Cadmus

New Paradigm in the Service Economy The Search of Economics for Scientific Credibility: In between Hard and Soft Sciences

2.2 The Monetarization of the Economy Developing Capitalism
The second essential characteristic of the Industrial Revolution has been the monetarization of the economy. Money has, of course, always existed in some shape or form, either directly (gold or silver or copper coins), or indirectly (exchanging three goats for one horse implies the existence of an exchange-value component which is one of the typical connotations of money). However, until the beginning of the Industrial Revolution only a very minor part of all economic activities had entered the monetarized system.

In a pure agricultural society the vast bulk of production and consumption does not enter the exchange system where money has its origin. Trade in fact gives rise to money. Even if we take into account the glorious histories of the caravans, which times past travelled Europe and the rest of the world or the numerous towns of Renaissance Europe which flourished as international market places for certain parts of the year, its quantification will show that a very limited part of all the goods produced and consumed in those times was exchanged within a monetarized system.

It has been calculated that up to the 16th century, no more than 1% of the average life of a European was organized in a monetarized system (the time spent in selling his time for money or using his time for trading).* Today, the corresponding percentage would be at least over 16%.

It is also very revealing that, at a time when kings and aristocrats were the rulers they often possessed little money since money was not an indicator of real power. The fact that banking activities could often be developed by marginal groups which did not really belong to the upper classes, shows that, up to the beginning of the Industrial Revolution, money was still a secondary tool in societal organization, something that could be left to those who did not form an integral part of that organization.

In the past money has always been linked to limited (by modern standards) trading activities and, until the beginning of the Industrial Revolution, very little or no recognition was given to it as a means of stimulating production.

It is not because Pope Gregory XII in the 13th century was particularly conservative or exceptionally moral, that the notion of interest on money was condemned by the Catholic Church. It was because money lending for interest, not being linked to any productive function, was equated with usury, which was simply a way of making the poor poorer. Before the Industrial Revolution, having debts was always “bad”. Today, in most instances it is the very nerve of investment.

Here again we must recognize the importance of Adam Smith and the social weight of his moral convictions. In his book on the Wealth of Nations he completely reverses the “moral” attitudes of the past centuries. He clearly states that the God-loving person, one who avoids sin and endeavours to cultivate the most acceptable moral and social attitudes, is the person capable of saving. Savings, which were potentially a sin before the Industrial Revolution had, with the beginning of the new era, become a measure of moral worth especially in those countries which witnessed the first waves of the industrialization process.

Saving, hard and virtuous saving, is then the prime capitalist virtue: through his accumulated money the capitalist is able to buy the machines or tools which the new Industrial Revolution needs if it is to develop within a specific environment outside the farm or cottage.

Increased specialization depends on more trade; and trade increases require more money. Greater availability of money makes it possible to save more and therefore to create capital for investing in new production activities. This, then, is how the mechanism works, through a process which has monetarised the industrial world on today’s vast scale.

As we have seen, the development of new moral and cultural attitudes parallels the emergence of new production processes and technologies. There can be no question that Adam Smith succeeded in making a virtue out of saving. One hundred and fifty years later, with John Maynard Keynes, even dis-saving (creating debts) would, in his time (when the situation was clearly deflationary), come to be considered a virtue rather than a vice.

Only during the second half of the 19th century did banks, which up to 1800 were mainly involved in trading, start to contribute to the saving and investment functions of the Industrial Revolution. In Adam Smith’s day, money used for investment amounted to no more than 5% of total sales in a given industrial activity. During the 19th century this percentage (as a function of increased concentration and productivity of the new technology) approximately doubled. Various savers (capitalists) joined together to share the ownership of a new industrial venture. Thus the “corporation” or sharing of ownership came into being. Corporations grew and started to spread their shares beyond the restricted circle of new enterprise initiators. Banks then entered the picture as a professionalized system for collecting savings from all sectors of the population and then began to function as intermediaries in channeling those savings towards productive activities.

It is important to distinguish between the forms that monetarization took before and after the Industrial Revolution. Before the Industrial Revolution, monetarization of the economy was a relatively marginal phenomenon. Its acceleration and development as an element essential to the functioning of the manufacturing process, however, are typical of the Industrial Revolution. Parallel to this, a shift of power occurred as society moved from the pre-industrial to the industrial state. In the latter case the very control and availability of money became an instrument of power, both social and political, whereas in pre-industrialized society power could be, and indeed was, exerted outside the direct control, and independently, of the few directly monetarized activities in social life.

In this sense, when we speak of capitalism, we are merely alluding to the sociological and economic aspects of this fundamental phenomenon: the monetarization of the economy as an essential part of the Industrial Revolution. The Industrial Revolution, therefore, cannot but be capitalist. The only important political question we need to resolve then is to what extent capitalism (the monetarization of economic activities) is compatible with, or even requires, a specific degree of political democracy. In any case even a Communist society, undergoing an Industrial Revolution is, in this sense, of necessity, capitalist to some extent.

This analysis of the process of monetarization born of the Industrial Revolution also suggests that there is an equilibrium somewhere between those activities which are more efficiently developed and managed through a monetarized system and those outside it.

Clearly, the process of improving and diffusing monetarization has still a long way to go at the planetary level. Nevertheless, we can today put forward some new questions: which type of productive activities (in a general sense) can be better stimulated through a monetarized system and which through a non-monetarized one? Which blend of monetarized and non-monetarized contributions would be most suitable for each of the main types of productive activity? How far should, and can, monetarized (and non-monetarized) systems go?

2.3 The Utopia of Certainty
The constantly renewed and increasingly efficient struggle against scarcity initiated by the Industrial Revolution can be traced to the search for a paradise lost, free of any anxiety about the need to fight for survival. As a general rule, the idea of progress is defined as utopia, where the normal uncertainty of real life will have been replaced by the dream of achieving some form of eternity through universal truth based on definitive certainties.

Before the European Renaissance this type of progress was essentially linked to a religious vision in which the churches played various intermediary roles between the ultimate certainty (the problem of death) and uncertainty (the reality of life).

“There appears to exist a constant pulse, a striving towards certainty which precludes any acceptance of uncertainty, probably caused by the persistence of ancestral fears.”

With the spread of Cartesianism, i.e. the development of scientific knowledge verified by experimental evidence, with the further development of positivism and benefiting from the evidence of the great advances in scientific discoveries of the last centuries, western civilization had lived a specific type of dream. It believed that by mastering reality “scientifically”, piece by piece, one would one day come very close to the universal truth.

Pascal once said: Science is like a ball in a universe of ignorance. The more we expand knowledge the greater the ignorance encountered by the ball’s expanding surface.

In fact we measure the advance of science by the growing number of questions we seek to answer. Science is more about man’s ability to frame questions than his capacity to provide guarantees about the veracity of the answers given.

In addition, so-called scientific observations and analyses always reach the point where, as they fail to apply under changing conditions, their limitations begin to be apparent. When philosophers, who are after all the fathers of physics, believed that the earth is flat, this theory was perfectly valid for a humanity moving on foot, at low speeds and over a limited part of the earth. The fact that the earth is round was of no particular use during the Roman Empire. The knowledge that the earth is almost round and that it is rotating in a certain way is clearly necessary for organizing air traffic. In the same way, to take the matter one step further, the knowledge that outer space is curved is of no immediate interest to local air traffic on earth, but is essential to space travel. From the standpoint of its application, no knowledge has to be a universal truth to be valid. It is its relevance and application in given space and time conditions, which make it valid and valuable.

At the political level, the Industrial Revolution introduced an assumption that every nation should have its independent state. It is too soon to judge, but overall this has probably been a useful historical step. On the other hand the definition of a nation in modern times is probably less clear-cut than it was when nations were simply tribes. In the modern world the notion of what constitutes a nation has become increasingly vague. The difficulty is that nationalism grows in particular in those who do not feel integrated among the people with whom they live and who, in trying to compensate, go too far. There appears to exist a constant pulse, a striving towards certainty which precludes any acceptance of uncertainty, probably caused by the persistence of ancestral fears. After all, in the course of the Industrial Revolution, political and ideological manifestations of the principle of certainty (frequently in the guise of nationalism and Communism) have provided justification for the unleashing of some of the most barbaric trends in human history. The mass-production achievements of the Industrial Revolution, when pressed into the service of barbarian impulses, have become awful mechanisms. That this was possible at all was due to the habit of looking for certainty and universal truth, which can all too easily be used as instruments for singling out those who are “beyond the ideological pale”, who do not subscribe to the “truth”.

“Certainty and nihilism are twin brothers: both fail to accept reality, the possibility of change, of contradiction.”

Enthusiasm and idealism for achieving new goals are essential to man’s development provided it is always the “better” that is sought and allowance is made for changing the conditions which will permit “even better” or “better still” at some subsequent stage. The quest for the “best possible” which automatically rules out any change or alternative is no more than man’s desperate attempt to eliminate human anxiety by applying the principle of certainty beyond its limits of applicability in time and space. The search for certainty, very much a part of the mobilizing utopias of the Industrial Revolution, is also a source of nihilism. Certainty and nihilism are twin brothers: both fail to accept reality, the possibility of change, of contradiction, or of modification of even the most advanced scientific ideas, those of Einstein included. As the sun sets over traditional western-born ideologies which for two centuries have conditioned the world, the utopia of worldly certainty provides a platform from which to launch a final attempt to secularize religion and metaphysics.

Uncertainty provides the raw material for searching, for asking, for developing, for creating, for doing. When uncertainty reaches intolerable levels, of course, it must be reduced. But the most intolerable level of uncertainty in life is that of full definitive certainty, because this is the point of death and here the choice will depend on what each and every one of us believes as individuals.


* Evaluation made by Ivan Illich in a paper on Shadow Work, presented to a conference at the University of Kassel, September 1980.


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