Relative immiseration

by CarlD

Does fiscal consolidation lead to social unrest? From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble cross country evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the key factor. We also analyse interactions with various economic and political variables. While autocracies and democracies show a broadly similar responses to budget cuts, countries with more constraints on the executive are less likely to see unrest as a result of austerity measures. Growing media penetration does not lead to a stronger effect of cut-backs on the level of unrest.

That’s the abstract of a long Centre for Economic Policy Research working paper (pdf), “Austerity and Anarchy: Budget Cuts and Social Unrest in Europe, 1919-2009” by Jacopo Ponticelli, Universitat Pompeu Fabra and Hans-Joachim Voth, UPF-ICREA, CREI and CEPR. Thanks to Duncan Law.

The dynamic is long familiar in social movement theory, often referred to as the ‘relative immiseration’ effect. It’s also familiar to people with more than one child. Basically, when you give folks stuff and then take it away, or give them relatively less stuff than reference groups, they get way more pissed off than if they never had anything to start with or deprivation is evenly distributed.

Relative immiseration is an important corrective to vulgarizations of Marxism in which capitalism is supposed to precipitate its own demise only if it reduces the working class to absolute abjection. Not so – just as all needs beyond mere subsistence are relative to particular social formations, revolutionary immiseration is relative to the general standard of well-being of particular social formations. Nowadays the poor in Western societies mostly have indoor plumbing that was not available even to kings just a few centuries ago. (They have fridges and microwaves, yes.) But that’s not the relevant measure of degradation – it’s where the poor stand in relation to the rich now. And as is well-known, that gap has been widening. The borrowing powers of governments have been filling the gap for the past several decades, but that compensatory regime seems to be hitting its unsustainability threshold. We live in interesting times.

Of course there’s nothing that says capitalists have to keep driving relative immiseration toward the brink. At least since Bismarck and the Gilded Age smart elites have recognized the need to spread the wealth to some degree to purchase social peace and secure the conditions for continued profit. All it takes is withdrawing some capital from speculative ‘investment’ and using it instead, directly or through government transfers, to build the consumption side of the economy – namely by hiring people and paying them well, whether they ‘earn’ it or not – compensating according to need, not productivity, as Marx argued and Jim Livingston keeps arguing.

If paying people to be consumers out of scale with their productivity seems immoral, it’s worth remembering that while credit default swaps may be called ‘products’ in the ‘industry’, they’re not actually making anything but wealth either. Aren’t (relative) need and general prosperity enough to ground public morals?

UPDATE: Dave Mazella at The Long Eighteenth has been rereading E.P. Thompson on “The Moral Economy of the English Crowd in the Eighteenth Century” and finds rioters “trying to restore traditional understandings of collective rights and reciprocities, traditions that elites disrupted or ignored at their peril.” This is consistent with both the analysis here and JohnM’s disambiguating comment below, but adding another layer: I often have to resist the activist reflex to see in every little upheaval a foretaste of revolution, and Thompson reminds us of the complex dynamic robustness of existing arrangements.

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7 Comments to “Relative immiseration”

  1. And yet, not one Republican primary candidate last night was willing to accept a deal with 10 dollars of spending cuts to 1 dollar of revenue increases…presumably even from the very rich. These are *not* the smart elites.

  2. I agree completely. But I also don’t think elites are driving Republican electoral politics right now.

  3. The one problem I have with the model as presented is that it sets up a categorical distinction between the elite and the immiserated that makes it look like resentment of the elite is the primary motivation involved. A more subtle analysis would include the middle class, whose members are driven less by resentment of the elite, whom they try their best to emulate, than fear of losing what they have. That is the fear that drives both members of the Tea Party and union members on the left, making both politically active, in contrast to the proles who are too caught up in nickel-and-dime survival to pay attention to politics.

  4. Right, John, but this is a paper about conditions that produce social unrest. So the aspirational middle class is not a likely candidate for relevance to this analysis, for the reasons you discuss. Under more extreme Weimarish kind of conditions, of course, we might expect the middle class to see its interests more existentially challenged and split into fractions anxiously defending or attacking the status quo. It may well be that the Tea Party is a first step in the former direction.

  5. Hey guys. Just quickly to say, w/r/t John’s point on the distinction between the elite & the immiserated: the paper itself doesn’t have a class analysis – it’s just looking for (and finding) a correlation between measures of social unrest and the annual change in government expenditure as a percentage of GDP.

  6. Hi folks, thanks for the mention of my E.P. Thompson post. Two historical points that might deepen and reinforce the analysis here. EPT in the same volume argues that the pre-professional model of gentry level patronage/clientage on “the great” is a huge factor in their poltiical quietism and hatred for the poor. It’s the rise of a bureaucratic, civil service ethos of meritocracy and professionalism that helps to drive out that attitude, but this seems to be precisely what’s in the line of fire right now throughout the “advanced world.” What we are left with now, especially in politics and academia, is another version of clientage through corporate funded think tanks and so forth.

    The other historical point would be that Mandeville was especially crucial to the conceptual discovery that “luxury” could only be defined in relation to other, available goods and services, and had no intrinsic meaning: the “hottentot” considers a bucket a huge luxury, but the meanest laborer in England would not, etc. etc. The moralists of his own era stoutly resisted this insight, but then folded, and what we were left with was an economic discourse that was as amoral as Mandeville could have ever wished.

    So this analysis shows economists rediscovering morality and immorality, and redefining it as the “inability to earn wages and consume products” in a system governed and maintained by “the great” for “the great.” That’s progress.

  7. Awesome, Dave. It strikes me that the patronage model was never actually driven out, just informalized – as what Bourdieu calls cultural goodwill, and as a component of hegemony, among other things. It’s interesting to think of this parallel track looking for opportunities to reassert, seizing on moments of weakness and delegitimation of rationalized bureaucratic meritocracy to do so. This helps me understand something about the appeal of the Tea Party in general and figures like Sarah Palin in particular.

    I don’t know how to think about your second point yet. I don’t see the contradiction between Mandeville’s discovery and humanist morality, as it was deployed for example by Marx. Of course it’s one of the many anthropological nails in the coffin of universal/deontological moralism, but aren’t we all in that boat at this point? Anyhoo, I’m about to do a post making fun of economists’ opacity to human ‘context’, so maybe there will be some productive overlap.

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