The Imaginary Economy: a new conception

by Mario Fabbri

  6 On this issue cf. POLANYI, The Great Transformation.

  7 SMITH, The Wealth of Nations, III.ii.9.

  8 VERRI, Memorie sincere del modo col quale servii nel militare, in Scritti di argomento familiare ed autobiografico, p. 63.

  9 They remain curiously alive in the world of the economists as the “disutility of labor”, a concept that is still present in the neoclassical economic doctrines.

  10 Very few economists today like to expend energy looking for a meaning in ‘capital theory’. And of course no one has ever been able to find one.

  11 Here is an evocative example because it regards the Latin word labor, the etymological father of labour. In 1st century BC Rome the upper classes have not yet taken power, and the contrast between the proud Roman plebs and the senatorial nobility has some analogies with the contrast between workers and capitalists 2000 years later. Rome is at war with Jugurtha, king of Numidia, and the consul Caius Marius, the leading exponent of the popular camp, inflames his followers with passionate arguments. Sallustius mentions a harangue to soldiers that Marius was about to lead in Africa: after having criticised the condescending aristocracy which praised not the personal virtue “that cannot be donated or received”, but only illustrious ancestry and gracious manners, Marius raises an ideological flag to make future fighters proud, saying, Bellum Iugurthinum, 85:

  I learned from my father and from other upright men

  to women gracious manners, to men demanding effort to be convenient.

  munditias mulieribus, viris laborem convenire.

  12 PASQUINELLI, Non avere paura di ricominciare. Come reagire alla perdita dell’impiego, p. 38.

  13. Complaisance

  Now let us ask: how is it possible that a large and growing mass of workers can receive an income to perform ‘unproductive’ activities?

  How could companies pay so many unproductive workers if they have to compete in a market in which competition eliminates operators whose costs are too high?

  This obvious reasoning would seem to irrefutably exclude the possibility of developments like those we are proposing. But to show that it is totally wrong a simple story will suffice:

  Once upon a time, when work times and methods were less evolved than today, there was a region abounding in small private textile firms, highly efficient according to the canons of the time, which competed fiercely with each other cutting expenses to the bone.

  To save money, owners handled their own accounting and secretarial work, and personnel was made up almost exclusively of people involved in the production and transport of textiles.

  One day, one of these company owners, whose business was performing better than usual, receives a visit from an old friend to whom he owes several favours.

  “This time I am the one with the problem.” says the friend. “My daughter Jane is bothering me: instead of finding herself a husband like the rest of them, she absolutely wants to find a job and to be independent… there’s nothing, by any chance, you could do to help? She is lettered but knows no craft and is not very sturdy. I would only ask not to put her on the production line.”

  The company owner is perplexed but then, taking into consideration the healthy state of his business, thinks of an unusual solution: he could allow himself a small luxury, and ask Jane to produce the fair copies of his letters, an activity that he had always found tedious… and she could also take care of keeping track of his commitments, and bringing coffee to visitors: in short doing what we today call being his secretary.

  So, to please a friend he takes on a cost to perform work that was already being done or maybe was not even necessary. And this makes his company a little less competitive.

  It is a provincial environment and the news spreads fast. All other proprietors deplore the novelty. “It is a waste to feel important.” “More time is spent fixing what the girl does wrong than what is saved. And he even pays her a wage!” smirk the well informed.

  But other enterprising girls take note and very soon a very determined widow goes to a famously tender-hearted company boss: “I could do the same work that Jane does. And I need it much more, with two children to maintain.”

  And so a second specimen of the species appears. And after a while there are already three or four firms with secretaries.

  Some years later, according to the normal dynamics of innovation diffusion, all company owners worth their salt have a secretary, and in larger companies first level managers have them too, albeit shared, at the beginning.

  By now it is the company bosses without a secretary who attract the perplexed looks.

  Why save money on this small expense which is indispensable today? Might it be a sign of a negative business situation or of ridiculous stinginess?

  In the end, even the last stalwarts of bare-boned efficiency give in.

  Now all companies are equally competitive again.

  And it all looks perfectly logical and rational, even because certain secretaries have really become very expert, and know how to write highly professional letters on their own from a few notes, making the company look good.

  The bosses, on the other hand, have lost the will to deal with all the large and small jobs they were used to. Now they attend many more meetings “and would no longer have the time”.

  The small industrialist that hires Jane to please a friend and Jane’s own father who sets out to find his daughter a job, are examples of the widespread attitude of men of trying to accommodate the requests of their fellows which we will call complaisance.1

  This story tells us that complaisance can make the imaginary economy grow, even when there is fierce market competition because the technically unnecessary costs that enter common use are not relevant to market competition, and may even become necessary for companies.

  Only outside the vast region of common use determined by customs and laws can the logic be based on profit, as described in economics texts.

  So, while company managers continue to come up against the constraint of efficiency, the world can also be increasingly populated by unproductive workers.

  Complaisance is an essential cornerstone of our explanation because it allows us to see the growth of the imaginary economy as a spontaneous and impersonal process, which evolves by itself, following a sort of path of least resistance.

  There is no need to imagine it is the product of some human mind, a sort of benevolent conspiracy pursuing a purpose, even if such an idea may at times have a heuristic value, namely a better than random chance of correctly directing our interpretations and predictions.

  But anyone who were to take such a position seriously would be on a par with those who believe that the development of living species must be guided by some mysterious architect rather than by the spontaneous and impersonal process of natural selection.

  1 This is an enlightening concept but not an especially new one. See, for example, the idea of ‘sympathy’ in The Theory of Moral Sentiments of Adam Smith.

  14. The ubiquity and sociobiological origins of complaisance

  The common rhetorical argument that man is selfish and indifferent to the well-being of his fellow men can offer a great many examples of behaviours very distant from the general brotherhood advocated by dreamers.

  But this view is incomplete and misleading because men are ‘social animals’ and must be natively capable of influencing one another’s behaviour effectively.

  Some people are less sensitive to these psychological pressures, but if they are exerted it is because they often get results, for everyone possesses some inclination to be moved by the requests of their fellows in order to get their approval and liking.

  Now as this aspect of human psychology is a result of natural selection, it must somehow foster the spread of genes related to it.

  And it is easy to realise that the resulting benefit is to make human groups mor
e robust and close-knit, which provides their members with a better chance to generate offspring.

  From a text dealing with these subjects:

  People cooperate not only for self-interested reasons but also because they are genuinely concerned about the well-being of others… we came to have these “moral sentiments” because our ancestors lived in environments… in which groups of individuals who were [better] predisposed to cooperate and uphold ethical norms tended to survive and expand relative to other groups…1

  In fact, if we pay attention, we find that complaisance is much more present in human behaviour than it would appear. And its power is striking:

  Towards the end of the 19th century, it was increasingly fashionable for European middle-upper class women to have attacks of hysteria, including elegant fainting fits.

  Among experts, the most common treatment for it was hypnosis, then quite fashionable. In France two well-established schools adopted it: one in Nancy and one in Paris at the Salpêtrière hospital, which developed theories about hysteria that were confirmed by the course of their patients’ disorders.2

  But the problem was that the two theories were rather different!

  The young Sigmund Freud, who too had begun using hypnosis on hysterical subjects, realised that the problem stemmed from what we here call complaisance, which is particularly strong in those characters: hysterical women perceived their therapist’s expectations and did their best to meet them.

  So both schools could boast excellent validations which were, however, worthless.

  For this reason Freud abandoned hypnosis and adopted the technique of the couch on which the patient talks to the psychoanalyst while remaining perfectly conscious.

  But that solved only part of the problem, because many years later the phenomenon of false memories emerged: some of Freud’s patients came to remember ‘removed’ childhood episodes fully in line with the expectations of Freudian theory.

  But then, the testimony of others on the patient’s childhood, made it clear that what had been recalled just could not have happened!

  And that is not all.

  Freud also developed an insightful theory on the origin and meaning of dreams: he would outline it to his patients who brought their dreams to him to be analysed, and these analyses often provided spectacular confirmation of his ideas.

  But a problem occurred similar to that on hysteria: his great rival Karl Gustav Jung had developed a different theory on the nature of dreams, and he too outlined it to his patients, and their dreams turned out to be clearly interpretable on this basis…

  That is: Freud’s patients dreamed Freudian dreams, Jung’s patients Jungian dreams!

  So, for man it is normal to meet the expectations of his interlocutor – particularly when an authority – even when he is sleeping!

  Therefore, in a country without production problems, complaisance has no difficulty allowing everybody who wants to be a worker with an income to become so, even when a truly productive occupation is not available.

  Clear cases, like that of Jane, are only the more visible part of the vast repertoire of humanity’s willingness to provide an income to those who ask for it, or allowing itself to be persuaded by sellers of whatever random merchandise, including the self-esteem offered by beggars on the streets.

  For example, a significant part in fuelling the imaginary economy is played by companies’ readiness to relax their control on costs when times are flourishing.

  The normal budget-based practice is to pay more attention to costs when results are worse than expected. Which is the same as saying that attention is lower when results are going as well as or better than expected.

  In fact when results are good, company managers are usually prey to a subtle euphoria which renders them more vulnerable to proposals from sellers, who are well aware of this and visit the managers and purchasing offices of successful companies profuse with compliments and smiles to offer their services.

  And often what happens here is not a rational decision aimed at increasing the company’s profit, but a sort of distribution of it to the outside by ‘optimistic’ managers, with respect to whom the supplier’s role is basically to confirm that the expenditure they are about to embark on is far-sighted and shrewd.

  Complaisance, whose logic incidentally blends perfectly well with the suggestion-imitation mechanisms described earlier, is a basic component of the human psyche and we come across it at all times and places.

  For example, in Greek and Roman antiquity rich hosts maintained stable multitudes of obsequious “clients” as table companions or, to use the Greek term, parasites.

  Another institution of ancient times was euergetism3: a wealthy individual at his own expense organised public festivities or implemented useful public works in order to boost his popularity among the fellow citizens.

  A modern analogue might be those companies which fund the restoration of a monument, the construction of a hospital, the management of a museum, especially in the local area.

  The mechanisms of complaisance are as unknown to economists as they are well known to sociologists.

  From a study on behaviour and values in an Italo-American slum of the 1930s:

  In order to participate in group activities, the corner boy must share his money with others. If he has money and his friend does not, he is expected to do the spending for both of them. It is possible to be thrifty and still be a corner boy, but it is not possible to be thrifty and yet to hold a high position in the corner gang. Prestige and influence depend in part on free spending.4

  Now, imagine that in the steel industry a new technology is discovered which can significantly reduce the workforce in foundries.

  In a market economy all the operators in the sector will be forced to adopt it, firing large numbers of now superfluous steelworkers.

  But thanks to the powerful mechanisms of complaisance and to the new jobs that appear, particularly in the service sector, after some time the population of paid workers will return to its full size.

  Mass exoduses from the productive sector can sometimes be very visible, whereas less apparent is the trickle of unproductive workers into the service sector, which has expanded little by little to the point of becoming the most extensive of all.

  There is a nice proverb describing this kind of asymmetry:

  a falling tree makes more noise than a growing forest.

  ∗ ∗ ∗

  The interplay of the four factors we have just seen – significant inertia of consumption, fast advancement of labour productivity, universal aspiration to ‘worker’ roles and complaisance – is enough to explain the development of what we have called the imaginary economy and which we will examine in the following pages.

  1 BOWLES, Human Reciprocity and Its Evolution, p. 1.

  2 On these cases cf. ELLENBERGER, The Discovery of the Unconscious.

  3 Eu-ergete is a Greek term that means bene-factor.

  4 WHYTE, Street Corner Society, p. 106.

  SECOND SECTION

  The imaginary economy

  15. The imaginary economy

  In addition to producing the 19th century economic cycles, the speed limit on the growth of consumption causes a much broader development of enormous importance, on which the time has come to reflect.

  For the past 180 years, the growth rate of US society’s per capita consumption has been about 1.9% per year, and per capita income has grown about 25 times.

  But the quantity of goods produced in one hour’s work, which is not limited by psychological or social resistances but only by the state of technology, has grown at a much faster rate thanks to the introduction of increasingly efficient machinery.

  The extreme case is Moore’s Law: since the 1960s manufacturers of semiconductors have doubled the number of transistors per integrated circuit every two to two and a ha
lf years, which is a growth, at comparable costs, of almost 10 billion times in half a century!

  But if for the last two centuries, the productivity of manufacturing and agricultural labour has grown very fast, while production has grown more slowly, because it had to stay in line with society’s less dynamic consumption, a surprising oddity appears.

  As the quantity of work-time necessary to produce the goods society consumes is much diminished, we might expect that the number of hours worked and the percentage of ‘workers’ in the population would fall correspondingly.

  But little can be seen of these effects, if anything at all.

  To be precise, the number of people who are involved directly in production – that is factory workers and farmhands – has actually fallen significantly, but this decrease has been offset by a grandiose expansion of the tertiary sector which officially produces useful services.

  It is only the growth of the services sector that has kept employment high!

  The logic is simple: let’s say that productivity in the manufactures improves by 3% per year, but that consumption by society only grows by 2%…

  Then, in order to keep employment stable, it is enough for 1% of the workers previously employed in producing goods to be redirected to the service sector, in which we include farming and manufacturing company white collars.

  And the limit of 2% in the growth of sellable goods requires that this additional 1% which exits every year from agriculture and industry remain absolutely unproductive of goods!

  It is to this growing, balancing portion of the service sector, which does not produce goods, that we give the name of imaginary economy, contrasting it conceptually with the real economy which produces tangible assets and essential services for society.

  This chart1 shows the progressive reduction in the ratio of blue collar workers to total employment. Turned upside down it also tracks the growth of the imaginary economy.