[Marxism] MR reviews new Perelman book

Louis Proyect lnp3 at panix.com
Thu Dec 2 19:22:50 MST 2004

Monthly Review, December 2004
Scarcity of What and for Whom?
by Mark Hudson

(Mark Hudson is a doctoral candidate at the University of Oregon in 
Eugene, specializing in the political economy of the environment.)	

Michael Perelman, The Perverse Economy: The Impact of Markets on People 
and the Environment (New York: Palgrave Macmillan, 2003), 224 pages, 
hardcover $55.00.

There is no shortage of opinion within the circles of policy and 
punditry that the free market is, or ought to become, the new Atlas. The 
dominant discourse holds that the weight of the world, and its scourges 
from poverty to pollution, can only be borne and transcended through 
utter reliance on the market. Michael Perelman’s latest book confronts 
this position head on, arguing that far from providing a basis for 
sustainability and health, markets provide and respond to incentives 
which impoverish, dehumanize, mutilate, and kill workers, and which are 
leading us further into ecological ruin. Perelman scrutinizes a number 
of pillars of conventional economic theory, assessing them under the 
light of their implications for people and the environment, and emerges 
with an argument that economic theory justifies an unjustifiable system. 
This requires two separate points. First, the market produces disastrous 
results for workers and for nature. Second, economics as a profession 
has consistently functioned to obscure and apologize for those results.

Over the last few decades, beginning most notably with the work of 
Nicholas Georgescu-Roegen, critiques of the anti-ecological quality of 
economic theory have become numerous. In this short and highly 
accessible book, Perelman makes two very worthy contributions to this 
body of critical inquiry. The first is to approach a highly complex set 
of relations in a way that is straightforward and direct. The second is 
to examine critically the disconnection between economic theory and 
history. In confronting the relations between economic theory, the 
economy, workers, and the environment, Perelman dares to ask the most 
basic of questions and to judge both markets and economic theory on the 
basis of their abilities to produce sane, sensible, and sustainable 
outcomes and explanations. Perelman’s interrogation of markets begins 
with what he calls the farm worker paradox.

The farm worker paradox illuminates how those who produce the things 
most vital to human survival and development are compensated the least. 
In the United States an individual farm worker earns an annual income of 
about $7,500. How has economic theory attempted to explain this? Given 
that economics claims to address how resources are allocated in the 
service of meeting human needs, this would seem to be a central 
question. However, following a brief flirtation with the problem by Adam 
Smith, conventional economics from Alfred Marshall onward has dismissed 
the paradox as an easily explained phenomenon, whereby the market doles 
out to each person—capitalist or worker—exactly what they put in. That 
is, mainstream economics “solves” the paradox by claiming that low wages 
signal low productivity (and that high wages, such as those bestowed 
upon the CEO’s of Tyco, Enron, and the rest, are indicative of 
tremendous productivity). This conclusion is the result of a long 
evolution of economic thought, summarized by Perelman, which has 
systematically attempted to both obscure and justify the social 
inequality that is inherent to capitalist organization.

In early political economy, the vast difference between workers and 
owners was attributed mainly to a “natural order.” In this system, it 
was natural that everybody but a small elite would labor long hours in 
exchange for their daily crust. For some prominent thinkers and moral 
philosophers of the eighteenth century, the resulting prod of hunger and 
poverty among the laboring class was a positive stimulus. Robert 
Townsend, for example, suggested that the wage system was, relative to 
slavery, a much-improved system for the appropriation of labor:

     [Slavery]...is attended with too much trouble, violence, and noise, 
...whereas hunger is not only a peaceable, silent, unremitted pressure, 
but as the most natural motive to industry, it calls forth the most 
powerful exertions....Hunger will tame the fiercest animals, it will 
teach decency and civility, obedience and subjugation to the most 
brutish, the most obstinate, and the most perverse. (p. 145)

The few who were spared the fate of the laboring masses were 
distinguished by their control over productive resources, beginning with 
land. The bloody and conniving histories of land “ownership” were pushed 
into obscurity and effaced by the laws of individual private property 
and what Marx called the “fetishism of commodities.”

With the development of fossil-fuelled manufacturing and 
industrialization, there arose a bubbling discontent concerning the 
persistent gap between workers and owners in the midst of skyrocketing 
“productivity.” Social and economic trends contributed to heightened, 
class-based conflicts, from the Paris Commune to clashes between 
strikers, National Guardsmen, and Pinkerton agents. Economists addressed 
themselves to these social clashes by turning their efforts toward the 
refutation of Marx’s critique of political economy and his analysis of 
capitalism, in order to reassert the justice of the market system. The 
development of marginal value theory (independently and simultaneously, 
as the legend in economics departments goes) by Jevons, Walras, and 
Menger, was motivated in all three cases by a desire to undermine 
socialist tendencies in Europe through the reformulation of value 
theory. Within the marginalist framework, capital and labor each get out 
of production exactly what they put in. If, for example, the addition of 
an hour of labor yields one more dollar in revenue for the firm, the 
worker gets one dollar in return. If one more machine contributes five 
dollars to revenue, the capitalist gets five dollars in return. What 
could be more just than rewards commensurate with contribution? 
Exploitation in this framework vanishes. In the words of then-prominent 
U.S. economist John Bates Clark,

     the distribution of income [is] controlled by a natural law, 
and...this law, if it worked without friction, would give to every agent 
of production the amount of wealth which that agent creates....Free 
competition tends to give labor what labor creates, to capitalists what 
capital creates, and to entrepreneurs what the coordinating function 
creates. (p. 152)

Despite the fact that Clark’s “proof” rested on what Perelman refers to 
as “absurdly unrealistic assumptions,” (p. 152) its comforting message 
became a “central part of economic dogma” (p. 153).

Clark also implicitly contributed to modern economic theory the notion 
that the distribution of ownership is irrelevant for economic outcomes. 
Transactions within the labor market are seen as voluntary exchanges no 
different than those in any other market. The vast difference in power 
between capitalists and individual workers disappears, as best summed up 
by Nobel Prize-winning economist Paul Samuelson’s urging that we 
“remember that in a perfectly competitive market, it doesn’t matter who 
hires whom” (p. 153). The ridiculous degree to which neoclassical 
economists have taken this conceptualization of relations between 
workers and owners is well demonstrated by Perelman’s presentation of 
the theories of economists like Clark Nardinelli, who proposed, 
“presumably in all seriousness...that children in the factories would 
voluntarily choose to have their employers beat them: ‘Now if a firm in 
a competitive industry employed corporal punishment the supply price of 
child labor to that firm would increase. The child would receive 
compensations of the disamenity of being beaten’” (pp. 153–154). In 
other words, agreeing to be whipped into greater effort is simply 
entrepreneurial initiative on the part of workers.

Perelman’s second major contribution is to take a long historical 
perspective on the interplay between economic theory on the one hand, 
and the environmental and human requirements of capitalist development 
on the other. His juxtaposition of the rationalizing contortions carried 
out by mainstream economic theorists and the often-contrasting 
realities—political, ecological, and social—emerging around them is 
striking. Perelman provides a nice selection of examples pertinent to 
issues of the environment and natural resource scarcity. One of these 
draws on the history of the passenger pigeon to illustrate the 
disconnection between market signals and species extinction. In 
neoclassical theory, when a resource becomes scarce, prices are supposed 
to rise, thereby inducing consumers to use less of it. The market is 
thus seen as the best tool for conservation. Perelman, however, notes 
that passenger pigeons were hunted to extinction (from a population of 
staggering numbers) between about 1840 and 1900 without so much as a 
blip in the price. The reason for this “anomaly” was that passenger 
pigeons were (a) easy to hunt even as their numbers dwindled; and (b) 
seen as a substitute for chickens—or more accurately, for chicken (it is 
the meat that is relevant, rather than the bird)—which was still in 
plentiful supply. This makes perfect economic sense and is completely 
unproblematic from the theorist’s perspective. Passenger pigeons are, to 
the market, indistinguishable from chickens. However, if the relevance 
of species goes beyond their place on the dinner plate (and, even more 
fundamentally, their potential as exchange value) the price mechanism 
must be seen as an inadequate, indeed a “perverse” instrument for 
mediating the relations between humans and nature.

In probing this disconnection between economic theory and the actual 
functioning of the economy, Perelman also looks at the reception given 
by mainstream economists to those among their own ranks who attempt to 
deal with resource scarcity. Since these instances are rare, he pays 
particular attention to the reaction of economic theorists to William 
Stanley Jevons’s 1865 book, The Coal Question, in which Jevons lays out 
the inevitability of the depletion of British coal deposits. In what 
later became known as the “Jevons Paradox,” Jevons argued that increases 
in efficiency of coal use would actually result in increased total coal 
use, rather than conservation of it, thus raising the uncomfortable 
prospect that economists—self-professed scholars of the allocation of 
scarce resources—might actually have to consider the possibility of 

This is not to say that neoclassical economists never worry about 
scarcity. It is an indispensable economic concept, constructed as a 
relation between the (insatiable) wants and limited means of firms and 
individuals. Thus, every economic decision is made within a “budget 
constraint,” meaning simply that although the world is full of 
possibilities, each individual actor can only afford to get their hands 
on so much of it at a given point in time. However, as Perelman points 
out, this has little or nothing to do with the kind of scarcity that 
Jevons was discussing. “[T]he overarching scarcity that economists study 
is the general scarcity of capital; that is, complex conditions 
artificially collapsed down to a single monetary measure....This sort of 
scarcity does not represent an ultimate barrier to the economy” (p. 41). 
Within the neoclassical framework, given the appropriate mobilization of 
savings and investment, more can be produced in perpetuity. Substitution 
of one resource for another will take care of any particular scarcity 
that might threaten, like Jevons’s dwindling coal supplies, to limit the 
growth of the economy. Of course, Perelman observes, coal has not run 
out, and Jevons did not foresee the emergence of oil or atomic energy. 
However, the point about general scarcity—the economy’s ultimate 
reliance on the productive consumption of both energy and matter for the 
transformation of natural resources into useful items—remains the 
proverbial elephant in the economist’s living room. While Jevons is 
viewed as a giant of neoclassical economics for his pioneering of 
marginal value theory, his work on the scarcity of coal was, and 
continues to be, seen by economic theorists as an eccentric slip up. 
Perelman confesses that he “never took a class that mentioned Jevons 
without some snide remark about his ‘foolish’ book on scarcity” (p. 40).

A final important point that Perelman discusses (one that is of 
particular and increasing relevance these days) is the giant gap between 
the comforting conclusions of economic theory—that resource scarcity is 
not a problem because markets will induce substitution for scarce 
goods—and the monumental political and military efforts carried out by 
world powers to ensure this result. History is crowded with violence, 
coercion, and conquest designed to ensure the access of civilizations to 
a steady supply of vital resources. While the ideological agents of 
capital derive equations demonstrating that scarcity is kept at bay by 
the operation of the free market, its political agents work to ensure 
that this is never put to the test. Local scarcities looming on the 
horizons of core nations are in reality warded off most often with 
violence. That violence might be administered by the IMF and World Bank 
through neoliberal economic discipline and the prying open of fresh 
markets, or it might be more directly delivered via the bullet and the bomb.

In all, Perelman does an excellent job of revealing the terrible 
consequences of the “normal” functioning of markets for people and the 
environment. While the book adds little that is brand new to the 
critique of market-dominated society, The Perverse Economy’s historical 
and direct approach to examining the contradictions between economic 
theory and the material unfolding of capitalist production is a worthy 
contribution. Unlike most of this body of literature, this book is 
highly accessible and engaging.

So, what is to be done? Perelman suggests we rehabilitate the good name 
of economic planning. He argues that the spur of war once urged
countries to undertake massive social and economic transformations, in 
which markets were subordinated to goals of improving worker morale, 
health, and productivity. The experience, he argues, demonstrated that 
efficiency and social solidarity work in unison (p. 182). The problem, 
as Perelman acknowledges, is the difficulty of a democratic check on the 
planners. In fact we already have, in a very selective way, a planned 
economy. It is an economy planned at both national and transnational 
levels to benefit a tiny minority, under the cover of market rule. The 
real questions then are who plans, how, and for what? It is a question 
of democratic or elite control, and we are currently witnessing an 
increasingly intense period of the latter. The emergence of the former 
will depend ultimately on the organized power and democratic yearnings 
of those on the wrong end of the farm worker’s paradox.
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