The Moral Economy

by Paul Heyne

As an economist living in Seattle in November 1999, I found myself and my profession "attacked." The scheduled meeting of the World Trade Organization (WTO) had galvanized anti-market groups throughout the world. In the months preceding the WTO gathering, the local media reported regularly on the plans and pronouncements of activists who would be assembling in Seattle to publicize their discontents.

It soon became apparent that for the activists, with the exception of labor union members, most of whom had a much more limited agenda, the WTO was the occasion and not the central issue. The great majority of the protesters wanted to abolish a global system that they claimed was responsible for most of the evils in the modern world: layoffs and declining wages in the United States, poverty and exploitation in developing countries, worldwide environmental degradation, glaring and increasing inequalities everywhere, and even the population explosion. Their basic agenda is stated in the full title of a 550-page collection of forty-three essays edited by Jerry Mander and Edward Goldsmith and first published in 1996, with contributions from all the leading figures in the movement: The Case Against the Global Economy (San Francisco: Sierra Club Books). The global economy is not, in their view, the evolved product of millions or even billions of people pursuing their interests, but rather the designed product of a small set of powerful corporations. The bible of the protesters is a book by David C. Korten, first published in 1995: When Corporations Rule the World (West Hartford, Conn.: Kumarian Press; San Francisco: Berrett-Koehler). The "when" of the title refers not to some future time but to the present.

Jack Powelson also cares deeply about the power that some people are able to exercise over others and about every one of the problems that so disturb the enemies of the WTO. Like David Korten, he has spent considerable time in poor nations, and, also like Korten, he gives evidence of genuine compassion for the disadvantaged. But his diagnoses and prescriptions are about as far as they could possibly be from the diagnoses and prescriptions of Korten and most of the writers represented in The Case Against the Global Economy. Powelson and Korten seem to be talking about two different worlds. How could this divergence have arisen? How can intelligent and informed people with almost identical concerns construct such contradictory recommendations for a world they have in common? Let me suggest the answer. Powelson, professor emeritus of economics at the University of Colorado, understands and employs the perspective of economic theory. Korten, on the other hand, tells us in the prologue to his book, in a section titled "Disclosure Statement": "I first encountered economics in college when I chose it as my undergraduate major. I soon found it mechanistic, boring, and detached from reality, so I switched to the study of human behavior and organization."

"In a moral economy, with today’s technology," Powelson begins his book, "no one should be poor." Because Powelson wanted to know why most of the world’s people were nonetheless poor, he began about a quarter century ago "to read voraciously in histories all over the world" (p. ix). In 1994 the culmination of his reading, reflection, and analysis was published as Centuries of Economic Endeavor: Parallel Paths in Japan and Europe and Their Contrast with the Third World (Ann Arbor: University of Michigan Press). In The Moral Economy, he now attempts to describe the world of the future on the assumption that the most enduring trends observed in the past will continue. It is an optimistic book, because the trends he perceives can lead eventually to a world in which moral behavior will become routine in the sphere of economic activity, as people find it in their own interest to behave morally. Economic and political power will be diffused so that no person or group, including the government, is able to dominate others. Those who wish to contravene the rules will be disciplined by the market. "The moral economy," Powelson writes, "captures the benefits of technological invention through classic liberalism while using sidewise checks and balances to prevent environmental damage, ethnic and gender bias, and distorted distributions of wealth... In the moral economy, governments facilitate but rarely mandate" (p. 19).

Balance of power is the key to the moral economy, and the book abounds with suggestions about how the power of some to dominate others can be constrained. Powelson rejects libertarianism, because it has no role whatsoever for government, in favor of classic liberalism. This orientation manifests itself throughout the book in his concern for the freedom of individuals to make their own choices, under the constraint of rules in whose making they have participated, and in his high regard for the capacity of markets to constrain power while coordinating diverse projects. These elements are strikingly absent from the analyses and prescriptions of the foes of globalization.

The book is rich in insights, instructive examples, and practical proposals. The preface mentions the many dialogues — with neighbors in Boulder, economists, professionals in other disciplines, family members, and anonymous reviewers — from which the book eventually emerged. The final product shows the traces of much discussion, which is all to the good.

The substantive part of the book begins with an instructive chapter on "Power and the Market," in which Powelson introduces the useful notion of "vicarious power." This is the power citizens want to exercise through government over the decisions of other citizens simply because they believe there is one right way, their way, to deal with such matters as education, health care, or making provisions for retirement. Next come chapters that examine the sources and potential remedies for poverty, environmental degradation, excessive population growth, and gender and ethnic bias, along with proposals for improved provision of welfare, retirement income, and health care.

Subsequent chapters pertain to how we establish accountability, the role of trust in economic systems, management practices under different sets of incentives, the nature and importance of property rights, the operation and control of monetary systems, the proper roles of law and regulation, the causes and cures of corruption, appropriate principles of taxation, the large topics of education and religion, and the evolution of a shared sense of morality that would be an essential underpinning for a globalized moral economy.

The passionate foes of the WTO see globalization as a process that is destroying the earth, perpetrating vast injustices, and being imposed by a small circle of powerful corporate leaders. Powelson sees globalization as a process that offers a prospect of ending poverty, correcting injustice, and halting environmental degradation. He sees it emerging slowly from the evolution of a higher morality along with expanded understanding of the institutions that can control power and facilitate tolerance and cooperation.

I doubt that many of those for whom David Korten’s book is authoritative could be persuaded to read Jack Powelson’s. Moral concerns about politics and economics seem for many people to override completely any obligation to pay attention to the arguments of those who disagree. The Moral Economy exemplifies a rare thing: a book by an author deeply concerned about establishing a moral economy who tries to look at the evidence and to pay attention to all viewpoints. It deserves a much wider readership than it is likely to receive. I wish it could find at least an equal place with When Corporations Rule the World on the reading list of the religious leaders who decided to join the Seattle demonstrations on behalf of God.

Paul Heyne, University of Washington

The unabridged review may be found here.

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DAVID KORTEN and JACK POWELSON

by J.D. von Pischke, a Friend from Reston VA, and a board member of TQE

David Korten was my best man in 1967 and some 20 years later Jack Powelson was one of my best friends.  I first met Dave and his wife Fran at Haile Sellassie I University, where they were on Fulbrights and I was a Peace Corps volunteer. Dave and Fran taught organizational behavior while I taught econ and money and banking. We became good friends and even spent one Christmas break, with two other Peace Corps guys, on a two-week Land Rover trip to Ethiopia’s southern side, crossing lots of rough country and desert, never once putting up the canvas roof.

On one memorable day Dave was drafting a letter to the Secretary of the Air Force requesting that he be relieved of his ROTC obligation and Reserve status due to age and other activities. The incoming mail that day included a letter from the Secretary of the Air Force informing Dave that he had been promoted to captain. After Ethiopia, Fran and he lived in the Washington DC area, he on active duty analyzing issues such as the optimal speed of US Army convoys moving through Vietnamese villages: basically a trade off between flattened chickens and children and the logistical requirements of our troops.

Dave and Fran were leaders — bright, upbeat PhD’s — and always good company. Dave had an almost perpetual smile and a ready laugh. He grew up in Oregon (Washington?), where his father owned a highly successful electrical appliance business.  He went to Stanford for his PhD and later taught at Harvard Business School. Dave was friendly and also contemplative, using time for himself, while Fran was engagingly spontaneous and gregarious. Each was generous. They had a wonderful marriage. They were not religious, but enjoyed Watts’ writings and the California thing or pseudo thing in the 1960s and 70s. Neither had an ear for foreign languages.

Dave and Jack moved away from their ideological and intellectual starting points, going far beyond. Jack has disclosed his socialist post-Depression-era sympathies — "Votez  Communiste!" — while Dave was associated with corporate America. Each wrote obscure books —Jack on a history of land reform and and Dave on cultural traits and economic performance —  before they moved on to the topics and issues that defined their careers. Each had worked for "the enemy," and turned then his back on it. Dave’s orientation changed while he and Fran lived in the Philippines and Indonesia, where they worked very creatively for the Ford Foundation. He also consulted for USAID and set up his People-Centered Development Forum, one of the earliest virtual organizations based on communication rather than location.  He became increasingly dissatisfied, seeking a new paradigm. After moving to mid-town Manhattan, Dave produced his magnum opus. Dave and Jack think globally: Corporations and Centuries are painted on large canvasses, but with greatly different brushes, techniques and media.

Gretel and I are no longer in touch with Dave and Fran. He consulted for the World Bank when I was a relative newcomer there. Later he refused to enter the World Bank building, even to attend a meeting of the nonofficial Quaker Group (which Jack has addressed). He wondered aloud "what the World Bank is doing to JD?" By that time our compasses were pointing in opposite directions. Some time later the annual exchange of Christmas letters ceased.

— J.D. von Pischke