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Economics and Power In the economic debate, power is defined and studied mainly as an interpersonal relation occurring out of perfect competition. This is a consequence of the combination of methodological individualism and the assumption of competition as a natural and everlasting coordinating mechanism, operating without any sort of coercion. This methodology, however, is not adequate to analyse the forms of social coercion that characterise capitalism. Economics and Power criticises the main theories of power developed in economic literature, analysing ultraliberal contractualism to radical political economics, and ultimately suggesting a Marxist conception of power and coercion in capitalism. Palermo’s ontological argument is rooted in the philosophy of ‘critical realism’. This unique volume presents his main finding as being that the essential coercive mechanism of capitalism is indeed competition. Capitalist power is not caused by a lack of competition, but by the central role it plays in this mode of production. Following this, the chapters reconstruct a Marxian conception of power where it is analysed as a social relation and argues that perfect competition does in fact exist under the disguise of capitalist power. This book criticises the construct of power and the underlying ideas surrounding perfect competition. This book will be of interest to those who study political economy, as well as economic theory and philosophy. Giulio Palermo is Researcher in Economics at the University of Brescia, Italy. Routledge Frontiers of Political Economy For a complete list of titles in this series please visit www.routledge.com/ books/series/SE0345 201 Economics, Culture and 207 The Rejuvenation of Political Development Economy Eiman O. Zein-Elabdin Edited by Nobuharu Yokokawa, Kiichiro Yagi, 202 Paradigms in Political Hiroyasu Uemura and Richard Economy Westra Kavous Ardalan 208 Macroeconomics After the 203 The Economics of Voting Financial Crisis Studies of self-interest, A Post-Keynesian perspective bargaining, duty and rights Edited by Mogens Ove Madsen Dan Usher and Finn Olesen 204 The Political Economy of 209 Structural Analysis and the Food and Finance Process of Economic Ted P. Schmidt Development Edited by Jonas Ljungberg 205 The Evolution of Economies An alternative approach to 210 Economics and Power money bargaining A Marxist critique Patrick Spread Giulio Palermo 206 Representing Public Credit 211 Neoliberalism and the Moral Credible commitment, fiction, Economy of Fraud and the rise of the financial Edited by David Whyte and subject Jörg Wiegratz Natalie Roxburgh Economics and Power A Marxist critique Giulio Palermo First published 2016 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2016 Giulio Palermo The right of Giulio Palermo to be identified as author of this work has been asserted by him in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Names: Palermo, Giulio, author. Title: Economics and power : a Marxist critique / Giulio Palermo. Description: Abingdon, Oxon ; New York, NY : Routledge, 2016. Identifiers: LCCN 2015049336| ISBN 9781138923096 (hardback) | ISBN 9781315685335 (ebook) Subjects: LCSH: Marxian economics. | Economics--Philosophy. | Power (Social sciences) Classification: LCC HB97.5 .P247 2016 | DDC 335.4/12--dc23 LC record available at http://lccn.loc.gov/2015049336 ISBN: 978-1-138-92309-6 (hbk) ISBN: 978-1-315-68533-5 (ebk) Typeset in Times New Roman by Saxon Graphics Ltd, Derby Contents List of illustrations vii Preface and acknowledgements ix List of abbreviations xi 1 Introduction 1 The dimensions of power in social sciences 4 The unidimensional view of power in economics 7 Methodological choices and ontological necessities 9 Historical materialism, exploitation and social coercion 12 Marx’s critique of capital and the critique of power 14 Structure of the book 16 PART I Power in economics 21 2 The economic debate on power 23 The contractual approach of Alchian and Demsetz 26 Williamson’s transaction costs economics 28 The property rights approach of Hart and Moore 30 The radical political economics of Bowles and Gintis 32 Goldberg’s institutional perspective 35 The terms of the debate 36 3 Power and post Walrasian economics 45 Post Walrasian economics 46 From Walrasian to post Walrasian economics 48 The theoretical results of Walrasian economics 49 The role of perfect competition in the debate on power 52 Conclusions 55 vi Contents 4 Power demystification 59 The categories of post Walrasian economics 60 As-if economic history 63 History and efficiency 65 Free contracting, imperfections and class relations 66 Exchange without production 68 Production, circulation and the free trader vulgaris 70 Scientific research and cultural hegemony 73 Conclusions 76 PART II The ontology of capitalist power and the coercive law of competition 81 5 Marx’s critique of capital and competition 83 Competition in Marx’s work 86 Total social capital and competition between individual capitals 89 The origins of competition 91 Competition and the contradictions of capital 93 The development of competition and the process of capital subsumption 96 Association against competition 97 The end of competition 99 Bourgeois economics and the myth of perfect competition 101 Conclusions 104 6 Capitalism as a system of power 112 Critical realism 114 Critical realism and Marxism 116 The ontology of power 118 The ontology of capitalist power 124 Conclusions 139 7 Final remarks 145 Formal similarities within opposite conceptions 146 Economists as servants of power 151 Reorienting the struggle 155 Index 162 Illustrations Figures 2.1 The boundaries of economic power 38 2.2 The terms of the debate 38 Tables 3.1 Power, decision making contexts and organisational structures 52 6.1 Capitalism as a system of power 126 (cid:84)(cid:104)(cid:105)(cid:115)(cid:32)(cid:112)(cid:97)(cid:103)(cid:101)(cid:32)(cid:105)(cid:110)(cid:116)(cid:101)(cid:110)(cid:116)(cid:105)(cid:111)(cid:110)(cid:97)(cid:108)(cid:108)(cid:121)(cid:32)(cid:108)(cid:101)(cid:102)(cid:116)(cid:32)(cid:98)(cid:97)(cid:110)(cid:107) Preface and acknowledgements This book is the result of a long period of research on power and the ‘new right’, initiated with my doctoral thesis in economics, defended in 1997.1 Since then, I have developed my critique in different directions and this book reorders these past arguments into an organic work. In these years, the attempt to behave coherently with my critique and to address the latter against the university as well – against its power-based mechanisms and against its social and economic role in the capitalist system – has caused me an unpleasant isolation, censorship and repression from academic hierarchies.2 This is why I have no acknowledgement to address within the academia. Naturally, my ideas have been influenced by the academic debates of our time and my work has benefited from the comments and criticisms of many authors. But the academy is only one side of the coin: the other is society. No academician can develop a critical conception of power without being part of a movement fighting against power. Rather than mentioning the professors and researchers that have most influenced me, I prefer thus to remember all the comrades that continue the struggle against the coercive conditions of this society and fight to free critical thinking from the power mechanisms that imprison it. It is to the anti-capitalist movement, in all its forms and developments, that I dedicate my work. Having used ample parts of articles that I have published, I thank the Cambridge Journal of Economics, Capital and Class, the Journal of Economic Issues, the Journal of Economic Methodology and Science and Society for having given me the free right to use the following articles: Ankarloo, Daniel and Giulio Palermo (2004), Anti-Williamson: A Marxian critique of new institutional economics, Cambridge Journal of Economics, vol. 28, n. 3, pp. 413–29.