How the informal economy took over the World by Keith Hart – Finale

The Euro crisis: an episode in the history of money.

The monetary crisis that has overwhelmed the eurozone of late needs to be seen in this context. The apparent triumph of the free market at the end of the Cold War in 1989/90 induced two huge political blunders, both of them based on the premise that society should be shaped by market economy rather than the other way round. Radical privatization of Soviet bloc public economies ignored the common history of politics, law and social custom that shored up market economies in the West, thereby delivering the economy into the hands of gangsters and oligarchs. And the European single currency was supposed to provide the social glue for political union without first developing effective fiscal institutions or economic convergence between North and South.

The big mistake was to replace national currencies with the euro. An alternative proposal, the hard ECU, would have floated politically managed national currencies alongside a low-inflation European central bank currency. Countries that didn’t join the euro, like Britain and Switzerland, have in practice enjoyed the privilege of this plural option. Eurozone countries cannot devalue and so must reduce their debts through deflation or default. Argentina’s example of default after the peso crashed is directly relevant to countries like Greece and Spain today. The euro was invented after money was already breaking up into multiple forms and functions. The Americans centralized their currency after a civil war; the Europeans centralized theirs as a means of achieving political union.

The infrastructure of money has already become decentralized and global. A return to the national solutions of the 1930s or to a Keynesian regime of managed exchange rates and capital flows is bound to fail. Where are the levers of democratic power to be located, now that globalization has exposed the limitations of national economic management? The cultural logic of national capitalism leads the political classes who got us into this mess to repeat the same mistakes. Politics is a dialogue of the deaf, between those who deny the need for any political regulation of markets and others who remain trapped in the outmoded model of central bank money.

The idea of world society is still perceived by most people as at best a utopian fantasy or at worst a threat to us all (Hart 2009). We need to build an infrastructure of money adequate to humanity’s common needs. “Economy” has multiple meanings, but the idea of putting ones house in order in a world shaped increasingly by markets combines several of them. In this conception, economy is pulled inwards to secure local guarantees of a community’s rights and interests; and outwards to make good local supply by engaging with outsiders through the medium of money and markets of various sorts, not just our own.  The trick is to manage this dialectic of internal and external forces effectively.

Our societies are becoming increasingly emancipated from their territorial base. Three things count above all in these societies — people, machines and money, in that order. But money buys the machines that control the people. Our political task – and I believe it was Marx’s too – is to reverse that order of priority, not to help people escape from machines and money, but to encourage them to develop themselves through machines and money. To the idea of economic crisis and its antidotes, we must add in 2011-12 the possibility of political revolution. Europe has become the main focus once more of a world revolution. Meanwhile, the EU persists with purely monetary measures such as the European Central Bank’s latest commitment to underwrite sovereign debt, when the issue is the political union itself and its current democratic deficit. National capitalism was based on a class compromise that reached its peak in the post-war decades. In the absence of a replacement with some prospect of offering economic democracy to the masses, informality and extreme inequality will continue to be the norm, until the next world war, that is.

Appendix on periodization

As an antidote to the daily news, I attempt a historical periodization of the last two centuries or more, mainly to indicate that the present rupture in history opens up the prospect of several decades of turbulence. It is commonplace to compare the current crisis with the 1930s, but this is misleading, since the Great Depression was part of a sequence launched after three decades of financial globalization by the outbreak of war in 1914.

1776-1815            Age of war and revolutions

1815-1848            The industrial revolution

1848-1873            Origins of national capitalism

1873-1914            First age of financial globalization

1914-1945            The second thirty years war

1945-1979            The golden age of national capitalism

1979-2008            Second age of financial globalization

2008-                     Another age of war and revolutions?

In P.Moertenboeck, H. Mooshammer, T, Cruz and F. Forman (eds) Informal Market Worlds Reader: The architecture of economic pressure. NAI010 Publishers, 33-44 (2015)

 

Sources:

Hart, Keith. 1973. Informal income opportunities and urban employment in Ghana, Journal of Modern African Studies 11.3: 61-89; Hart, Keith. 1986. Heads or tails? Two sides of the coin, Man 21.4: 637-656; Hart, Keith. 1992. Market and state after the Cold War: the informal economy reconsidered. In Roy Dilley (ed) Contesting Markets. Edinburgh: Edinburgh University Press: 214-227; Hart, Keith. 2005. The Hit Man’s Dilemma: Or business, personal and impersonal, Chicago: Prickly Paradigm; Hart, Keith. 2009. Money in the making of world society. In Chris Hann and Keith Hart eds Market and Society. The Great Transformation today. Cambridge: Cambridge University Press; Hegel, G.W.F. 1998 [1817]. Science of Logic, New York: Prometheus; International Labour Office. 1972. Incomes, Employment and Equality in Kenya, Geneva: ILO; Johns, Adrian. 2009. Piracy: The intellectual property wars from Gutenberg to Gates, Chicago: University of Chicago Press; Lewis, Michael. 1989. Liar’s Poker. New York: Norton; Locke, John. 1960 [1690].Two Treatises on Government, Cambridge: Cambridge University Press; Marx, Karl. 1970 [1867]. Capital: The critique of political economy. London: Lawrence and Wishart; Partnoy, Frank. 1999. F.I.A.S.C.O.: The inside story of a Wall Street trader. New York: Penguin; Perkins, John. 2004. Confessions of an Economic Hit Man. New York: Plume; Polanyi, Karl. 1977 [1964]. Money objects and money uses, The Livelihood of Man. New York: Academic Press, 97-121; Polanyi, Karl. 2001 [1944]. The Great Transformation: The political and economic origins of our times. Boston: Beacon; Shaxson, Nicholas. 2011. Treasure Islands: Tax havens and the men who stole the world. London: Bodley Head; Simmel, Georg. 1978 [1900].The Philosophy of Money. London: Routledge; Williams, Raymond. 2011 [1961]. Realism and the contemporary novel, in The Long Revolution. Swansea: Parthian Books.

 

 

 

 

 

 

 

 

 

 

•      

 

 

 

Mainstream economics says more about what money does than what it is. Its main function is held to be as a medium of exchange, a more efficient lubricant of markets than barter. Another school emphasizes money’s function as a means of payment, especially of taxes to the government and hence on “purchasing power”. It is also a standard of value or unit of account, with the focus again on government’s role in establishing the legal conditions for trade; while John Locke (1690) conceived of money as a store of wealth, a new form of property that allowed the accumulation of riches to escape from the limitations of natural economy. In a little-known article, Polanyi (1964) later approached money as a semantic system, like writing. He argued that only modern money combines the four functions (payment, standard, store and exchange) in a few “all-purpose” symbols, national currency. By contrast, primitive and archaic forms of money attached the separate uses to different symbolic objects or “special-purpose” monies.  Polanyi argued against the primacy of money as a medium of exchange and for a multi-stranded model of its evolution.  For him and for Keynes, it was above all a means of payment or the “purchasing power” of citizens which drives modern economies, not so much a medium of exchange for buying and selling as such (…to be continued).

 

Source:

Hart, Keith. 1973. Informal income opportunities and urban employment in Ghana, Journal of Modern African Studies 11.3: 61-89; Hart, Keith. 1986. Heads or tails? Two sides of the coin, Man 21.4: 637-656; Hart, Keith. 1992. Market and state after the Cold War: the informal economy reconsidered. In Roy Dilley (ed) Contesting Markets. Edinburgh: Edinburgh University Press: 214-227; Hart, Keith. 2005. The Hit Man’s Dilemma: Or business, personal and impersonal, Chicago: Prickly Paradigm; Hart, Keith. 2009. Money in the making of world society. In Chris Hann and Keith Hart eds Market and Society. The Great Transformation today. Cambridge: Cambridge University Press; Hegel, G.W.F. 1998 [1817]. Science of Logic, New York: Prometheus; International Labour Office. 1972. Incomes, Employment and Equality in Kenya, Geneva: ILO; Johns, Adrian. 2009. Piracy: The intellectual property wars from Gutenberg to Gates, Chicago: University of Chicago Press; Lewis, Michael. 1989. Liar’s Poker. New York: Norton; Locke, John. 1960 [1690].Two Treatises on Government, Cambridge: Cambridge University Press; Marx, Karl. 1970 [1867]. Capital: The critique of political economy. London: Lawrence and Wishart; Partnoy, Frank. 1999. F.I.A.S.C.O.: The inside story of a Wall Street trader. New York: Penguin; Perkins, John. 2004. Confessions of an Economic Hit Man. New York: Plume; Polanyi, Karl. 1977 [1964]. Money objects and money uses, The Livelihood of Man. New York: Academic Press, 97-121; Polanyi, Karl. 2001 [1944]. The Great Transformation: The political and economic origins of our times. Boston: Beacon; Shaxson, Nicholas. 2011. Treasure Islands: Tax havens and the men who stole the world. London: Bodley Head; Simmel, Georg. 1978 [1900].The Philosophy of Money. London: Routledge; Williams, Raymond. 2011 [1961]. Realism and the contemporary novel, in The Long Revolution. Swansea: Parthian Books.

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s