Sunday 5 December 2010

‘I bring good news about our bourgeois lives’: Why business is good for your soul

Deirdre McCloskey's Bourgeois Virtues: Ethics for an Age of Commerce is a bold attempt to rehabilitate the much maligned bourgeoisie as the focus of a positive inter-twining of capitalism and ethics. Who are the bourgeoisie? People with middle-class values, temperament, and position. People like us. McCloskey argues, building on her extensive reading in economics, history, philosophy, religion and ethics, that we should recognise and embrace our bourgeois identity. For it is an ethical way of life that is not only instrumentally successful (showing up in our ever increasing wealth and freedom), but intrinsically valuable (showing up in the meaningfulness and richness of our middle-class lives).

McCloskey has three main goals. The first is to undermine and repudiate the negative image of capitalism, as promoted by the likes of Jean-Jacques Rousseau or Thomas Carlyle, as well as a great many sociologists, past and present. McCloskey achieves this easily, deflating the anti-bourgeois stereotypes with flair and wit. Secondly she claims positively that capitalism is in fact ethical because it nurtures the virtues, an argument that is unproblematic up to a point. Thirdly and less convincingly, McCloskey argues for her own positive positions of a libertarian political-economy and a Christian virtue ethics, which would make capitalism even better.

Much of the book is an extensive examination of a system of bourgeois virtues deriving from McCloskey’s distinctive reading of the Christian virtue ethical tradition and Adam Smith. The book is strongly opposed to the two other great ethical traditions:  Kantian obedience to moral laws and utilitarian calculation of what the best interests of all requires. In virtue ethics, virtues are   a matter of personal character, of the good character traits or ‘ethical capabilities’ that we manage to fix in ourselves through effort, training, and habit, and which are seen and praised in our behaviour. Prudence, for example, is the economist’s prized virtue because it consists of the application of practical, calculating reason to achieve the most with the least (efficiency) and is useful for situations from fixing a bicycle to forecasting oil prices.

Each virtue is a standard of excellence for a certain domain of application, but McCloskey argues that the virtues themselves all hang together in a balanced and harmonious system, and it is the system that works (this contrasts with Aristotelian virtue ethical systems which build up a list of virtues from an analysis of excellence in the activities required of a fully human life). So McCloskey argues that even in just the sphere of business, a ‘prudence only’ ethic wouldn’t work out, ethically or financially, without the other balancing virtues. 

The system she lays out in the book, exploring each virtue and their application in detail, is a Christian one consisting of Prudence, Courage, Justice, Temperance, Love, Faith, and Hope. (She suggests that non-Christian cultures have their own virtue systems - because it's more or less a requirement of the human condition - but cut up the domains differently and so have different definitions.) These seven virtues, defined culturally through stories, role-models, and examples, together cover everything and are the ‘primary colours’ from which further virtues, such as honesty and generosity, can be mixed.

George Stigler started his banquet speech at the bicentennial of the original publication of the Wealth of Nations by declaiming, "I bring you greetings from Adam Smith, who is alive and well and living in Chicago". By this he meant that Chicago (Neoclassical) economists were fulfilling Smith's legacy by producing mathematical representations of the 'Invisible Hand': how private individuals acting from private self-interest can nevertheless make society as a whole better off. McCloskey, also an economist in Chicago but no longer a 'Chicago Economist', begs to differ.

One of McCloskey’s abiding concerns is to persuade economists to talk about whole people again rather than abstracted ‘agents’ maximising ‘utility’ (as the real Adam Smith did - especially in his book on moral philosophy and psychology - The Theory of Moral Sentiments). She accuses both anti-capitalist writers and mainstream economists of overemphasising the single virtue of prudence to the exclusion of all the others. Not only that, but 'prudence' has been reduced to mere individual greed - a vice. This has led to a systematically misguided debate about the morality, practice, and theory of capitalism between leftish critics appalled by a system that institutionalises private vice, and a rightish side delighted to endorse a system which allows them to rationalise their greed as socially beneficial.

So what is capitalism if not a system of institutionalised private greed and public cynicism? In a clever move, McCloskey escapes from the trap of talking about the ‘system of capitalism’ and what it allegedly demands, and instead talks about the people who live capitalist lives. This 'bourgeoisie' is ideologically held together by three central concerns, for equality, property, and, most especially, 'honourable work'; while sociologically it stretches broadly over the corner-shop owner and the university intellectual (people like us, that is), as well as Karl Marx’s standard factory owner.

McCloskey admits that if it were true that the bourgeoisie retained only the virtue of prudence then the criticisms of their cold-hearted, boundless greed would be justified. But it’s not true. As McCloskey argues quite convincingly, while the virtue of prudence is certainly at the centre of the bourgeois world view, the bourgeoisie remain whole people. They, or rather ‘we’, maintain a coherent and successful system of virtues, with love, faith, justice, and the rest, successfully adapted to the modern capitalist world with its central role for prudence. We still have friends, watch baseball, vote in elections, believe in God (or Art, or even Economics), and do the other things that make for a good life. The popular understanding of the bourgeois life is of something we should struggle against or escape, as boring, inauthentic, alienating, and so forth. But according to McCloskey this has more to do with the unbalanced but unchallenged views of critics, such as the romantics promoting ‘aristocratic courage’ or ‘saintly love’, than a fair assessment of bourgeois lives themselves.

While it is relatively easy (but still important) to argue that bourgeois life is compatible with ethical life, McCloskey wants to go further and convince us that capitalism is actually good for us. Her two main arguments, the ethical and the instrumental, recur in different ways throughout the book. The ethical argument goes that dealing successfully with strangers in the marketplace leads to a general improvement in treating other people with respect as equals, as opposed for example to a feudal-like respect for the social roles people happen to occupy (an argument that can be traced back to Montesquieu's 'Doux Commerce' thesis). The instrumental argument goes that the political domination of bourgeois values has led to sustained economic growth with all the freedoms and middle-class living standards that has allowed, including the space for ethical development.

While these arguments are eminently acceptable and forcefully put by McCloskey, there remains what I shall call a ‘sociological gap’ between her claims and her evidence, which mostly comes from literature and philosophy. If the heart of the bourgeois world view is indeed an 'honouring of work' then it may well have an affinity with the skills that lead to success in market transactions but that provides no evidence that market transactions as such cause us to be ethical or are even compatible with the bourgeois ethical system in the long run (i.e. the functioning of capitalism, especially its characteristic of intense rivalrous competition, may itself undermine bourgeois virtues like courage or justice over the long run, perhaps even undermining itself in the process). 

What seems to be missing is a sociological analysis that would do the hard work of theoretically and empirically connecting the demands of capitalism with coherent responses in social values and ways of life, and the success or failure of these responses. As McCloskey herself admits, however, there is very little for her to work with: almost the entire field of sociology, from the founding fathers of Karl Marx and Émile Durkheim to more recent grandees like Richard Sennett, has been focussed on the problems not the solutions of modern bourgeois life.

A democratic but cultured and creative capitalism is possible, and to our good. It needs to be worked on. You come too. (p. 13). 

While McCloskey ardently believes that the capitalist life is better for us than any other alternatives, she does not mean by this that successful capitalists are necessarily virtuous. Enron, Madoff, Goldman Sachs and a cornucopia of other examples disprove that. Capitalism as we know it is certainly not perfect, ethically or productively, and can and should be improved. McCloskey argues that the best way to achieve this is for us, the bourgeoisie, to recognise that the economy is a deeply ethical enterprise and to attempt to live up to that fact by exercising our whole set of bourgeois virtues. And this is in keeping with the bourgeois theme: good capitalism takes hard work, but it is honourable work.

As this suggests, McCloskey’s libertarian political-economics, which is connected with her virtue ethical emphasis on personal character, is a good deal warmer and humbler than one might expect. Really it is a species of Smithian laissez-faire (rather than macho libertarianism) which sees individuals and their local associations as more worthy of our Faith and Hope, and often more effective in providing public goods, than government. Nevertheless the libertarian twist is responsible for a particular weakness of the book that I will explore in the remainder of this review: while McCloskey’s local, ‘associational’ view of ethics is very good for making one’s way in the apocryphal small town, it doesn't fit well with life in the wider world, where most of us live these days.

While it seems easy to agree that business people are ethical with those they know or could know - e.g. at the office - this essentially comes naturally to most of us. Since even monkeys exhibit such gregarious pleasantness, it is hard to see as an ethical achievement, let alone a special achievement of capitalism. A more substantial test of ethical thinking should be how one considers and treats the far away strangers whom one never meets but still affects, and this actor anonymity is a common feature of many market transactions. It is far from clear that a company manager equipped with McCloskey’s libertarian bourgeois virtues, and responsible for achieving the best deal when sub-contracting production to a Honduran clothing manufacturer, really cares about the working conditions of those who actually carry out the work that fulfils his order. Likewise, it is hard to take seriously McCloskey’s claims that Walmart or McDonald’s really care about their customers in any way beyond their effect on the bottom line.

McCloskey’s libertarian streak also shows in her neglect of the political dimension of human living, both with regard to capitalism's own political foundations, and our bourgeois society's concerns with social justice and power.

Capitalism is not about particular human motivations, like greed, or particular economic innovations, like markets, money, or banking (which many non-capitalist societies have had). It is a way of organising a whole society that is closely related to Locke's liberal political philosophy, in which the state is justified by the interest of its members in the protection of their property in the threefold sense of life, liberty, and estate (cf the US Declaration of Independence). 

So far so McCloskey. But what McCloskey seems to forget is that capitalism was, and is still, a political project. It required dramatic changes to institutions that could only be achieved at the political level, including state consolidation and rationalisation; laws and courts; harmonisation of standards; removal of feudalistic relationships and the introduction of commercial ones, like contracts and corporations; etc. It is this political dimension, reflecting a society's active collective choice and commitment to capitalism, over and above their particular culture, religion, or ethical values which explains the appearance of sustainable commercial societies in a few countries in the 17th Century, and the gradual appearance of more such societies, all with significant local variations, from Singapore to Japan.

McCloskey also neglects - or rather, rejects - the political dimension of contemporary bourgeois societies, and this is somewhat puzzling and unconvincing given her frequent approving comments about the entwining of liberal democratic and liberal commercial values. Obviously one can be for democracy but against democratic politics in practice - just as one can be for individual free choice but against many choices people actually make - but it is still somewhat strange to expect that one can constrain the latter without giving up the former. All rich commercial countries, including the USA, have large governments tasked with social justice not libertarian minimalism (in the OECD, spending 40-60% of GDP), and that, I suggest, is no coincidence. The state is a fundamental part of bourgeois society.

McCloskey's ardent support for Market Capitalism is mirrored by her vehement distaste for Big Government, which apparently does not deserve our Faith or Hope. But liberal politics, in the modern sense that spills over from the local town hall to national and even global concerns, seems a natural and essential part of bourgeois life. To be bourgeois is to be concerned with justice as well as house-prices, but justice is a political virtue, not merely a social one.

Indeed much of what makes bourgeois life possible and bourgeois society attractive to so many (including the citizens of non-bourgeois societies who vote with their feet), from public goods to fair laws, would be hard to achieve in any way except politically. It was, for example, social justice movements that confronted (and continue to confront) powerful establishments to end race, gender, and sexuality based discrimination and they did it by appealing to a vision of universal principles, not through piecemeal consensual agreements. It was bourgeois politics that invented modern distributive justice - based on the claim that people have needs that society has a duty to meet - and rejected the pessimistic induction that the poor must always be with us. Bourgeois politics also gave us the public health vaccination programmes, urban sanitation systems, comprehensive education systems, etc. that achieved most of the enormous extension of lifespan and quality of life that McCloskey rightly associates with commercial societies (and note that the more income unequal the society, the smaller such programmes and the lower the lifespan of both poor and rich - previously).

Bourgeois politics, like capitalism, is not evil. To assert that it leads to totalitarian government is as unfair, and unfounded, as saying that capitalism leads to slavery. Democratic government is not "the problem". In fact it works pretty well in providing the circumstances in which good human lives, and commercial society itself, are possible. But, like McCloskey's vision of capitalism, it is certainly a project that we could make even better - more ethical, more effective, less wasteful - a project that deserves and requires our hard work and commitment.

The Bourgeois Virtues is the first of a projected 6 volumes and is intended to outline McCloskey's case and provide the philosophical foundations for her whole project, while postponing other issues for later. But you don't have to wait for or commit to reading the future volumes, for this beautifully written, deeply insightful, deliberately provocative contribution to ethics and economics stands on its own merits. As McCloskey admits, rehabilitating the bourgeoisie from the accumulated scorn of many generations of intellectuals is a mammoth undertaking. But she has certainly converted me.

Update: I noticed when I was putting this up that Volume 2 - Bourgeois Dignity: Why Economics Can't Explain the Modern World - has just been published and it looks great. If I have time I'll review it here too. (In the meantime, see here for a precis of the argument of the new book.)