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The Invisible Handcuffs of Capitalism: How Market Tyranny Stifles the Economy by Stunting Workers
Mainstream, or more formally, neoclassical, economics claims to be a science. But as Michael Perelman makes clear in his latest book, nothing could be further from the truth. While a science must be rooted in material reality, mainstream economics ignores or distorts the most fundamental aspect of this that the vast majority of people must, out of necessity, labor on behalf of others, transformed into nothing but a means to the end of maximum profits for their employers. The nature of the work we do and the conditions under which we do it profoundly shape our lives. And yet, both of these factors are peripheral to mainstream economics.
By sweeping labor under the rug, mainstream economists hide the nature of capitalism, making it appear to be a system based upon equal exchange rather than exploitation inside every workplace. Perelman describes this illusion as the “invisible handcuffs” of capitalism and traces its roots back to Adam Smith and his contemporaries and their disdain for working people. He argues that far from being a basically fair system of exchanges regulated by the “invisible hand” of the market, capitalism handcuffs working men and women (and children too) through the very labor process itself. Neoclassical economics attempts to rationalize these handcuffs and tells workers that they are responsible for their own conditions. What we need to do instead, Perelman suggests, is eliminate the handcuffs through collective actions and build a society that we direct ourselves.
By sweeping labor under the rug, mainstream economists hide the nature of capitalism, making it appear to be a system based upon equal exchange rather than exploitation inside every workplace. Perelman describes this illusion as the “invisible handcuffs” of capitalism and traces its roots back to Adam Smith and his contemporaries and their disdain for working people. He argues that far from being a basically fair system of exchanges regulated by the “invisible hand” of the market, capitalism handcuffs working men and women (and children too) through the very labor process itself. Neoclassical economics attempts to rationalize these handcuffs and tells workers that they are responsible for their own conditions. What we need to do instead, Perelman suggests, is eliminate the handcuffs through collective actions and build a society that we direct ourselves.
280 pages, Paperback
First published January 1, 2011
4 people are currently reading
162 people want to read
About the author
Michael Perelman
40 books28 followersMichael Perelman (born October 1, 1939) is an American economist and economic historian, currently professor of economics at California State University, Chico. Perelman has written 19 books, including Railroading Economics, Manufacturing Discontent, The Perverse Economy, and The Invention of Capitalism. A student of economics at the University of Michigan and San Francisco State College, Perelman earned a Ph.D in agricultural economics from the University of California, Berkeley in 1971, under supervision of George Kuznets. Perelman writes that he was drawn away from the "framework of conventional economics," noticing that the agricultural system was "consuming ten times more energy than it was producing in the form of edible food." Perelman's research into how "profit-oriented agricultural system created hunger, pollution, serious public health consequences, and environmental disruption, while throwing millions of people off the land" led to his first book, Farming for Profit in a Hungry World (1977). Perelman continued to write extensively in criticism of conventional or mainstream economics, including in all his books (and especially his books published from 2000 to date), papers and interviews.
Although perceiving flaws in Marx's work as it is typically interpreted in the context of its modern reading, Perelman writes that "Marx’s crisis theory was far more sophisticated than many modern readers had realized," focusing on an interpretation that is largely bypassed by many readers of Marxian economic thought. Perelman views Marxist theory as vindicated through its account of crises that a capitalist economy must inherently generate.
Perelman has appeared on a number of programs, including Media Matters, Pacifica Radio, KPFA 94.1 Berkeley, and WBBR (Bloomberg Radio).
Although perceiving flaws in Marx's work as it is typically interpreted in the context of its modern reading, Perelman writes that "Marx’s crisis theory was far more sophisticated than many modern readers had realized," focusing on an interpretation that is largely bypassed by many readers of Marxian economic thought. Perelman views Marxist theory as vindicated through its account of crises that a capitalist economy must inherently generate.
Perelman has appeared on a number of programs, including Media Matters, Pacifica Radio, KPFA 94.1 Berkeley, and WBBR (Bloomberg Radio).
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Displaying 1 - 9 of 9 reviews
January 9, 2021
For a reader looking for a book explaining in understandable language why capitalism doesn't work, and can't work, for regular working people and an explanation of why mainstream economics is theology rather than science, Invisible Handcuffs is what you are looking for. For an experienced reader who already knows this, this is also a highly useful book.
Mainstream economics substitutes mathematics and blind faith for human beings and human relationships. The author explains how economists conceptualize the economy as an aggregate of consumers who determine what is produced. Absent are the conditions in the workplace, the unequal relations there and the inequality of power within the workplace and society as a whole. This reduces everything to individual behavior, so if you are struggling to pay the bills (as most people do), that is an individual failing, not a consequence of an economy that not only doesn't provide enough jobs but doesn't want to — high unemployment is a most welcome disciplinary stick for capitalists.
The author writes:
"At first, this thinking emerged in academic economics theory. Then, some leading intellectuals began to push a popularized line of thinking, explicitly counseling workers not to see themselves as exploited members of the lower class. Instead, they advised workers to look beyond their immediate working conditions—no matter how horrible—and seem themselves as equal participants in a consumer society. … By this intellectual sleight of hand, economics reconceptualized the mass of often surly workers into an obedient collection of content consumers, aspiring only to shop in elite venues such as Neiman Marcus."
We of course spend large numbers of our life in workplaces, generally with little or no control over our conditions. Even if we were all able to enjoy pleasant working conditions, the workings of an economy can't be understood without understanding the relations within workplaces and the processes of production. We aren't simply consumers, and businesses don't cower in the face of consumer preference. But by eliminating any notion of class, mainstream economists can reduce the complexities and inequalities of a modern capitalist economy to merely an aggregate of consumers choosing freely what to buy in a free marketplace. That, obviously, bears no relation to reality.
The author draws on a huge amount of research as the book covers the beginnings of capitalist ideology in the time of Adam Smith to the present day, and the broad scope of how and why capitalism does so much damage to those who must work in it by stunting the development of workers' capacity. There are several examples of where workers began making decisions on the shop floor in order to make production more efficient and less dangerous, only to have management take away the information and space to do so, even when taking back that control actually meant a hit to profits. Capitalism is a system of control and rigid hierarchy, reinforced by an endless barrage of self-serving propaganda.
Invisible Handcuffs is written in a very accessible style for readers who have little background but is so full of useful information that for the reader well familiar with the concepts, the book provides much background information useful for our own arguments and debates.
Mainstream economics substitutes mathematics and blind faith for human beings and human relationships. The author explains how economists conceptualize the economy as an aggregate of consumers who determine what is produced. Absent are the conditions in the workplace, the unequal relations there and the inequality of power within the workplace and society as a whole. This reduces everything to individual behavior, so if you are struggling to pay the bills (as most people do), that is an individual failing, not a consequence of an economy that not only doesn't provide enough jobs but doesn't want to — high unemployment is a most welcome disciplinary stick for capitalists.
The author writes:
"At first, this thinking emerged in academic economics theory. Then, some leading intellectuals began to push a popularized line of thinking, explicitly counseling workers not to see themselves as exploited members of the lower class. Instead, they advised workers to look beyond their immediate working conditions—no matter how horrible—and seem themselves as equal participants in a consumer society. … By this intellectual sleight of hand, economics reconceptualized the mass of often surly workers into an obedient collection of content consumers, aspiring only to shop in elite venues such as Neiman Marcus."
We of course spend large numbers of our life in workplaces, generally with little or no control over our conditions. Even if we were all able to enjoy pleasant working conditions, the workings of an economy can't be understood without understanding the relations within workplaces and the processes of production. We aren't simply consumers, and businesses don't cower in the face of consumer preference. But by eliminating any notion of class, mainstream economists can reduce the complexities and inequalities of a modern capitalist economy to merely an aggregate of consumers choosing freely what to buy in a free marketplace. That, obviously, bears no relation to reality.
The author draws on a huge amount of research as the book covers the beginnings of capitalist ideology in the time of Adam Smith to the present day, and the broad scope of how and why capitalism does so much damage to those who must work in it by stunting the development of workers' capacity. There are several examples of where workers began making decisions on the shop floor in order to make production more efficient and less dangerous, only to have management take away the information and space to do so, even when taking back that control actually meant a hit to profits. Capitalism is a system of control and rigid hierarchy, reinforced by an endless barrage of self-serving propaganda.
Invisible Handcuffs is written in a very accessible style for readers who have little background but is so full of useful information that for the reader well familiar with the concepts, the book provides much background information useful for our own arguments and debates.
February 2, 2015
For a longer and more conclusive version of this review, please visit https://scottandrewhutchins.wordpress... .
This book has my highest possible recommendation. I think it should be required reading for all people, especially those who adore Adam Smith (but probably haven't read the breadth of his work). Although Perelman does not invoke the term pseudoscience (as "pseudo-science") until page 195, this book is a scathing critique of neoclassical economics as a religious and faux-scientific discipline, and he ties it all directly back to Adam Smith, and back even further to the Greek myth of Procrustes. For a Procrustean, a job is a job is a job, no matter how much it pays or its impact on a person's quality of life, health, or lifespan. It is simply an exchange of disutility (work) for utility (purchasing of commodities), in the minds of these pseudointellectuals. Perelman cites a study by Richard Thaler and Sherwin Rosen discussing the probability of death on the job, citing that there is a downward bias because poor people are more likely to accept dangerous jobs.
Thaler quickly realized the weakness of his results. His friends told him they would never accept anything less than $1 million in return for the increasing their chances of dying by 0.1 percent. Paradoxically, the same friends would not be willing to sacrifice any income to reduce the probability of dying on the job. "How would economists' subjective evaluation of their own welfare possibly change if they found themselves subjected to the imposition of long hours of grueling physical labor? I think any rational person knows the answer" (124).
There are some very sick people out there, and we have a system that encourages them called capitalism that should be called Procrusteanism. "Economists seldom realize that, like work, leisure can be productive and that fulfilling work might actually create more utility than leisure. None of that matters within the theory because economists simply assume that work is nothing more than the loss of leisure" (72). "Within this world," Perelman elucidates us, "an accountant with a college degree could replace a star center on a professional basketball team without a college degree" (109). Overpaid hack Michael Cox thinks it's great when essential workers, such a firefighters, have to work two jobs to be able to afford to live in New York City. "It gives you portfolio diversion in your income;" implicitly financializing the job market. Cox one-ups Smith by recasting workers as investors. "If only the poor, benighted workers could figure out how to extend the working day beyond 24 hours, they could divide their work among hundreds of jobs. I wonder how Dr. Cox would feel, however, if groggy but well-diversified firefighters arrived to save his house already so exhausted from their other job that they could not perform their duties effectively" (124-5). "Economists presume that work is simply the absence of leisure, and that only the duration of time on the job creates a negative utility. People are free to adjust their hours of work to maximize their utility per hour of work, as if a worker had the choice to take off work forty minutes early in order to maximize utility. Unemployment, even during serious depressions, reflects an increased preference for leisure over work" [based on [author: Robert E. Lucas, Jr.] Business Cycles The Yjiro Januson Lectures (118). Joseph Schumpeter sees cycles of depressions and recessions as necessary to competition. He is mostly admired for the phrase "creative destruction," while his more challenging ideas, such as this, are ignored (131).
"Procrusteanism presents itself as the only way to create prosperity, yet Procrusteanism itself cannot flourish amid prosperity. Prosperity undermines efficiency in a market economy" (130). Drawing on Greg LeRoy's The Great American Jobs Scam Corporate Tax Dodging and The Myth of Job Creation, Perelman tells us that the top 200 largest corporations in 2000 "employed a mere 0.78 percent of the workforce even though their sales accounted for 27.5 percent of world economic activity. That business is not particularly good at creating jobs--especially good jobs--should come as no surprise. Wall Street rewards corporations for eliminating jobs, not creating them. Profits rather than jobs are the highest priority of business leaders" (30-31). And yet they, like Mitt Romney, proclaim themselves the "job creators" and demand huge tax subsidies as rewards for their nonexistent generosity. He cites how the work of John Maynard Keynes (about whom he details quite unpleasantly late in the book, which can easily be summed up in one sentence: "Although Keynes looked forward to a time when people could flourish, his vision of flourishing almost seemed to be limited to those already living in a more refined manner" (285).) is wrongly interpreted as advocating more government spending, when what he said was that government is necessary to create sufficient jobs because business does not produce enough investment to keep the economy healthy (262).
Neoclassical economics took a long to to take hold, let alone become mainstream. That it is a pseudoscience is made clear on page 76. Although Smith had tied his version of economics to Newton (196), himself the product of a public education, economists like Henry Dunning Macleod made the leap in the 1860s.
In other words, economists love their little equations, but they have no basis in economic reality, which is why their models keep coming up untrue, causing massive growth at the top and massive shrinkage at the bottom, particularly the downward mobility of the majority of the middle class since 1980.
On pages 70 and 71, he mentions two economists I find stunning were allowed to have their inanities published in a peer reviewed academic journal: Clark Nordling and Steven Cheung. So devoted are mainstream economists to the idea that all work is a voluntary, even exchange, a dubious notion if ever there was one, that Nordling claimed in Explorations in Economic History that children working in factories voluntarily chose to have their employers beat them, while Cheung, writing in Journal of Law and Economics, claimed "that riverboat pullers who towed wooden boats along the shoreline in China before the revolution of 1949 agreed to hire monitors to whip them to restrict shirking" (71). It boggles the mind how anyone could take such notions seriously. Perelman cautions us that we must take such notions seriously, even knowing them to be erroneous, because so many with wealth and power take them seriously. Perelman goes on to show us how the Chicago School of Economics routinely rejects empirical evidence that does not fit with their dogma, such as the unscientific dismissals of separate studies by David Card and Alan Krueger and Richard A. Lester (not to be confused with the eponymous brilliant comic filmmaker) demonstrating that increasing the minimum wage does not increase unemployment. Perelman quotes at length from the aforementioned Sherwin Rosen's scienceless dismissal of Card and Krueger on page 82. At no point does Rosen cite any specific flaws or errors with Card and Krueger's data or their analysis of it. He just cannot accept a study that does not fit his dogma, and Perelman cites Deirdre McCloskey and Melvin Reder who have served on the University of Chicago's faculty, talking about how closely the school clings to old theories in the face of empirical evidence. Neoclassical economics is a religion. Card and Krueger shied away from such controversial work for the sake of their careers (81). Perelman further cites the example of William Stanley Jevons's analysis of how working conditions, such as repetitive movements in a factory, have a profound impact on efficiency and productivity. "Jevons's 'sin' was not that his analysis was imperfect, which it was. Instead Jevons's offense was that he opened a window on the imperfection of the emerging economic consensus about economic theory" (97) Indeed, Rosen lamented that Thaler took his career into behavioral economics, which is more associated with business academia than economics academia, in spite of the name, dismissing Thaler's later work as wasted on trivialities (107). Merton Miller, another of the Chicago faculty, refused to even speak with Thaler or Card and Krueger but leveled heavy and vague criticism against the latter pair (107). Circular reasoning, universally recognized as illogical, is a favorite tool of right-wing nutjobs, and economists are no exception. George Stigler, "and his allies used enough invective to satisfy their colleagues that Lester must be wrong because his data was inconsistent with their theory" (81). "Lester and Card did not fail to convince their fellow economists because of errors in their work. Most economists either ignored their results or, worse yet, rejected them out of hand because they conflicted with their cherished beliefs" (82). "The example of a statistical life illustrates the opportunistic ways economists avoid looking into questions regarding, work, workers, and working conditions except when they can cherry-pick some useful results" (106). "Stigler did not mean the leisure and health of the workers, but that of their employers. CEOS often trade profitability for personal vanity--golf, private jets country clubs. Stigler wants us to ignore waste... [and] declared that unless economists can wrestle waste onto a simple mathematical box, economists must not take such a 'mighty methodological leap'" (102). "[Harvey] Leibenstein's sin was to suggest a line of research that would require economists to look at the way things are produced rather than confining themselves to the transactional side of the market" (103).
The so-called liberal "media rarely notice deaths in the workplace or the prevalence of poor working conditions...The maximum punishment for willfully violating safety laws is a six-month sentence, half the maximum for harassing a wild burro on public lands" (58). "When such disasters [as Bhopal] occur, workers suddenly come into the forefront--not so much as victims, but rather as culprits who are supposed to bear the ultimate responsibility for the damage. Unmentioned is the nearly forty-year effort by employers to disempower unions left workers and regulators with less opportunity to effectively push for improvements in workplace safety" (60). He notes that the only workers covered in newspapers, in spite of large business sections, are professional athletes that most newspaper readers can't afford to see at work, anyway, which also fits for almost anyone whose career is covered by the arts and entertainment section of the paper (108). The Wall Street Journal once had an article honoring Bonnie Lovelette Rooks, who was still working as a janitor at a steel factory at the age of 79 because she needed the money to pay for her health care. "The tone of the story was not an expression of sympathy for Ms. Rooks; instead, it exuded and appreciation for the potential of extending working years worthy of Procrustes. Business has good reason to applaud the long career of Ms. Rooks, although she has less cause to appreciate the economic conditions that left her with so much responsibility for an unaffordable medical system" (127).
"Before modern technology was important in production, considerations of labor were of great importance to economic thinking. The early political economists (as economists of the time were known) advocated policies to increase the amount of work, which, in turn, would make the nation more prosperous. Either directly or indirectly, they supported policies to drive people from producing goods for their own needs, forcing them to work for wages. these economists were also unanimous in their support for extending the workday as long as was humanly possible (61). Workers were not thought of as people, and their day-to-day experience was seen as irrelevant; Smith lumped them in with working cattle (62). "Differences of skill or the intensity of work did not often enter into their analysis" (63). Although workers were producing outputs that would have been unimaginable in Smith's day, their wages were far from commensurate with their productivity. In the shadow of this new form of industry, class lines were hardening. Traditionally, workers had a chance to prosper by beginning as independent artisans and eventually becoming small employers in their own right. In modern industry, traversing the path from shop floor to the main office was unlikely, even with the utmost perseverance" (65). And yet, this myth is ingrained in most of us, at least in the Anglo-Saxon world, from a very young age. "How realistic is Smith's vision?" Perelman asks us. "In a small island village in which industry only consisted of artisans producing on a small scale, a market society might have worked in the way Smith suggested. In such a world of micro-businesses, the ratio of workers to employers would be small. Under such conditions, young workers could reasonably expect that with diligence and a bit of luck their time as a wage laborer might be relatively short. Such an economy has probably never existed" (159). "[M]any cases do exist in which very bright, hardworking people are able to leverage their talents and opportunities into positions of authority. These exceptions serve to make the existing social pyramid less vulnerable to questions about fairness" (278). These are exceptions that prove the rule. If it were not the rule that such things do not normally happen, the media would ignore it when it happens. "The problem, however," Perelman explains with the American myth, "is that the 'normal' life cycle of labor that Smith imagined precludes a world in which large operations became common. If only relatively few rungs at the top are open to the many at the bottom, how could the typical young worker expect to ascend the ladder of success merely through hard work and diligence?" (160).
Adam Smith, the Procrustean prophet, insisted that individual virtue rather than social influences determine people's fate.
Yet Smith seemed bewildered about why many poor people would express their discontent. The real surprise should be that people accept their lot in life while others wallow in obscene luxury. (188)
"For the most part, talent and strong work ethic alone are rarely enough to ensure success. Successful people almost invariably have received a crucial boost from some preexisting connections. The importance of such connections becomes obvious when well-connected people, no matter how undeserving, enjoy meteoric success" (278). In the United States today, rewards are certainly not commensurate with contributions to society. How could anyone rationally explain why schoolteachers or nurses earn less than advertising executives or stockbrokers? (279)
The double standards advocated by neoclassical economists are enormous. Economists such as Arthur Hadley were reading Marx and publicly disagreeing, but advocating "the creation of trusts, cartels, and monopolies, as well as government regulation to protect the railroads [which had been repeatedly going bankrupt] from the ravages of competition. Ironically, these same economists were simultaneously defending and refining mainstream economics rather than the railroads. They published articles and textbooks to 'prove' that an unimpeded market economy is both just and efficient. In effect, they produced one kind of economics for political and business leaders and another for workers, telling them why they should accept the market" (68). "Their critics accused economists of being too abstract and remote from the concerns of the real world. Business people rebuked them for not offering practical advice, while workers understood that economists were siding with business in its struggle with labor" (74). "The exclusion of labor was central to making the case that the system was just. Wages were treated as part of a voluntary transaction, just like any other" (79).
The heart of the book is two chapters focusing on Adam Smith. Smith was slow to gain popularity, and Arthur Young's travel writings (several passages from which Perelman compares to Smith) were cited more in parliament than those of Smith (170). Perelman attacks the unjustified reputation of Smith as a humanist. Francis Horner referred to the "superstitious worship of his name" in a letter dated August 15, 1803 (152). Smith's pithy sentiments wishing success on workers "may have given Smith more of a reputation as a humanitarian than he deserved" (195). Smith primarily demanded the denigration of the worker (191). His free market loving fans ignore the interventionist stance of the later chapters (153). Perelman spends two chapters focused on Smith's oft-ignored authoritarian side. By comparison of Smith's letters and early lectures to the text of his so-called masterpiece, The Wealth of Nations, Perelman shows how Smith deliberately distorted reality, such as the claim that the division of his labor increasing productivity by using numbers from an earlier lecture in which the metal ore came from the ground to starting with the wire in the factory, which Perelman informs us is more accurately described as a workshop. This way, he could pretend that the workshop added greater productivity and value than it actually did. Adam Ferguson, whom Smith accused of plagiarism, focused on the negative consequences of the division of labor, creating class divisions and undermining society. "Ferguson's real sin might well have been to use the pin factory in a way that contradicted Adam Smith's libertarian vision" (167-8). Perelman is always one to tie economics to religion, and the word "sin" appears multiple times to drive home the metaphor, although I believe I have cited all instances of the term in this review.
This book has my highest possible recommendation. I think it should be required reading for all people, especially those who adore Adam Smith (but probably haven't read the breadth of his work). Although Perelman does not invoke the term pseudoscience (as "pseudo-science") until page 195, this book is a scathing critique of neoclassical economics as a religious and faux-scientific discipline, and he ties it all directly back to Adam Smith, and back even further to the Greek myth of Procrustes. For a Procrustean, a job is a job is a job, no matter how much it pays or its impact on a person's quality of life, health, or lifespan. It is simply an exchange of disutility (work) for utility (purchasing of commodities), in the minds of these pseudointellectuals. Perelman cites a study by Richard Thaler and Sherwin Rosen discussing the probability of death on the job, citing that there is a downward bias because poor people are more likely to accept dangerous jobs.
If, for example, economists had the capacity to plumb the minds of students who are about to graduate with MBAs from elite universities, they could investigate how much more the students would accept from hypothetical investment banking jobs with an annual 1 percent chance of workplace fatality. If such a study were somehow possible, the value of 'statistical life' would certainly be higher than estimates for the pool of potential jobs for farmworkers.
Thaler quickly realized the weakness of his results. His friends told him they would never accept anything less than $1 million in return for the increasing their chances of dying by 0.1 percent. Paradoxically, the same friends would not be willing to sacrifice any income to reduce the probability of dying on the job. "How would economists' subjective evaluation of their own welfare possibly change if they found themselves subjected to the imposition of long hours of grueling physical labor? I think any rational person knows the answer" (124).
There are some very sick people out there, and we have a system that encourages them called capitalism that should be called Procrusteanism. "Economists seldom realize that, like work, leisure can be productive and that fulfilling work might actually create more utility than leisure. None of that matters within the theory because economists simply assume that work is nothing more than the loss of leisure" (72). "Within this world," Perelman elucidates us, "an accountant with a college degree could replace a star center on a professional basketball team without a college degree" (109). Overpaid hack Michael Cox thinks it's great when essential workers, such a firefighters, have to work two jobs to be able to afford to live in New York City. "It gives you portfolio diversion in your income;" implicitly financializing the job market. Cox one-ups Smith by recasting workers as investors. "If only the poor, benighted workers could figure out how to extend the working day beyond 24 hours, they could divide their work among hundreds of jobs. I wonder how Dr. Cox would feel, however, if groggy but well-diversified firefighters arrived to save his house already so exhausted from their other job that they could not perform their duties effectively" (124-5). "Economists presume that work is simply the absence of leisure, and that only the duration of time on the job creates a negative utility. People are free to adjust their hours of work to maximize their utility per hour of work, as if a worker had the choice to take off work forty minutes early in order to maximize utility. Unemployment, even during serious depressions, reflects an increased preference for leisure over work" [based on [author: Robert E. Lucas, Jr.] Business Cycles The Yjiro Januson Lectures (118). Joseph Schumpeter sees cycles of depressions and recessions as necessary to competition. He is mostly admired for the phrase "creative destruction," while his more challenging ideas, such as this, are ignored (131).
"Procrusteanism presents itself as the only way to create prosperity, yet Procrusteanism itself cannot flourish amid prosperity. Prosperity undermines efficiency in a market economy" (130). Drawing on Greg LeRoy's The Great American Jobs Scam Corporate Tax Dodging and The Myth of Job Creation, Perelman tells us that the top 200 largest corporations in 2000 "employed a mere 0.78 percent of the workforce even though their sales accounted for 27.5 percent of world economic activity. That business is not particularly good at creating jobs--especially good jobs--should come as no surprise. Wall Street rewards corporations for eliminating jobs, not creating them. Profits rather than jobs are the highest priority of business leaders" (30-31). And yet they, like Mitt Romney, proclaim themselves the "job creators" and demand huge tax subsidies as rewards for their nonexistent generosity. He cites how the work of John Maynard Keynes (about whom he details quite unpleasantly late in the book, which can easily be summed up in one sentence: "Although Keynes looked forward to a time when people could flourish, his vision of flourishing almost seemed to be limited to those already living in a more refined manner" (285).) is wrongly interpreted as advocating more government spending, when what he said was that government is necessary to create sufficient jobs because business does not produce enough investment to keep the economy healthy (262).
Neoclassical economics took a long to to take hold, let alone become mainstream. That it is a pseudoscience is made clear on page 76. Although Smith had tied his version of economics to Newton (196), himself the product of a public education, economists like Henry Dunning Macleod made the leap in the 1860s.
Economists quickly (mis)appropriated the mathematics of physics to economics. In the words of one critic [[author: Philip Mirowski]] of this effort, "To put it bluntly, the progenitors of neoclassicism copied down the physics equations and just changed the names attached to the variables." Physicists found the economists' work sadly lacking, partly because the economists' model allowed for unlimited growth, while the physical system that that they were emulating was restricted by such constraints as the conservation of matter and energy.
In other words, economists love their little equations, but they have no basis in economic reality, which is why their models keep coming up untrue, causing massive growth at the top and massive shrinkage at the bottom, particularly the downward mobility of the majority of the middle class since 1980.
On pages 70 and 71, he mentions two economists I find stunning were allowed to have their inanities published in a peer reviewed academic journal: Clark Nordling and Steven Cheung. So devoted are mainstream economists to the idea that all work is a voluntary, even exchange, a dubious notion if ever there was one, that Nordling claimed in Explorations in Economic History that children working in factories voluntarily chose to have their employers beat them, while Cheung, writing in Journal of Law and Economics, claimed "that riverboat pullers who towed wooden boats along the shoreline in China before the revolution of 1949 agreed to hire monitors to whip them to restrict shirking" (71). It boggles the mind how anyone could take such notions seriously. Perelman cautions us that we must take such notions seriously, even knowing them to be erroneous, because so many with wealth and power take them seriously. Perelman goes on to show us how the Chicago School of Economics routinely rejects empirical evidence that does not fit with their dogma, such as the unscientific dismissals of separate studies by David Card and Alan Krueger and Richard A. Lester (not to be confused with the eponymous brilliant comic filmmaker) demonstrating that increasing the minimum wage does not increase unemployment. Perelman quotes at length from the aforementioned Sherwin Rosen's scienceless dismissal of Card and Krueger on page 82. At no point does Rosen cite any specific flaws or errors with Card and Krueger's data or their analysis of it. He just cannot accept a study that does not fit his dogma, and Perelman cites Deirdre McCloskey and Melvin Reder who have served on the University of Chicago's faculty, talking about how closely the school clings to old theories in the face of empirical evidence. Neoclassical economics is a religion. Card and Krueger shied away from such controversial work for the sake of their careers (81). Perelman further cites the example of William Stanley Jevons's analysis of how working conditions, such as repetitive movements in a factory, have a profound impact on efficiency and productivity. "Jevons's 'sin' was not that his analysis was imperfect, which it was. Instead Jevons's offense was that he opened a window on the imperfection of the emerging economic consensus about economic theory" (97) Indeed, Rosen lamented that Thaler took his career into behavioral economics, which is more associated with business academia than economics academia, in spite of the name, dismissing Thaler's later work as wasted on trivialities (107). Merton Miller, another of the Chicago faculty, refused to even speak with Thaler or Card and Krueger but leveled heavy and vague criticism against the latter pair (107). Circular reasoning, universally recognized as illogical, is a favorite tool of right-wing nutjobs, and economists are no exception. George Stigler, "and his allies used enough invective to satisfy their colleagues that Lester must be wrong because his data was inconsistent with their theory" (81). "Lester and Card did not fail to convince their fellow economists because of errors in their work. Most economists either ignored their results or, worse yet, rejected them out of hand because they conflicted with their cherished beliefs" (82). "The example of a statistical life illustrates the opportunistic ways economists avoid looking into questions regarding, work, workers, and working conditions except when they can cherry-pick some useful results" (106). "Stigler did not mean the leisure and health of the workers, but that of their employers. CEOS often trade profitability for personal vanity--golf, private jets country clubs. Stigler wants us to ignore waste... [and] declared that unless economists can wrestle waste onto a simple mathematical box, economists must not take such a 'mighty methodological leap'" (102). "[Harvey] Leibenstein's sin was to suggest a line of research that would require economists to look at the way things are produced rather than confining themselves to the transactional side of the market" (103).
The so-called liberal "media rarely notice deaths in the workplace or the prevalence of poor working conditions...The maximum punishment for willfully violating safety laws is a six-month sentence, half the maximum for harassing a wild burro on public lands" (58). "When such disasters [as Bhopal] occur, workers suddenly come into the forefront--not so much as victims, but rather as culprits who are supposed to bear the ultimate responsibility for the damage. Unmentioned is the nearly forty-year effort by employers to disempower unions left workers and regulators with less opportunity to effectively push for improvements in workplace safety" (60). He notes that the only workers covered in newspapers, in spite of large business sections, are professional athletes that most newspaper readers can't afford to see at work, anyway, which also fits for almost anyone whose career is covered by the arts and entertainment section of the paper (108). The Wall Street Journal once had an article honoring Bonnie Lovelette Rooks, who was still working as a janitor at a steel factory at the age of 79 because she needed the money to pay for her health care. "The tone of the story was not an expression of sympathy for Ms. Rooks; instead, it exuded and appreciation for the potential of extending working years worthy of Procrustes. Business has good reason to applaud the long career of Ms. Rooks, although she has less cause to appreciate the economic conditions that left her with so much responsibility for an unaffordable medical system" (127).
"Before modern technology was important in production, considerations of labor were of great importance to economic thinking. The early political economists (as economists of the time were known) advocated policies to increase the amount of work, which, in turn, would make the nation more prosperous. Either directly or indirectly, they supported policies to drive people from producing goods for their own needs, forcing them to work for wages. these economists were also unanimous in their support for extending the workday as long as was humanly possible (61). Workers were not thought of as people, and their day-to-day experience was seen as irrelevant; Smith lumped them in with working cattle (62). "Differences of skill or the intensity of work did not often enter into their analysis" (63). Although workers were producing outputs that would have been unimaginable in Smith's day, their wages were far from commensurate with their productivity. In the shadow of this new form of industry, class lines were hardening. Traditionally, workers had a chance to prosper by beginning as independent artisans and eventually becoming small employers in their own right. In modern industry, traversing the path from shop floor to the main office was unlikely, even with the utmost perseverance" (65). And yet, this myth is ingrained in most of us, at least in the Anglo-Saxon world, from a very young age. "How realistic is Smith's vision?" Perelman asks us. "In a small island village in which industry only consisted of artisans producing on a small scale, a market society might have worked in the way Smith suggested. In such a world of micro-businesses, the ratio of workers to employers would be small. Under such conditions, young workers could reasonably expect that with diligence and a bit of luck their time as a wage laborer might be relatively short. Such an economy has probably never existed" (159). "[M]any cases do exist in which very bright, hardworking people are able to leverage their talents and opportunities into positions of authority. These exceptions serve to make the existing social pyramid less vulnerable to questions about fairness" (278). These are exceptions that prove the rule. If it were not the rule that such things do not normally happen, the media would ignore it when it happens. "The problem, however," Perelman explains with the American myth, "is that the 'normal' life cycle of labor that Smith imagined precludes a world in which large operations became common. If only relatively few rungs at the top are open to the many at the bottom, how could the typical young worker expect to ascend the ladder of success merely through hard work and diligence?" (160).
Adam Smith, the Procrustean prophet, insisted that individual virtue rather than social influences determine people's fate.
The truth was (and still is) that members of the lower class had little chance of succeeding in business, even with a high degree of virtue. Today, in California, you can see farm workers sweating in the fields under the 100-degree sun. Nobody can doubt what these people are doing is difficult, but despite their hard work, their chance of material success is slight.
Yet Smith seemed bewildered about why many poor people would express their discontent. The real surprise should be that people accept their lot in life while others wallow in obscene luxury. (188)
"For the most part, talent and strong work ethic alone are rarely enough to ensure success. Successful people almost invariably have received a crucial boost from some preexisting connections. The importance of such connections becomes obvious when well-connected people, no matter how undeserving, enjoy meteoric success" (278). In the United States today, rewards are certainly not commensurate with contributions to society. How could anyone rationally explain why schoolteachers or nurses earn less than advertising executives or stockbrokers? (279)
The double standards advocated by neoclassical economists are enormous. Economists such as Arthur Hadley were reading Marx and publicly disagreeing, but advocating "the creation of trusts, cartels, and monopolies, as well as government regulation to protect the railroads [which had been repeatedly going bankrupt] from the ravages of competition. Ironically, these same economists were simultaneously defending and refining mainstream economics rather than the railroads. They published articles and textbooks to 'prove' that an unimpeded market economy is both just and efficient. In effect, they produced one kind of economics for political and business leaders and another for workers, telling them why they should accept the market" (68). "Their critics accused economists of being too abstract and remote from the concerns of the real world. Business people rebuked them for not offering practical advice, while workers understood that economists were siding with business in its struggle with labor" (74). "The exclusion of labor was central to making the case that the system was just. Wages were treated as part of a voluntary transaction, just like any other" (79).
The heart of the book is two chapters focusing on Adam Smith. Smith was slow to gain popularity, and Arthur Young's travel writings (several passages from which Perelman compares to Smith) were cited more in parliament than those of Smith (170). Perelman attacks the unjustified reputation of Smith as a humanist. Francis Horner referred to the "superstitious worship of his name" in a letter dated August 15, 1803 (152). Smith's pithy sentiments wishing success on workers "may have given Smith more of a reputation as a humanitarian than he deserved" (195). Smith primarily demanded the denigration of the worker (191). His free market loving fans ignore the interventionist stance of the later chapters (153). Perelman spends two chapters focused on Smith's oft-ignored authoritarian side. By comparison of Smith's letters and early lectures to the text of his so-called masterpiece, The Wealth of Nations, Perelman shows how Smith deliberately distorted reality, such as the claim that the division of his labor increasing productivity by using numbers from an earlier lecture in which the metal ore came from the ground to starting with the wire in the factory, which Perelman informs us is more accurately described as a workshop. This way, he could pretend that the workshop added greater productivity and value than it actually did. Adam Ferguson, whom Smith accused of plagiarism, focused on the negative consequences of the division of labor, creating class divisions and undermining society. "Ferguson's real sin might well have been to use the pin factory in a way that contradicted Adam Smith's libertarian vision" (167-8). Perelman is always one to tie economics to religion, and the word "sin" appears multiple times to drive home the metaphor, although I believe I have cited all instances of the term in this review.
November 7, 2025
3.75 - Reading this book really highlights how failure by economists and employers alike that failed to take work, workers, and working conditions into account led to actions that have stifled the economy. It also highlights how that framework came to be by talking about how Adam Smith viewed workers as "exchangers" in the same way as their employer. They're really saying that people must adjust to the market instead of making any attempt to adjust the market for the people, and they want people tied to wages because if they can take care of themselves without a wage/salary job, then can ignore market forces in regards to work. So long as the causes of alienation, insecurity, and powerlessness that goes along with capitalism remains invisible to the population, then free floating anger is common and is weaponized in such a way that reinforces the system (anger towards policies, taxes, voters, and immigration). The Federal Reserve also serves the needs of the powerful by protecting the interests of capital over interests of labor. This also keeps workers disciplined by making them fearful of losing their jobs. It was also fascinating to learn that while unemployment has adverse affects on people's mental health that continues to compound over time in a different way than PTSD or other mental health issues, mortality rates actually go down during a recession. That just highlights how adverse the impacts of work are to our health.
My interest in this book waned a little near the end as I wasn't getting as much information as I wanted but I still enjoyed it.
My interest in this book waned a little near the end as I wasn't getting as much information as I wanted but I still enjoyed it.
March 12, 2012
This book is packed with critiques of the modern economics profession and its penchant for upholding the notion that wage-slavery is freedom. Workers, wages and working conditions are a closed book to the economists. Of course, they all think that the labour theory of value is outdated, yet they cannot come up with a source for value outside the buying and selling of commodities already product by labour. The INVISIBLE HANDCUFFS are in the way we are led to perceive the world as being created by Capital instead of ourselves. We are the creators of Capital, not vice verse. Until we realise and act on that knowledge, we shall continue our sleep of reason on the Procrustean bed Capital has made for us.
August 18, 2019
God is invisible. But it exists. And only me, the witch doctor, can tell you god's will in exchange for money and food.
The soul is invisible. But it exists. And only me, the witch doctor, can heal your soul in exchange for money and food.
Capitalism puts invisible handcuffs on you. But they are real. And only me, the witch doctor, can tell you how to free yourself. Luckily the government is paying Perelman generously enough and he would settle for some attention.
The soul is invisible. But it exists. And only me, the witch doctor, can heal your soul in exchange for money and food.
Capitalism puts invisible handcuffs on you. But they are real. And only me, the witch doctor, can tell you how to free yourself. Luckily the government is paying Perelman generously enough and he would settle for some attention.
August 31, 2023
Delivers plenty of food for thought. I only wish there had been more fleshed out ideas for how to get out of the handcuffs.
November 28, 2023
All of Perelman's book are essential reading.
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August 11, 2011The title says it all. Capitalism is an economic system that cares nothing for people, but only about money. Yet we are wedded to it in a seemingly unbreakable marriage. How sad. The evils of capitalism have been pointed out in as early a book as The Jungle by Upton Sinclair, but we still haven't got it.
September 20, 2012
It was an interesting look at the flaws of the capitalist system from the perspective of workers and the discipline of those workers by management. This book offers a nice critique of how management works against their own self interest by attempting to force workers into the role of automatons.
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