Tarullo’s Complaint

Last week a past Federal Reserve Governor, Daniel Tarullo, published a working paper, urging economists to develop a theory of inflation that governors on the Federal Open Market Committee (FOMC) could rely upon to set interest rates. While sympathetic with Governor Tarullo’s larger point, I do take issue with how he gets there, at least in part. The problem, as I see it, is not only that the what the FOMC does lends itself to being politicized. That goes without question. My more general objection is that, the decisions made by the FOMC are political — and rightly so. In what follows I want to suggest how we might recognize the fundamentally political nature of the FOMC’s job while protecting its members — and its decisions — from the kinds of political meddling from which Congress, rightly, wished to protect its decisions.

The US Congress has given the Federal Reserve a dual mandate: (1) to maintain employment at near “full employment” (however defined); and (2) to keep inflation in check. Its chief means for fulfilling this dual mandate is (1) easing or tightening the monetary supply; and (2) closely related, establishing the Federal Funds interest rate. In theory, these related mechanisms determine how ready investors are in the short term to part with — i.e., invest — their capital in assets that are more “fixed,” less “liquid.” So, for example, when the Fed lowers interest rates it means to encourage investors to invest their money in “fixed” assets that promise to offer higher returns than the interest rate on offer. But should the economy be expanding at a rate faster than investors can manage — i.e., when the overall effect of “easy money” is to raise prices and wages, not investments in fixed assets — the Fed will “cool” the economy down, usually by raising interest rates and tightening the monetary supply.


Last week Daniel K Tarullo, a former Fed governor, published a stunning admission. In a working paper titled “Monetary Policy without a Working Theory of Inflation,” the former Governor admitted “we do not, at present, have a theory of inflation dynamics that works sufficiently well to be of use for the business of real-time monetary policy-making” (2). Which means that, when he and the other governors met to set interest rates such that inflation could be maintained at the benchmark 2% — and when the governors meet today to do the same — they do not actually have a working theory for where they should set interest rates to achieve this goal.

“Not to worry,” you say. We know, roughly, that raising interest rates will tamp down inflation, and that lowering interest rates will — in the long run — fan the fires of inflation. Moreover, in light of its two fold mandate — employment and inflation — lowering interest rates under conditions of higher than desirable unemployment has the serendipitous consequence of bringing investors to invest in fixed assets that generate employment: a factory, a jet plane, a mine. Killing two birds with one stone, so to speak.

Yet, while they have contributed to a reduction in unemployment, over a decade of zero bound interest rates have not generated inflation at the target 2% rate desirable for a healthy, expanding economy. This, in turn, has led some to fear that raising the interest rate under conditions of inflation that are less than 2% will (1) discourage investment; and so (2) lead to higher unemployment.

One out of two isn’t bad. That’s fifty percent success. At least all of those unemployed folk will enjoy reasonably cheap prices; which, because they are unemployed, are still too high.

Overall, I found Governor Tarullo’s working paper stimulating. I agree (who doesn’t?) that the infamous Phillips Curve — which models the relationship between inflation and unemployment — is a less than perfect instrument. I also agree that the FOMC members are compelled to draw upon information for which there is no accounting in our existing models. Chiefly this information concerns what committee members feel future markets will look like and, therefore, how they will behave. Is the future brighter and rosier than the present? And, if so, does this information trigger a looser policy — to generate the growth I foresee? — or does it instead trigger a tighter policy — to put the breaks in advance on the overheated economy I foresee? Much will depend on how I read the tea leaves.

Governor Tarullo is troubled by these tea leaves, what he calls “unobservables.” I am not. Since interest rates are set to establish a general tendency toward some goal, not to hit that goal in an instant, I think that it is sufficient to take notice of where we are, where we have been, and where we want to be — how far are we from 2% — and work accordingly. I also think that the margins separating the judgments of one governor from another with respect to “(1) potential GDP growth, (2) the ‘natural rate’ of unemployment, and (3) the ‘neutral’ or ‘equilibrium’ rate of interest ” (4) are so modest as to warrant less weight than Governor Tarullo grants them.

Far more obscure — I agree with Governor Tarullo — is the crystal ball foretelling future market performance, because this performance is so dependent upon variables that do not fall under the jurisdiction of the Federal Reserve. In short, they are political.

Still, all politics are not the same. From 1945 to roughly 1971, all political actors were on roughly the same page, at least where the Federal Reserve was concerned. All of this changed over night when President Nixon took the dollar off the Gold Standard.

No. There is nothing magical about Gold. But, to what is the Dollar pegged if not to Gold? It is pegged, of course, to the total value of the goods and services in the economy. But, to what is the value of these goods and services pegged? To the Dollar.

The real significance of taking the Dollar off the Gold Standard was, in effect, to make the US and its economy a player in the global economy; not its standard; not its arbiter — but a player. More specifically, it allowed President Nixon to devalue the Dollar sufficiently (irrespective of its now irrelevant Gold value) to make US goods more affordable on the global market: things in the US became less expensive. US producers became — through this purely monetary vehicle — more productive.

Not that President Nixon needed the help; he buried his Democratic opponent, George McGovern, in a landslide in 1972. But, remembering the last time he had run, as the Vice President of a President who refused to take any action to expand the economy, President Nixon did not want to take any chances. In 1960, Nixon had lost by a hair’s breadth to Kennedy. Not again. Taking the Dollar off the Gold Standard was insurance; perhaps unnecessary, but useful nonetheless.

So, in 1971, the Federal Reserve was placed in the unenviable position, in the absence of Gold, of regulating the monetary policy for an economy that was not, in fact, growing; but was growing only on account of its recently liberated currency — liberated precisely for political reasons.

Absent actual economic expansion, but gifted with a now floating currency, Arthur Burns and then G William Miller struggled under untenable conditions. With Germany and Japan (since 1968) back at full industrial capacity, there was virtually no chance that the US — without a working national rail system, absent a single-payer universal health care system, without a viable universal educational system — would outcompete Germany or Japan on their own terms. Which is why Fed Chair Volcker had not choice but to put the beast out of its misery, raising interest rates almost twenty percent and, therein, putting an end to “stagflation.”

This political act, however necessary in fact, virtually guaranteed President Carter’s loss to Ronald Reagan in 1980.

Could anyone in the 1970s have predicted “stagflation”? Yes. And many did. Could anyone in the 1970s have predicted Chairman Volcker? No. But many hoped for his coming.

The business community is currently pining away for relief from taxes and regulations which are already among the least restrictive in the industrialized world. Where Japan’s and Germany’s productivity bumps have been grounded in — well — actual increases in productivity, US investors continue to rely upon federal assistance in the form of hand-outs from the bottom and middle to the top of the income hierarchy, shifts that hold absolutely no promise to increase productivity or growth, but only to increase the share of wealth owned by those in the top centile.

In this regulatory environment, is there any wonder, really, why inflation remains well below 2% while employment — or should we not say underemployment — has hit a twenty-five year low? Consumer purchasing power is completely stagnant. Full employment and below target inflation? If any one was wondering how, practically, to invalidate the Phillips Curve, this is how: send all of the efficiencies earned by working families to the top of the income hierarchy. That’s how.

This is politics, pure and simple. It was politics in 1971; it was politics in 1980; and it is politics today. Now, the goods news is that Chairwoman Yellin is as straight a shooter as anyone could want or find. The bad news is that under the current regulatory environment 2% is a completely unrealistic goal. Which is one of the reasons why I am still a bit confused by Governor Tarullo’s complaint.

I actually think that, without too much effort, we could identify the coefficients Governor Tarullo is seeking. That is to say, I think that we could identify a set of variables, weighted differentially, that would allow us to account for the dramatic falling off of what Lord Keynes called the “propensity to consume.” The propensity to consume is not only a function of wages, but of wages relative to a stable currency and the value of goods on the market. Lord Keynes argued so many years ago that when wealth is bunched at the top of the income hierarchy, we might have an aggregate increase in wealth, but a much smaller growth in aggregate consumption: full employment, but stagnation.

Perhaps this was Governor Tarullo’s point; that we need to explicitly state and fold into our models what everyone already knows: that our productivity is being directed largely into the accounts of those who have the least propensity to consume. And this, of course, will dramatically dampen any inflationary pressures.

Lord Keynes invited us to speculate in another direction. What would happen if the efficiencies earned in the economy were spread out more broadly? And what if we then hit the wall of full employment?

Though the rentier would disappear, there would still be room, nevertheless, for enterprise and skill in the estimation of prospective yields about which opinions could differ. For the above relates primarily to the pure rate of interest apart from any allowance for risk and the like, and not to the gross yield of assets including the return in respect of risk. Thus unless the pure rate of interest were to be held at a negative figure, there would still be a positive yield to skilled investment in individual assets having a doubtful prospective yield. Provided there was some measurable unwillingness to undertake risk, there would also be a positive net yield from the aggregate of such assets over a period of time. But it is not unlikely that, in such circumstances, the eagerness to obtain a yield from doubtful investments might be such that they would show in the aggregate a negative net yield (General Theory, ch. 16).

Horrors! The disappearance of the rentier? Doubtful investments a negative net yield? Imagine!

We might — perhaps we should — imagine income inequality to maintain its upward climb, leveling off eventually as the rentier approach full command of all wealth. Such would not be an unrealistic assumption. In that case, we would be well-advised, as Governor Tarullo suggests, to scrap the unrealistic 2% goal for inflation; a goal which, after all, was based on a regulatory environment that now lies almost forty, and arguably sixty, years behind us. In that case, we would invite governors to hazard guesses grounded in the expectation of an expanding inferior goods market, with pockets of high tech, but with national wealth, by and large, invested in economies enjoying a more productive regulatory environment: India or Germany or, God forbid, France.

But, let us speculate, Lord Keynes-like. Let us suppose that, as in 1968 or 1971, there were a dramatic political shift where those in policy making positions suddenly focused on raising the fortunes of working families. Such is the kind of unpredictable future that Governor Tarullo imagines; where shifting policies give rise to shifting wealth and consumption patterns that invite us to rethink interest rates, employment, and inflation. What if, suddenly, wealth were to accrue to those who earned it, to working families? And what if, suddenly, their spending began to generate real economic growth, real wage growth, and real increases in prices and profits? Of course, relative to GDP, such increases, in and of themselves, would not be cause for alarm. Indeed, perhaps we would find ourselves precisely in that circumstance imagined by Lord Keynes at the end of Chapter 16, where, with the disappearance of the rentier and the lackluster returns on speculative ventures, growth, wages, and interest would find a sustainable equilibrium.

Ok. Pure speculation. Fantasy. Of course. But, now let us suppose that the Fed set as its goal not 2% inflation, but such interest rates as necessary sent efficiencies downward and outward: Yes. Negative interest rates that cost capital for hold it; cost capital for not investing it in economic growth.

Politics! Well, of course. Its all politics.


Aristotle’s Attraction in Turbulent Times

I begin every class, every semester, with a short section I call “Gymnasium in a Box.” Gymnasium in a Box introduces students who are not classically trained to the “canon”; or at least as much of the canon as students can handle in ninety minutes. Students get a taste of Homer, Thucydides, Socrates (Gorgias), Plato (Republic), and Aristotle (Nicomachean Ethics and Politics), as well as St Thomas, Immanuel Kant, George WF Hegel, and K Marx.

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My theologically inclined friends are aghast: St Thomas? The Summa? Really? Why?

Aristotle is perhaps best known as Plato’s most gifted (or, in any case, most prolific) student. He was prevented by Athenian law from succeeding Plato at the Academy. Aristotle was foreign born — a Macedonian — and, worse still, was very close to the Macedonian court: his dad, Nicomachus, was Philip’s physician; and Aristotle was Alexander’s personal tutor. Onay ealday onyay ethay oolschay.

But then Philip defeated Athens and Alexander, Philip’s son, saw no good reason to prevent Aristotle from establishing the Lyceum.

I will admit some attraction to Aristotle and to Aristotle’s most devout Roman Catholic son, Thomas. The challenge for both was to begin from scratch. Times are changing, both in the fourth century BCE and in the thirteenth century CE. Appearances can be deceiving. So, if you have to build from the ground up, on what will you build?

To their credit, both Aristotle and Thomas erected their respective mansions not upon what cannot be seen — Plato and Occam — but upon what can be seen. That is to say, although each acknowledged that there existed broad swaths of reality that he did not understand, each left this mystery in God’s hands. For those of us with one foot or more on earth, we need to look at the evidence. We need to look to the natural order.

But, what is “natural”? This question was as relevant in the fourth century BCE as in the thirteenth century CE as it is today. What is “natural”?

If, as Christians, we build upon Romans 1-2 or Romans 13.1-7, then what is “natural” is as clear as day:

For since the creation of the world His invisible attributes, His eternal power and divine nature, have been clearly seen, being understood through what has been made, so that they are without excuse (Rom. 1.20).

Let every soul be in subjection to the higher powers: for there is no power but of God; and the powers that be are ordained of God. Therefore he that resisteth the power, withstandeth the ordinance of God: and they that withstand shall receive to themselves judgment. For rulers are not a terror to the good work, but to the evil. And wouldest thou have no fear of the power? do that which is good, and thou shalt have praise from the same: for he is a minister of God to thee for good. But if thou do that which is evil, be afraid; for he beareth not the sword in vain: for he is a minister of God, an avenger for wrath to him that doeth evil. Wherefore ye must needs be in subjection, not only because of the wrath, but also for conscience’s sake. For this cause ye pay tribute also; for they are ministers of God’s service, attending continually upon this very thing. Render to all their dues: tribute to whom tribute is due ; custom to whom custom; fear to whom fear; honor to whom honor (Rom. 13.1-7).

Not a believer? No problem. Here is a “natural” order that everyone can buy into. No Christ — no faith! — necessary.

I suspect that natural theology is attractive during turbulent times because we want something a little more rigorous than faith; something a little more self-evident than the dead and raised Palestinian Jew. Got it.

And so we build on a different foundation, confident that because we are building on God’s natural order — Creation — we won’t go too far off track. But here’s the rub. Creation is fallen. Indeed, Paul himself seemed to feel that Creation itself was waiting for the children of God to take the lead guiding all of Creation to redemption. But it gets worse.

In his first letter to the community at Corinth, Paul went out of his way to turn Stoic ontology on its head:

For consider your calling, brethren, that there were not many wise according to the flesh, not many mighty, not many noble; but God has chosen the foolish things of the world to shame the wise, and God has chosen the weak things of the world to shame the things which are strong, and the base things of the world and the despised God has chosen, the things that are not, so that He may nullify the things that are (1 Cor. 1.26-28).

Where Stoicism rests confident on the things that are, an ontology arising out of Christ rests on things that are not. Why? Paul explains:

Where is the wise man? Where is the scribe? Where is the debater of this age? Has not God made foolish the wisdom of the world? For since in the wisdom of God the world through its wisdom did not come to know God, God was well-pleased through the foolishness of the message preached to save those who believe. For indeed Jews ask for signs and Greeks search for wisdom; but we preach Christ crucified, to Jews a stumbling block and to Gentiles foolishness, but to those who are the called, both Jews and Greeks, Christ the power of God and the wisdom of God. Because the foolishness of God is wiser than men, and the weakness of God is stronger than men (1 Cor. 1.20-25).

And, yet, time and again, in turbulent times, Christians feel pulled to rest their case in “natural” theology.

This is unfortunate because in nature the weak do not prevail. In nature the foolish perish. In nature those who enjoy wealth, power, education, and culture dominate the poor, the powerless, the foolish and parochial. That’s how the real world works. That’s how nature works. That’s how Stoicism works. And, in fact, that is how Aristotle and St Thomas work. To this extent, Rom. 13.1-7 contains far more lucid advice than 1 Cor. 1.20-28. That’s just the truth.

But Christologically it is ill-informed. How ill-informed can be clearly seen from John Milbank’s Politics of Virtue, in which Professor Milbank seeks to broaden his left-leaning message of radical orthodoxy to include readers who are not explicitly (or even implicitly) Christian. Where else to stake one’s case than on the unnatural bent of those without virtue and the natural bent of those who are: virtue is natural; vice is unnatural.

Obviously, however, because this message bears no direct relationship to the gospel, Milbank is compelled by the logic of his own argument to pick and choose the “nature” that corresponds to virtue while casting as “unnatural” those things that do not. By inference “nature” corresponds to Christian; while “unnatural” corresponds to secular, humanist, human-centered, selfish.

Note: this is precisely the (Stoic) message we read in Paul’s letter to the Romans. But it gets worse. Because Milbank is eager to critique capitalism, he is compelled to criticize it because it is unnatural. This then places him in the awkward position of defending pre-capitalist social forms as natural; awkward because Milbank is quite far from defending the misogynist and fixed, i.e., “natural,” social stratification Christendom inherited from late Rome. He therefore ends of repeating a fairly pedestrian variety of nineteenth century Roman Catholic criticism of modernism, including capitalism, including liberalism. Indeed, he even unblushingly invokes Carl Schmitt, Adolf Hitler’s judicial expert, as an authority (199). This is far less unusual than might be thought. Professor Schmitt was a lapsed Roman Catholic who, like many of those attracted to National Socialism, found liberalism’s weak foundations untenable. National Socialism provided these lapsed Romans with a foundation grounded in nature, yet without the added unnecessary weight of the gospel. Liberalism could be criticized from the unassailable vantage point of nature itself: the Aryan race as embodied in National Socialism.

This reliance upon natural theology is doubly unfortunate for Milbank since it is also unnecessary. Milbank, after all, would like to make peace with the critical wing of Marxian and post-Marxian scholarship. It is doubly unfortunate because he picks up a strand in the tangled web of post-Marxian scholarship that is most sympathetic to Thomist natural theology. And this leads him further astray.

The strand Milbank picks up is the F Braudel, K Polanyi, R Brenner strand — which holds that capitalism is unique not on account of its reliance upon free markets, but on account of its reliance upon state intervention. Markets have always been with us. What is unique is the role that the state came to play during the early modern period. To this Braudelian line, Milbank adds K Polanyi’s distinction between fictitious and non-fictitious commodities. Land, labor, and money, since they are not produced for exchange on the market, are deemed “fictitious”; which, of course, means that other commodities are “natural.” Nature, then, becomes the ground on which a specific strand of ex-Trot ideology will rest its case. Capitalism is not natural. It relies upon state intervention. It relies upon fictitious — unnatural — commodities: land, labor, and money.

Had Milbank chanced to pick up a different strand of post-Marxism, he might have abandoned this reliance upon natural theology and “natural” post-Marxism. He might, in this case, have been curious over the correspondence within capitalism between abstract value and its peculiar cultural forms; and he might have been curious to explore the increasing tension between the commodity’s abstract value form and its material form of appearance: the production of mountains of things holding the same value socially as earlier generation’s smaller mountains.

This other critique does not lend itself to a naturalist rendering. Society — all society — is unnatural; even emancipated society is unnatural (see 1 Cor. 1-2). Nature does not lead us to the good. That is because “nature” is not an ethical category — except for those willing to inflect “nature” as “power.”

What this other post-Marxist critique has going for it is that it is not forced to flee from the capitalist social formation into a fictitious “nature” that on biblical as much as anthropological grounds has never existed. This alternative post-Marxist critique wants us to historically and socially ground and limit capitalism — identify its point of departure in the fourteenth century and, perhaps, its transition to something new, better or worse. That is as far as it can go, because it is not an ideology.

But, this other post-Marxist critique lends itself far better to a Gospel that also finds in “nature” little guidance. That guidance it seeks from the Palestinian Jew Jesus. Its ontology is not positive, but negative.

For the anxious longing of the creation waits eagerly for the revealing of the sons of God. For the creation was subjected to futility, not willingly, but because of Him who subjected it, in hope that the creation itself also will be set free from its slavery to corruption into the freedom of the glory of the children of God. For we know that the whole creation groans and suffers the pains of childbirth together until now. And not only this, but also we ourselves, having the first fruits of the Spirit, even we ourselves groan within ourselves, waiting eagerly for our adoption as sons, the redemption of our body (Rom. 8.19-23).

Here creation is not the guide. It waits for the community of faith to lead the way to redemption, bodily redemption, physical redemption: the redemption of creation.

For, what is most problematic about capitalism is this disconnect between bodies and value. Milbank wants to ascribe this breach to nominalism, to the isolation of value from bodies. But he is only partially correct. If it is capitalism that gives rise to this breach, then the wound will be healed not by absolutizing some historically and socially limited experience of bodies, i.e., bodies in the late Middle Ages. The wound is healed by the Cross because it raises those who are at the bottom. It reverses the Stoic ontology. Christ is already there at the bottom, among the rejected, among those who Stoic natural theology counts as nothing.

This is not to suggest that this alternative post-Marxist strain is more Christian. It is, however, to suggest that it does not require that we fall into theological contradiction. We can, in other words, articulate this alternative critique without falling back upon a putatively fixed “nature” qua Creation. Do you want the New Creation? There it is on the Cross.

So, why do we always run back to Aristotle (or Thomas) during turbulent times? I suspect it is because we want a more firm foundation than the Cross. I understand the attraction. I reject it.

Violence and Symmetry

In my History of Economic Thought lecture, we have already begun to transition from the classical to the neoclassical thinkers — from thinkers grappling with a wide range of seemingly independent variables to thinkers who recognize that all of their variables are differentially related to one another. The breakthrough was in large measure due to the elimination of market barriers. So long as local custom, law, habit, and regulation impeded and impaired market forces,  the smooth trend lines familiar to us from economic modeling could not appear because they did not exist.

Now, finally, in the 1860s, economic thinkers such as Leon Walras, William Stanley Jevons, Carl Menger, and even Karl Marx begin to take note of the comprehensive, integrated nature of the maturing capitalist social formation. And we begin to see the familiar x and y linear graphs that will forever be a feature of economic science. So that this:

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WS Jevons Theory 1862


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WS Jevons Theory 1862

where over time (the x axis) the utility won from any good moves from p to r along the y axis.

What is sometimes difficult to explain to students is why, during one of the most violent periods of modern history, the trend lines smooth out. And, yet, a moment’s reflection reveals the answer. Economic integration, if successful, destroys the purely local, customary laws, regulations, and habits that invariably impede and impair market efficiency. Empire-building, if successful, destroys the communities that lay in its path. The very success of these projects is displayed graphically in the smooth trend lines that begin to appear in the 1860s.

I am thinking of these trend lines today because the so-called champions of “individual liberty” are among the most fierce advocates of eliminating particularity and so further smoothing these trend lines. So, for example, regulating coal for the sake of community health and climate change remediation counts as a particularity that, when unregulated, destroys lives and sustainable planetary ecosystems. The elimination of regulations governing carbon content, for this reason, helps smooth the trend line displaying the marginal benefits of coal extraction, processing, sales, and use. Of course, the particularities removed in this case are the bodies of individuals and communities directly involved in coal extraction, as well as the planet on which they live. These particularities are “smoothed.”

Which raises the interesting question of what precisely we mean here by “liberty.” But, no sooner have we asked this question than its answer stares us in the face. We are talking here not about the liberty of Sally Drug Store Clerk or Ricky Accountant. We are talking about the liberty of capital itself as it enters and destroys our communities — is free to enter and destroy our communities. This destruction smooths the trend line. Ain’t that right David Koch, Paul Ryan, Rand Paul, and Mitch McConnell? Ain’t that right Donny Boy?


My initial, off the cuff, response to the drive for Catalonian independence is, wtf? The richest, wealthiest, best educated, most progressive region in Spain wants to break free from its neighbors?


And, yet, I must admit that as a long-time Californian, I have often thought: OK. You don’t like our state Constitution’s equal rights clause? You don’t like our green bent? You don’t like our over-the-top Democratic — leaning socialist — politics? Well, then, perhaps you also don’t like the huge subsidies we — along with New York, Oregon, Washington, and Massachusetts — send to Washington, DC, and, by way of Washington, to all of you loser red states. So there! Catalofornia that!

We owe to the capitalist social formation the drive towards integration. More homogeneous laws, regulations, and institutional arrangements give rise to lower transactional costs. But we also owe to the capitalist social formation the drive to achieve efficiencies at the expense of others. The answer, for California as for Catalonia, is not isolation and independence — though I totally understand that drive — but greater outlays earmarked for raising the standard of living, learning and caring of our fellow countrymen and women.

Race and the American Sonderweg

In the Spring of 2015, I stumbled upon Ta-Nahisi Coates at Howard University reading an excerpt from his Between the World and Me. The reading sent me to my bookstore where I purchased several copies of Mr Coates’ book. I gave it as Christmas presents that Winter to all of my relatives. Now two years later, equally serendipitously, I stumble upon Thomas Chatterton Williams’ review of Mr Coates’ most recent volume: We Were Eight Years in Power: An American Tragedy (see “How Ta-Nahisi Coates gives Whiteness Power,” NYT 10/06/2017). Writing from Berlin, Williams, who is also African American, appears even less happy with Coates’ latest offering than he was with the first.

Race and ethnicity have served as social markers for just shy of 2.4M years. The boundaries these markers erect or reinforce depend greatly on the social formations in which they appear. Understanding race therefore requires both that we understand these formations and that we understand them as socially and historically specific; race along with the formations in which race is embedded often perdure long after the conditions that marked race in socially specific ways have waned.

I was reminded of this problem of race by the way that Mr Williams framed his disagreement with Mr Coates; he framed his disagreement in terms deeply familiar to students of modern German history — in terms of the Sonderwegthese.

In the study of German history, there is the notion of sonderweg, literally the “special path,” down which the German people are fated to wander. In different eras, and depending on who employed it, the term could imply different things. It began as a positive myth during the imperial period that some German scholars told themselves about their political system and culture. During and after World War II it turned distinctly negative, a way for outsiders to make sense of the singularity of Germany’s crimes.

Yet whether viewed from within or without, left or right, the Germans could be seen through such a lens to possess some collective essence — a specialness — capable of explaining everything. In this way, one could speak of a trajectory “from Luther to Hitler” and interpret history not as some chaotic jumble but as a crisp, linear process.

. . .

A similar unifying theory has been taking hold in America. Its roots lie in the national triple sin of slavery, land theft and genocide. In this view, the conditions at the core of the country’s founding don’t just reverberate through the ages — they determine the present. No matter what we might hope, that original sin — white supremacy — explains everything, an all-American sonderweg.

No one has done more to popularize this “all-American sonderweg,” according to Williams, than has Coates.

As in the German Sonderwegthese, so in the all-American one, we are invited, writes Williams, to entertain a particularly virulent version of “identity epistemology, or knowing-through-being,” which then became “identity ethics, or morality-through-being.” In the same way that post-war German historians made Antisemitism and authoritarianism a near ontological quality of being German, so believing one’s self to be “white” became an ontological attribute of this belief itself — a kind of covering principle for the thoughts and actions of all persons who entertained this belief.

So, for example, Williams takes issue with Coates’ seemingly ontological inflection of gentrification:

“To empathize on any human level with the lynched and the raped, and then to watch all of the beneficiaries just going on with their heedless lives, could fill you with the most awful rage. I feel it myself, for example, walking through Washington, D.C., or Brooklyn, where gentrification has blown through like a storm. And I feel it not just because of the black people swept away but because I know that “gentrification” is but a more pleasing name for white supremacy, is the interest on enslavement, the interest on Jim Crow, the interest on redlining, compounding across the years, and these new urbanites living off of that interest are, all of them, exulting in a crime” (Coates, We were Eight Years).

The issue Williams takes with Coates on gentrification arises not only from the fact that both writers — Williams and Coates — have each lustily participated in the process.

In my own young black life, I have done my part to gentrify a half-dozen mixed neighborhoods ranging from Spanish Harlem to Fort Greene to the ninth arrondissement of Paris. Many of my well-educated black, Latino, Asian and Arab friends have done the same. Most of us harbored conflicted feelings about the processes we were engaged in, but few of us considered advancing white supremacy to be one of them. Mr. Coates, a self-made millionaire and longtime Harlem resident, briefly catches himself in the essay, admitting, “And I know, even in my anger, even as I write this, that I am no better” (Williams NYT)

The issue is with the implication that individuals with means to purchase properties out from under their long-time occupants in gentrifying neighborhoods are investing money that, in “a more pleasing name for white supremacy, is the interest on enslavement, the interest on Jim Crow, the interest on redlining, compounding across the years, and these new urbanites living off of that interest are, all of them, exulting in a crime.” That is to say, the issue that Williams takes with Coates’ characterization is that it makes those who participate in a specific action — in this case gentrification — complicit in a range of other activities, and bearers of ontological qualities, that Coates equates with “whiteness.”

Speaking as a European historian, I find myself conflicted by Williams’ objection. The Sonderwegthese was and remains simplistic. Moreover — and I take this to be Williams’ point — it brings us to credit mechanisms such as race and ethnicity with powers that in fact lie elsewhere and so brings us to ignore or downplay the real mechanisms at work. In the case of Nazi Germany, purveyors of the Sonderwegthese downplayed class as a factor and ignored the progressive, democratic dimensions of German politics and society from 1871 to 1932. Similarly, perhaps, in the case of gentrification, when we focus on “whiteness” we may ignore or downplay social and economic mechanisms driving the invasion and occupation of urban landscapes by the well-graduated and well-compensated at the expense, to be sure, of minority families forced to occupy these same neighborhoods a century ago. In this sense, Coates’ single-minded focus on race — on “those who believe themselves to be white”; on “whiteness” — may bring us to overlook mechanisms such as economic policies that appear to have less to do with race than with wealth, power, and prestige.

But, now let us suppose that, like every thing in any modern capitalist social formation, we take race also as a commodity, a social form composed both of utility, for those who find race useful, and of abstract value, which integrates race into the comprehensive world of other value-bearing commodities. If this is the case, if race is a commodity along these lines, then its value as a social marker needs to be distinguished from the ways race has been inflected in other kinds of societies where it has played a role. In our society, where abstract value mediates all social relations, race has value. At the very least this means that race is exchangeable for things that have equal value, that it is subject to opportunity costs, to trade offs, to diminishing marginal returns, to monopoly and quasi-monopoly constraints, to regulation, to gluts and dearths, etc. Here the value of “whiteness” continues to differ from the value of “blackness”; in aggregate, it requires more units of “blackness” to equal “whiteness.” Or, if you prefer, “blackness” trades for less on the open market.

If I am correct, Coates is not inviting us to ontologize race so much as he is challenging us to recognize the continuing, persistent value race enjoys within an economic formation that differentially values “whiteness” over “blackness.” He is challenging us to recognize that these differential values arose socially and historically out of a specific history; a history in which human labor, already commodified, was also forced to be African, and a history where its “blackness” earned higher returns for equal amounts of labor insofar as it was legally owned and wholly controlled by those who employed this labor; whereas, by contrast, “whiteness” cost employers more insofar as it could resist employment legally. This differential valuation has not disappeared. So, while single-minded focus on race may bring us to overlook or downplay social and economic mechanisms, it is also true that these mechanisms are racially inflected: “blackness” has value.

Since we have not, as a society, had this conversation — have not institutionalized and memorialized it — we are not ready to move on. The invasion of the Americas was driven by Europe’s sudden economic expansion; but it was the economic inflection of America’s indigenous peoples — peoples who, in Jeremy Bentham’s memorable expression, enjoyed “no government, consequently no rights: no rights, consequently no property — no legal security — no legal liberty: security not more than belongs to beasts” (1789). Europeans’ rights to the Americas was erected on the view that unexploited land, like unexploited labor, was unnatural and subhuman: “beastly.” But, we have not had this conversation. We have neither institutionalized nor memorialized this genocide. Nor have we institutionalized or memorialized the genocide to which this one paved the way.

When the production of wealth is made the only legal means to produce — much less understand — value, the generation of value will take precedence over everything else, not simply as a means for producing material wealth, but even more as a means for understanding the world at all. When men and women are forced to feed this process; when against their will they are compelled to produce the wealth that commands value, their bodies are subject — as Adam Smith put it — to the natural wear and tear of any means of production whose utility arises from its relatively more favorable marginal cost relative to other means of production; for example, of machines or European wage laborers. We have not had this discussion. We have neither institutionalized nor memorialized the reduction of men and women to mere means of production because were we to have that discussion it would implicate us today. In a society mediated by commodity production and exchange, race has value.

Once race no longer has value — even then — it will not be time to forget the value “blackness” contributed to the immense, expanding engine of US industry from the seventeenth to the twenty-first century. The value “blackness” has contributed economically can be calculated; and not only the value of cotton, tobacco, rice, and soy. The value of “blackness” also includes the efficiencies transferred from Africans to Europeans when I easily slip unnoticed into secure neighborhoods that enjoy well-funded schools and well-maintained homes on well-lit streets monitored by smiling, congenial police officers. I did not “earn” this “right.” I worked not one minute for it. But someone did.

Is this an all-American Sonderwegthese, as Williams suggests? No. Were we to talk openly about the value of “whiteness” and “blackness”; were we to institutionalize in our schools, laws, and regulations; were we to memorialize in our parks, museums and public spaces the violence of this economic calculus, including its continuing racial inflection — then we could happily report that we are not talking about European Americans today, but about European Americans in the past. Lacking such institutionalization and memorialization, however, we are talking and need to continue to talk about the still peculiar path of America. Race has value.