their economic policies bear harshly on the least privileged members of society: the poor, the ill-educated, ethnic minorities, and the unemployed. Theoretically, these groups should be grateful for the economic liberty imposed by the New Conservatism and pull themselves up by their bootstraps; if they cannot do so ... well, tough shit.
Tough shitism, however, works one way for the elite and another for the subaltern. This is because Statism and free market anarchism need each other. As creditors the central banks and other financial institutions had to save the Hunts or go down with them. There were many other cases in the 1970s. In 1973 and 1974 the governor of the Bank of England launched a lifeboat operation when the collapse of a number of malfeasant banks (to which the central bank turned a blind eye) endangered the whole British banking system. In the U.S. the Federal Reserve Board bailed out Penn Central, Lockheed, Chrysler, and the Franklin National Bank. The traditional role of the central bank is that of 'lender of last resort' but the fallout from the era of savage money is turning them into lenders of first resort as the market place transforms itself into a casino.