BrinkLindsey.com – The Age of Abundance

Naomi Klein, darling of the loonie left, has a new book out called The Shock Doctrine: The Rise of Disaster Capitalism. The basic idea is that the insidious forces of neoliberalism take advantage of wars, economic crises, and natural disasters to impose their evil schemes on disoriented and distracted publics. The career of Milton Friedman, the occupation of Iraq, and the bungled response to Katrina are all supposedly cases in point.

Klein is not a serious person, and in this book she does not mount a serious argument. But she does raise an interesting issue: the political implications of crises. It is certainly true that the waves of liberal reform (political as well as economic) that swept the world in the ’80s and ’90s were often triggered by economic crises. Indeed, I wrote a book on the subject in which I interpreted the current episode of globalization as a response to the often cataclysmic breakdown of various state-dominated models of economic development.

There’s nothing terribly surprising about this. Inertia is a powerful force in politics: every status quo has vested interests that benefit from it, while advocates of change push in all different directions and frequently cancel each other out. A crisis, though, can discredit the status quo and demoralize its supporters, while galvanizing particular pro-reform camps and boosting their credibility. Politics suddenly becomes more fluid; rapid and sweeping changes that had no chance of being enacted beforehand now occur in rapid succession.

But it’s ridiculous to portray this dynamic as somehow uniquely favoring one side of the political spectrum. Recall the great triumphs historically associated with the left: the French Revolution was made possible by the financial distress of the ancien regime; the Paris Commune was founded after defeat at the hands of the Prussians; the Russian Revolution was catalyzed by military failures in World War I.

In our own country, it was a one-two punch of cataclysms – the Great Depression, followed by World War II — that brought Big Government to the United States and then consolidated its hold. The unprecedented economic collapse made traditional American attitudes of laissez faire and individual responsibility seem hopelessly outdated; by contrast, the frenetic activity of the New Deal, regardless of the decidedly mixed results, projected boldness and vigor and hope. The subsequent mass mobilization for total war reinforced the shift in political culture. If you watched any of the wonderful new Ken Burns documentary on “The War,” you saw that the “home front” wasn’t just an expression: the diversion of the country’s industrial might to war production, price controls and rationing, extremely high tax rates, war bond drives, and incessant propaganda combined to thoroughly collectivize American society. And it worked: the economy boomed, people reaped the psychological satisfactions of banding together against a common and abominably evil enemy, and in the end America triumphed.

Today people on the left are filled with nostalgia for the political economy of the early postwar decades. I don’t think many of them recognize, though, how heavily their Golden Age depended on the lingering economic and cultural effects of destruction on a mind-boggling scale. They call themselves progressives, yet they pine for the good old days of disaster collectivism.

In her Wall Street Journal column today, Kimberly Strassel reports on opposition within the congressional Democratic ranks to various “soak the rich” tax hikes. Here’s an excerpt:

Class warrior Sander Levin from Michigan introduced House legislation levying higher taxes on hedge fund and private equity managers’ earnings back in June. It took until the end of July for Senate Democrats to start publicly trouncing the idea. Washington’s Maria Cantwell worried the tax would hurt returns for her state’s public pension fund, which makes a pretty penny off the back of private equity funds. Others fretted it would drive their private equity companies offshore. As for the almighty Chuck Schumer, patron senator of Wall Street, he declared his opposition to any tax that wasn’t also levied on non-finance industries. And since Mr. Schumer is the one doling out money for next year’s Senate re-election races, that may well be the end of that tax idea….

Madame Speaker, meanwhile, spent what was by all accounts an unfriendly hour last week trying to coax Democrats from oil-patch states to sign on to her oil-company tax hike. As of yesterday, she hadn’t had much luck; Texas’s Gene Green and about two dozen other oil-state dissidents were holding firm against the $16 billion tax package leveled directly at their home-state economies. It was unclear whether Ms. Pelosi could even risk bringing her vaunted energy legislation for a vote before August recess. Chief tax writer Charlie Rangel has faced so much in-party blowback to his idea of heavily taxing “the rich” in order to finance an alternative minimum tax fix, he has yet to introduce legislation.

It’s too early to know how any of this will turn out, but these little flareups of tax resistance illustrate the political constraints that serve so often to keep economic populism in check.

Economic populism — bash the rich, bash corporations, and bash foreigners — cashes in on economic anxiety, and consequently it usually resonates with a goodly chunk of the electorate. For a variety of reasons, it’s resonating especially well these days.

But here’s the catch: populism works much better as diagnosis than prescription. Rail against obscenely paid CEOs and hedge fund managers, greedy oil and pharmaceutical companies, and dastardly job-stealing Chinese imports, and you’re sure to convince certain constituencies that you’ve correctly identified the problem. No suprise there — people are feeling pain or feeling worried, and you’re offering up a primal scream on their behalf.

But now comes the hard part. Now that you’ve tapped into economic anxiety for political gain, what are you going to do to alleviate it?  If your answer is tax increases or protectionist policies or other measures that throw sand in the economic gears, good luck — because those proposals, if enacted, will end up increasing the number of people suffering from economic anxiety.

Because of this dynamic, the politically optimal solution is often some version of bait and switch: stir up political support with market-bashing demagoguery, then avoid a huge backlash by sticking to small-bore or symbolic policy changes. Consequently, populism’s bark usually ends up being much worse than its bite.

The great outsourcing scare of 2004 was a case in point. It was a political season, and the “jobless recovery” made playing to employment anxieties a political winner. John Kerry dutifully cashed in with a populist diagnosis of “Benedict Arnold CEOs”; his prescription, though, was penny-ante tinkering with the tax code. Yawn…. Before too long, job creation recovered, the election season ended, and concern over outsourcing was relegated to the back burner.

I’m not saying we should be complacent in the face of market-hostile political sentiment. Rather, I’m saying that supporters of pro-growth policies shouldn’t get demoralized by the current wave of economic populism. Yes, we’re forced to play defense for the time being, but being temporarily on the defensive and actually losing are two different things.

In his Friday column David Brooks (TimesSelect) offers an 800-word “Hamiltonian” manifesto. It starts with this typology of current schools of thought:

First, there are the limited government conservatives, who think taxes should be low and the state should be as small as possible. Second, there are the Hamiltonians, who believe in free market capitalism but think government should help people get the tools they need to compete in it.

Third, there are the mainstream liberals, who think government should intervene in small ways throughout the economy to soften the effects of creative destruction. Fourth, there are the populists, who believe the benefits of the global economy are going to the rich and we need to fundamentally rewrite the rules.

So where do I fit in? Obviously, as a Cato Institute libertarian, I can claim membership in the limited government conservative club. Meanwhile, though, in an article for The New Republic, I proposed a “liberaltarian” alliance between pro-market liberals and pragmatic libertarians on the following terms: “On the one hand, restrictions on competition and burdens on private initiative would be lifted to encourage vigorous economic growth and development. At the same time, some of the resulting wealth-creation would be used to improve safety-net policies that help those at the bottom and ameliorate the hardships inflicted by economic change.” So while I’m clearly not a mainstream liberal, I’m at least open to doing business with people of that description.

What I want to do here is assess my Hamiltonian credentials. According to Brooks, “We Hamiltonians disagree with the limited government conservatives because, on its own, the market is failing to supply enough human capital. Despite all the incentives, 30 percent of kids drop out of high school and the college graduation rate has been flat for a generation.”

I accept the main thrust of this Hamiltonian critique of the status quo. The market currently provides big incentives for getting a college degree (the so-called “college wage premium”) — and big disincentives for dropping out of high school (virtually a guarantee of socioeconomic failure). But as I wrote in my book:

For while economic incentives matter, sometimes culture matters more. And many Americans have been raised in a working-class culture that does not sufficiently encourage education or long-term planning. As a result, they lack the skills that are now so highly rewarded — and what is worse, they lack the capacity to develop those skills.

I expanded on this point here:

Today many people do not live as fully as they might. It has always been thus. Formerly, though, the fact was an unavoidable corollary of scarcity: the division of labor was too crude to allow any but a small minority to develop their intellectual capacities. Today the main problem is the comparatively much more tractable problem of cultural lag. The division of labor has now attained such a level of complexity that there are more openings for people with high skills than there are people to fill them. At present, then, the primary obstacle that prevents more people from living better is the persistence of cultures maladapted to current circumstances. Working-class culture has become, to a significant extent, obsolete: it does not raise people to develop the planning, networking, and analytical skills that are the admission ticket to the golden circle. Underclass culture, meanwhile, has been dysfunctional since its inception.

For more about the cultural divide, I recommend reading Annette Lareau.

Brooks and I agree, then, at least on this diagnosis: one of the major challenges facing the country is devising public policies more conducive to a culture of human capital development. But what’s the right prescription?

In his column Brooks endorses a grab bag of nostrums: bigger child tax credits, upping the earned income tax credit and extending it to single men, sending nurse practitioners to assist single-parent families, subsidizing quality preschools, encouraging quality teachers through merit pay and changed certification rules, senior citizen mentor programs, national service, portable pensions and health insurance, an immigration system that better rewards skills, and increased government funding for basic research.

I’m not going to take the time to go through these in detail. Of the lot, expanding the EITC strikes me as the activist measure most likely to do some good (in terms of encouraging labor force participation and thereby combating underclass pathologies). Some of Brooks’s proposals seem like Clintonesque microprograms that are really more about symbolism than actually making a cognizable difference (nurse practitioners, senior citizen mentors). And I’m not at all clear how national service, portable pensions and health insurance, and more basic research funding — regardless of what I think of them on their own merits (I’m against, for, and undecided, respectively) — are supposed to encourage poor and working-class young people to develop marketable skills.

The data suggest that early, intensive, and sustained intervention in kids’ lives is necessary to make any kind of difference. But what makes anyone think that the educational establishment that so egregiously fails to serve poor kids today can take on such an ambitious mission?

Number one on my own human capital agenda would be something missing from Brooks’s list: expanding educational competition any way you can (tax credits, vouchers, fewer regulatory obstacles for home schooling and charter schools, per-student funding). I don’t see how you can be serious about upgrading human capital without taking on the fundamental systemic flaw in the current educational system.

Put me down, then, as someone who supports libertarian means for Hamiltonian ends.

I’ll be the first to admit, though, that educational reform is no silver bullet. Cultural pluralism is and will be an unavoidable fact of American life. This is especially true given the large inflows of low-skilled immigrants from Mexico and Central America — and neither Brooks nor I favor Canute-like measures to sweep back that tide.

On this important and divisive issue, then, both Brooks and I agree that libertarian ends trump Hamiltonian ones.

The second highlight of the Pew report on economic mobility is the finding that, for men in their thirties, median income has fallen slightly between 1974 and 2004. The implication is that American men today are doing worse than their fathers.

The most obvious problem with this analysis is that it doesn’t appear to control for the big demographic shift that’s occurred over the past 30 years. Specifically, the share of the total population born in foreign countries has jumped from 5 percent in 1974 to 12 percent in 2004. Relatedly, people of Hispanic origin have climbed from 5 percent of the population in 1974 to 14 percent in 2004.

The huge wave of Hispanic immigration over the past generation has been good for the immigrants and their families, and good for the country as a whole. But this big influx of relatively low-skilled immigrants has to have depressed median income compared to what it otherwise would have been. Unfortunately, I’m not aware of good studies that quantify the effect.

But there is a much deeper problem, I think, than the comparison of demographic apples and oranges. And that is the comparison of purchasing power apples and oranges.

The issue here is the one of calculating “real income” in constant dollars. The problems associated with such calculations are usually framed in terms of correcting for inflation — i.e., for changes in the overall price level. But a far bigger problem, especially when you are comparing incomes over relatively long time periods, is that an increasingly major component of purchasing power in the later time consists of the power to purchase goods that weren’t available at any price in the earlier time.

Let’s take an easy case. Do your best job of coming up with a deflator that takes care of changes in the price level, and calculate the dollar income in 1800 that is the “equivalent” of an income of $100,000 in 2007. Then try with a straight face to convince somebody that the earner in 1800 and the earner in 2007 are equal in terms of material well-being.

Now let’s go to the comparison that’s at the heart of the stagnating median incomes argument: incomes today and incomes in the early 1970s. Do what you want as far as adjusting for inflation, but there’s still the problem of all the goods that simply weren’t available back then: personal computers, the World Wide Web, cell phones, cable and satellite TV, DVDs and iPods, airbags, anti-lock brakes, automatic teller machines, aspertame, LASIK surgery, CAT-scans, home pregnancy test, and ibuprofen, just to name a few.

Of course economists do their best to deal with this problem, but I believe the task is hopeless. I’ve come to the conclusion that, in today’s technologically dynamic world, the concept of real income has a useful time horizon of no more than a couple decades. Stretched beyond these limits, calculations of trends in real income simply aren’t worth very much.

I don’t see how anybody without an ideological axe to grind can maintain seriously that ordinary people in the ’70s had the same material well-being as their counterparts today — yet that’s the implication of saying that median real incomes have been stagnant.

A new report from the Pew Charitable Trusts’ Economic Mobility Project — an initiative that brings together experts from Pew, the Brookings Institution, the Urban Institute, the American Enterprise Institute, and the Heritage Foundation — suggests that the American Dream of upward mobility is in trouble. In particular, the report makes these two attention-grabbing findings:

1. Americans have less relative income mobility (as measured by the relationship between parents’ and children’s incomes) than many other industrialized countries, including France, Germany, Sweden, Canada, Finland, Norway, and Denmark. In other words, the so-called land of opportunity isn’t all it’s cracked up to be.

2. The median income of American men aged 30-39 in 2004 is slightly lower than that of their counterparts in 1974. In other words, American men today are worse off than their fathers’ generation.

In predictable response, Kevin Drum expresses gloating schadenfreude here.

In this post I’ll focus on the first claim about intergenerational mobility. Here are some preliminary thoughts:

1. First, the bottom line: is measured income mobility between generations really on the decline in the U.S.? Not according to Gary Solon of the University of Michigan, who is probably the leading American researcher in the field. (He is on the advisory board of the Economic Mobility Project.) His most recent research on the subject, in a paper co-authored with Chul-In Lee, concludes that “intergenerational income mobility has not changed dramatically over the last two decades.”

So, to the extent that the vitality of the American Dream has something to do with measured intergenerational income mobility, that dream seems alive and well.

2. OK, so how do experts measure intergenerational income mobility anyway? Using survey data that tracks the income of the same individuals and families over time, researchers compare the income of parents at some specific age or age range to incomes of children at the same or other ages. As I understand it, perfect correlation between parents’ and children’s incomes is measured as an “elasticity” of 1, whereas a lack of any correlation would correspond to an elasticity of 0. In other words, the lower the elasticity, the more random the pattern of parents’ and children’s incomes — and the higher the measured level of intergenerational mobility.

So mobility means both upward and downward mobility. This isn’t a measure of how much better kids are doing than their parents. Rather, it’s a measure of the lack of connection between how parents did and how their kids are doing.

3. What factors can influence the level of measured mobility? Solon has developed a model based on the insight that income is a return to human capital. According to Solon’s model, intergenerational income elasticity is a function of: (1) the heritability of human capital; (2) parents’ investment in their children’s human capital; (3) returns to human capital; and (4) the progressivity of public investment in human capital (public health, education, etc.). Elasticity varies positively with factors (1) through (3) (i.e., the higher the values for factors (1) through (3), the higher the elasticity and the lower measured mobility) and inversely with factor (4) (i.e., more steeply progressive public investment in human capital reduces elasticity and ups mobility).

4. OK, let’s turn now to the Pew report’s finding about relative mobility in the U.S. and Europe. The data cited by Pew come from this study by Miles Corak. Let’s assume for the sake of argument that Corak’s numbers are rock solid. The question then is: what do they mean?

Using Solon’s model, let’s look at the four factors that influence mobility. Presumably heritability of human capital is the same on both sides of the Atlantic, so that can’t explain the differences in measured mobility. That leaves three other possibilities: (1) American families invest more heavily in their kids’ human capital than do European families; (2) returns to human capital are higher in the U.S. than in Europe; and (3) public investment in human capital is more progressive in Europe than in the U.S. I don’t know about (1) and (3), but (2) certainly looks plausible.

But if that’s the case, it means that, at least to some extent, measured intergenerational mobility in the U.S. is relatively lower because the payoff for talent and hard work (surely conscientousness and diligence are forms of human capital) is higher here.

Which suggests that the concept of measured intergenerational income mobility might not always be terribly illuminating. After all, what we’re trying to get at here is whether we live in some kind of rigid class structure where kids of poor parents are doomed to be poor themselves. And a system where the rewards for talent and hard work are relatively high seems like the opposite of a rigid class system.

If continental Europe truly were more open and less stratified than we are, then why are Europeans worried about a “brain drain” to the supposedly class-stratified U.S. and U.K. (the only country in Corak’s survey to score lower than the U.S. on intergenerational mobility)? Why in particular did Nicholas Sarkozy make a campaign stop in London and urge the estimated 300,000 French expat’s living in the U.K. to come home and “make France a great nation”?

The second big claim in the Pew report — that American men in their thirties make less than did men in their fathers’ generation — is just a rehash of the familiar argument that median real incomes have been stagnating since the ’70s. I’ll have a thing or two to say about that in my next post.

UPDATE: I should point out that Solon and Lee’s estimate of intergenerational mobility trends is by no means the only one out there. Indeed, they write:

The research conducted so far on intergenerational mobility trends has produced wildly divergent estimates. In this paper, we argue that this confusing array of evidence is partly an artifact of imprecise estimation, which in turn has stemmed from inefficient use of the available data. By drawing more fully on the information in the Panel Study of Income Dynamics, we generate more reliable estimates of the recent time-series variation in intergenerational mobility.

It appears to me that Solon and Lee’s estimate represents the state of the art, and therefore that stability in measured intergenerational mobility is the (lack of) trend best supported by the evidence. But I must say that I wouldn’t be surprised if measured mobility had declined over the past couple of decades. Consider, after all, the factors that drive the values. We’re pretty sure that returns to human capital have risen — that’s what is behind the rise in the college premium. And it seems plausible that, with the rise of the parental style of “concerted cultivation,” parents’ investment in their kids’ human capital has increased as well. So for intergenerational elasticity not to rise (i.e., for mobility not to fall), there must have been a big increase in the progressivity of public investment in human capital.

Which, come to think of it, doesn’t seem that unlikely. Think about a thirtysomething man in the mid-’70s, born in the early ’40s, and compare the situation of a thirtysomething man in 2004, born in the early ’70s. It seems likely that, for people in the lower half of the socioeconomic scale, there were dramatic improvements between those generations in health care, nutrition, and education.

My new book is about the interplay between economic change and cultural change in postwar America. My main focus is on how the former brought about the latter — specifically, how mass prosperity triggered first the social upheavals of the ’60s and ’70s, and then the hyperpluralistic “plenitude” of the ’90s and ’00s.

But causation has been running in the other direction as well, and one of the clearest examples of this can be found in the countercultural roots of the PC revolution. There’s an interesting 2006 book on this subject, What the Dormouse Said, for those of you who want to explore these connections in detail.

I’ll be tracing this causal thread in blog posts now and again. Let me start off with this wonderfully trippy poem, “All Watched Over by Machines of Loving Grace,” by Richard Brautigan:

I like to think (and
the sooner the better!)
of a cybernetic meadow
where mammals and computers
live together in mutually
programming harmony
like pure water
touching clear sky.

I like to think
(right now, please!)
of a cybernetic forest
filled with pines and electronics
where deer stroll peacefully
past computers
as if they were flowers
with spinning blossoms.

I like to think
(it has to be!)
of a cybernetic ecology
where we are free of our labors
and joined back to nature,
returned to our mammal brothers and sisters,
and all watched over
by machines of loving grace.

This poem was written in 1967 — the same year, by the way, that Brautigan served as Poet-in-Residence at Caltech.

America’s experience with mass prosperity is the leading edge of a global phenomenon. The fundamental nature of this transition from scarcity to abundance is well captured by the title of this post — which is also the title of an excellent but underappreciated 1987 book by Max Singer.

Here Singer summarizes his thesis (p. 4):

No other word as aptly describes the character of the new world into which we are passing as the word “human.” The new features of this world are being created by people. In this new world the most basic fact of life – how much of it each person will have — will be determined by the genes of our human species, not by external natural forces that cut human life short. Humans will be plentiful, and their lives will be the kind of lives that we think of as normal human lives — concerned mostly with human creations, not with a constant struggle against nature.

The presentation below by Hans Rosling of the Karolinska Institute in Sweden provides a fantastic visual representation of how far along this passage we’ve already come. If you haven’t seen this, I urge you to take the 20 minutes — it’ll rock your worldview.

The great sociologist Max Weber took a famously dour view of both capitalism and the larger phenomenon of modernity that capitalism anchors.

Here is his celebrated evocation of the “iron cage” at the end of The Protestant Ethic and the Spirit of Capitalism:

The Puritan wanted to work in a calling; we are forced to do so. For when asceticism was carried out of monastic cells into everyday life, and began to dominate worldly morality, it did its part in building the tremendous cosmos of the modern economic order. This order is now bound to the technical and economic conditions of machine production which to-day determine the lives of all the individuals who are born into this mechanism, not only those directly concerned with economic acquisition, with irresistible force. Perhaps it will so determine them until the last ton of fossilized coal is burnt. In Baxter’s view the care for external goods should only lie on the shoulders of the “saint like a light cloak, which can be thrown aside at any moment.” But fate decreed that the cloak should become an iron cage….

No one knows who will live in this cage in the future, or whether at the end of this tremendous development entirely new prophets will arise, or there will be a great rebirth of old ideas and ideals, or, if neither, mechanized petrification, embellished with a sort of convulsive self-importance. For of the last stage of this cultural development, it might well be truly said: “Specialists without spirit, sensualists without heart; this nullity imagines that it has attained a level of civilization never before achieved.”

And here, his equally familiar proclamation of “disenchantment“:

The fate of our times is characterized by rationalization and intellectualization and, above all, by the ‘disenchantment of the world.’ Precisely the ultimate and most sublime values have retreated from public life either into the transcendental realm of mystic life or into the brotherliness of direct and personal human relations. It is not accidental that our greatest art is intimate and not monumental, nor is it accidental that today only within the smallest and intimate circles, in personal human situations, in pianissimo, that something is pulsating that corresponds to the prophetic pneuma, which in former times swept through the great communities like a firebrand, welding them together.

These are profound critiques, and they have been echoed ever since by those unreconciled to capitalism and the mass affluence it eventually brings. For a recent example, see my review of Benjamin Barber’s latest book. Again and again, the same charges are leveled: the bourgeois life is a trap and a spiritual wasteland.

It’s ridiculous to try to answer Weber in a blog post. Here I just want to make one lighthearted point. No doubt Weber would have found much to disapprove of in contemporary America, but at least one thing is for sure: this is no dreary, technocratic dystopia. The arid, suffocating world of relentless, dehumanizing rationalization that Weber warned of has not come to pass. Not only in our personal lives, but in our public lives as well, magic and flights of fancy abound. We call this enchanted public realm pop culture.

In Lead Us Into Tempation, the marvelous James Twitchell made this point with specific regard to the phantasmagoria of modern marketing (pp. 67-68):

While we may have lost the superhuman beings and regions of classical and Christian mythologies, we have not lost our desire to link with this parallel world. It is, after all, a source of abiding comfort to think we are not alone. Just on the far side of the margin are others who care about us…. What characterizes commercial culture is that this parallel world, our utopian otherland, has been populated by new and beneficent spirits, spirits magically residing not in nature, holy books, magical signs, or chants but in objects as mundane as automobile tires, rolled-up tobacco leaves, meat patties, green beans, and sugar water. The Man with a Thousand Faces simply has a few more, and he spends most of his time inside containers on shelves down at the A&P.

More on this in the next post.

To illustrate the ironic fulfillment of Marx’s prophecy, I began the first chapter of my book with an account of the famous 1959 “kitchen debate” between Nixon and Khrushchev.  The triumph over scarcity was indeed achieved, but under capitalism rather than communism. And to add insult to injury, the capitalists set up an exhibit of their triumph in the capital of world communism!

Above a great shot of the encounter.  Note Leonid Brezhnev, Khrushchev’s successor, standing at the far right — what a face! Below is a newsreel clip about the exchange:

And here is a transcript of the debate.

Today is May Day, the old high holy day of socialism.  A fine occasion, then, to recall Karl Marx’s prophecy of the transition from the “realm of necessity” to the “realm of freedom” — in other words, from the Age of Scarcity to the Age of Abundance.

Here, as far as I know, is Marx’s only use of these wonderful expressions (from Capital, vol. III):

 In fact, the realm of freedom actually begins only where labour which is determined by necessity and mundane considerations ceases; thus in the very nature of things it lies beyond the sphere of actual material production. Just as the savage must wrestle with Nature to satisfy his wants, to maintain and reproduce life, so must civilised man, and he must do so in all social formations and under all possible modes of production. With his development this realm of physical necessity expands as a result of his wants; but, at the same time, the forces of production which satisfy these wants also increase. Freedom in this field can only consist in socialised man, the associated producers, rationally regulating their interchange with Nature, bringing it under their common control, instead of being ruled by it as by the blind forces of Nature; and achieving this with the least expenditure of energy and under conditions most favourable to, and worthy of, their human nature. But it nonetheless still remains a realm of necessity. Beyond it begins that development of human energy which is an end in itself, the true realm of freedom, which, however, can blossom forth only with this realm of necessity as its basis. The shortening of the working-day is its basic prerequisite.

Pretty dense stuff — what is Marx driving at? First, that freedom consists of freedom from blind (i.e., not under conscious human control) forces, including not only nature but the unplanned workings of the market economy.  And second, that the achievement of such freedom (through communism) will liberate us to realize our full potential as human beings (”that development of human energy which is an end in itself”) by liberating us from the organized division of labor (”The shortening of the working-day is its basic prerequisite”).

Friedrich Engels conflated these two steps in this somewhat snappier formulation (from Anti-Dühring):

Anarchy in social production is replaced by systematic, definite organisation. The struggle for individual existence disappears. Then for the first time man, in a certain sense, is finally marked off from the rest of the animal kingdom, and emerges from mere animal conditions of existence into really human ones. The whole sphere of the conditions of life which environ man, and which have hitherto ruled man, now comes under the dominion and control of man who for the first time becomes the real, conscious lord of nature because he has now become master of his own social organisation. The laws of his own social action, hitherto standing face to face with man as laws of nature foreign to, and dominating him, will then be used with full understanding, and so mastered by him. Man’s own social organisation, hitherto confronting him as a necessity imposed by nature and history, now becomes the result of his own free action. The extraneous objective forces that have hitherto governed history pass under the control of man himself. Only from that time will man himself, with full consciousness, make his own history — only from that time will the social causes set in movement by him have, in the main and in a constantly growing measure, the results intended by him. It is humanity’s leap from the kingdom of necessity to the kingdom of freedom.

Marx and Engels were right that expanded control over natural forces would someday lead to a much fuller development of human capacities than had ever before been possible.  They were tragically wrong, however, to think that this expanded control would take the form of centralized, socialized control of the division of labor. The realm of freedom would be achieved through markets, not five-year plans. 

Further, although capitalist wealth creation has led to the shortening of the workday (and the working life as well, through education on the front end and retirement on the back end), it didn’t turn out that people would choose to fulfill only their basic needs through the organized division of labor. Today most of our working day is devoted to enabling the purchase of all manner of luxuries that aid in the quest for self-realization.  And for increasing numbers of us, the workday itself is a vital, central part of that quest.

Liberation from natural forces through technology? Absolutely! Liberation from the market? To some extent, yes, but mostly liberation through the market.

That’s the story I seek to tell in The Age of Abundance. And that’s why I titled the first chapter of the book “The Realm of Freedom.”