[iDC] Crisis of value and the ethical economy

Adam Arvidsson adam.arvidsson at unimi.it
Thu Sep 3 08:06:04 UTC 2009

Dear All,


here’s the first in five instalments where I try to speculate on how the
idea o fan emerging ‘ethical economy’ can cast light on the current
financial crisis. You can find more details and links to the whole text here







After capitalism: ethics? Five ideas on value and the crisis.



' As soon as labour in the direct form has

ceased to be the great well-spring of wealth,

labour time ceases and must cease to be its

measure and hence exchange value [must cease 

to be the measure of] use value.'

Karl Marx, Grundrisse[i]



We are, it would seem, in the midst of a historical crisis of the capitalist
system. As the dynamo effects of the sub-prime collapse ripple through the
economy, from financial markets to consumer spending and industrial
production, it has become common to point at how our present capitalist
system lacks long-term sustainability.  If this used to be the privilege of
a handful of left-leaning economists like André Gunder Frank (2005) or
Robert Brenner (2004), economists, politicians and business leaders who used
to be more than happy with the existing order of things have now joined the
ranks. Even Richard Florida, whose theories of the 'creative class' stood at
the heart of the gentrification-driven real estate boom that preceded the
present crisis now proclaims that  '[t]he housing bubble was the ultimate
expression, and perhaps the last gasp, of an economic system some 80 years
in the making, and now well past its "sell-by date" (Florida, 2009:9).  


However, in order to understand why the 'system is past its "sell-by date"'
and, by implication, what can be done about this, it is not enough to go
beyond populist cries of managerial greed and corrupt banks. We need to move
even deeper into the heart of the matter, beyond even most current
explanations that focus on the perversities of advanced financial
instruments and the need for tighter regulation of financial markets; we
need to 'descend into the depths of production' to quote (an increasingly
popular) Marx (1939[1973]:105) once more, and engage with the fundamental
concept of any economic analysis: value.


 This article will attempt a couple of moves in that direction. It will
argue that we are witnessing a fundamental re-configuration of the very core
logic of value with which our economy works: We are moving from a capitalist
economy where value is directly related to investments in productive time,
to an ever more influential ‘ethical economy’ where value is related to the
quality of social relations. I will develop this argument by presenting five
(interconnected) ideas: One, that our crisis is a crisis of transition from
one system, industrial capitalism, to another economy that has yet to find
its political, juridical and ideological form, its 'superstructure' to keep
using Marxist terms. Two, that this crisis of transition is driven by the
emergence, within the institutional framework of capitalism itself of a new
mode of production that works according to a logic of value that is
different from that of industrial capitalism. Consequently a lot of the
wealth actually produced by the economy cannot be adequately valued and, by
implication, managed within existing structures of accounting, control and
measurement. Seen this way, the crisis we are now living through is
essentially a value crisis, where, as the opening quote claims, exchange
value no longer adequately reflects use value, or, to put it in less cryptic
terms, there is a general sensation that a lot of the real values that
circulate in our economy cannot be adequately represented. Three, that the
emerging 'new economy' has a distinct value-logic of its own. It is an
economy where value is related not to productive time as in the capitalist
economy, but to the ability to build ethically binding relations: it is, in
this sense and 'ethical economy'. Four, that the emergence of such an
ethical economy is the outcome of a dialectic that has been immanent to the
very development of the capitalist economy, and in particular to its
post-War globalization- phase. Five, that since, as recent economic
sociology would argue,  'value' is essentially a shared convention as to the
representation of economic processes (cf. Barry & Slater, 2005, Chiapello,
2008[ii]), the solution to the present 'value crisis' is contingent on the
establishment of a new shared convention. Given the nature of the ethical
economy, such a convention must be centred on a transparent and systematic
measure of the social impact of companies and organizations.


I am aware that a bold statements like these are risky in an academic
setting, particularly when expressed in the condensed format imposed by the
medium of the journal article. (This article is in fact an attempt to
summarize the ideas behind an ongoing book project.[iii]) As a sort of
pre-emptive defence against the (legitimate) criticism that this article
will no doubt produce,  I  want to remind the reader that its purpose
suggest ideas that can guide our interpretation of current events. Although
such theoretical work needs to proceed in close dialogue with the available
facts, it stands no chance of even approaching the empirical rigour needed
for a thorough substantiation of the hypotheses proposed. All this article
aims to do is to present a number of ideas that can serve as heuristic
devices, that may be, hopefully, developed, corroborated, criticized or
refuted by others. 



[i]    Penguin edition, translated by Martin Nicolaus: Marx, 1973(1939):

[ii]    Admittedly, 'value' is one of the most difficult and entangled
concepts in the social sciences. Value can be simplistically defined a
'social importance', the weight that a society gives to an object or an
issue. Under ideal conditions, conditions of complete rationality,
transparency and information, value should be reflected in market price (or
at least in long-term market equilibrium: another utopia). However value is
different from price: it is more like the normative guideline for price
(rather like Aristotle’s' notion of 'just price').  To establish what counts
as ´valuable´is in fact a fundamental political act, which sets the stage
for subsequent struggles. Arguably the greatest revolutionary achievement of
the French revolution of 1789 was to establish that labour had a value (and
that it wasn't just an abundant natural resource). This set the stage for
the struggles that accompanied (and led) the industrialization process of
the 19th century. Similarly twentieth century industrial capitalism operated
with a value-convention that resulted from  the Fordist compromise between
capital and labor. This way struggles over social redistribution could be
normatively oriented around the productivity of factory labor. The
neo-liberal reaction of the past twenty years has been organized around a
systematic denial of any distinction between value and price. The result has
been a 'market society' where the only acceptable mechanism for social
distribution is the market and its fluctuations. All of these are value
conventions that have been achieved by political struggles and subsequently
institutionalized in everything from labour law through accounting systems
to public morality. They become part of what Max Weber (1934) called the
societal 'iron cage' the set of socially institutionalized norms, values and
motivations that guide social action, independently of individual will. The
(political) challenge today is to construct a new such value convention (and
an iron cage to follow).

[iii]   Arvidsson, A. & Peitersen, N. The Ethical Economy, work in progress,
available at www.ethicaleconomy.com

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