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Noyola’s Critique of Orthodoxy This is the English version of “Juan F. Noyola Vázquez : regreso al solar de la economía política clásica” in Carlos Mallorquín and R. Torres, eds. El Institucionalismo norteamericano y el estructuralismo Latinoamericano, Discursos compatibles? (Universidad Autónoma de Puebla, forthcoming 2004). Colin Danby

University of Washington, Bothell

November 2001

1. Introduction

Two facts should be kept in mind when we discuss Latin American economic thought

from the 1950’s. The first fact is that this was a decade of grave political tension in many

countries of the region. This tension was aggravated by price shifts in the international

economy that hurt exporters, but it was rooted fundamentally in a variety of domestic

political trajectories. While in some cases – for example Brazil and Chile – those tensions

became much more manifest in events of the following decades, the 1950s can hardly be

called a period of institutional stability.

The second fact is the worldwide rise, in the same period, of formalism and

methodological individualism within economics. Neoclassical doctrine was essentially

launched in the postwar period, following the 1930’s rediscovery and extension of

Pareto and Walras by J. R. Hicks, its 1940’s development and popularization by Paul

Samuelson, and groundbreaking 1950’s work by such figures as Koopmans, Arrow and

Debreu. (The rise of neoclassical thought was also the defeat of institutionalism within

the academy.) The formation of the International Monetary Fund and other

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organizations, together with the expansion of national economic ministries around the

world, gave employment to a generation of technocrats who were supposed to pursue a

purely technical brand of economics isolated from the contamination of politics. The

apolitical formalism of neoclassical theory fit their requirements very nicely.

Noyola was caught between these two facts. On the one hand he was working, quite

explicitly, to broaden the scope of economic theory to embrace the situations of political

tension, contingency, and change that he saw around him. In this process he drew on

older work in political economy, in the fullest sense of the term. On the other hand he

was fighting a losing battle against the increasing narrowing and technocratization of

economic theory.

The rest of this essay proceeds as follows. In the next section I establish Noyola’s

approach to political economy, and contrast this with the existing interpretive literature

about his work. Following that I discuss his 1956 article to show that this

methodological and political vision is very much alive in that much-cited work. I then

turn briefly to the works of three of Noyola’s intellectual sources to show that his claim

to draw on a broad political economy tradition, distinct from narrow technocratic

economics, is well-founded. Finally, in an effort to further clarify the distinction

between Noyola’s work and the work he critiqued, I introduce the concept of a Cartesian

totality, as developed in the contemporary Marxian literature. This gives us a language

to consider the questions of social ontology and causality that are raised by Noyola.

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As we examine Noyola’s work, we should not ignore the socialist politics that animates

it. We are of course used to the idea that political beliefs and economic analysis are

separate things, and in most ways they are. But let us remember, as we try to read

Noyola in context, that the decade or so after the defeat of fascism in World War II was

one of considerable hope for socialists around the world – hope for fundamental change

in governments and political institutions. Like Michal Kalecki, Celso Furtado, K.N. Raj1,

and other left-wing economists of his generation, Noyola clearly understood his

academic and technical activities as linked to a political project. Class struggle, in

Noyola, is much more than an analytical curiosity. It contains the possibility of large-

scale historical and political change.

2. For Social Science

At the very beginning of “Principios de Economía”2 Noyola distinguishes between “two

kinds of economics: the great Classical tradition, developed by Adam Smith y David

Ricardo, which understood economics as a social science,” and the “current approach in

the Anglo-Saxon countries, which understands economics in a much more abstract

way.” (Noyola 1978, 142). He says that the former approach was lost in “bourgeois

economics” after Mill but is today represented in the Marxian tradition; the latter he

exemplifies with Robbins’ definition of economics as the study of relationship between

scarce means which have alternative uses”

1 Raj was a 1940’s graduate of the London School of Economics who worked on India’s first five-year plan, under Nehru; he later held posts at the Delhi School of Economics and the Kerala-based Center for Development Studies. He was influenced by Kalecki; among his best-known works are Raj (1973) and (1977); see also his comments on land reform in Raj (1965: 12) for a political economy argument of the kind made by Furtado and Noyola. 2 “Curso dictado en la Habana en noviembre de 1961.” Pp. 142-252 in Noyola 1978. All translations mine.

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Here and in other writings (e.g. Noyola 1955) Noyola explicitly identifies himself with

the broad political economy tradition of Smith, Ricardo, and Marx as opposed to the

narrow, abstract study that he terms bourgeois and Anglo-Saxon. “Social science” above

should be read with an emphasis on “social,” with the clear implication that

contemporary, abstract Anglo-Saxon economics does not qualify as a social science.

Following the remarks quoted above he adds that “Economic science is an historical

science, an inductive science, observing real phenomena ... It would be sterile to give up

observation when we study economy.” (Noyola 1978, 142). These are strong words in

the context of economic thought, pointing explicitly to the division between deductive

versus inductive logic, abstract/formalist versus institutional/historical method, that

goes back to the Methodenstreit of the late 1800s. Noyola was not of course naively anti-

formalist, and wrote clearly about the usefulness of abstract reasoning (1955, 1978). But

it would be hard to ask for a clearer rejection of the notion of economics as essentially

abstract and deductive.

It is therefore striking that most of the interpretive literature on Noyola since his death

has read him as a narrow technical economist whose main achievement was the

development of an abstract scheme for the study of inflation.3 There is no doubt that

Noyola was educated in what he called bourgeois economics, wrote about it (Noyola

3 Seers 1962B, Bazdresch 1983, 1984, 1987, Arndt 1985, Solís 1991. Bazdresch is right in noting that Noyola did not theorize with Marxian categories like surplus value. But this misses Noyola’s point, because it construes Marxism as an abstract, technical theory competing with other abstract theories. The kind of abstract theorizing that Noyola critiques is a broader category than what we now call neoclassical economics. For Noyola, class struggle implies a politics of social relations, not simply a division of income shares.

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1955), and has earned a place in its literature. But the Noyola that can be

accommodated within this tradition is only a shadow of the Noyola quoted above.

Neoclassicals have avoided Noyola’s critique by classifying him as a “structuralist,” and

then defining “structuralism” as a minor variant of neoclassical theory. A structuralist

world, in this conception, is simply a neoclassical world with a poorly-oiled price

mechanism.4 Either prices themselves fail to adjust, or quantities stubbornly refuse to

respond properly to price signals. It is possible to theorize in this way, and the papers of

Seers (1961B) and Oliveira (1964) are sophisticated examples. But this is not Noyola.

While he certainly had no great faith in price systems, he dissented from neoclassical

thought at a much deeper level: he challenged its methodological individualism, its

assumption of exogenous politics, and its equilibrium framework. The successful effort

of conservatives like Campos (1961, 1963) to move the debate over stabilization into the

terrain of neoclassical theory rules out of consideration broader challenges, like

Noyola’s, to the neoclassical framework itself. 5

4 Campos 1961 is the apparent origin of the term “structuralist” and its definition as a theory of bottlenecks; see also Campos 1963. Arndt 1985 is an influential recent account that accepts this characterization. 5 The story of how the radical work of figures like Noyola became caricatured as an economics of price inflexibility is in part a story of the politics of translation into English. Noyola’s writings have never been translated. Campos’ (1961) caricature appeared in English and at a significant moment, as U.S. interest in the region, following the Cuban Revolution, was intensifying. In the Baer and Kerstenesky (1964) volume, which contains results from a 1963 conference held in Brazil with the support of the Ford and Rockefeller Foundations, Arthur Lewis jokes (Baer and Kerstenesky 1964: 24) that “usually, when I take any particular opinion as being typically Latin-American, or in any sense the Latin-American point of view, the typical Latin-American who has expressed this idea turns out to be Mr. Dudley Seers.” Seers wrote an influential article in two versions (1962A) and (1962B) which essentially translated what he imagined to be the Latin American debate into a long-standing Anglo-American debate over state planning, which had arisen during World War II. The result was that Anglophone academics heard only what they already knew, a process that reaches its logical culmination in the survey by Arndt (1985), in which Arndt nominates his own wartime work as the origin of Latin American structirualism.

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3. Mexico vs. Chile

Noyola’s 1956 article compares inflation in Mexico and Chile. His declared preference

for induction should alert us to the fact that these are not random examples of an

abstract theory. Noyola was a Mexican speaking to other Mexicans after a sojourn in

Chile: this article was originally given as a talk at the Escuela Nacional de Economía in

Mexico City, to an audience including some of his former professors. The discursive

context is vital to reading this article and the recorded conversation that followed it. In

the opening paragraph Noyola twice disassociates his remarks from his employer

(CEPAL) and provides an extended disquisition on the importance of freedom of

expression and frank discussion among academics. This clearly reflects his discomfort

at the time with the limitations placed on him by CEPAL; it can also be read as an

acknowledgment that his paper is highly critical of the Mexican state. 6

Noyola went to Chile to join CEPAL in 1950, and it is clear that events in Chile in the

early 1950s made a strong impression on him as an economist, and also as a socialist.

Chile spent much of the 1950’s in a state of acute political crisis. Two aspects of this

period are relevant to our argument here. One is that the institutional forms of politics

in Chile – elections, congress, and party politics – were understood by all to be fragile. It

was widely expected that Gen. Carlos Ibañez would, after winning election in 1952,

Olivera 1964 is the best example of how “structuralism” was conceived as a mutation of neoclassical theory. 6 See Mallorquín (1998, 1999) on the limits that CEPAL, and in particular Prebisch, placed on younger employees like Furtado and Noyola. It is no surprise that Noyola resigned from CEPAL to work for the Cuban government; the sense of relief in his Cuban writings is palpable.

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assume dictatorial powers (Maloney 1997, Pisciotta 1987). He chose not to, but his

capacity to call on military support and rule in defiance of constitutional norms hung

over Chilean politics. Meanwhile socialist groups, understanding the threat posed to

them by military rule, worked vigorously to defend themselves and establish

independent organizations. Thus while political institutions and norms were not

unimportant in Chile, nobody assumed their stability or continuity.

The second key aspect of the Chilean experience was that class struggle around inflation

was absolutely open, and widely understood as such. This was exemplified in

government efforts to get an austerity plan passed in 1953 during which would, in the

famous phrase of Finance Minister Felipe Herrera, “let the powerful also pay.” For this

he was assailed by the right-wing opposition as a “crypto-marxist” (Pisciotta 1987, 123).

The plan failed to get political support, and it soon became clear that the Ibañez

government lacked the political support for any plausible sharing of real income. Wage

increases achieved by unions were followed by more rapid price increases, and so forth.

Thus no contemporary observer would have thought it unreasonable to posit a

relationship between Chilean inflation and the obvious fact of acute political struggle, a

struggle in which both a right-wing dictatorship and a socialist revolution were possible

outcomes.7

7 Kaldor (1956: 234) writes: “one’s general impression is that the obstacles in the path of accelerated improvement are neither natural, technical, nor economic, but essentially political – they ensue from the continued clash between the individual interests of particular groups and classes, and the general interest; and they reflect the lack of appropriate institutional arrangements for the continued resolution of conflicts, and the attainment of social compromises.”

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While its state institutions proved much more durable, Mexico had experienced a brief

political crisis in 1954, when a devaluation provoked significant labor opposition. The

Mexican state then embarked on a set of policies that later came to be called “stabilizing

development,” aimed at low-inflation growth – and in those narrow terms, it achieved

impressive success for a decade and a half. The audience to which Noyola spoke in 1956

was certainly inclined to regard Chile’s experience with inflation as significantly worse

than Mexico’s, because measured by the overall rate of inflation, it was.

Noyola, however, points out that Mexican workers have lost significantly more income

share than Chilean workers over the same period, “to show how hard it is to answer the

question, which inflation was more intense, the Chilean or Mexican? ” (1956: 606). With

highly institutionally-specific attention to mechanisms, he argues that Chilean workers

had far greater access to state power and ability to influence government to take policy

measures that favored them, or that at least protected their real incomes.8 The bitter

contrast hardly needed underlining for a Mexican audience – the Mexican Partido

Revolucionario Institucional claimed not simply to support workers, but to incorporate

unions in its political base. The most essential difference between the two countries, in

Noyola’s analysis, was the lack of political clout held by Mexico’s workers.9

One of the clearest illustrations of Noyola’s approach to inflation – and indeed to social

science in general, comes in the discussion that followed the presentation of the formal

paper. In some ways the discussion is more illuminating than the talk itself, because it

8 Note also Furtado’s interest in mechanisms (Furtado 1963: 253-258). 9 See Furtado (1971: 153-154) for further elaboration of Noyola’s distinction.

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shows very sharply the differences between Noyola’s approach and the kind of

economics that he criticized.

During the talk, Noyola had argued that one of the events that had contributed to past

Chilean inflations was a drop in the price of its main export, copper. To a neoclassically-

trained economist, this makes no sense. Inflation is a rise in the general price level,

hence it is hard to see how a drop in the price of one good contributes to an increase in

the price of goods in general.10 This criticism is raised in the discussion. Here is how

Noyola replies:

In a country in which exports have fallen as brutally as they did in Chile during the Great Depression, if nothing is done to maintain a certain level of demand … the country is condemned, in a very short time, to a tremendous social explosion. One has only to remember that in 1932 there were several revolutions in Chile, which is the most peaceful country in Latin America, among them [the establishment of] a socialist republic, the only one we’ve had on our continent …. The fact that such great social upheaval occurred in a country of great institutional stability shows the necessity of maintaining demand at a certain minimal level.… (Noyola 1956, 629)

The logic of this argument hinges on the very real possibility of institutional and

political change, including revolution. The institutional survival of the Chilean state is

in doubt. It is precisely because of this doubt – its historical contingency – that the state

acts to preserve itself by trying to reduce the impact of falling export prices on workers’

real income. If it does not, workers may overthrow it. To put it another way, the state

finds itself an actor in a historical drama whose outcome is uncertain, and in which the

end of the state is a clear possibility (the more hegemonic Mexican state, by contrast, had

greater confidence in its longevity). Thus even if the state survives, it has thought and

10 Javier Márquez (Noyola 1956, 619-620): “What was inflationary was not the fall in demand for Chilean nitrate, what was inflationary was the monetary policy that was followed to counteract the effect that the drop in external demand for Chilean nitrate had on the monetary incomes of its producers. ... It was the monetary policy that was inflationary, not the drop in foreign demand.”

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acted in a way that can only be properly understood with reference to the other ways

that the drama might have played out. Another possible result of historical change is

that some classes vanish and new classes appear. Thus for example the Mexican

Revolution of 1910-1917 essentially eliminated the landed oligarchy as a political force

(Furtado 1971: 307). Theories which see a fixed set of classes contending for shares of

national income are, by definition, unable to contemplate the possibility that some

classes may vanish and new ones may appear.

Historical contingency is unthinkable within a narrow economics that excludes history

and politics.11 Formal, abstract economics theorizing simply assumes away institutional

change, and has no theory of power or institutions as such. And indeed it is clear from

the recorded discussion that most of Noyola’s interlocutors in 1956 were trapped by this

kind of theorizing.

Noyola was doing more than just theorizing competing claims to national income.

There is a long tradition of theories (e.g. Burdekin and Burkett 1996) that understand the

national economy as characterized by competition among various groups for shares of

total national income. But as that tradition has developed in recent decades, it has

moved toward formalized theories shorn of institutional content. Such theories tend to

assume that the institutional/historical context in which classes vie for income shares is

set; they lack any clear theory of power as distinct from income shares. In other words

in these theories the only reason to have power is to get more income; a class that

11 A useful formulation of the distinction between struggles within existing institutions and struggles over the shape of those institutions can be found in Baumgartner and Burns (1980).

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achieves a higher income share can only have done so by somehow gaining and then

using more political power.

4. The Tradition of Non-reductionist Political Economy

Noyola was explicit about his intellectual sources. In this section we turn to the work of

three of them: Aujac and Kalecki, whom he twice names (1955, 1956) as key sources for

his notion of class struggle, and Keynes, praised highly as a political economist. 12 Our

purpose is to show that the distinctions we have pointed to in Noyola also exist in this

older literature.

Henri Aujac (1954) argues that inflation stems from underlying social conflict, but points

out that such conflict may be over institutions, not just within or through them. Aujac

distinguishes between theories that understand inflation as originating in the narrowly-

defined economic realm, with effects then transmitted to the broader society, and

theories that see inflation as having a social-conflict origin. But his notion of conflict is

quite broad:

Inflation arises, then, from the attempt by groups to modify the character of compatibility between behaviours which is determined by monetary relationships. It ends only when a new type of compatibility, which is the result of these efforts, imposes itself on the various groups – whether they accept it willingly or whether they can no longer avoid it. … in short, there is no law which prevents “the rules of the game” from becoming a “stake”. (Aujac 1954, 123)

12 Noyola (1955: 411) “With Keynes, economics began to turn itself into the study of society as a whole, not just the individual consumer or firm. This lack of the social dimension (which had been seen for the last time in the English tradition in en John Stuart Mill) was what had given the study of economy the mediocrity and insignificance that characterized it during the Marshallian period.”

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Aujac seems to have in mind inflation as characteristic of a political interregnum in

which one set of political institutions has broken down and groups struggle over the

shape of the next one. He notes, for example, that workers “can try to come to political

power so as to change the structure of the State and other institutions to their

advantage.” In this simplified historical model, situations of low inflation are likely to

be characterized by (perhaps temporary) victories of one class over others, and the

imposition of a distribution of income that all classes are forced to accept – the relevant

social groups “are once again, willingly or by force, led to adopt a behaviour of

acceptance” (Aujac 1954,115). This is similar to the contrast Noyola (1956) draws

between Mexico, where acceptance has been successfully forced by a strong state, and

Chile, where it has not.

Similar ideas can be found in the work of Keynes, whose work Aujac draws on and

critiques. Throughout his career Keynes emphasized the contingency and artificiality of

institutions that others for granted. In “The Treaty of Peace,” originally written in 1919,

he famously wrote of the “sandy and false foundation” of European society: “Very few

of us realize with conviction the intensely unusual, unstable, complicated, unreliable,

temporary nature of the economic organization by which Western Europe has lived for

the last half-century. ” (Keynes 1963, 3) This was hardly an unusual concern in 1920s

Europe, especially given the 1917 Russian Revolution.

In the Tract on Monetary Reform (1923) Keynes makes a political argument that inflation-

derived windfall profits hurt the position of the business owners who receive them. In

the contemporary abstract competing-claims literature (Burdekin and Burkett 1990) this

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argument would be nonsensical, because income share has been made identical with

political power, and vice versa. It is worth quoting at length.

But if the depreciation of money [inflation] is a source of gain to the business man, it is also a source of opprobrium. To the consumer the business man’s exceptional profits appear as the cause (instead of the consequence) of the hated rise in prices. Amidst the rapid fluctuations of his fortunes he himself loses his conservative instincts, and begins to think more of the large gains of the moment than of the lesser, but permanent profits of normal business. The welfare of his enterprise in the relatively distant future weighs less with him than before, and thoughts are excited of a quick fortune and clearing out. His excessive gains have come to him unsought and without fault and design on his part, but once acquired he does not lightly surrender them, and will struggle to retain his booty. With such impulses and so placed, the business man is himself not free from a suppressed uneasiness. In his heart he loses his former self-confidence in his relation to society, in his utility and necessity in the economic scheme. He fears the future of his business and his class, and the less secure he feels his fortune to be the tighter he clings to it. The business man, the prop of society and the builder of the future, to whose activities and rewards there has been accorded, not long ago, an almost religious sanction, he of all men and classes the most respectable, praiseworthy and necessary, with whom interference was not only disastrous but almost impious, was now to suffer sidelong glances, to feel himself suspected and attacked, the victim of unjust and injurious laws – to become, and know himself half-guilty, a profiteer. No man of spirit will consent to remain poor if he believes his superiors to have gained their goods by lucky gambling. To convert the business man into a profiteer is to strike a blow at capitalism, because it destroys the psychological equilibrium which permits the perpetuance of unequal rewards. The economic doctrine of normal profits, vaguely apprehended by everyone, is a necessary condition for the justification of capitalism. The business man is tolerable so long as his gains can be said to bear some relation to what, roughly and in some sense, his activities have contributed to society.

Keynes has, therefore, an implicit theory of politics that is distinct from, and more

multidimensional than, a mere theory of income shares – otherwise the windfall profits

would be an unmixed blessing for capitalists. Ideas of dignity and justice play a large

role in politics, and history matters. Keynes contributed to a political economy tradition

going back to Adam Smith that contains a rich sociology, psychology, and theory of

politics. The basic social problem for Smith, as for Keynes, is that capitalism disrupts a

fine-grained feudal social order characterized by intricate, interlocking, connections of

obligation, deference, responsibility, and submission. Capitalism creates new roles and

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disrupts old ones, posing severe ideological challenges to ruling groups. Keynes was

outspokenly antiegalitarian, in important ways a Burkean conservative (Skidelsky 1992,

61-64). What distinguished him from less reflective conservatives was his conviction

that the social order was the opposite of natural and stable – it was contingent,

changeable, and likely to collapse if not cared for properly.13

If, therefore, we are to make sense of Noyola’s distinction between a merely technical

economic analysis and the “gran tradición clásica, propugnado por Adam Smith y

David Ricardo,” it is to this more broad-gauged conception of social science that we

have to turn, to the tradition of economic analysis that never holds institutions, politics,

or society constant but instead studies their interactions.

Finally we turn to Michal Kalecki, whose work on inflation clearly influenced Noyola’s

treatment of the subject.14 In many respects the argument we are making about the

interpretation of Noyola applies to Kalecki as well. Kalecki was a socialist and a brilliant

technical economist. He is today treated largely as the founder of a tradition of technical

model-building. Yet in Kalecki’s thought, specific models always rest on a particular

institutional organization of the economy at a particular moment, and Kalecki was

clearly aware of the possibility that that institutional organization could change. So

there are always two steps in the logic of a Kaleckian model: first, what are the political

conditions that make a given institutional organization of the economy stable, and

13 “I would like to warn the gentlemen of the City and High Finance that if they do not listen in time to the voice of reason their days may be numbered. I speak to this great city as Jonah spoke to Nineveh...” Keynes, Collected Writings xix 158-62, quoted in Skidelsky 1992, 152. 14 Noyola 1956 can be read in part as a fleshing-out of Kalecki 1954. See Danby 2001.

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second, what are the properties of that institutional organization. 15 It is the second

question that is formalizable, and it is for these formalizations that Kalecki is today best

known.

Kalecki analyzed a variety of institutional settings, with his work falling broadly into the

discussion of three types: capitalist, planned socialist, and developing economies. In the

last, heterogeneous category, he contributed the specific historical-political category of

the “intermediate regime” (Kalecki 1976, 30-37), examining the formation of a new kind

of state and discussing the conditions for its political stability. Many of his writings on

development, now relatively neglected by his followers, contain references to politics.

Like Noyola he had a “telegraphic style”16 and did not dwell long on politics; in part this

is because, like Noyola, he was usually employed as a technocrat and had to watch his

tongue, especially as the cold war settled in.

Let us consider one of Kalecki’s better-known works on a capitalist economy. “Political

Aspects of Full Employment” (Kalecki 1971, 138-145), which originally appeared in 1943,

asks why business owners in a wealthy capitalist nation may oppose a program of

government spending aimed at full employment, even though the result of this

spending would be higher incomes for those same business owners. Kalecki proposes

three reasons:

(i) the dislike of Government interference in the problem as such (ii) the dislike of the direction of Government spending (public investment and

subsidizing consumption 15 Thanks to S. Charusheela for this insight in a personal communication. Compare Taylor (1991: 2-4). 16 “telegraphic style” is Furtado’s (1988: 162) term for Noyola, in particular the lecture that produced Noyola (1956).

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(iii) dislike of the social and political changes resulting from the maintenance of full employment. (Kalecki 1971, 139)

All of which, most explicitly the last, point toward a political analysis not reducible to

real income or income shares. The first argument not only echoes Keynes’ discussion of

the “almost religious sanction” surrounding the ideology of laissez faire, but is

interestingly extended by Kalecki to a key property of the structure of a capitalist

economy:

Under a laisser-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of both output and employment … This gives to the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the Government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. (Kalecki 1971, 139)

In his discussion of the second point, Kalecki discusses both business worries that an

expansion of the state’s role might lead to nationalizations, and the importance of

ideology in the “violent” opposition of business leaders to consumption subsidies for

workers:

For here a ‘moral principle’ of the highest importance is at stake. The fundamentals of capitalist ethics require that ‘You shall earn your bread in sweat’ -- unless you happen to have private means. (Kalecki 1971, 140)

Despite the barb at the end of this sentence, Kalecki is not simply making a rhetorical

point about hypocrisy, but an analytical one. Like Keynes, he takes the moral discourse

of capitalism seriously and understands that it is not mere ideology, but politically

effective in producing and reproducing the social relations that define capitalism.

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Finally on the third point, Kalecki argues that should government prove effective at

maintaining full employment, the very structure of the society would change to the

disadvantage of business:

Indeed, under a regime of permanent full employment, ‘the sack’ would cease to play its role as a disciplinary measure. The social position of the boss would be undermined and the self assurance and class consciousness of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension. It is true that profits would be higher under a regime of full employment than they would be under laisser-faire; and even the rise in wage rates resulting from stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only rentier interests. But ‘discipline in the factories’ and ‘political stability’ are more appreciated by business leaders than profits. (Kalecki 1971, 140-141)

Thus, just as does Keynes, Kalecki very explicitly refuses to collapse politics into a mere

struggle for real income or income shares. This anti-reductionism is a key to the broader

and richer political economy tradition that Noyola allied himself with.

It should now be clear that a theory that sees society as inherently unstable and

conflictual – as did Keynes, Aujac, Kalecki, and Noyola – and that sees the nature of the

state and state institutions as contingent and one of the things that different groups

struggle over, cannot simultaneously regard the state as a neutral referee of class

conflict. Noyola’s 1956 article is consistent in its unwillingness to exogenize the state,

and this is a critical point of resistance for conservative critics (e.g. Campos 1961, 1963).

In the work of Noyola and his colleague Furtado, a given constellation of class forces

includes the differential access that different groups have to various organs of the state.

There is, therefore, no place for the apolitical technocrat, no perch from which a

technician can devise and implement an “optimal policy.” Noyola’s work is

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distinguished by the concepts of social disequilibrium, historical contingency, and

endogenous government, all facets of the same underlying idea

This is perhaps part of the reason that Noyola insisted at the beginning of his 1956 article

that he was speaking as an academic and not as a CEPAL employee. Like Furtado and

Kalecki, he made a living as a technocrat, and it is very difficult for intellectuals in his

position to avoid the discursive mode of advice-giving, a mode which assumes an

apolitical, well-intentioned policymaker to whom the advice is directed. Campos’ (1963)

gibe that a “structuralist” was simply a monetarist without policymaking responsibility

reflects his effort in the early 1960’s to ignore the fundamental dissents of people like

Furtado and Noyola by creating an artificial debate between “structuralists” and

“monetarists” as competing varieties of technocratic discourse on a shared field of

neoclassical theory.

5. Cartesian Reductionism

The category of Cartesianism, or more pointedly “Cartesian reductionism,” has been

developed by the biologists and historians of science Richard Levins and Richard

Lewontin, and drawn on by the contemporary Marxian literature (Cullenberg 1996,

Charusheela 1997). This set of ideas is particularly useful for distinguishing between the

kind of argument that Noyola made and the contemporary “structuralist” tradition to

which he has been wrongly assigned. Levins and Lewontin note that “scientists, like

other intellectuals, come to their work with a world view, a set of preconceptions that

provides the framework for their analysis of the world.” Cartesian analysis assumes:

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1. There is a natural set of units or parts of which any whole system is made. 2. These units are homogeneous within themselves, at least insofar as they affect the whole

of which they are the parts. 3. The parts are ontologically prior to the whole; that is, the parts exist in isolation and

come together to make wholes. The parts have intrinsic properties, which they possess in isolation and which they lend to the whole. In the simplest cases the whole is nothing but the sum of its parts; more complex cases allow for interactions of the parts to produce added properties of the whole.

4. Causes are separate from effects, causes being properties of subjects, and effects the properties of objects. While causes may respond to information coming from effects (so-called “feedback loops”), there is no ambiguity about which is causing subject and which caused object. (This distinction persists in statistics as independent and dependent variables.) (Levins and Lewontin 1985, 269)

Levins and Lewontin map out the intellectual infrastructure that produces dichotomies

such as environment|organism. At stake are not superficial questions like what is the

appropriate unit of analysis, but the buried axiomatic underpinnings that assume that

separable units exist, units that are internally coherent on their own and which may be

analyzed separately from the whole that they compose.

This distinction helps us grasp what happens when we move from the sophisticated

political economy tradition of Smith, Marx, Keynes, Kalecki, Aujac, and Noyola to the

kind of ahistorical, abstract formalization that Noyola warned against. Ahistorical

economics builds on a Cartesian intellectual infrastructure, which assumes away the

social, in the fullest sense – Cartesianism is hostile to interconnection, allowing only the

most attenuated links between different parts of society, because it is an analytical mode

that depends on breaking wholes into parts and finding what is essential to the whole in

the parts as such. Thus it eliminates the possibility of truly social science, as Noyola used

the term.

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What is a class? In the political economy tradition that Noyola is a part of, the social

totality precedes the individual class, with class, or “rank” in Smith’s terminology, being

a characteristic of the social whole. A society of undifferentiated individuals was

inconceivable to Smith (1976: 226 [VI.ii.I.20]); he states clearly that social rank and

station is not a consequence of the innate capacities of the individuals who occupy

them(1979: 28 [I,ii,4]). This is not, of course, a sign that Smith was an egalitarian – quite

the opposite – it is rather a consequence of the fact that Smith understood class division

as a property of the social whole. Like Keynes, Smith described a densely-ordered social

world in which individuals are not only formed by society but formed within a

particular class, with a complex set of expectations about how they should behave

towards others of the same class and others of different classes. These social

relationships cannot, therefore, be deduced from the nature of the classes in isolation

(much less the individuals in those classes). Rather, it is the pattern of relations that

define the classes.

Classes, in this conception, think about themselves in relation to other classes. The

social whole is a set of intersecting expectations and judgments, as different groups

watch each other. Hence the significance of the phrase “sidelong glances” in the Keynes

material quoted in the previous section. What is important is not just – or even mainly –

how much real income the business class receives, but what range of freedom the rest of

society is prepared to allow to the business class. This class depends on social consent,

which may be withheld.

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In this tradition of analysis, real income and political power cannot be collapsed into one

another, nor can moral judgments be ignored. Culture – a loose term for the terrain in

which stories are told and notions of desert, obligation, and responsibility are

established and contested – becomes a vital realm that cannot be collapsed into politics

or “economics.” A group may struggle to prevent another group from attaining a new

position, status, or access to power even if this change offers no immediate (or even

long-term) threat to its real income. Power and position matter, and both are concepts

with meaning only in terms of the social whole. There is also no political “outside” in

this conception, no group of social institutions that somehow stands outside politics and

political struggle. There are no referees, no unchallengeable rules.

A similar argument is made by Levins and Lewontin when they challenge the

dichotomy between organism and environment that has structured much debate in

biology, showing that notions like the “fitness” of an organism or species to its

environment, or the notion of environmental “niches” to which species fit themselves,

are tautologous. As Aujac noted, the game’s rules themselves are at stake.

This rich political economy approach has no necessary ideology. Both Smith and

Keynes were essentially conservative, believing deeply in the moral rightness of a

ranked, classed society. Their occasional concern for the welfare of workers is not

egalitarian, but a matter of noblesse oblige or – more pressingly in the case of Keynes –

worry about the potential for socialist revolution. In Marx’s more abstract work the

sociology of capitalism is sometimes attenuated, but even there he retained a Hegelian

framework that stresses deep interconnection, a fundamentally anti-Cartesian world

22

view. And of course Marx’s more conjunctural writings, particularly those on France,

are far from reductionist. Thus the conception of class in Noyola or Marx is distinct

from the Cartesian analyses of class that characterize the competing-claims literature,

and indeed the Cartesianism of the neostructuralist literature.17 It is a political theory in

which it is the integrated properties of the whole that matter, not the isolated qualities of

the parts.

With a more holistic social ontology, finally, we need to think differently about

causality. The Cartesian notion of cause and effect is the billiard table (Cullenberg 1996,

129), in which effects can be traced clearly to a single original cause. Hence inflation

must have a single “cause,” an act of money-creation by government that then ripples

through the society. This notion of causality assumes an initial equilibrium (the

assumption of equilibrium, as Levins and Lewontin note, is a sort of inoculation against

history). It also assumes an “outside” and an “inside,” with an “outside” including the

institutional structure and the government which acts on the society. Similarly in

biology the “outside” is the environment which then (for example through a climate

change) inflicts new “problems” on various species to which they then respond.

In Noyola’s work causality cannot be traced back in this billiard-table fashion. His 1956

article is an effort to move away from simple-minded applications of the highly abstract

17 See Charusheela 1997 for a careful examination of the Cartesianism of the neostructuralist or neo-Kaleckian literature represented by figures such as Lance Taylor. She argues that Cartesianism represents a set of ontological commitments shared by neoclassicals and neostructuralists: “a shared language ... a shared commitment to reductionism with self-regulation and closure” (56). Burdekin and Burkett (1996) discuss the competing-claims literature.

23

quantity theory of money toward historically-specific studies which take into account

the ways in which state institutions are already enmeshed in class conflict.18 In his work

we are immediately drawn toward the study of an interconnected and changing whole.

This is why the ideas of social disequilibrium, historical contingency, and endogenous

government in Noyola’s work are reflections of a single underlying vision. This vision

refuses to compartmentalize economics from social science in general, and examines

places and times in which large-scale institutional, historical change occurs, or in which

it may occur even a given set of institutions manages to survive. In doing this Noyola

participated in a large and rich tradition of political economy, one to which he explicitly

referred in his own work. His work has been marginalized only because the competing

abstract, formalist, ahistorical, and anti-contingent tradition has prevailed in the

intervening four decades. But if we are aware of this, we may be able to read it with

fresh eyes.

18 I argue in Danby 2001 that Noyola’s treatment of accommodating credit should be differentiated from the way the concept is used in the contemporary Post Keynesian literature. In his work financial institutions and central banks have very particular political locations and accommodate credit demands from particular constituencies to which they are tied. This can be clearly seen as well in Furtado (1963: 253-256), which contains an account of inflation in Brazil using a very similar methodology, but different results given Brazil’s particular circumstances.

24

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