The business of the neighbourhood

Maurice argues that the economy cannot (and should not) be seen in isolation from the rest of our social, cultural and political lives, but should be seen as embedded in our neighbourhoods.

A local market embedded in a community

‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner’, wrote Adam Smith in 1776, ‘but from their regard to their own interest’.

The idea that individual pursuit of self-interest in a free market maximises the welfare of the society as a whole is the founding axiom of the dominant economic paradigm of our era. Question this basic premise and you are likely to be accused of ‘economic illiteracy’.

Take Aditya Chakrabortty. In December 2014 the Adam Smith Institute published a blog post deriding an article Chakrabortty had written for the Guardian about the area of Enfield in north London.

“This is painful”, begins the Adam Smith blog post, “even for The Guardian, even for the history graduate that writes their economic leaders”.

What is so ‘painful’? The sheer economic ‘illiteracy’, it appears, displayed in his article – though it isn’t surprising, the author snootily implies, given that the writer has only a history degree, rather than one in economics.

Chakrabortty’s failing? In the article he had said: “11 Tesco stores [in the area], for instance, provided the PLC with around £8m of its annual profit. And what did the area get back? Not very much, but the highlight included a community toilet scheme and some charitable giving from the supermarket’s corporate social responsibility department.”  He went on to suggest that councils should press big corporations to “give more of their local work to local contractors with local staff”, or press banks to lend more to local businesses.

This is what Tim Worstall, who wrote the Adam Smith blog post, finds so economically “illiterate”. The value, to the area, of Tescos, he says, is the couple of hundred million pounds worth of groceries the chain sold to local shoppers. Nothing more, nothing less. To look outside the products for additional value is “simply insane”. Irrational. Illiterate.

Now, arguably Chakrabortty should have included the groceries in his take on what Tesco contributes. But the Adam Smith Institute’s account is missing something that could be seen as far more important – and doing so deliberately. Ideologically.

It does so, curiously enough, in a way that would have surprised, and possibly dismayed the man whose name it adopts. Think about Smith’s description of the market: this is not an abstract, faceless place of pure exchange between isolated individuals, but a place where there are butchers, brewers, bakers, people with trades and crafts, carts to take their wares to a market where they will meet face to face. Somewhere like Smith’s eighteenth Century Scotland, perhaps, with taverns and ostlers, and coopers, and farriers.  Somewhere, in short, where there is a rough equality of social condition and purchasing power, and where the market is embedded in the local community.

Today’s dominant neo-classical economic paradigm, which is arguably a bare, reductive abstraction from Smith’s rather richer approach, demands selective blindness. It is axiomatic that we must crop out of the picture anything external to the market transaction, anything external to our ‘own interests’ (narrowly conceived) in making the exchange. You get the groceries, the company gets the profit. Anything outside that exchange is immaterial. That’s how we maximise benefit for all.

The problem is, this begs the question: what is external to the exchange? Back to the meal: who made Adam Smith’s dinner? As Katrine Marçal points out, it wasn’t the butcher, brewer or baker. In fact it was Adam Smith’s mother, who cooked for her adult son every day as long as she lived. Yet even in Smith’s text, let alone those of his self-proclaimed intellectual descendants, she remained cropped out of the picture, written out of the story. Not relevant.

In fact, from the moment you leave the house – indeed from the moment you wake up – you find yourself in an evolving world of living interconnections with others, most of which are cropped out of the (reductive, dominant) economic account. From the material in your bed, the carpet, floorboards beneath it, the power that allows you to flick on the light and boil the kettle, you are affected by and affect the lives of others at every stage of your day and throughout your life.

Take the bedsheets. Someone, a living, nameable person, tended the field and grew and harvested the cotton that makes them up; someone else transported it; still another treated it, another spun and wove it. As we saw in Connections and Combinations, cotton drove the industrial revolution, the age of Empire, the growth of slavery, the American Civil War and its long legacy (something we will return to in a later post). And if the cotton industry has a long history, a widespread and long lasting impact, so do the other industries upon which it in turn relies – not least oil. Before you get out of bed you are, in a sense, however minimally, materially connected to climate change and instability in the Middle East.

This is our neighbourhood. These are our neighbours – those we live ‘nearby’, in terms of material, bodily impact, if not in geographical distance.

Let us be clear about this: the way our industries and economies are set up has a material effect politically, socially, and environmentally. Is it really so ‘insane’ to give consideration to these effects on our neighbourhood? Or is it not rather the sanest and most urgent thing a political economist – or a historian – should be doing right now?

Indeed, is the charge of illiteracy not a better fit for the neo-classical economist who so reduces the idea of ‘value’ that it can only be measured in products and profits?

Arguably the illiteracy here is virtually literal. Read Chakrabortty’s article, the one that got Worstall so flustered; of the thousand-plus words, Worstall chose to focus exclusively one aspect of two paragraphs, thus avoiding the problem of dealing with points Chakrabortty raises about, for instance, “massive taxpayer subsidies handed to the corporate sector with fewer questions asked than of disabled people wondering where their living allowance has gone”.

By refusing to read the rest of the article, to engage with the broader issues, Worstall can conveniently focus in on the ‘illiteracy’ of the claims about Tesco.  By making all else illegible one can reduce ‘value’ to the narrow confines of the market exchange.

But this is also to reduce the idea of the ‘economy’ (and therefore economics) in an arbitrary, artificial and tendentious way.

The broader effects of the market – the effects on the environment, the cranking up of power to the wealthy, increasing inequality – are not legible inside the narrow logic of the neo-classical market. But for that very reason the discipline of economics needs to change, precisely to make those broader effects visible.

Adam Smith’s mother can no longer be cropped out of the picture. Nor can the other great chunks of our political, social and cultural lives together be guillotined off and left on the cutting room floor.

There is no business, however far ‘offshore’ it tries to be, that is not embedded in a neighbourhood, a locale, a community or series of communities. The business of that business, then, is very much the business of the neighbourhood. Chakrabortty is right to re-embed economic issues into the community, and right to bring up issues of democracy.

That’s why his new series of articles looking at alternatives to the dominant paradigm is so essential.

Chakrabortty looks at the women who took matters into their own hands in an area of Liverpool left to decline by government, local and national, turning the streets “into a commons for anyone left to protect”.

He looks at how the Council in Preston has adopted a “guerilla localism”, expanding local cooperatives, and adopting policies to make sure what little money there is in the area doesn’t “leak out” to big companies based elsewhere.

The commons and the cooperatives: there’s something of a theme emerging among Chakrabortty’s ‘alternatives’.

Chakrabortty is currently focusing on the UK, but there are many other exciting experiments that have been going on elsewhere – Emilia Romagna in Italy, the Mondragon federation of worker-owned cooperatives in Spain, even the cooperative movement closer to home. You can watch Stephen Nolan of Trademark discuss them at the recent GFI2017 conference in Belfast, filmed by the Combination for the Green Foundation Ireland.

As the damage from the crank economy continues to mount up, it’s surely time mainstream economists, and indeed politicians, stopped cropping these alternatives out of the picture.

Maurice Macartney

14 February 2018