Theses on Human Capital and the Second Modernization*
Prof. Laszlo Garai, Dr. Acad.
Sc.
1. From the end of 19th
century the capitalism underwent such a transition that in an after World War I
writing Schumpeter observed: "Capitalism is so obviously being transformed
into something else, that it is not this fact, but its mere interpretation that
may evoke disputes", and that for those disputes it turns out to be
"a matter of mere taste and terminology to call Socialism or not"
what Capitalism is going to turn into.
2. That transition occurred in
connection with changes in the economic status of human faculties
and needs.
3. The
Capitalist economic system might have afforded during its great century (i.e.
the 19th) to consider
only the material conditions of its running, because from human
conditions the system's functioning was made maximally independent by
effective mechanisms: the machine in a large scale industry set free the
production from the producing faculties of the population; while the
accumulation process gets its liberty from the population's need to consume
due to the capital's property relations.
4. Material conditions were
dealt with by the Capitalist economic system correspondingly to the
modernization paradigm: the system manufactured these conditions by artificial intervention into natural processes.
5. On the other
hand, the modern dealing with material conditions was ensured by investing capital that got increased when
the product of that manufacturing process was marketed. This was so even when
the investor into the manufacturing of an essential condition (e.g., into the
development of networks of transport or public utilities) was not some private
person or company but the state: such processes were financed not
necessarily from the citizens' taxes, but to an increasing extent from an
investment which became profitable when the state started to charge money
for the use of the given infrastructure.
6. As far as
for the system's functioning some human conditions were, however, still needed, they were trivial, hence,
unlike material conditions, not manufactured, but merely extracted by
the economic system. Thus, both the practice and the mentality of the system
were that of exploitation [1]: human resources were
treated as something that is available independently from any economical
efforts, as if the profit that could be produced from it would be gratis, not
brought in as the interest from a capital invested into human.
7. The mechanisms (evoked in the Thesis 3) that enabled the economic system during the 19th century to
leave human conditions out of consideration, by the end of that century had
discontinued to be effective: e.g., for the employment of the machinery,
that would set free the system’s functioning from human faculties, newer and newer faculties were needed.
8. Since this
alteration the Capitalist economic
system, its run being no longer independent from human conditions, has
no more alternative but to provide them for itself the same way as it did with
the material conditions, i. e., by manufacturing them. From this time on, the
practice of a second modernization, which, together with the
material conditions of the economic system's functioning, will manufacture the
human conditions, too, replaces the one evoked in the Thesis 6.
Hence, from this time on, the capital and
work invested in cultivating faculties are as productive as investments into developing
machinery.
9. In the period of the second modernization,
any human potential will yield profit only if the costs, required to its
production, allocation, maintenance, running and renewal, are really assigned.
Such assignation will no longer be prescribed by pious moral imperatives (well
known to be either hypocritical or impotent in the nineteenth century), but by
solid business calculations.
10. In the light of these
business calculations, one may no longer hold the formerly evident assumption
that costs assigned to the human would withhold resources from the accumulation
and put them to the credit of the consumption – instead, human assignations
will only regroup resources from one side of account to another: "A
sizable portion of what is termed consumption means nothing but
investment into the human capital", Theodore W. Schultz argues.
11. For such an approach, expenditures on education
has to be booked among the production costs for the human potential, health
expenditures will appear as maintenance costs, housing and transport allowances
as costs for the allocation of the latter, cultural expenditures
as costs for the running of these specific capital assets, and
expenditures related to the management of unemployment will be regarded
as amortization costs for the human potential considered as fixed
capital.
12. A key issue in human capital related calculations
is to define who should be the investor: be it the household of the
individual whose skills are developed by the investment; be it the enterprise
who intends to apply the trained knowledge, or be it the state.
13. When the investor is the state, a
misinterpretation may be generated by the fact that by this expenditure a kind
of providence is at issue. Nevertheless, this is not some Divine or humanistic
kind of providence, but rather the pragmatism of the good craftsman, who
provides for tools before he would start working.
A particular
person develops its communication potential only if the correlated potential is
similarly developed in other people as well: nobody ever may have a capacity to
communicate with others, e.g., in writing or in some foreign language if there
is nobody in his environment who has the corresponding capacity to communicate
in writing or in that foreign language. Besides, the communicated information,
too, gets its meaning only against its background, in correlation with
it.
16. By force of the previous Thesis,
for an information management not only personal attributes of individuals
become economic factors but also their social interrelations: equality and
unequality, exclusivity and commonness, solidarity and struggle for survival.
Thus, what used to be traditionally factors of a merely moral universe that was
detached from the world of economy are turned by the second modernization into
factors for this very economic universe.
18. These inputs and their outputs can be
managed rather in an organization which has the power to lay a charge, impose
certain share of risks to the related individuals and counter-balance it not
exclusively in the market way. Such an organization can be, for example, the state.
19. What was put in Thesis 5 about state
investment into infrastructural development will also be true for the human
expenditures administered by the state: the investment into the human
capital will not necessarily be financed from the citizens' taxes, but in
various possible forms of a profitable business enterprise.
20. However, if the investor into
the human capital is the state (and so when it is a company) the question of Thesis 12 will be supplemented
by another one: who profits from the employment of the human potential
produced by that investment?
22. The issue of ownership has to be raised
with particular emphasis because the capital invested by the state or by a
company into the formation of a person's potential will be organically
integrated in his body and mind, and will be inseparable from the physical and
mental faculties that were originally given to him. Now, property means, first
of all, power of disposing, hence the question is put for the human potential
whether this indecomposable neoformation is dominantly disposed by the
bearer of the endowments or by the owner of the money invested into its
qualification.
23. The correspondence of the answers to the
three questions is only an abstract possibility. Two formulations are known in
which this abstract possibility is realized:
if the interested
person invests his own savings into the development of his own skills and
abilities it is he himself who disposes over his own developed potentials, and
it is he himself who gains the profit of the accumulated capital;
if the totalitarian
state invests into the human capital it does it in such a way that it has
total control over the manufactured human potantial, and thereby ensures for
itself recovering with profit its money tied up in living persons.
24. The more
highly qualified human potential is involved the larger and larger amount of
capital is required for its manufacturing – and, at the same time, the larger and larger
autonomy is required for that human potential's running. This
antinomy represents the basic dilemma of the second modernization: as
far as the required capital is ensured by the involvement of a totalitarian
State the autonomy turns out to be in short supply – but if the aspect of the
autonomy makes the State get out from the human business by charging the costs
of human development to the individual's account then capital will be scarce
(if only by virtue of Thesis
17).
25. Both succes and failure of both versions
of the socialism have been linked to attempting to resolve that basic
dilemma.
26. In its successful periode the socialism
by its Bolshevik
version constructed a psycho-economic structure that kept in operation (by
joining in the Nomenklatura the status of the official and that
of the commissary and by running a self-establishing machinery of the democratic
centralism) a peculiar processing industry whose final mass-product was a
rather peculiar version of the autonomy (the victim's complicity) [2]; and
by its social
democrat version it dealt with the antinomy by adjusting the modernization's
interest and the socialist values in promoting in a capitalist State the
labour power as capital: the welfare State succeeded in the optimal
distribution of the capital's enlarged reproduction among the multiplied
material and the equally multiplied human capital.
27. The periode of the socialism's failure
came about because
from the
Bolshevik version everything but factors directly and plainly serving the
consolidation of power got extincted or eroded;
the welfare
State, being an investor into human capital without being its owner or
beneficiary (cf. Thesis
12, 20 and 21), turned out to be unable to function indeed (as it
has been stated in the Thesis
19) as a profitable business
enterprise and this experience reiterated the accusation that here again
(contrary to what is stated in Thesis 10), resources are
withheld from accumulation.
28. The failure of these socialist attempts
established a claim for the neo-liberal renaissance, although those attempts
merely catalysed a trend that has not been originated from them but from the
compulsion referred at by the Thesis 8.
29. That claim gets worded in terms of merely
cancelling the validity of Keynes' procedures in ensuring for the national
economy
Spontaneous functionning of a capitalist
market aimed at by that claim seems to supply a radical disposal of the
dilemma: societies' new splitting in an élite and a mass at this end of
the 20th century. On the side of the élite there is focused both the capital
required for the manufacturing of a highly qualified human potential and the
autonomy that is required for its running (cf. Thesis 24),
and on the side of the mass there is both factor's lack.
30. In this context George Soros' warning is
particularly pertinent: "The main enemy of the open society... is no
longer the communist, but the capitalist threat".
31. The warning is pertinent in spite of (or
just because) the fact that the new split does not replicates the one that
splitted the middle class during 19th century into an élite and a mass. This
latter was then compelled to participate in the production of assets from the
consumption of which it was eliminated (just from this discrepancy Marx used to
deduce his prognosis about a proletariat that is forced by it to overthrow its
basis, the capitalist system). By the new split of the society the unformed
mass is just as well eliminated from the production as from the consumption.
32. The new split is a particular way for the
second modernization to manifest the force of its tendency for making the
schooling a conditio sine qua non of the production.
33. This unprecedented elimination of the
unskilled mass from the economy would be enabled by the transformation of the
material economy leaving much room for the employment of unskilled work into an
information management (cf. Thesis 14) demanding much
less but qualified human resources.
34. However, the same transformation disables
the economic system from separating those individuals qualified from those not
qualified since for an information management the human potentials at stake are
not represented by atributs of separate persons but by their relations (cf. Thesis 15).
35. Thus, philosophical problems related to
the open society and pragmatic problems related to the information management
may have only common solution.
* These theses are
developed and argued by the author in the monograph The human potential as capital: An approach by the economic
psychology ("Aula" Economic
University Press, Budapest, 1998. – in Hungarian) and the collected studies About
the path of modernization and the man who migrates on it, I–II. (Scientia
Humana. Bp., 1995 – in Hungarian).
The term is used here not in the
same sense as in the Marx' theory and the related ideology, but as a manner of use of some (material or human)
resources which not only that does not implicate the active reproduction of
these resources, but not even affords to them the opportunity to be reproduced
by their own.
2 Both The human potential as capital and the vol. I
of The path of modernization of the author include a chapter entitled "The Bolshevik
version of the second modernization"
presenting this unknown psychoeconomic
aspect of well-known configurations of an "existierende Socialismus".