HUMAN CAPITAL 7:7

Human Capital and Political Economy

REVIEWED BY WILL KENTON  Updated Mar 25, 2018

What is Political Economy

Political economy is the study of production and trade and their links with custom, government and law. It is the study and use of how economic theory and methods influence and develop different social and economic systems, such as capitalismsocialism and communism; it also analyzes how public policy is created and implemented. Since various individuals and groups have different interests in how a country or economy is to develop, political economy as a discipline is a complex field, covering a broad array of potentially competing interests.Volume 0%01:1401:14 

Political Economy

BREAKING DOWN Political Economy

Political economy also involves the use of game theory, since groups competing for finite resources and power must determine which courses of action will give the most beneficial results, and what the probability of those results being reached are.

In the contemporary setting, political economy talks about the different but linked approaches to defining and studying economics and other related behaviors. Political economy may be approached in three different ways.

1. Interdisciplinary Studies

Political economy approached from an interdisciplinary angle draws upon sociology, economics and political science to define how political institutions, the economic system and the political environment affect and influence each other. With an interdisciplinary approach, political economy is associated with three subareas: economic models of political processes and the links of different factors to each other; international political economy and the impact of international relations; and the role of the government in resource allocation for each kind of economic system.

2. New Political Economy

The new political economy approach treats economic ideologies not as frameworks that must be analyzed, but as actions and beliefs that must be explained and discussed further. This approach combines the ideals of classical political economists and new, analytical advances in the field of economics and politics. This approach rejects old ideas about agencies, structures, material interests, states and markets. It seeks to make normative and explicit assumptions that encourage progressive political debates about societal preferences. The new political economy approach encourages the discussion of real-world political economy that is grounded on cultural, social and historical details.

3. International Political Economy

International political economy, also known as global political economy, stems from an interdisciplinary approach. It analyzes the link between economics and international relations. As it stems from an interdisciplinary approach, it draws from many different academic areas such as political science, economics, sociology, cultural studies and history.

International political economy is ultimately concerned with how political forces like states, individual actors, and institutions shape systems through global economic interactions and how such actions effect political structures and outcomes.

The Political Economy of Human Capital

Nancy Folbre First Published May 22, 2012 Research Article 

Abstract

In this paper I develop a critique of both standard neoclassical and standard Marxian conceptualizations of human capital that illustrates an important hypothesis of feminist political economy: collective conflicts based on class, gender, and age, as well as other dimensions of collective identity, affect the distribution of the costs of developing human capital.

JEL codes: B50; E11; E24Keywords Human capitalgenderfeminist theory

The term “political economy” is a contested one, claimed both by neoclassical loyalists at the University of Chicago and by a motley crew of heterodox economists such as those at my own University of Massachusetts. So I should begin with a clear definition of what I mean by political economy: an approach that examines the impact of group identity and collective conflict on the organization of economic activity. This definition departs from Marxian orthodoxy because it does not focus exclusively or even primarily on class. It is informed by a feminist perspective that insists on the importance of collective conflicts based on other dimensions of group identity, including gender and age.

In this paper, I outline a hybrid approach to what neoclassical economists term the production of human capital and what Marxian economists term the process of social reproduction. I begin with a brief discussion of the concept of human capital that emphasizes its distinctive features. Next, I critique the ways that both neoclassical and political economy have treated human capital, and defend my claim that collective identity and collective action play an important role in human capital formation: not as a substitute for or alternative to individual optimization or class conflict but as an additional, complicating factor. In order to strengthen this claim, I briefly outline some methodological tools that can be used to formalize the role of collective action on the formation of human capital, both on the level of microfoundations and on the level of institutional evolution. Finally, I argue that the political economy of human capital is central to an understanding of current economic events.

1. The Unique Features of Human Capital

Many economists in the Marxian tradition dislike the term “human capital” because it elides the distinction between labor and capital, implies that all workers are capitalists, and blurs class boundaries. I believe that the reality the term aims to capture—not the term itself–blurs the distinction between workers and capitalists. I use the term “human capital” to intentionally challenge classical Marxian theory. However, I do not embrace standard neoclassical models of human capital. My intent, as Elissa Braunstein put it in her comments, is to create a healthy and vigorous hybrid: a mutt.

Many neoclassical economists define human capital in rather narrow operational terms as education and experience that yield a rate of return in the labor market in the form of higher wages. But the term can be and often is defined more broadly as an endowment or accumulation of skills that improve productivity and are likely to yield a future rate of return, whether in the labor market (in the form of higher wages), other markets (such as a payoff to entrepreneurship), or in other domains of life (including, for instance, improved health or more successful children). Viewed in these terms, human capital can be construed as a subset of human capabilities, which include functionings that may have intrinsic value, but do not necessarily offer a future return.

Most economic research on human capital focuses entirely on “value added” in the form of education and experience, without considering the basic cost of bearing and rearing children, or creating the basic substrate which education and experience may enhance. As I have argued elsewhere (Folbre 2008, 2009), I believe that the costs of producing future workers, developing their skills, maintaining their health, and providing for them in old age should be construed as part of the costs of producing human capital. To use Marxian terminology, the value of labor power is not biologically determined but socially bargained. Workers in most countries demand a wage (in one form or another) that is sufficient to cover the costs of their own depreciation.

Marxist and other heterodox economists have good reason to dislike the conventional theory of human capital. Much empirical research based on it seems intended to rationalize existing inequalities in wage earnings, restating older claims that wages are determined by the marginal product of labor. The notion that two measures of human capital–education and experience—determine productivity and therefore wages pervades modern labor economics, despite some dissenting views that these measures may simply offer employers a way of ranking and queuing workers in a convenient and ideologically justifiable way. The bulk of empirical research on sex and race/ethnic discrimination adopts the assumption that education and experience are primary determinants of earnings, treating any residual difference in earnings as a measure of discrimination. This assumption does not necessitate agreement with the claim that earnings are primarily determined by productivity, but it certainly implies it.

However, the putative causal linkage from human capital to productivity to wages is far weaker than standard neoclassical theory implies. As Marxian theory has long emphasized, the individual and collective bargaining power of workers is a primary determinant of earnings. Further, considerable evidence points to the impact of non-cognitive traits. Some of these traits—such as ability to get along with others, or propensity to arrive on time—are surely relevant to productivity. But many other traits, including “Machiavellianism,” seem less positively linked to productivity, suggesting that ability and willingness to manipulate others may pay off to individuals even if they lower overall workplace productivity (Bowles et al. 2001). Similarly, evidence that men negotiate wages more aggressively than women do, and are generously rewarded for doing so, raises doubts about the relationship between productivity and wages (Babcock and Laschever 2007). In my research on the distinctive features of care work, I argue that the preferences that women bring to both unpaid and paid care are costly, leading them to accept lower pecuniary rewards than are warranted by the value of their services.

In other words, I reject the view that earnings simply represent a market rate of return on human capital that primarily reflects its productivity. Nonetheless, I believe that human skills that are enhanced by education and experience have played a crucial role in economic development and that heterodox economists influenced by the Marxian tradition have underestimated their importance. Individuals who obtain high levels of human capital typically enjoy much higher income and much greater job security than those who do not, and can be described as members of a distinct professional-managerial class (Ehrenreich and Ehrenreich 1979) or in “contradictory class locations” (Wright et al. 1982). Unlike other forms of capital, which can be appropriated or redistributed, human capital cannot easily be separated from its owners, realizing its value only through labor. Sometimes this lack of fungibility proves advantageous, as in, “you can’t kill me or even fire me, because you need me.” It gives managers who are responsible for the day-to-day operations of a company considerable power relative to owners in the private sector or voters in the public sector.

But this distinctive feature of human capital can also create liabilities: many specific forms of human capital cannot easily be reinvested into new forms, and can be (and often are) rendered obsolete. Human capital accumulates rapidly at the young end of the lifecycle, but deteriorates quite rapidly at the end. Further, human capital may deteriorate through lack of use, much the same way athletic skills deteriorate if they are not constantly practiced and honed. We do not know what proportion of the pay penalty that is imposed on individuals who take time out of paid employment (whether voluntarily or as a result of unemployment) can be attributed to such deterioration, and it may be quite small compared to other forces such as queuing or motivational screening. Still, it is probably not negligible.

Individuals who accumulate general skills that are costly to develop but offer productive benefits to others often acquire a significant level of bargaining power. In other words, they become more productive and also better able to capture the benefits of their own productivity.

The development of remunerative human capital requires a significant amount of parental, social, and individual effort, heightening the importance of incentives to encourage such effort. It is interesting to note that the classical view that profits represent a return to abstinence, a low rate of time preference, or risk-taking have largely been supplanted by the view that they reward intelligence, organization, and managerial skills. In my view, there is some truth to this view, although (as noted above) they also represent a return to personality traits (such as Machiavellianism) as well as sheer luck.

Paradoxically, however, those who concentrate their efforts on developing human capital aimed to improve the human capital of others do not acquire much individual bargaining power. One could describe this problem as a market failure, because individuals do not literally purchase the human capital they acquire. Children cannot bargain with parents over the price they are willing to pay for parental investments in them, and students cannot bargain with teachers. However, one could also describe this problem as a failure of altruism, because parents (and teachers and other caregivers) do not always make the best possible investments in their children out of sheer love, and those who receive gifts of care do not always repay them. In my view, the language of institutional economics provides a more useful description: investment in human capital represents a serious contracting problem.

The contracting problem derives from the specific features of human capital. First and foremost, human capital is co-produced by a number of different agents who collaborate in its development: parents, grandparents, other family members, the community, schools, social services, society as a whole, and the person who embodies that human capital. In fact, it is difficult to imagine any other product so dependent on team production. The contribution that any one person makes to the human capital of another is almost impossible to discern. As a result, the marginal contribution that one agent makes to the development of human capital is virtually impossible to measure, making it difficult, in turn, to give that agent exclusive property rights over the capital created. Adults are required to pay taxes that represent “repayment,” at least in part, of contributions to their development, but these repayments are not linked to actual effort or contribution of parents, teachers, or other caregivers.

Further, co-production is not easily standardized, because it has person-specific dimensions. That is, children seldom thrive if denied the opportunity to form a secure emotional attachment to one or more consistent caregivers. Later in life, children remain heterogeneous: some teachers are quite successful with some children but not others. Evidence also suggests that adults function more productively if they form secure relationships with other adults, whether through marriage, partnership, or other forms of family/community connections.

Second, the timing of human capital transfers creates a first-mover disadvantage to those who transfer it (the missing market problem, restated). The most crucial contributions to the development of human capital come early in the lifecycle (indeed, even before the fetus is sustainable on its own); the potential payback to “investors” comes at a later point, involving both delay and risk. Note that delay and risk refer to emotional as well as pecuniary payback. As we know, relationships between parents and children, as between parents, often go awry. They are also affected by events well beyond the control of the individuals involved. For instance, rapid economic growth often increases the well-being of the younger generation compared to the older generation, while economic stagnation and decline have the opposite effect.

Third, investments in human capital can be both enriched and impoverished by the complexity of emotional attachments. Some caregivers are more altruistic than others, and become vulnerable to opportunistic behavior. For instance, a parent who knows that another parent will provide unconditional care is able to easily default on his or her commitments to a child. Further, if caregivers are too self-sacrificing, children may never learn to take responsibility for themselves. On the other hand, if caregivers are too self-interested, they are unlikely to provide high quality care. Adults may try to make rational decisions about investments in the development of other people’s skills, but they often have little control over the emotions that may develop or dissipate in the process.

As this brief discussion suggests, I do not find standard neoclassical or heterodox approaches to the basic concept of human capital satisfactory. A slightly more detailed review of the literature helps explain why I derive some insights from both.

2. Neoclassical Theory

The neoclassical approach to human capital finds its most systematic realization in the work of Gary Becker, who carries the methodological individualism of neoclassical theory to its logical conclusion in ways that illustrate its most profound limitations. While Becker started out with a theory of “self-investment” in human capital (1964), focusing primarily on the decisions of young adults to obtain a college education, he moved quickly toward a theory of family investments in children that also accommodated an important role for parents and the state (Becker 1993). His approach is, in many ways, consistent with the neoclassical tradition, largely premised on utility maximization, perfect information, and efficient outcomes.

But Becker is able to describe family decision making in terms of utility maximization only because he treats the family itself as an undifferentiated unit, a dynastic entity built on altruism that successfully aggregates the preferences of all its members. Indeed, the family in Becker’s model represents a miniature socialist regime that is so altruistic and so powerful that it can successfully induce cooperation even from members who may occasionally suffer selfish impulses. Parents invest in their children’s human capital because they love them. The only thing standing between them and a perfectly efficient allocation of resources to the younger generation is a credit constraint: they may not be able to borrow the capital they need.

Here Becker acknowledges the contracting problem alluded to above: parents cannot “collateralize” the future earnings their children will generate in order to borrow what they need. Hence the emergence of an intergenerational social contract that will help solve the problem: taxpayers will finance public education for children in return for payment of taxes that will help provide for taxpayers in their old age. Becker’s contribution here undermines his prior emphasis on individual utility-maximization. Further, the very admission that children depend on their parents and on society as a whole for the development of their human capital weakens the foundational meritocratic principle of neoclassical theory: that a market economy delivers to individuals what they deserve. James Heckman forthrightly describes the inability of children to choose their own parents as a market failure, far more binding than any mere credit constraint (Cunha and Heckman 2010). Heckman has campaigned tirelessly in recent years for expansion of public investments in early childhood education (which he views as far more productive than public investments at the university level and above).

The notion that families can be treated as undifferentiated units has also begun to unravel. A huge literature on bargaining models now concedes the possibility that men and women, as well as parents and children, may have different priorities within the family. Mothers often reveal more altruistic preferences toward their children than fathers do. Still, the logic of revealed preference suggests that the “psychic income” that mothers enjoy must provide a compensating differential. The possibility that mothers may have underestimated the future costs of their commitments, or that they may encourage their daughters not to develop some costly preferences, goes unexamined. Yet neoclassical economists have moved toward greater consideration of preference formation, emphasizing the economic incentives parents have to instill altruism in their children (Cox and Stark 19962005). In Accounting for Tastes (1996), Becker includes a fascinating discussion of the ways that the rich may seek to instill certain preferences in the poor.

Debates over gender inequality, once largely focused on differences in education and experience, now put considerable evidence on women’s greater propensity to put more time and effort than men into family care, and to choose caring jobs over those that pay more. In the face of evidence that single women without children often earn more than men with the same demographic characteristics, even discussions of employer behavior have shifted away from sex discrimination to family responsibility discrimination (FRD) (Correll et al. 2007). As Joan Williams and Stephanie Bornstein (2007) argue, such forms of discrimination often reflect employer preferences that are inefficient and outdated. However, they may also reflect a genuine trade-off between effort devoted to paid employment and effort devoted to the production and development of family members’ human capital.

The resulting contracting problem is obvious: contributions to the development of human capital in the family and community represent public goods that employers can only partially capture. It is not in employers’ interests to subsidize their employees’ family work, unless such subsidies offer a more cost-effective way of recruiting and retaining talent than simply paying higher wages. In the United States, the lack of universal policies of paid family leave and childcare/early childhood education provision have heightened the importance of individual bargaining and outsourcing. Highly educated women who are employed typically enjoy far more generous work/family policies than less-educated women.1

If one follows neoclassical habits, taking preferences as a given, it is easy to explain away both gender inequality and class inequality: women earn less than men because they care less about money and more about the welfare of children and other family members; poor people are poor because they have children even when they do not earn enough to support or educate them at a level that would allow them to successfully compete with the children of the affluent.

I find both these explanations not just simplistic, but troubling. If we accept them on their own terms we arrive at two alarming conclusions: apparently we live in an economic system that penalizes caregivers and condemns children to remain in (or fall below) their parents’ economic class. It seems unlikely that this economic system maximizes the production of human capital, much less human capabilities.

3. Marxian Theory

A Marxian approach to political economy does not offer an alternative theory of human capital, but it does suggest some useful ways of considering the role of collective conflict and negotiation in its development. In its orthodox form, Marxian theory focuses on the extraction of surplus from adult workers, highlighting class conflict. As I argue at length in Greed, Lust, and Gender, Marxist orthodoxy has long expressed active hostility to the feminist project, partly because it grows out of an intellectual tradition that simply fails to problematize childrearing, care work, or the production of human capital.

The labor theory of value, in its original and modern incarnations, treats men and women as “non-produced” commodities. Within classical Marxian theory, the value of labor power is defined as the value of the wages earned, the cost of “reproducing labor power.” But no labor seems to be required to convert wages or wage goods into labor power. Nor do there seem to be any demographic parameters involved in defining the reproduction of labor power. It does not seem to matter whether workers raise no children, exactly enough children to take their place as adults, or enough children to generate population growth. In his early writings Marx describes labor as a fundamental aspect of man’s “species-being,” his engagement with the world. He distinguishes the largely instinct-driven activities of animals from the rational and creative problem-solving activities of men faced with the need to provide for themselves.2 He never explicitly discusses women’s activities of care for family members in part because, like most of his contemporaries, he takes these for granted. His omission is rendered particularly obvious in his hallowed distinction between production for use and production for exchange. Production for use is described as production for one’s own use, not for that of family members. Production for exchange is described as sale in a market, excluding the informal non-monetary exchanges that take place within the family. Production of family members or forfamily members, whether motivated by love or by reciprocity, does not count as production.

My intent here is not to derogate Marx, who certainly had more respect for the working-class family’s struggle to care for its members than many of his predecessors, including David Ricardo and Robert Malthus. These political economists viewed childbearing and childrearing not only as “unproductive” but also as a major threat to economic growth (Folbre 2009). Still this legacy of disinterest in the family has also rendered most Marxian treatments of education seriously incomplete by framing them largely in terms of conflicts between employers and workers (Bowles and Gintis 1977).

Class conflict is cross-cut by other conflicts over the distribution of the costs of producing and maintaining human capital that help explain why the welfare state itself is increasingly a locus of political struggle. Some public spending clearly has a direct impact on class dynamics; unemployment insurance is the most obvious example. But a huge component of public spending entails redistribution of the costs of developing and maintaining human capital: expenditures on health, education, and social services. The amplified economic, demographic, and racial/ethnic diversity of the U.S. population makes it hard to achieve consensus over how these investments are best allocated (Folbre 2011). Indeed, as noted earlier, increased stratification by education itself has divisive effect.

Still, class dynamics remain relevant. In an increasingly competitive global economy prone to recurrent crises in the affluent countries, collective investments in human capital become something of a zero-sum game. If more children gain access to a college education, my own children’s college degrees will be worth less. As U.S. capitalists shift toward more global investment strategies, they have less incentive to invest in the human capital infrastructure of the United States.3

The larger contribution of Marxian theory, in my view, lies not in attention to class conflict alone, but the more abstract notion of collective conflict over the distribution of the costs of creating and maintaining human capital, which represent a distinctive form of surplus. Attention to this form of surplus helps explain the historic role of the nation-state as progenitor of socialized provision for health care and education, that pools risk, coordinates collaborative efforts, and captures the returns to human capital better than families or firms

Unfortunately, Marxian theory fails to provide a plausible blueprint for democratic and sustainable socialism (Nove 1983). The romantic view of the proletarian family put forward by Friedrich Engels helps explain the romantic view of socialism that assumed it would function in a smooth, democratic, and egalitarian fashion (Folbre 2009). Marxian theory fails to offer a coherent theory of individual decision making that could help explain how free-rider problems emerge or how they can be overcome. In short, it does not explain the difficulties of successfully coordinating and sustaining cooperative efforts, such as the efficient development of human capabilities. As a result, efforts to demonstrate the role of collective identity, action, and conflict in the production of human capital need to draw from a much broader literature.

4. Collective Identity, Action, and Conflict in the Production of Human Capital

Let me outline two sets of tools that I believe can help fill in the gaps. I will start with micro-foundations (traditional neoclassical territory), and then turn to the grand issue of evolution of economic systems (traditional Marxian territory). Constraints of time and space prevent me from exploring the more intermediate terrain of macroeconomics, to which my discussant Elissa Braunstein has made especially creative contributions.

4.1 Microfoundations

Some individual decisions take the form of buying and selling in competitive markets. But these decisions represent only a subset of economically relevant decisions, which also include organized theft or appropriation, rent-seeking/surplus extraction, bargaining, and contracting. Three distinct but related approaches offer an alternative to standard utility maximization models of investment in human capital: conflict theory, Nash-bargaining models, and principal-agent models.

Conflict theory is a new and growing area in both economics and political science, though often narrowly directed at analysis of military engagement. Jack Hirshleifer’s essay The Dark Side of the Force (2001) sidesteps the question of how or why individuals join groups, and simply observes that strong groups can often successfully prey on weak individuals or groups. The relative costs and benefits need to be analyzed in terms of a “technology of conflict.” Hirshleifer emphasizes that trade takes place only if theft or appropriation is too costly.

Why is this relevant to the production of human capital? As we know from Claude Meillassoux (1971)Gerda Lerner (1986), and others, one of the objectives of warfare among societies in early human history was the seizure of young women and young children, which provided a boost to demographic expansion of the victorious group. The history of the founding of Rome–and pictorial depictions of the Rape of the Sabine Women–exemplify this strategy (Folbre 2006). Obviously, the gains come at some cost: the injury and death of young men in warfare. Also, the ability to effectively utilize stolen or enslaved human capital has a significant impact on its productivity; young women were more easily subordinated and controlled than young men because they could be held hostage by concerns for their children; again, a story exemplified by the Rape of the Sabine Women.

The development of the slave trade represents another clear example of predatory appropriation of human capital. Without going into detail here, I will simply note the fascinating debates over the evolution of slavery in the United States concerning the efficiency of slave labor: whether the use of organized force and violence could successfully extract labor power from slaves, or whether this mode of utilization of human capital was intrinsically inefficient (Fogel and Engerman 1974).

Rent-seeking and surplus extraction, in my view, can be conceptualized as a form of collective action designed to affect the outcome of market exchanges and individual bargaining. As Marx explains in his theory of primitive accumulation and John Roemer (1994 and elsewhere) elaborates in his distinctive approach to Marxian exploitation, the successful dispossession of an entire group of people puts them in a very weak exchange position. In her “Feminist Political Economy of the Rent-Seeking Society,” Elissa Braunstein (2008) uses this approach to explain why gender hierarchies may persist despite their obvious economic costs.

The Nash-bargaining models that have come into wide use in analysis of household decision making provide a very neat illustration. Start with two individuals who seek to maximize their joint gain from cooperation (this gain can be conceptualized in terms of utility, or in terms of income). The gain from cooperation represents the difference between what the bargain delivers and a fall-back position: what the individual would fall back to if bargaining broke down. The Nash-bargain model reveals a frontier of Pareto-efficient choices without specifying which one will be chosen. But the location of this frontier is entirely determined by fall-back positions.

Some aspects of an individual’s fall-back position are determined by specific characteristics or circumstances (including their level of human capital). But some, termed extra-household environmental parameters (McElroy 1990), are determined by laws, public policies, and other social institutions. And some of these environmental parameters apply to individuals based on their gender, race, class, or citizenship, as with a set of gender specific environmental parameters that I have explored elsewhere (Folbre 1998). This suggests that individuals have an incentive to engage in forms of collective action that can improve their own relative bargaining position. For instance, considerable evidence suggest that men successfully engaged in collective action to restrict women’s rights to earnings, income, and child custody in marriage at one point in time, while in more recent years, women have engaged in collective action to modify those rules in their own favor.

Another form of decision making involves the structuring of contractual arrangements between principals, who have a goal that they hope to induce agents to help them meet. As is well-known, relationships between capitalists and workers can be described as a principal-agent problem, in which the capitalist acts as a residual claimant (Bowles 1985). Much debate focuses on whether this is an efficient or inefficient contractual arrangement (of course, much depends on, compared to what?). Elissa Braunstein and I argue that traditional patriarchal property rights gave the male head of household similar rights as a residual claimant, and that similar efficiency issues come into play (Braunstein and Folbre 2001).

Taking a more neoclassical approach, Rick Geddes and Dean Lueck (2002) outline a slightly different principal-agent model to suggest that men in nineteenth century United States realized that it was in their interests to give women more property rights in the form of Married Women’s Property Acts. They describe this as the extension of rights to “self-ownership” to women, which set the stage for further improvements in gender equality. However, as I pointed out above, self-ownership only goes so far; if individuals specialize in the production of goods that they cannot own or trade such as their children’s human capital, they typically increase their economic vulnerability.

4.2 The Evolution of Economic Systems

From a standard neoclassical perspective, economic systems are largely irrelevant; utility-maximizing individuals simply respond to changes in relative prices and incomes. From a standard Marxian perspective, the concept of a mode of production remains dominant, and the global economy is typically analyzed as a capitalist system. However, at least three methodological approaches offer a more expansive set of tools relevant to the political economy of human capital: analysis of property rights, social formations, and evolutionary game theory.

Both traditional patriarchal and slave-based systems clearly established property rights over human capital and these were linked in important ways (such as rights governing property rights over the marriage of slaves and ownership of their offspring). The above-cited paper by Geddes and Lueck refers to property rights that denied women “self-ownership.” My paper with Elissa Braunstein, also alluded to above, refers to a distinctive set of patriarchal property rights that include control over married women’s wealth and earnings, and custody of minor children in the event of divorce. Capitalist development tends to undermine patriarchal property rights in uneven and somewhat unpredictable ways. The OECD’s relatively new gender, inequality, and development data base, which includes assessments of family law and asset ownership (OECD 2010), offers scope for cross-national comparisons. Elissa Braunstein (2011) has explored the relationship between scores of gender inequalities and economic development, showing that direct measures of patriarchal institutions dominate a variety of religious affiliation variables.

How do we explain the “laws of motion” of patriarchal systems? Neoclassical methodology urges us to focus on individual responses to changes in prices and incomes. I have argued above that collective identity and action—especially alliances based on gender and age as well as class, race, and citizenship—need to be brought into the picture. Another important lesson of historical materialism, in my view, is that systems often develop a logic of their own, following paths that were never explicitly chosen by either individual or collective actions. Evolutionary thinking urges us to recognize that the forces of natural selection operate on individuals and groups and “systems” after the fact. In the language of neoclassical institutional economics, we could speak of “coordination problems” and “public goods” problems. In my view, the very success of capitalist accumulation undermines its long-term viability, generating unanticipated environmental and social problems.

Likewise, I believe that the early emergence of patriarchal systems can be explained by a set of unanticipated results: these systems contributed to rapid demographic expansion by fostering high fertility, population growth, induced innovation, and military expansionism (Folbre 2006). While it is difficult to mobilize evidence for such a hypothesis, I see great opportunities for comparative anthropological and historical analysis of the emergence of patriarchal systems, along with studies of the evolution of patriarchal capitalism.

5. The Challenges of Human Capitalism

The political economy of human capital helps explain at least three features of our current political environment in the United States: a) collective fragmentation along lines of class, race/ethnicity, and gender; b) intensified contention over the future of the welfare state; and c) the disruptive impact of globalization and immigration. Yet it also helps explain why Americans would have much to gain from the development of a more cooperative and egalitarian economic system.

The economic importance of human capital has contributed to major divisions among wage-earners, with college-educated workers in a stronger position than others. We have long been instructed that anyone who is willing to work hard, study hard, and get a college degree can prosper. Thomas Friedman regularly preaches from the pages of the New York Times that Team America could solve all its economic problems if we all just worked smarter and harder. Both the increased global supply of highly-educated labor and the current economic crisis have partially exposed the implausibility of these claims.

For a long time, the college-educated managed to hold their earnings even, while those of other workers dropped. Over the past five years, however, most of them have seen their real earnings decline.4 In the 1980s and 1990s, the growing penetration of women and immigrants into managerial and professional occupations reduced prospects for the upward mobility of white males, creating a backlash against affirmative action and diversity efforts. Now, however, gender and racial/ethnic diversity may have crossed a threshold of acceptability. Both trends should contribute to increased solidarity among wage-earners

Contention over the future of the welfare state represents distributional conflict over the costs of social insurance that are key to the production of human capital: the provision of health care, education, and care in old age. In my view, the expansion of means-tested social assistance in the United States drove a significant wedge between the economic interests of the poor and the near-poor, imposing a huge marginal tax rate in the form of benefit phase-outs.5 Racial/ethnic and gender differences widened this wedge; white men proved particularly hostile to programs that involved support for black and Hispanic mothers and their children. The sheer complexity of government programs, and the difficulty voters have in actually assessing the benefits of social insurance, net of taxes, have intensified the problem.

Yet in their efforts to cut government spending, conservatives have moved to eliminate, privatize, or restructure a number of entitlement programs that provide important benefits to most Americans, and which enjoy widespread support. Debate over the extension of unemployment benefits has shifted away from the stigmatization of welfare and highlighted the need for a safety net to compensate for market failure. True, conservatives continue to tell horror stories about the unsustainability of Social Security. The ideology of fiscal austerity prevails. But efforts to roll back the welfare state either in the United States or in Europe have proved unsuccessful for a reason. Whatever its limitations, and despite uncomfortable levels of bureaucracy, inconsistency, and inadequacy, the welfare state performs a valuable economic function that neither markets nor families can replace.

The disruptive impact of increased globalization and immigration goes well beyond the costs of adjustment to competition, which have contributed to de-industrailization and de-unionization in the United States. Ability to import needed skilled workers on special visas, to exploit low-wage illegal immigrants, and to outsource or offshore production to low-wage countries has reduced the incentives that American firms once had to develop the human capital of the U.S. labor force (Folbre 2010). Further, immigration of Hispanics in particular has shifted the racial/ethnic composition of the population under 12 far more rapidly than that of the population over 65, contributing to intergenerational conflict. In the United States today, social spending on the elderly benefits the white population much more directly than does social spending on children (Folbre 2009).

I do not see any countervailing forces to this trend which, in my view, represents the biggest challenge to political mobilization around an increased “human capabilities and capital” investment strategy.6 Most Americans lack a sense of this big picture. They do not understand how capitalist class commitments to national well-being have weakened, or how free-rider problems threaten both ecological and social sustainability. Our job is to explain this as clearly, creatively, and patiently as possible, not just for our own sake, but for that of future generations.

Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.

1
On this point see my recent Economix blog at http://economix.blogs.nytimes.com/2011/12/19/feminisms-uneven-success/)

2
In the Economic and Political Manuscripts, Marx writes, “Admittedly animals also produce. They build themselves nests, dwellings, like the bees, beavers, ants, etc. But an animal only produces what it immediately needs for itself or its young. It produces one-sidedly, whilst man produces universally. It produces only under the dominion of immediate physical need, whilst man produces even when he is free from physical need and only truly produces in freedom there from. An animal produces only itself, whilst man reproduces the whole of nature. An animal’s product belongs immediately to its physical body, whilst man freely confronts his product. An animal forms only in accordance with the standard and the need of the species to which it belongs, whilst man knows how to produce in accordance with the standard of every species, and knows how to apply everywhere the inherent standard to the object. (See http://www.marxists.org/archive/marx/works/1844/manuscripts/labour.htm)

3
I have elaborated this point in several Economix blog posts: http://economix.blogs.nytimes.com/2011/06/20/will-business-buy-in-to-early-childhood-education/ and http://economix.blogs.nytimes.com/2011/05/02/super-sad-true-jobs-story/andhttp://economix.blogs.nytimes.com/2010/02/15/college-students-the-new-cash-cows/

4
See Paul Krugman, http://www.democracynow.org/2006/6/19/paul_krugman_on_the_new_class

5
See my blog post entitled “The Resentment Zone” at http://economix.blogs.nytimes.com/2010/03/22/the-resentment-zone-losing-means-tested-benefits/

6
I talk about this in more length in a recent interview in In These Times entitled “Care Socialism.” http://www.inthesetimes.com/article/12167/a_care_socialist_speaks_out

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