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Oleg Solovyev

TECHNOLOGIES OF POWER AND INSTITUTIONALISING KNOWLEDGE IN THE MODERN MODEL OF ECONOMIC MANAGEMENT

The modern model of economic management, containing both the traditional forms of state economic regulation and post-industrial innovations in the management and the financial systems, can be thought of as a sum of two vectors. One of the vectors is economic development; the other - the exercising the technologies of power. It is the public power who decides what is necessary to know, which innovations are needed by the society, and for whom they work: whether they make the rich richer and the poor poorer.

B. A. Lietaer notes that the real difficulty is not the changes of the monetary system. These changes take place whether we like them or not. The real difficulty is whether we understand what the changes really mean.[1] Lietaer concludes, ‘the type of money used in society, the way money is created and administered, deeply moulds values and relationships within that society by encouraging, or discouraging, specific collective emotions and behaviour patterns’.[2] No doubt that all money systems facilitate exchanges among people. Meanwhile we should not forget K. Marx’s thought: ‘As long as the social character of labour appears as the money-existence of commodities, and thus as a thing external to actual production, money crises – independent of or as an intensification of actual crises – are inevitable’.[3] The dynamics of financial markets creates the necessity of a serious overhaul of money. So we do need such a model of economic management, according to which historical events, being regarded as depending on both the technological innovations and the technologies of power, form the series we could consider sustained development. Capitalism can offer confidence in the future if public power could direct the series of events on the way of steady economic development. The understanding of these series as well as the management of financial markets does not allow the innovations to come into conflict with the exercises of power. This is the most actual thing for developing countries where the consumer boom, stimulated by the credits, is turned over an impoverishment of the people and a devaluation of national currency or a payment default on state securities.

To achieve the understanding of convergent series of interconnected events in financial markets, in monetary and credit regulation, in political systems, we should apply M. Foucault’s concept of power. His works on power and the relationship between power, knowledge, and discourse have been classified by him as a critical history of modernity. The goals of power and the goals of knowledge cannot be separated as it were in the Baconian engineering model, for which ‘knowledge itself is power’ implies that knowledge is an instrument of power, whereas on Foucault’s account in knowing we control and in controlling we know. He has formulated such notions as the societies of sovereignty, and discipline, primary techniques of control – hierarchical observation, normalising judgment, the examination. In ‘Discipline and Punish: The Birth of the Prison’ M. Foucault argues that the modern mode of punishment, imprisoning criminals rather than torturing or killing them, becomes a vehicle of more effective control: to punish less, perhaps, but certainly to punish better. It becomes as well the model for control of an entire society with factories, hospitals, schools modelled on the prison.

Disciplinary Societies: K. Marx’s Economic Theory

According to M. Foucault’s concept of power, the disciplinary societies are located in the eighteenth and nineteenth centuries and reach their pinnacle in the epoch prior to the World Wars at the outset of the twentieth. The goal and the functions of the societies of sovereignty were to tax rather than to organize production, to rule on death rather than to administer life, whereas the disciplinary societies tend to arrange the industrial production, the environments of enclosure, in which the relationships among the people are strictly regulated, cannot be reviewed and cannot be a subject to the discussion. The power organizes these environments to enclose men for a long period of their life. Since the childhood the family and the school limit communications placing the children under the command of its regulations and excluding harmful influence of the streets. The prisons and the hospitals are the environments of enclosure par excellence. At the same time the best projects of enclosure are certainly to be the factories that concentrate, distribute in space, order in time and compose a productive force within the dimension of space-time whose effect will be greater than the sum of its component forces.

Marx’s theory of Surplus-Value defines the economic basis of the disciplinary societies, i.e. the industrial stage of capitalism. Simple commodity-production implies that commodity circulation is looked at exclusively in the form Commodity → Money → Commodity. Then simple commodity-production had been replaced by expanded, based on wage labour, capitalist production of the disciplinary societies. The formula is transformed into Commodity → Money → [Means of Production + Labour-Power] + Surplus → Commodity’ → Money’. On industrial stage risk capital was to be arisen: Money → Money’; the science and the engineering had been given considerable development. In capitalist social and economic structure, described by K. Marx’s theory, innovations were mostly created beyond the bounds of traditional manufacture. Thus the honour of the invention of the power loom belongs to Edmund Cartwright, clergyman of the Church of England. Sir Richard Arkwright, leading entrepreneur of the Industrial Revolution, whose achievement was to combine power, machinery, semi-skilled labour, and cotton to create mass production over a century before Ford, began his working life as a barber and wig-maker. This invention could be made by the craftsmen or the merchants who provided the craftsmen with raw materials and the orders but it was the wig-maker who had begun to build first factories.

The development of production chiefly on account of means of production is, according to V. I. Lenin, ‘real “production as an end in itself” – the expansion of production without a corresponding expansion of consumption’.[4] This production constitutes a contradiction not of doctrine, but of actual life, contradiction that corresponds to the very nature of capitalism and to other contradictions of this system of social economy in the societies which we call, after M. Foucault, the societies of discipline. They bring to the surface a contradiction that is immanent to capitalist production. Lenin believed that expansion of production without corresponding expansion of consumption corresponded to the historic mission of capitalism and to its specific social structure. Lenin wrote: ‘There is an undoubted contradiction between the drive towards the unlimited extension of production inherent in capitalism, and the limited consumption of the masses of the people (limited because of their proletarian status)’.[5] It leads to economic crises and social burst when the contradictions become antagonistic. It was obvious to him that limited consumption of the masses contradicted the boundless, now in the direct sense of the word, drive towards unlimited expansion of capitalist production. He emphasised Marx’s statement on the contradiction in the capitalist mode of production: important to the market as buyers of commodities, labourers are the sellers of their own labour-power, capitalist society tending to keep them down to the lowest price.

This contradiction was ascertained in Marx’s ‘Capital’: ‘The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit’.[6] So as soon as the labourers are turned into proletariat, their means of labour into capital, then the further socialisation of labour and further transformation of land and other means of production into socially exploited means of production the capitalists exploit more and more labourers. K. Marx drew his attention to the fact that one capitalist always killed many. Hand in hand with the centralisation of capital, the expropriation of many capitalists by few, developed the co-operative form of the labour-process, the conscious technical application of science, the methodical cultivation of the soil, the transformation of the instruments of labour into instruments of labour only usable collectively, the economising of all means of production by their use as means of production of collective, socialised labour, the entanglement of all peoples in the net of the world-market, and with this, the international character of the capitalistic regime. Thus it was logical conclusion to say:

Along with the constantly diminishing number of the magnates of capital, who usurp and monopolise all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working-class, a class always increasing in numbers, and disciplined, united, organised by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralisation of the means of production and socialisation of labour at last reach the point where they become incompatible with their capitalist integument. Thus integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.[7]

From Discipline to Control: J. M. Keynes’s Economic Theory

Which innovations allowed contemporary capitalism to overcome insurmountable contradictions in social development? Relying on Marx’s social and historical concepts and later theoretical achievements, particularly on the works of M. Heidegger, we will certainly see that the fundamental cause of social movement is technological improvement.

According to Marx, the technologies, as the mode of production of material life, condition social, political, and intellectual life overall. The consciousness of men does not determine their being, but their social being determines their consciousness. The society is dependent upon many relationships. K. Marx hypothesised that social relationships determined how we perceived and interacted with the entire environment, including other people.

Heidegger, in his turn, believed that modern technology as Enframing was dangerous. Reconciling with a secret planetary superpower of the technology, he assumed that Nazism and bolshevism were the results the planetary technology (das Gestelt) meeting modern man. There is a tendency for us to reduce ourselves to a source of energy for human use. We turn ourselves into ‘users’ of the world around us including other people. After his ‘turning’ to the point of unity, in which Dasein and Being belong together in the event (das Ereignis), Heidegger stated:

Enframing does not simply endanger man in his relationship to himself and to everything that is. As a destining, it banishes man into that kind of revealing which is an ordering. This ordering holds away, it drives out every other possibility of revealing. Above all, Enframing conceals that revealing which, in the sense of poesis [truth], lets what presences come forth into appearance.[8]

So through Enframing the technology shapes society in the way we perceive our surroundings and ourselves.

Technology embodies social relations and power. In the eyes of L. Winner, ‘If the experience of modern society shows us anything, however, it is that technologies are not merely aids to human activity, but also powerful forces acting to reshape the activity and its meaning. The introduction of a robot to an industrial work place not only increases productivity, but often radically changes the process of production, redefining what “work” means in that setting’.[9] L. Winner believes that technologies are forms of life, and they can engender a world around us.

Likewise G. Deleuze guessed that types of machines were easily matched with each type of society: ‘not that machines are determining, but because they express those social forms capable of generating them and using them’.[10] The world is filled with ‘machinic’ entities such as the pervasive layers of the machinic phylum, desiring machines and war machines. The old societies of sovereignty made use levers, pulleys, clocks; the disciplinary societies equipped themselves with the machines exploiting the energy of steam and internal combustion. There were two kinds of dangers, the passive danger of entropy and the active danger of sabotage. At the beginning of the last century the industry technologies had stepped from visible world of connecting rods, axes, crankshafts to invisible world of atoms, electromagnetic waves, electron currents, bacteria and viruses. So the societies of control have invented and operate with machines of a third type, cybernetics and computers, whose passive danger is jamming and active one is piracy and the virus attacks.

The transformation of social relations both in economic life and in the economic theory has allowed the application of capitalism to the widest strata of the population. Technological evolution has led to the point that G. Deleuze regarded as ‘a mutation of capitalism’ – an already well-known or familiar mutation from capitalism of concentration, for production and for property, to capitalism of higher-order production. While Marx wrote ‘Capital’, the disciplinary societies conquered the markets sometimes by specialisation, sometimes by colonisation, or by lowering the costs of production. Now capitalism of higher-order production is no longer involved in production. It is capitalism for the product, which is being sold or marketed. G. Deleuze has noted that the conquests of the market are made by grabbing control and no longer by disciplinary training, by fixing the exchange rate much more than by lowering costs, by transformation of the product more than by specialisation of production. There is no need at all for contemporary capitalism to buy raw materials and sell the finished products: it buys the finished products or assembles parts. G. Deleuze has concluded: ‘What it wants to sell is services but what it wants to buy is stocks’.[11]

Society, in which an economic transition has occurred from an industry based economy to a service based economy, a diffusion of national and global capital, an imbalance of international trade, is well-known as post-industrial society. The idea of post-industrial society was primarily established by D. Bell through his work ‘The Coming of Post-Industrial Society’. So we can describe modern capitalism as a post-industrial society, from the point of view of knowledge and social and economic attributes, as well as the society of control, from the point of view of applied technologies of power.

Along with the technological development there is another premise for ‘a mutation of capitalism’. This premise is in reflexivity. The societies, especially the societies of control, are the systems managed by reflexivity. Reflexivity implies simultaneous determination of social reality, including market prices, by the current social situation and the expectations. These relationships, as a whole being ignored and rejected by social scientists, must be taken into account simultaneously. People's thinking undoubtedly plays a dual role. Thinking is both a passive reflection of the reality we try to understand and an active ingredient in shaping the events, in which we participate. In ‘The Crisis of Global Capitalism’ G. Soros argues reflexivity:

Social events … have thinking participants. Here the relationship between thinking and reality is more complicated [than the relationship between thinking and subject matter of natural science]. Our thinking is part of reality; it guides us in our actions and our actions have an impact on what happens. The situation is contingent on what we (and others) think and how we act. The events in which we participate do not constitute some sort of independent criterion by which the truth or falsehood of our thoughts could be judged. According to the rules of logic, statements are true if, and only if, they correspond to the facts. But in situations that have thinking participants, the facts do not occur independently of what the participants think; they reflect the impact of the participants’ decisions. As a result, they may not qualify as an independent criterion for determining the truth of statements. That is the reason why our understanding is inherently imperfect. This is not an abstruse philosophical debating point, comparable to Berkeley’s question about whether the cow in front of him ceases to exist when he turns his back. When it comes to decision making, there is an inherent lack of correspondence between thinking and reality because the facts lie somewhere in the future and are contingent on the participants’ decisions.[12]

So the social systems are able to change themselves, using the mechanisms not only of scientific and technological development but the mechanisms of conscious social changes as well. Social functions of capitalism were acknowledged as the result of rational estimation on economic efficiency and necessity to revise a system of economic management and social institutions. Marx and Lenin must have rendered of ‘service’ to their contemporaries and the descendants explaining what was to be the main direction of economic and political development of capitalism. The society should have created mass consumer markets and culture. The consumer should have possessed high effective demand. Such a consumer will be interested in the development of capitalism rather than in its destruction. This development of capitalism will facilitate the invariable growth of living standards and the well-being for most people, not only for the top of the property pyramid. There isn’t another opportunity for capitalism, nor can there be. Marx’s theory unambiguously argues for the end of spontaneous capitalistic development uncontrolled by economic and political social institutions.[13] In turn Lenin has practically proved that the mass impoverishment is fraught with the social explosion during the crisis periods or protracted wars.

The disciplinary societies had realized the necessity of performing social function since United States President Franklin D. Roosevelt started the New Deal in 1933–6, a complex package of economic programs with the purpose of giving Relief to the unemployed and to badly hurt farmers, Reform of business and financial practices, and promoting Recovery of the economy during the Great Depression. The New Deal was combined with new economic theory of a mixed economy, which predominantly promoted the private sector but had a place for an active policy of government and public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle. The author of ‘The General Theory of Employment, Interest and Money’ British economist John M. Keynes contended that aggregate demand for goods might be insufficient during economic downturns, leading to unnecessarily high unemployment and losses of potential output. He argued that government policy could be used to increase aggregate demand, thus increasing economic activity and reducing unemployment and deflation.

Keynes insisted that there was no strong automatic mechanism moving output and employment towards full employment levels, either there was no automatic equilibrium between savings to be expected and the real capital investments. Excessive savings, savings beyond planned investments, were a serious problem, encouraging recession or even depression. He told about the invalidation of Marx’s theory as scientific achievement and its uselessness for an application to twentieth century’s capitalism. But it was the inducement to invest economy at the expense of aggregate demand growth, particularly individual purchasing demand, that was the solution found by Keynes. He suggested stimulating the economy through some combination of two approaches: a reduction in interest rates and government investment in infrastructure. Keynesian economics upheld the ideas that unregulated markets led to depression and unemployment, and also that government deficit spending on public works was needed while the economy was shrinking. Meanwhile President Roosevelt was engaged on a double task, Recovery and Reform. Keynes reminded him to be careful for even wise and necessary Reform might, in some respects, impede and complicate Recovery. In ‘An Open Letter to President Roosevelt’ Keynes wrote:

My second reflection relates to the technique of Recovery itself. The object of recovery is to increase the national output and put more men to work. In the economic system of the modern world, output is primarily produced for sale; and the volume of output depends on the amount of purchasing power, compared with the prime cost of production, which is expected to come on the market. Broadly speaking, therefore, and increase of output depends on the amount of purchasing power, compared with the prime cost of production, which is expected to come on the market. Broadly speaking, therefore, an increase of output cannot occur unless by the operation of one or other of three factors. Individuals must be induced to spend more out of their existing incomes; or the business world must be induced, either by increased confidence in the prospects or by a lower rate of interest, to create additional current incomes in the hands of their employees, which is what happens when either the working or the fixed capital of the country is being increased; or public authority must be called in aid to create additional current incomes through the expenditure of borrowed or printed money. In bad times the first factor cannot be expected to work on a sufficient scale. The second factor will come in as the second wave of attack on the slump after the tide has been turned by the expenditures of public authority. It is, therefore, only from the third factor that we can expect the initial major impulse.[14]

So during economic downturns ‘public authority must be called in aid to create additional current incomes’. The National Industrial Recovery Act, passed by Congress in June 1933, had been called for ensuring the incomes of workers to rise along with the prices. It established National Resources Planning Board to assist in planning the economy by providing recommendations and information. It created also the Public Works Administration, a major program of public works to cut unemployment. From 1933 to 1935 government investment in infrastructure made up 3.3 billion dollars spent Public Works Administration with private companies to build more than 34000 projects. This is barely some examples of Keynesian arrangements undertaken Roosevelt administration. Keynesian economics served as the economic model during the latter part of the Great Depression, World War II, and the post-war Golden Age of Capitalism, 1945–73.

The substantial effect of Keynesian arrangements is that the society was set the direction of development from old technologies of power, the discipline as the constraint and the surveillance in the sites of confinement,[15] to the new technologies of control, the enablement and the manipulation of people behaviour, that allow inducing them as the consumers. Thus the exercises of power acquire the forms of covert power that works through people rather than only on them, the constraint is replaced the enablement, and social control is grounded on high technologies that signify the society has come into post-industrial epoch of innovation solutions. Now the ‘spirit’ of corporation, i.e. marketing, is the essential instrument of social control. Along with the development of information technologies, the factors of production such as the earth, labour, and capital have lost former significance in favour of another source to raise capital and surplus – that is the knowledge.

Monetarism and Reaganomics: ‘One Step Forward, Two Steps Back’ of Post-Industrial Economy in the Societies of Control

During 1970s Keynesian economics lost some influence following the stagflation, rising inflation combined with rising unemployment. As a middle way between laissez-faire capitalism and socialism, it has been and continues to be attacked from both the right and the left. There was a qualitative leap in productive forces development, and the relations to Keynesian model were determined by a new level of engineering and industrial technologies. Modern living standard has destroyed the scope of class division on capitalists and workers. As far as concerned the USA, terms like ‘working class’, ‘middle class’ and ‘upper class’ get all muddled quickly. There is an opinion that class divisions in the United States have more to do with lifestyle, social networks, social stratification, cultural capital, or attitudes than with income. Social networks, for example, are strongly connected to geography, race, and religion. These are also huge factors in lifestyle divisions, so we can divide people on ‘the classes’ according to them.

In the societies of control the number of stockholders is comparable with the number of workers living just on their wages or salaries. Thus T. Egan suggests that a new class division is emerging in America between the graduates and the fast food workers.[16] It should be still noted that neither the graduates nor the fast food workers are the proletariats described by Marx’s theory. In the societies of control the living standards of the fast food workers are much higher than that of the labourers or the employees in the disciplinary societies. Not surprisingly, M. Thatcher called J. M. Keynes a ‘dinosaur’, whereas R. Reagan proceeded to promote economic policy the main pillars of which were to reduce government regulation of the economy and to control the money supply for reducing inflation. F. A. von Hayek’s Trade Cycle Theory and M. Friedman’s Monetary Theory of National Income had got a triumph. M. Friedman argued for a volunteer army, freely floating exchange rates, abolition of licensing of doctors, a negative income tax, and education vouchers. Demonstrating the complexity of stabilisation policy he presented evidence to resurrect the quantity theory of money – the idea that the price level depends on the money supply. So his solution to the problems of inflation and short-run fluctuations in employment and real gross national product required to increase the money supply at the same rate as real gross national product increased.

Throughout the stagflation most mainstream economists, including many Keynesians, were swayed with M. Friedman’s Monetary Theory. Thus in 1985 former Keynesian P. Samuelson wrote that money was the most powerful and useful tool for macroeconomic policy. Now economists agree with M. Friedman statement that in the long run increased monetary growth increases prices but has little or no effect on output. They believe there is no long-run trade-off between inflation and unemployment. In the short run increases in money supply growth cause employment and output to increase, and decreases in money supply growth have the opposite effect. Undoubtedly in the short run, while equilibrium prices and output change the balance depending on the situation, as for example immediately after manufacturing application of a new technology, it was a great step of industrial economy forward to the societies of control. In the short run it was tactically right solution how to craft optimal monetary and fiscal policies, how to keep unemployment permanently lower, how to add a new impulse to private enterprises, and how to achieve certain political goals. Monetarist policy gives the ability to alter the money supply and thus influence the interest rate and increased/decreased growth of personal incomes. This policy could have been realised as eventual series of processes just in the society of high standard of living, namely in the societies of control after forty-year history of Keynesian arrangements. In these societies reflexive development of productive forces and productive relations leads now to total supremacy of information technologies both in the institutions of knowledge and in the exercises of power.

Nevertheless the public policy of the deregulation and the shrinkage of social guarantee programs do not facilitate most people afford contemporary middle class lifestyles. The population of the USA and Western Europe owe the growth of welfare to general trends of technology development and the globalisation carrying out social intensions to the ‘third world’ countries. Thus the welfare is not the merit of monetary policy exclusively. This level life is alleged to be high, and under detailed consideration it turns to be relative and questionable. In this way one of the monetarist policy results is the abolishment of ‘family wage’. The Philadelphia Trade Union warned its members about the hidden agenda of what it called ‘cormorant capital’ as early as in the 1830s:

Oppose [employment of our women folks] with all your minds and with all your strength for it will prove our ruin. We must strive to obtain sufficient remuneration for our labour to keep the wives and daughters and sisters of our people at home. ... That cormorant capital will have every man, woman, and child to toil; but let us exert our families to oppose its designs.[17]

The apprehension was reasonable. The property owners needed the credit. Nowadays Patrick J. Buchanan notes:

In an agricultural economy, the workplace was the home where husband and wife laboured together and lived together. In the industrial economy, the man left the home to work in a factory, while his wife stayed home to look after the children. The agricultural economy gave us the extended family; the industrial economy, the nuclear family. But in the post-industrial economy, husband and wife both work at the office, and no one stays home with the children. Indeed, there are may be no children.[18]

So both spouses are induced or encouraged to work and to use long-term loans for providing young age with high level life. Such society is hardly to be called the society for prosperity. In the present world crisis the society for prosperity still is a goal of social progress for civilised countries. Some of them have got a preferred position in the structure of world economy because of their history or the singularity of nature conditions. That is why the models of economic management, basing on economic development of such countries as Sweden, Norway, Liechtenstein, Monaco, Switzerland, New Zealand, can not serve as the patterns for the rest of the world.

The changes, happening on financial markets since the last third of twentieth century, are caused by post-industrial economic unfolding. They lead to cardinal revision on the mode to gain a profit by heavy financial and industrial capital. Thus a man is no longer a man confined, but a man in debt: instead of credits or loans for the enterprises the banks prefer to lend out cash money to the population using credit cards and other electronic means of information millennium. Thereby in the societies of control the technologies of power are exercised by means of financial markets. As G. Deleuze noted, ‘control is short-term and of rapid rates of turnover’.[19] Control is free-floating, modular and never-ending. The language of control is digital. On the contrary, the discipline is of long duration, infinite and discontinuous. But now we are controlled rather than disciplined not according to our status as normal/abnormal subjects, but according to our status as consumers. In the societies of control the individual has been displaced by dividuals, replaced by samples, data, markets, banks. The logic of production has been transformed to the logic of marketing and consumerism. Deleuze and Guattari state that rather than being disciplined as more or less rational beings we are controlled as more or less good consumers.[20] Therefore the societies of control required much more intense methods of surveillance than the disciplinary ones.

Capitalism That Leads Nowhere: Between Discipline and Control

The beginnings of giant property gap in the post-Soviet societies were caused by economic reforms under monetaristic conditions. The choice of monetary model was prescribed by international financial institutions such as the International Monetary Fund and the World Bank. They financed emerging markets infrastructure development, particularly command-and-control economic system of Russia in 1990s, under the conditions of market liberalisation and social relationships reforming on the way where the market was supposed to solve everything. As well the maintenance of sustained, long-term social and economic growth by the creditor states was elaborated on monetaristic thesis that the market system will tend to equilibrium and a self-regulation. So the official attempts to achieve economic stability were reduced to varying quantity of money in circulation, cost and availability of credit, and composition of a country’s national debt. Monetary authority started to apply three instruments in order to implement monetary policy: open market operations, reserve requirements, and the ‘Discount Window’ allowing the commercial banks to borrow reserves from Central Bank at a discount rate. Such monetary policy is suggested to establish ranges for inflation, unemployment, interest rates, and economic growth by the money supply. Any other actions of government regulation started to be considered inadmissible interference, introducing distortions in market relationships as a whole and in the economic management particularly. This reminded of the words of Ronald Reagan addressing his country’s economic malaise in his first inaugural speech on 20 January 1981: ‘In this present crisis, government is not the solution to our problems; government is the problem’.[21]

It must be admitted that there are enormous weaknesses at the core of the world’s seemingly strong dictatorships, whether they are of the military-authoritarian Right, or the communist-totalitarian Left. Since the middle of 1970s military regimes had been failing: first in Greece, Portugal, Spain, then in Turkey and Latin America – Peru, Argentine, Uruguay, and Brazil. In the 1980s the power of USSR had been diminishing, and in 1991 the governments of Eastern European countries withdrew from the Warsaw Pact. USSR broke up into fifteen independent states, and each of them requested the funds for structural changes in the economy and also for market reforms. Stable liberal democracy remained the only coherent political aspiration that spanned different regions and cultures around the globe. F. Fukuyama believes that ‘liberal principles in economics – the “free market” – have spread, and have succeeded in producing unprecedented levels of material prosperity, both in industrially developed countries and in countries that had been, at the close of World War II, part of the impoverished Third World’.[22] So in 1990s monetarism in all its completeness had triumphed as the economic management system among the creditors and, as a consequence, among their borrowers.

However in former Soviet countries the monetaristic variant of the monetary approach to the balance of payment should have applied, if at all it could have applied, exclusively for the countries of Central and Eastern Europe. These countries could rely on the support of the European Union at the threat of depression. M. Friedman’s Monetary Theory did not assume that successive monetary-and-credit policy led to the seizing up of credit markets. Such market saturation with money and credits conditions the crises and the depression arising from ‘permanent growth of competitive money offers’ (F. A. von Hayek) but not from its deficit or deflation. This permanent money supply, related long-term price inflation, multiplies the values of financial instruments circulating in world and national financial markets both in the segment of securities, including derivatives, and in the segments of currencies and interbank credits. Since 2007–8 credit bubbles have been blowing off, ending in widespread bankruptcy and financial crisis, as it occurs in the real sector of the economies of the USA and the European Union, or burst as in the economies depending on credit – Iceland, Hungary, the Baltic countries, and the countries of Central Asia.

Elaborated on constant consumption growth, the monetarist model exploits the technologies of covert power such as enablement and manipulation. In post-industrial countries the consumers, deciding upon current consumption, prefer to consider lifetime or permanent income rather than current income. So it seems their behaviour will be easily controlled by the credits and the monetary policy. Wage earners work because they aren’t in danger of dying from starvation or losing the roof over their head as it were in disciplinary societies that forced proletariats to sell their labour, which was their only material possession. Now they can survive on unemployment relief. But at the same time most of them are enticed by higher standards of living. Acquiring real estate or expensive goods, the consumers borrow some money with long-term conditions. As early as April of 2008 Russian bank ‘VTB 24’ offered the clients to repay their mortgage credits by equal instalments for fifty years.

M. Foucault recognized these modes of control as our immediate future. The old discipline is superseded by new surveillance as is also the language of analogy among the sites of confinement by digital language of the ultra-rapid forms of free-floating control throughout an open environment. This is obvious in the matter of salaries: ‘the factory was a body that contained its internal forces at the level of equilibrium, the highest possible in terms of production, the lowest possible in terms of wages; but in a society of control, the corporation has replaced the factory, and the corporation is a spirit, a gas. Of course the factory was already familiar with the system of bonuses, but the corporation works more deeply to impose a modulation of each salary, in states of perpetual meta-stability that operate through challenges, contests, and highly comic group sessions’.[23] So the brashest rivalry that opposes individuals against one another is an excellent motivational force used by the corporation to increase labour productivity, ever more concerned with the growth of knowledge and the computer technologies. Deleuze notes, as the corporation replaces the factory, perpetual training tends to replace the school, and continuous control to replace the examination.

This way the new century pushes Russian authority to apply the technologies of consumer’s society, the technologies of enablement and manipulation of people behaviour. Such technologies allow inducing people as the consumers. They take place in the country whose standard of living cardinally differs from that of post-industrial societies. Thus as concerns the Russian Federation one of the results of monetaristic money-and-credit policy is the great difference in personal incomes of population. According to the data of the Ministry of Economic Development and Trade the difference of the incomes between ten percents of the most wealthy and the less well-off categories of citizens made up 14.5, 14.8, 14.9 and 15.3 times for 2003–6 correspondingly. Hopeless impoverishment, this is the essential feature of proletariat in the epoch of two outstanding economists K. Marx and F. Engels. And nowadays purchasing ability of most people in Russia is hardly to go beyond the subsistence minimum. Now as with one hundred years ago the processes of capital centralisation and diminishing effective consumer demand, described by K. Marx, V. I. Lenin, S. N. Bulgakov and other researchers, originate economic and political risks for the societies running from the deadlock of planned economy to the deadlock of monetarism.

At the same time under the conditions of bureaucratising, precarious property rights, a shortage of investment funds for industrial and utilities infrastructure expanses, and colossal growth of corruption, Russia is alleged to leave military-industrial ‘well-developed socialism’ for desired contemporary post-industrial capitalism. Without forty-year history of Keynesian arrangements this reminds of Lenin’s eagerness to drag the country out feudalism into communism at once. Monetaristic money-and-credit policy attempts to promote the technologies of control in the disciplinary society. In this society there is neither the consumer (creditworthy borrower) nor the creditor (national bank system of private capital and real investments). This policy dooms the population to sharp rise of consumption without the correspondent growth of personal incomes and without the correspondent development of productive forces. It deliberately leads to degradation of human resources, to the whole economy depending on world prices of raw materials. All of this contradicts the concept of the societies of control according to which it should not constrain but induce the consumer, not compel but educate, not import but produce science and information innovations. So there is a doubtless contradiction between the sharp rise of consumption on account of lending and variable encouragement to take a credit, from one side, and the present development of productive forces, from another. The former corresponds to the technologies of power in the societies of control, the last does to that in the disciplinary societies in which the crediting of the masses of the people was strictly limited because of their proletarian status. The danger to apply the technologies of consumer’s inducement, the technologies of covert power accepted in the societies of high living standards, is not conscious yet in the disciplinary societies. It is all the more dangerous while the economic relationships are burdened with the negative factors such as oil and gas power, underestimation of labour, extremely low real incomes of population.

Another contradiction between the technologies of power, from one side, and the development of commodity and service production, from the other, consists of the mode of economic management itself. In post-industrial societies, power successfully forms the public opinion due to the technologies of control operating through the mass media and the financial system. These societies have overcome class contradictions as well as class divisions on antagonistic social oppositions. They have promoted either the cause of globalisation, which moved out some burning problems into the “third world’ countries, or on the cause of implementing the ‘social state’ model. On the contrary, these technologies of power applied to the citizens of the disciplinary societies are not effective exactly ‘because of their proletarian status’ what has been motivated as far back as by V. I. Lenin. This evident gap between the discipline, from one side, and the encouragement to consume, from another, causes some social intensions. Now public powers are obliged to correct monetarist model towards more considerable government regulation of market relations. And even so this is the half measures.

The point is the unfolding of modern natural science itself has a great and rather uniform effect on any society. F. Fukuyama guesses two reasons that have experienced it. In the first place, he argues, technology confers decisive military advantages on those countries that possess it, and no state that values its independence can ignore the need for defensive modernisation. In the second place, modern natural science establishes a uniform horizon of economic production possibilities. F. Fukuyama believes:

Technology makes possible the limitless accumulation of wealth, and thus the satisfaction of an ever-expanding set of human desires. This process guarantees an increasing homogenisation of all human societies, regardless of their historical origins or cultural inheritances. All countries undergoing economic modernisation must increasingly resemble one another: they must unify nationally on the basis of a centralised state, urbanise, replace traditional forms of social organisation like tribe, sect, and family with economically rational ones based on function and efficiency, and provide for the universal education of their citizens. Such societies have become increasingly linked with one another through global markets and the spread of a universal consumer culture.[24]

Does the logic of modern natural science dictate a universal evolution in the direction of capitalism? There is no unambiguous answer. We can accede to Fukuyama’s opinion that the experiences of the Soviet Union, China, and other socialist countries indicate the level of industrialisation, which was represented by Europe in the 1950s and later by highly centralised economies. But socialist economy was inadequate in creating a post-industrial society in which information and technological innovations play a much larger role. The Soviet Union remained an industrial and raw materials giant and clearly proved unable to compete against post-industrial societies.

So the modern model of economic management should include equally with land, capital, and labour, such factor of production as knowledge, namely institutional forms to gain, accumulate, and communicate knowledge. It involves undoubtedly post-industrial societies but as well such industrial society which tend to be a modern and forward-looking nation able to take a worthy place in the global economy. Land as a factor of production was institutionalised in the societies of sovereignty. Its proprietor, the feudal lord, was the power itself. Later the disciplinary societies institutionalised capital in the liberal and democratic system of political parties. Labour had the revolutionary importance until it was institutionalised by Keynesian arrangements in the forms of strong government regulation of employment relationship, labour unions, and social guarantee system. As far as knowledge is concerned its institutionalising in the political system has not been any considerable till the present time, although such a need grows with the significance of scientific knowledge as a new factor of production. The higher ex officio, the more competent ex professo – it is the principle of control to come. Perhaps this is the only way to be saved from the mediocrity at the helm.

The End of Capitalism or the Capitalism for Majority?

Is Keynesian model able to be universal means on overcoming financial and economic crisis in the societies of control whose economies not long ago entered into a new stage of post-industrial development? Are the government measures neither more nor less than an end of capitalism which is regularly proclaimed by some philosophers, scientists, and writers? According to them capitalism is unsustainable in a very basic way.[25] Capitalistic system requires infinite exponential growth in a finite world. So it cannot exist forever on a planet that is defined by very real ecological and social limits. The opinion that the ongoing economic downturn is a crisis of the system itself emphasises that the only solution is to change all structure of the economy.

Indeed the crisis of industrial economies, needing badly for the credits, suffering from the decay of its infrastructure, and shrinking the social programs, is caused by the model of economic management and the paradigm of global development elaborated in era inaugurated by R. Reagan and M. Thatcher thirty years ago. This model was based on maximising profits and simultaneous reducing government regulation considered before indispensable for the protection of all society’s interests. Eventually the abolition of government regulation has provoked the social intensions in many regions of the world just because of uncontrolled and unregulated political, economical and immigration processes. At the end of 2008 the corporative and national debts of the USA exceeded the gross domestic product of world economy leader in 3.7 and including the social liabilities in 8.2 times. For collation at the beginning of Great Depression this relation was 1.5 times in 1929 and 2.3 times in 1933. However the stock prices of the American investment banks were at several times more than its balance costs till September 2008. This is the result of ignoring the interrelated aspect of credit expansion and credit shrinkage by M. Friedman’s theory. It explains why G. Soros believes that monetarist theory is fallacious. Deregulation of economy has caused the stock markets and the markets of other financial instruments, including credits and derivatives, have appeared to be more important for the investors than the physical or actual markets. As a rule contemporary capital relegates the production to the ‘third world’ countries, buys the finished products or assembles parts, and tends to maximise the profits. Capital doesn’t care about its portion in the physical market as it were before when the wars burst out for the attainment of colonies or for the market penetration. Now the corporations belong to managerial class; the stockholders are not interested in the production as it is, since the only goal of stockholding is to earn more money speculating with the securities.

So there is a crisis of old institutions in the modern corporate system which invents new ways of handling money, profits, and humans. The progressive and dispersed installation of a new system of domination gives rise to some serious questions. G. Deleuze noted:

Can we already grasp the rough outlines of the coming forms, capable of threatening the joys of marketing? Many young people strangely boast of being ‘motivated’; they re-request apprenticeships and permanent training. It’s up to them to discover what they're being made to serve, just as their elders discovered, not without difficulty, the telos of the disciplines. The coils of a serpent are even more complex that the burrows of a molehill.[26]

It is true that capitalism has retained as a constant the extreme poverty of three-quarters of humanity, too poor for debt, too numerous for confinement. G. Deleuze has predicted that control would not only have to deal with erosions of frontiers but with the numerous social explosions within shanty towns or ghettos.

To revise the consumption, that has been ‘the motor’ of super-bubble world’s economy for many years and now is gone, is what G. Soros to accept for unraveling, though inevitable, need. He thinks that we all have to consume less:

We will consume less because we will have to. And rather than being unemployed, let’s keep employment up. We’d use it for dealing with global warming. That, I think, is the way that this could work in the right way.[27]

The Washington Consensus, that kept global capital moving around the world, has failed. The Wall Street crash of 2008 has shown all vulnerability and insidiousness of present-day financial system shifting the burden of born in the USA crisis onto the ‘third world’ countries. They are vulnerable due to the market discipline of the Washington Consensus imposed on them by the World Bank and the International Monetary Fund. That was a number of political recommendations including budgetary discipline, privatisation, deregulation, trade liberalisation and so on. The losses caused by these recommendations have not been estimated till now.

Is it possible to create a new motor for a post super-bubble world? We guess it would not be enough just to repeat the words of Business & Media Institute adviser Don Luskin: ‘So if you want to move the world, just move the markets’.[28] The matter is a new model of a society, where politics, economics and morals would go hand in hand. It is all the more important if we are to deal with energy, one of the main aspects of over-consumption problem, and to combat global warming. All of this really requires a huge amount of efforts, an amount of change and development that can restart economy. Philosophy of modern society as well as its social and economic model is appeared to be primitive enough to be founded exclusively on the profit, consumption and personal income. There are quite a few public figures close to this point of view. Among them is the former Soviet leader M. Gorbachev who believes now it is time for change at the very philosophy of capitalism of higher-order production.[29] After transforming Russia in the late 1980s he insisted positively on American’s turn to act, but Washington, celebrating its Cold War victory, was not interested in a new model of a society. Most of the Americans have failed to realise that the Soviet Union no longer exists, that Europe has changed, and that new powers like China, Brazil and Mexico have emerged as the important players on the world stage.

Meanwhile the USA, which is the most successful in the researches, meets with the discredit of science as the institution of knowledge. American writers and futurists Alvin and Heidi Toffler assure that today’s changes affect how we all make decisions right down to the very truth or to the lie on which they based on. We are leaving through a period when our longstanding criteria for separating truth from falseness were themselves under fire. Science, as the branch of knowledge most necessary for economic advance, is under widespread attack. They argue that science is in more trouble in the most aspects than we can suggest. It is not the crisis like the declining finances for basic research. Science survives by the grace of its host culture and that culture is turning hostile. We can see the growing attack on evolution by the creationists and the so-called ‘intelligent design’ movement. The influence of science is also under cut by cases of corruption among the scientists wielding knowledge at the pharmaceutical firms and other industries, by repeated media portraits of scientists as evil, by oncoming biological breakthroughs that threaten traditional definition of ‘the humanity’. Besides scientific method itself is under attack by ‘truth managers’, who prefer decisions based on other criteria from mystical revelation to political or religious authority. Alvin and Heidi Toffler believe that the ongoing battle of the truth is a part of transformation in our relationships to the deep fundamentals of knowledge.[30]

Nowadays China has passed ahead of the USA in exporting information and communication technologies. So China is a new leader. Are there any preferences in the technologies of power given by the societies of control (the democracies of USA and Western Europe)? Western civilisation has brought democracy, philosophy of the rational research, and scientific and technological advance. In G. Frankl’s opinion, after falling communist hallucinations there is no doubt that the West has preserved its freedom. But the question is how much does this freedom cost. Perhaps the cost is depersonalisation of the consciousness and the soul.[31]

Another question, that should be analysed, is whether the contemporary science leads to liberal democracy. Thus Fukuyama concludes that the relationships between economic development and technologies of power are not casual, although the motives for the choice of democracy are not economic by their nature. They have another source, and the industrialisation just gives them the opportunities to be fulfilled but it does not make them necessary.[32]

The alternation of social politics and economic development is the sufficient feature differentiating the liberal post-industrial societies from the industrial dictatorship of the disciplinary societies and from ‘the laboratories of life’ as Keynes nicknamed the Soviet Union. At the dawn of cybernetics British economist had suggested new economic model of industrial society. In the USA and later in Western Europe improvement of the quality of life was accompanied by purposeful financing for science, public health, and education. It supports our general conclusion: if there are no system arrangements of public authorities to improve the quality of life in the disciplinary societies, neither innovation activity nor high-technology acceleration is possible.

To Deleuze, if nowadays we have some deficiency that is not a critique of K. Marx. We need contemporary monetary theory, which would be as good and applicable as Marx’s theory was and could be regarded as its continuation. In turn Deleuze welcomed capitalism’s destruction of traditional social hierarchies as the liberation, but disapproved its convergence of all values to the goals of the market. We think the unfolding of technology, productive forces, and productive relations did not abolish Keynesian model as a middle way between market fundamentalism and socialism. Capitalism, allowing such a purchase power, which can provide extended reproduction, is the capitalism for the majority. It discovers the spheres of human activity, in which the market mechanisms do not properly function. There are two convergent vectors of social politic and government expenditures for education, science, public health, and house building. The first one is overcoming poverty by the means of redistribution of wealth and therefore serving prevention of social bursts. The second one is developing ’human factor’, increasing productivity of labour and intensification of economy. In the disciplinary societies both of them can work under the conditions of liberalisation and democratisation of public authority. They demand glasnost, as well the intention to understand what ‘contemporary society’, ‘society of control’ implies, and in the final analysis what facilities we need for sustainable development and well-being worldwide.

References

Bill Moyers Journal 2008, ‘George Soros’, 10 October, available at: <www.pbs.org/moyers/journal/10102008/profile.html>.

Buchanan, Patrick 2002, The Death of the West: How dying populations and immigrant invasions imperil our country and civilization, New York: St. Martin's Press.

Deleuze, Gilles 1990, ‘Society of Control’, available at: <www.nadir.org/nadir/archiv/netzkritik/societyofcontrol.html>.

Deleuze, Gilles and Felix Guattari 1977 [1972], Anti-Oedipus: Capitalism and Schizophrenia, New York: Viking Press.

Egan, Timothy 2005, ‘Letter: America’s new class division’, available at: <news.bbc.co.uk/2/hi/americas/4284161.stm>.

Frankl, George 1993, Civilisation: Utopia and Tragedy, London: Open Gate Press.

Fukuyama, Francis 1992, The End of History and the Last Man, London: Penguin.

Gorbachev, Mikhail 2008, ‘World Crisis’ La Stampa, 11 November.

Heidegger, Martin 1977, The Question Concerning Technology and Other Essays, trans. by William Lovitt, New York: Harper and Row.

Keynes, John 1933, ‘An Open Letter to President Roosevelt’, New York Times, 16 December.

Knight, Alex 2009, ‘About the End of Capitalism’, available at: <endofcapitalism.com/about/>.

Lenin, Vladimir 1964 [1899], The Development of Capitalism in Russia in Lenin’s Collected Works Volume 3, Moscow: Progress Publishers.

Lietaer, Bernard 2001, The Future of Money: Creating New Wealth, Work and a Wiser World, London: Random House.

Lietaer, Bernard 2003, ‘A world in balance?’, available at: <www.lietaer.com/images/Reflections.pdf>.

Marx, Karl 1960 [1867], Capital, Volume 1 in Marx and Engels Collected Works Volume 23, Moscow: Political Literature Publishers.

Marx, Karl 1962 [1894], Capital, Volume 3 in Marx and Engels Collected Works Volume 25, Part 2, Moscow: Political Literature Publishers.

Murray, Robert and Tim Blessing 1993, Greatness in the White House, Penn State Press .

Poor, Jeff 2008, ‘Liberal Financier Soros Blames Consumption for U.S. Crisis’, available at: <www.businessandmedia.org/articles/2008/20081013140828.aspx>.

Soros, George 1998, The Crisis of Global Capitalism: Open Society Endangered, New York: Public Affairs.

Toffler, Alvin and Heidi Toffler 2006, Revolutionary Wealth: How it will be created and how it will change our lives, Knopf Publisher.

Turner, Jonathan 1997, The Institutional Order, New York: Longman.

Winner, Langdon 1986, The Whale and the Reactor: A search for limits in an Age of High Technology Chicago, IL: The University of Chicago Press.

[1] See Lietaer 2001.

[2] Lietaer 2003.

[3] Marx 1962, p. 62.

[4] Lenin 1964, p. 56.

[5] Ibid.

[6] Marx 1962, p. 26.

[7] Marx 1960, p. 772–3.

[8] Heidegger 1977, p. 27.

[9] Winner 1986, p. 6.

[10] Deleuze 1990.

[11] Ibid.

[12] Soros 1998, p. 24.

[13] We use the term ‘social institutions’ to refer to complex social forms that reproduce themselves such as governments, human languages, universities, hospitals, business corporations, and legal systems. J. Turner’s definition is available: ‘a complex of positions, roles, norms and values lodged in particular types of social structures and organising relatively stable patterns of human activity with respect to fundamental problems in producing life-sustaining resources, in reproducing individuals, and in sustaining viable societal structures within a given environment’ [Turner 1997, p. 6.].

[14] Keynes 1933.

[15] M. Foucault called them ‘regimes of truth’.

[16] Egan 2005.

[17] Buchanan 2002, p. 35.

[18] Buchanan 2002, p. 32.

[19] Deleuze 1990.

[20] Deleuze and Guattari 1977, p. 142.

[21] Murray and Blessing 1993, p. 80.

[22] Fukuyama 1992, p. xiii.

[23] Deleuze 1990.

[24] Fukuyama 1992, p. xiv.

[25] See Knight 2009.

[26] Deleuze 1990.

[27] Bill Moyers Journal 2008.

[28] Poor 2008.

[29] See Gorbachev 2008.

[30] Toffler 2006, pp. 382–3.

[31] See Frankl 1993.

[32] See Fukuyama 1992.