by Mario Fabbri
Some other considerations…
To install the ‘multidimensional database’, one of the software packages used by Prof. Foggy and his assistants, a young consultant, an expert in this field, was hired, and oversaw the setting up of the classification system and the hierarchies for its use.
He was brilliant and non-conformist and could therefore have realised the basic productive futility of the studies office and therefore of his own work.
But how could the hardware technician who came one day to fix the computer that would not start come to a similar conclusion?
He had replaced a faulty card and this was enough for him to classify his work in his own eyes as concrete and productive.
And what about the motorway petrol station attendants who had filled the consultant’s and technician’s cars up on their way to the big company’s studies office?
As we distance ourselves from the areas where it can somehow be identified, productive futility is hidden from view behind the thick layers of complexity typical of modern economic systems.
And, with the help of the wishes of the interested, everything takes the aspect of real economy.
We also see the operations of large sectors of the real economy, such as the output from Professor Foggy’s computer, take on the ambiguous nature of an activity in itself materially productive but absorbed by imaginary needs, namely generated by the operating requirements of the imaginary economy.
The hidden factors that determine the gap between the prices of bread and wheat should now have become rather more visible.
1 Jenner Meletti, Dal chicco di grano al pane il prezzo lievita di venti volte, in Repubblica, 24 September 2003: www.repubblica.it/2003/i/sezioni/economia/prezzi2/chicco/chicco.html
26. The useful concept of ‘causation by disappearance’
Two developments we have recently seen – the growth of complexity and the spread of company neuroses – suggest a reflection that is worthwhile because it helps us understand the logic of many of the changes we are witnessing today.
Given the energy they consume and the unproductive activities they promote, both developments fit in so well with the growth of the imaginary economy that one would be forgiven for thinking there is a kind of mysterious joint operation at work towards the achievement of a common goal…
But the triviality of things usually emerges as soon as you understand them.
Take the growth of complexity. To counter it a deliberate commitment is necessary, typically on the part of someone who wants to operate efficiently and strives to keep the environment tidy.
But if the need to be efficient lessens, the same goes for commitment. And disorder and complexity take over again.
Therefore, the increase in complexity is an excellent indication of a reducing need for efficiency.
And, undoubtedly, the abundance of goods procured by technology has reduced the need to be orderly and efficient.
The mechanism is the same for what we have called neuroses.
Many, to promote their social rank in a group, engage in moralistic attacks, manipulations and other sophisticated manoeuvres which tend to create a divisive climate.
However, if the group finds itself in a precarious situation confronted with real tasks, a climate of unity and general co-operation is often established that leads the group to successfully push back against such neurotic developments.
Then, the lack of real tasks, today more common than in the past, triggers the onset of neurotic atmospheres in human groups.
In conclusion, technological advances and the resulting abundance of material wellbeing are the common root from which spring the parallel growths of complexity, business neuroses and the imaginary economy.
In the past these were countered by the need to be efficient and united; today the attenuation of this need causes their growth.
We will meet this elusive but important logic again. So, lest we forget we will call it ‘causation by disappearance’.
Causation by disappearance is the source of many misunderstandings because, when something new occurs and we wonder why, it comes naturally to look for something that wasn’t there before and now is, while the novelty may depend on something that was there before and no longer is.
This logic is central to the imaginary economy because it explains numerous, new and disparate developments as a function of the only novelty of productive enhancement and the associated reduction in material hardship.
In fact, a great many new developments appear to be the effect of neurotic, antiproductive factors that have always been present in man. Except that today their relevance has grown because of the gradual, slow decline in material difficulties and the need to engage in contrasting them.
27. A general overview
In the present economic system, the search for productive efficiency is of less and less importance, while the key factor remains the ability to extract income from the surrounding environment: it is always the flow of money that drives operator behaviour.
But today only in rare cases, as with raw materials and commodities, do income and profits come from knowing how to produce more efficiently, and consequently being able to sell at lower prices than competitors.
Instead, the income of many operators depends on the relations they have with the surrounding environment rather than on attractive prices.
For example, the income of a company that owns patents for products in great demand has little to do with its ability to produce at low cost.
The same applies to producers of luxury goods who are able to pay less attention to costs because they must demand high prices or risk losing their precious image of exclusiveness.
The Scottish 19th century economist John Rae grasps their logic perfectly:
If every peasant girl could afford to have a string of [pearls], no lady would wear them, and… peasant girls would lay them aside.1
But many mass-market producers too do not rely only on low prices, but rather seek to create an attractive image of sympathy and quality for their products that builds ‘customer loyalty’.
Today, even the smallest shopkeeper or bar owner tries first and foremost to earn the loyalty of a stable clientele.
Similarly for many service providers price often plays a secondary role because the approval of their clients mostly depends on qualitative–subjective impressions which take precedence over the mere assessment of the price to pay.
The size and stability of the income achieved with their marketing techniques vary from operator to operator, but those with a fairly steady flow of income are more or less in the position of someone who receives a rent, which he then spends according to the pressures from the surrounding social environment and in the logic of excipient costs.
The result resembles an aristocratic society in which nobles of different power and wealth hold court. And it is those with the biggest estates and incomes who give the most splendid parties, to the benefit of the minor courtiers and nobles dependent on them.
It is true that part of the production system continues to remain open to price competition and thus is forced to pursue efficiency, but we know that in a macro perspective the sum of inefficiencies and waste present in the economic system must always remain substantial enough to prevent production exceeding society’s disposition to consume.
Should such a situation occur, today we would expect the central government to find a remedy. And the usual interest rate increase to cool down the economy serves precisely to depress the activities of the real economy and make it less productive, namely more inefficient.
But such a conjunctural increase in inefficiency is just a temporary addition to the much more substantial structural inefficiencies created by the imaginary economy whose growth is now lagging behind.
We conclude our analysis of the imaginary economy by reflecting on the effects
it can have on a country’s well-being.
It might seem that it must be harmful if a large section of society receives an income without producing anything.
But such reasoning would be crude because receiving an income without producing anything is typical of the upper classes, and if sometimes, as in the case of the Roman Empire – see my La rovina delle nazioni – this makes the whole society poorer, in other cases it is a fundamental stimulus for economic growth, as was the case with the European aristocracy around 1000 AD.
So distinctions must be made for the imaginary economy: in some circumstances its development helps the economy, in others it is more or less immaterial, and in others it leads to a decline in the country’s general well-being…
1 RAE, Statement of Some New Principles, p. 286.
28. The imaginary economy can stimulate economic development
This occurs in situations where technically feasible production is greater than actual production, but a Sismondi effect keeps consumption in check.
In this case, providing income in any way to aspiring consumers causes the strengthening of the production system.
Thus, in the England of the early 19th century, the paradoxical ideas of Malthus were logical and correct.
Later the situation, which, by penalising the consumption levels of the working class, limited the growth of the economy, was defused by the increase in workers’ wages, which were gradually able to cast off the shackles of the iron law.
But even more significant was the great take-off of the imaginary economy which – while continuing to respect the traditional capitalist institutions and the idea of income as payment for work – sustained growth even more by releasing a great many consumers from the untenable constraint of also being productive.
Inspired by 18th century Ancien Régime scenarios, Malthus imagines lackeys, lady’s companions, artists and such in the role of unproductive consumers.
And in a way his auspices were realised, except that the roles that actually emerged were those of secretary, auditor, consultant… in line with today’s values, which demand that people who receive an income should be ‘workers’.
The essential condition that receivers of income be unproductive is, however, respected.
In this perspective, the explosion of rules and regulations makes the economy expand in societies where consumers and not producers (!) are in short supply.
It is normally justified by the need to keep under control an increasingly complex economic-social situation for which intervention from above is needed to achieve constantly evolving ideals of fairness.
But its real function is that, on the one hand, rules provide income for those who manage the new obligations these rules have created: consultants, tax experts, accountants, certifiers of this or that, and so on.
And, on the other hand, this glorification of rules justifies the high social position of legislators, norm-makers, inspectors in the many countries where a parliament churning out laws is looked on as a company manufacturing cars: the more efficient and praiseworthy it becomes, the more laws it passes.
But, as long as some Sismondi effect is present, the expansion of regulations and social expenditures – including those inflated by inefficiencies or misappropriation (!) – brings benefits to economic development.
29. The imaginary economy can be irrelevant to economic development
The growth of the imaginary economy since the early 19th century, has gradually reduced the relevance of the Sismondi effect, so that consumption by the mass of society today is limited much more by resistance to changing lifestyles than it is by the institutional income shortfalls of some social sectors.
At a certain point, then, the increase in the number of unproductive workers must have basically ceased to boost consumption while retaining the effect of changing the channels through which the income of the country flows from the economic system to members of society.
As usual, a little story helps to clarify the point:
Imagine a slowly growing society, sustained by improvements in production techniques and increasing consumption.
Initially, most of the population is employed in the real economy, with few distinctions between men and women.
But when production techniques improve many women choose to stay at home to look after the house, something which, at the time, everyone considers an obvious improvement in their living conditions.
So, in most families, wives do the housework and only the husband earns a wage to pay for the family’s expenses.
Then as cultural values change, working for a wage becomes a source of high social esteem.
Also, thanks to mechanisation and the growth of the imaginary economy, new works emerge which demand not physical strength but the ability to communicate and socialise, something which women are often better at.
Some wives leave home to work in offices, and two incomes begin to enter the family, with the result that their standard of living rises compared to that of their neighbours.
The phenomenon grows and female employment becomes widespread, particularly in the imaginary economy.
All economists acclaim women’s contribution to the country’s economic progress, which is actually the effect of improvements in production technology and the increase in consumption.
Initially the return of the working wife may have eliminated some residual Sismondi effect, and made a real contribution to the development.
But when the adoption of new consumption starts to grow again at its previous physiological rate, production will also grow again at the previous rate, and the further expansion of the imaginary economy will no longer affect the speed of its development but only the way income is distributed.
Wives will be happy to play a more prestigious social role and to earn an independent wage, but the amount husbands bring home will be less than it would have been if they had continued to be the only ones ‘working’.1
The story recalls that of the working families of the early 19th century whose income was independent of the number of working members.
But there the limit was institutional – a labour market with competition among workers – whereas now it is physiological with the limit being the cap on the speed of change in life styles.
1 The relevance of this story to recent developments is fully confirmed in The Two-Income Trap (2003), by Elizabeth Warren and Amelia Warren Tyagi.
30. The imaginary economy can harm economic development
The imaginary economy may grow in such a way that the production sector becomes too small to support society’s consumption.
There are two possible modes in which this situation can present itself:
According to the ruling morality, being an unproductive worker may be so preferable to being productive, as to distract too much social energy from productive activities.
The form taken by the activities of workers in the imaginary economy – norm-makers, controllers, bureaucrats… – can encroach severely on productive activities, making it difficult to produce.
In the first mode no one wants to be a producer because it is humiliating… in the second those who do not want to be producers because it is humiliating become imaginary labourers who, to perform their roles, hinder production. In other words, rather than being just unproductive they become (too) counter-productive.
The crucial point of this third case is that society lacks not consumers but producers.
The first mode recalls the decline of Roman civilisation, of which a contemporary writer said:
… the number of people who received began to exceed the number who gave, so that, once the massive burden of taxation had worn out the farmers, the fields were abandoned and the crops went wild.1
In other words: the imaginary economy becomes a real burden on the production system, taking on the guise of that mass o
f unproductive consumers of those past civilisations examined in La rovina delle nazioni.
If this dynamic is not reined in, the production system may collapse: and it will collapse more quickly when the country has to compete in the international marketplace with others where the imaginary economy is less developed or where it is in any case easier to produce.
It would be a repetition of the crisis of 17th century Italy, when competition from more efficient foreign producers destroyed the flourishing manufacturing industry of the centre and north of the country.2
∗ ∗ ∗
From the perspective we set out here, many of the currently debated ‘economic problems’ take on a rather different aspect.
But we cannot go into these matters as this would require not only a great deal of space, but would also risk shifting the purpose of our discourse from describing facts and logic to making recommendations.
Thus we confine ourselves – to give some examples – to citing the futility, as a support for the National Product, of measures such as extending the working age or suppressing midweek holidays.
Nor does the popular idea that a reduction in the population of working age creates insoluble problems for the adequate maintenance of pensioners stand up.
The reasoning here would make sense if, to obtain the goods required by society, it were really essential for so many people to consume their time in filling out forms and interpreting directives; namely if the limits on consumption were the number of hours worked by those today called “workers”.
But this is not the case.
1 The text from the 4th century – De mortibus persecutorum, 7 – is attributed to Lactantius.
2 Cf. Rovina delle nazioni, p. 173 ff.