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Problems with Economics: The Cult of Utility

2016 February 5
by Ian Welsh

I first took Economics in Grade 11. We used the standard college textbook at time, written by Lipsey, Steiner, and Sparks.

It started with axioms–the assertions upon which economics are based. The most important axiom  was the following: Humans act to maximize utility.

Utility.

What is economic utility? It’s generally defined as how useful a product or service is to someone.

How do you find out how much utility an item has?

It is a revealed preference. That is to say, how much utility something has is shown by how much people buy it and how much they are willing to pay for it.

So, Coca-Cola has vast economic utility, for example, but it has less than it used to have in many countries, where people are buying much less of it.

Basically, utility says, “Whatever action people choose to take is the one from which they derive the most usefulness.” This is known as revealed preference.

This is a circular definition; metaphysical in the worst sense. Any action we take is utility maximization. A person can never fail to maximize utility (within their budget), because their actions are what defines the actions’ utility.

People are utility maximizers. Whatever they do is meant to maximize their utility, therefore anything they do is maximizing their utility.

Note that utility is not happiness. It is not health. It is not meaning. It is not pleasure. It is not avoidance of pain.  It is not self-satisfaction. Utility boosters would claim that it includes all these things.

But you can’t measure utility except as price and behaviour. “If they do it, it must have maximal utility for them.”

This is based on another axiom of economics. “Humans are rational.” This axiom has been hit badly in modern economics, but it still underlies most of the models.

Note that utility is always measured as whatever actions people take. This allows no room for self-destructiveness (they must want to be self-destructive!), now does it allow room for not knowing what is good for oneself, for making bad decisions, for doing things which makes one unhappy, and so on.

Utility is not independently measurable. We can (sort of) measure happiness, or pleasure, or meaning, or physical health. We could then ask, “Do these actions actually produce any of these things?”

For example, money produces quite a bit of happiness up to the point where you have everything you need and some security. After that point, it doesn’t produce much compared to other things like having a loving spouse, say.

If we said, “Humans act to increase their happiness,” a common assertion in philosophy, we would have some way of measuring that, albeit roughly.

We cannot measure utility maximization, because utility is always maximized.

This is a statement of belief. “People must do things because they know those things are useful to them in some way, and they must choose that which is most useful.”

Well, no, no they don’t. You don’t need a Ph.D. to know that, you just need to have lived life and seen that people often don’t know what would improve their situations, and, when they do, they often choose not to take those actions, even when they could and often when they wish they would.

Utility maximization doesn’t make sense. Utility itself is a concept with no “useful” definition. Trying to use utility as a concept in the real world leads to circular bullshit: “Well, people are doing these things, therefore, they must be the best things for them even if they don’t seem to be. Who are we to ban trans fats in the face of revealed preferences?”

This leads to all sorts of arguments that take the form of, “Well, yes, we know X has a bad effect on people, but they have chosen X, so, therefore, we should not interfere.” This scales from drinking pop, to borrowing money for college, to activities which have caused global warming.

Actual decision-making, if it is to be rational, depends on an individual knowing their actual objectives re: the decision. Do we want more happiness? Do we want love? Do we want to be healthy? We can measure those things. (On an individual level, yes, even love. I know when I’m in love–though I grant I used to mistake infatuation for love. Still, infatuation was closer to love than not.)

As a society, we probably want to satisfice. We can’t actually measure progress in utility. We can measure progress in happiness, health, childhood mortality, and even in meaning. We can measure infrastructure deficits, and pollution, and global warming, and income mobility.

Utility is best used when you turn it into a basket of “good stuff” and measure those good things.

As for market economies, for capitalist economies, they work best when you take money (price) and you say: “The more people have of this the happier they should be.” As for “utility” maximization as a society, if money is leading to that basket of goods, you try and get everyone past the point where utility starts to sharply decline.

At that point, you work on policies which directly benefit various metrics. Do parks make people happier?  Build park. Does more free time make people happier? Give them more free time. Does less chronic disease make them happier (or less unhappy)? Work on that.

How do you work on those things? You progressively tax people who are above the utility inflection point. If $40K/year is where your inflection point is, you don’t tax people who earn that amount or less, and you increasingly tax people above that.

“Any income above one million has a negligible effect on measured utility (the basket). Therefore, we are taxing you at 95 percent and will spend that money on activities which do increase ‘utility.'”

Because increased inequality decreases various, actually measurable, criteria such as health, happiness, and life-satisfaction, there is even an argument for a simple, 100 percent cutoff point. “Any income beyond this point makes you worse off, and makes society worse off.”

As for utility, as it currently exists, it is a form of Panglossianism. “Whatever a person is doing, that must be what is best for them!” We know that’s bullshit in social terms (this is not the best of all possible worlds, unless it is the only possible world), and we know it’s bullshit in terms of individuals because we all know people (and maybe are people) who could have been far better off if we’d done a few things differently or if society was a little different.

Economics, as a discipline, has some useful things to say, but it was created in an attempt to mimic not just the sciences too closely, but to mimic the certainties of Euclidian geometry and other axiomatic systems too closely.

And there is no such thing as utility in any useful, pragmatic, usable sense.


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Why Do Millenials Love Bernie Sanders?

2016 February 4

This is not difficult. If you are a Millenial who goes or went to college and your parents aren’t rich, your life is dominated by debt from student loans.

If you haven’t gone to college, well, if it was free, you probably would.

Bernie wants to make college tuition free. Clinton does not.

There are other parts to it, of course. Bernie’s policies are just generally better for young people, but this is the core.

This is not hard to understand.

I also find it amusingly hypocritical that the majority of Boomers oppose free college tuition, given that most of them benefited from a system which was so cheap it was almost free.


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Failure Is the Precondition for Fascism

2016 February 3

Well, not all the time, but it is one of the necessary preconditions.

More broadly, when the old regime has failed (lost a war, bungled the economy), then people are willing to try something else. This “something else” may mean electing someone like FDR. It may be allowing someone like Stalin or Hitler to rise to power. It may be opting to try Communism. It may be electing someone as mild as Corbyn.

Or it may take the form of someone like Trump or Cruz.

Unhappiness occurs during decline.

Decline. The US economy has been lousy for most people for decades. Since somewhere between 1968 and 1980. 1968 was the peak of wages for working class white males, for example. You are surprised they are unhappy? They have been in decline for almost 40 years.

Women’s wages were rising through much of the period. They might be less than men’s, but they were rising.

Happiness is predicated on doing better than in the past. It doesn’t have to better by much, it just has to be better.

Since 2008, the economy, for the majority of the population (over 80 percent, over 90 percent by some calculations), has been bad. They have lost income. Their houses are worth less. They are less likely to be employed, much less have that lesser job.

They are ripe for fascism.

They are ripe for any sort of radical change offered by anyone who doesn’t parse; doesn’t feel, like one of the current set of elites. Trump does not, Cruz does not, Sanders does not. In Britain, where the situation is similar, Corbyn does not.

This is the beginning of the time of changes. Some countries will choose well, others will not, but the issues of how and by whom countries are run is in play–in a way it has not been in my lifetime.


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Iowa Caucus Results

2016 February 2
by Ian Welsh

So, Cruz beat Trump by 4 percent —28 percent to 24 percent, with Rubio in at 23 percent.

Nice for Cruz, but all the sneering I’m seeing at Trump is way premature, winning Iowa is by no means necessary and he’s up over 20 percent in New Hampshire. Not to say this isn’t a boost for Cruz, but it’s not even close to over.

As of this writing, Clinton and Sanders are neck and neck in the popular vote, but, however it turns out, she’ll still have more delegates because the super-delegates will be hers. That won’t matter much, either; Bernie has shown he’s competitive, but there’s plenty still to go

Onwards.


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The Bailouts Caused the Shitty Economy, Part 2

2016 February 1
tags: ,
by Ian Welsh

Back in 2013, I wrote an article making the argument that bailouts were responsible for the bad economy.

The reason the economy has not recovered and will not recover for at least a generation is because of the overhang of bad debt, the glorification of financial “profits” (they aren’t), the failure to de-financialize the economy, and the confirmed control of government by the rich.

There is also a section on alternatives to the what we did. “We should do something,” is not the same as, “We must do what we did.”

But, be clear, the economy would be better now if we had not done anything. Yes, the immediate two years after the financial collapse would have been worse, but we’d be better off now than we are.

I think we need to note, first, where we are.

  • We are about to go into worldwide recession. In other words, the good part of this business cycle is mostly over. In many countries, it has been over for some time.
  • Peak to peak—from the peak of the last recovery to the peak of this recovery, the employment to population ratio has not recovered. It didn’t recover in Bush’s economy either, by the way.
  • Median incomes in the US have dropped. This is true in a number of other countries.
  • All of the gains of the recovery went to somewhere between the top 3 percent to top 5 percent. And really, that means the top 1 percent, .1 percent, and so on.
  • The rich are now richer than they were before the crash.
  • China is has hit the mercantile wall. After the financial collapse, they were the engine of global demand. But with so many of their customers in austerity, this could not be maintained.

In other words, the economy never actually recovered. You can argue it did, dishonestly, by looking at stats like unemployment (which don’t consider people who have given up looking for jobs), or GDP, but for most people, this is a shit economy, at best.

It has, however, been a good economy to be rich in.

Now, as I’ve been writing about what Capitalism is this last week, I think it’s worth noting something very fundamental.

The 2000’s economy was sick. It was doing the WRONG THINGS. It was doing them with trillions of dollars. Derivatives such as CDOs, vast expansion of borrowing for stock buybacks, the housing bubble, and so on.

It was doing things which had negative real returns–even measured in money. That these actions had negative, real returns was revealed in the financial collapse when those derivatives were worth ten cents or less on the dollar, and by the fact that central banks and governments had to spend trillions on the bail out.

Measured in human welfare, the mal-investment was worse. When you measure this in “opportunity cost,” meaning what we could have done with those resources instead, which would have increased human welfare, the cost was beyond vast: There are no words.

Capitalism is a system where markets make the primary economic investment decisions through price signals and the availability of money (these are not always identical, which is why I separate them).

More to the point, markets say, “If you are making money, do more of what you are doing.” The assumption is that if you’re making money, other people want what you’re doing, and that what people want is what has the most social utility—the greatest welfare for the buck.

I trust it is obvious to anyone but those brainwashed by the cult of economic utility that, in the 2000’s, the individuals who were making the most money were not creating welfare. They were, instead, reducing human welfare, absolutely and relative to other options.

The other case for capitalism and markets is that they are supposed to be self-correcting. People may make money doing the wrong thing due to market failures, but eventually they will lose that money.

They did.

I repeat, they did. The people making the wrong decisions lost all their money. They lost more than all their money.

We have a shitty economy now because we bailed them out. They then went back to doing all the wrong things, but with a huge debt overhang and more power.

What we needed was new economic decision makers. We needed the people who had all that money to lose their money and thus their political power, making it possible for a different set of people to make money.

Those people would have started off with a lot less money, and a lot less power, and that means there would have been a lot less money in politics, which would have fixed a swathe of problems political, social, and economic.

All that was required for this to happen was to DO NOTHING. Let the banks and brokerages and so on go out of business, and allow the process of law to proceed. The laws on the books at the time made most of what bankers and shadow bankers and various other decision makers doing illegal. Rather than allowing them to pay fines to indemnify themselves against law breaking, actually apply the law. Start with RICO statutes (conspiracy), grab their emails, and prosecute for fraud. (They were, essentially, all engaged in some fraud or another, though I don’t have time to go into that in this piece).

As an additional slice, all their remaining assets would have been seized as proceeds of crime, and they would have had to rely on public defenders.

This is what happens if you just follow the laws and regulations on the books. No special action is needed. None. Except to ensure laws are actually followed, I guess. That it requires special action for rich people to be subject to the law, is, however, part of the point.

So, we have a shitty economy now because we did not get rid of the people making terrible decisions who caused the financial collapse. We have a shitty economy because of the bailouts.

I went into personal decline in 2009 because I recognized that a watershed opportunity had been missed. It was our last chance to get off the train to Hell, really. Oh, we’ll get off that train one day, but we’ll already be in Hell.

The bailouts caused this shitty economy.

Much of what happened was a case of Obama’s decision making, either through action or inaction. TARP passed because he pushed it, for example. Bankers were not properly prosecuted because his DOJ chose not to do so. Many consider the actions of the Fed beyond his purview, but they are wrong.

The full argument is in my pieces “What Can Obama Really Do?” written in 2010, and “Could Obama Have Fixed the Economy?” written in 2014, though I also wrote an absurd number of pieces at Firedoglake on specific policy in real-time. I know for a fact that those articles reached the White House (though I don’t know if Obama ever read them). I know they were included in Dodd’s briefings.

Many other people were writing good proposals at the time as well. People more famous than I. The ideas were available.

So, I once said I don’t hate Clinton. I don’t hate Obama any more, but I did for a long time. He had a historic opportunity to be the next FDR. He deliberately chose not to be, and to instead help and defend the people who caused the financial crisis.

Obama triumphalists who go on about what a great president he is are either misinformed or cockroaches. The true cost of anything is the opportunity cost, and Obama’s opportunity cost is beyond large. Everything he could have done, and did not even try to do.

This is a bad economy, in terms of the numbers that matter to ordinary people. Less have work, and those who do make less money. It is about to get worse. Obama, and yes, Bernanke at the Fed, and Tim Geithner, and various other central bankers and politicians (including, yes, Bush), are responsible for how bad this economy is.

I will add that the most logical, good stimulus, would have been a massive energy project, in which America’s buildings were all retrofitted to be at least energy neutral. It would have directly put to work the people who needed that work, it could not be offshored, with some fairly simple policy, it could have created a solar manufacturing industry in America, and so on.

This means that some of the losses of climate change will also be Obama’s responsibility. Opportunity cost, again.

Enough.

The Obama presidency will go down as a huge failure to historians looking back in even 20 years. The larger point is this: Capitalism does have some virtues, and one of them is wiping out people who are doing the wrong thing. That doesn’t mean that “all bailouts” were a bad idea, but bailouts of the people who caused the crisis (bankers, shadow bankers) were. The primary bailouts caused the lousy economy.

There will be another crisis. Learn the lesson of the last one. If we don’t, well, crises will continue until we do.


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And This Is Why You Don’t Screw Up Post-USSR Russia

2016 January 31
by Ian Welsh

Sigh.

These days most Russians regard the loss of the USSR as a negative event. A poll conducted this month by the independent Levada Center found that 63 percent see the collapse “negatively” while just 14 percent think it was a “positive” event. Asked which type of political system they would prefer to live under, 13 percent named “Western democracy,” 23 percent said the present Russian setup was best, while 37 percent said the Soviet system would be most desirable.

As the article itself says, the USSR was a superpower, it produced consumer goods Russia does not (produced, not bought from other countries) and it claimed to seek to create a better world.

This wasn’t necessary. But we, the West, deliberately chose to wreck Russia through shock therapy: We sold everything off as fast as we could, dismantled industries, allowed oligarchs to rise, and generally plundered the country. Russian mortality actually exceeded births, the average age of death dropped, and so on.

It was a terrible time.

The joke back then, was, “Everything the Communists told us about Communism was a lie. Unfortunately everything they told us about Capitalism was true.”

Sigh.

The stage is now set for a new ideology, claiming to fix the failures of Communism, but keeping its ideals.

This was easily enough avoided; we could have eased them in the way we did Poland, for example, and ensured that they thought Capitalism was ace. If we’d given them European social democracy, by now they’d be asking to join the EU (because any elites competent enough to follow this policy wouldn’t have borked the EU the way the last 20 years of EU bureaucrats and European officials have.)

Geopolitically, this would have left China isolated, ensured American dominance for a few more decades, and so on.

A world that never was to be, but could have been, had we not been run by neo-liberal ideologues and carpetbaggers.


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Police Now Steal More than Burglars

2016 January 30
by Ian Welsh

According to Harpers, in 2014 police seized more assets than burglars stole.

From Harpers Police Seizures

This is trickle-down kleptocracy in action. America is ruled by thieves, con artists, and corrupt officials (even if much of what they do is legal).

Police can generally seize any asset they say they think might have been used in a crime. They do not need a warrant, approval from a judge, or anything else. To get that property back, you must take them to court. In most cases, it isn’t worth it. This is one reason a lot of people in corrupt areas (or who have darker skin) don’t carry large amounts of cash.  It’s not the criminals one needs to worry about, it’s the cops.

But they can take anything, including your car, boat, and even home.

This is punishment without trial, and it is dead routine.

Welcome to your dystopia.


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Important Doesn’t Mean What You Think It Does: Corbyn Trident Missile Edition

2016 January 29

So, off in Britain, Jeremy Corbyn, the new Labour leader, has been against the Trident nuclear missile system: He wants to scrap it.

The hysteria over this has been epic–from the Press, from within his own party, and from the Conservative Party.

His opposition has been characterized as wildly irresponsible, but someone finally polled the issue: 49 percent agree with Corbyn, scrap the missiles. 51 percent disagree.

This is a statistical dead heat.

So, something which half the population supports is somehow massively opposed by the elites and the press.

I mean, issues over which the population is split down the middle can be controversial, but I see no indication that Trident is an important issue to ordinary Britons, compared to, say the NHS, austerity, the EU, or immigration.

As for Trident and its merits, upon investigation, I have come to Corbyn’s position (which I did not support originally).  Trident is not a fully-independent deterrent. The missiles are made by the US, maintained by the US and supplied from the same pool the US uses. While Trident may be “operationally independent,” the US could pull the plug on the program any time it wanted.

Trident is a deterrent as long as the UK is on good terms with the US. But, if it’s on good terms with the US, it has the US umbrella anyway.

Trident is only useful if you think the US might not retaliate for a nuclear attack on the UK (yeah, right, unless there’s been a HUGE falling out, in which case Trident is gone), or if the UK wants to nuke something itself that the US doesn’t want to nuke.

This is worth paying for? A small, first-strike nuclear capacity?

But the larger point is simpler: It’s not a very important issue to most Britons, and it’s not something about which the polls are skewed. So why is the establishment so hysterical about it?


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Paul Krugman Against Bernie Sanders

2016 January 28

So, Paul Krugman has a column in which he says he thinks Clinton has better policy proposals than Sanders:

As far as I can tell, every serious progressive policy expert on either health care or financial reform who has weighed in on the primary seems to lean Hillary. (emphasis mine)

Ah.  Serious.

Ok, Paul. Let’s bring up some history, Paul.

You supported Bernanke, strongly. Not just in his appointment as Federal Reserve Chairman, but during his tenure–during which he refused to do anything about the housing or financial bubbles.

Bernanke, for those who don’t know, was the man who plucked Krugman out of MIT and moved him to Princeton, where Krugman was a star. MIT had a lot of very brilliant economists, Princeton had very few.

Then, let us return to that word “serious.” For years, the word “serious” has been used to freeze out outsiders. “Serious” foreign policy experts are the most pernicious: They were virtually unanimous in their support for the Iraq war, for example.

We know how that went.

“Serious” almost always means you are part of the establishment.

Because of this, the “serious policy experts” are almost all wrong. Take Obamacare (ACA). It’s done some good, but a lot of problems have resulted in which people can’t use it because the deductibles are too high.

The serious people (like Krugman) who supported the ACA somehow didn’t predict this.

The un-serious people who opposed the ACA did predict it.

Serious.

Meanwhile, Krugman links to Paul Starr of Politico (Politico, ok), who attacks Bernie’s “Medicare for All” policy.

Starr’sattack has three prongs:

  1. Bernie’s not viable in a general election because he is a “socialist” and Americans will never vote for that because they say they don’t like the word. Might be true, but head-to-head polls show Bernie doing just fine.
  2. Medicare-for-All can’t be passed, because it would involve a large tax increase.
  3. Medicare- for-All is a bad idea because it is inefficient and pays only 80 percent of costs.

It’s a bad sign when you’re misleading your readers. Here’s what Aetna has to say about Medical Cost Ratios:

In general, the minimum percentage of premium health plans must spend on health care is 85 percent for large groups and 80 percent for small groups and individual policyholders.

So, at most, a 5 percent difference.

Starr also suggests that Medicare is less efficient. This is untrue. In fact, Medicare spends about 2 percent on administrative costs. Private health care plans spend about 17 percent.

So, Medicare is more efficient and its ratio is only slightly less than the private ratio. If the US switched to a Medicare-for-All system, it would be simple enough to go to 85 percent and would still cost less.

The international experience for single payer is that it costs about two-thirds what US healthcare costs.

Even in a non-single payer system, Medicare has kept costs down better than private insurance:

Ok. So, Medicare-for-All would cost the Americans less than private insurance + ACA has. To try and deny this is like saying the sun doesn’t rise in the morning. It’s not not just wrong, it’s not just a lie, it is delusional.

Would taxes have to be raised?

Absolutely. But since Americans pay, y’know, premiums, if the tax raises were distributed properly (a.k.a. if corporations paid their fair share), most people would have more take-home money in the end, or corporations would be paying less for insurance. There have been cases of corporations going to Canada just to avoid having to provide medical insurance.

That leads to the feasibility argument. Can Medicare-for-All be passed? Probably not. But it won’t be passed if the President doesn’t try, that I guarantee.

It can be sold, however; Medicare is popular. And it is popular with the Republican base, I might add.

Starr’s argument really comes down to obfuscation (that’s the polite word) and, “It’s not likely to pass so we shouldn’t try.”

Sanders has been a member of Congress for a long time. If he can’t get what he wants, he’ll negotiate–that’s how it works. And he’ll get more because he’s starting from a stronger position.

Meanwhile Clinton won’t even try.

As for financial reform, it is hard to even. Sander’s position is “break up the too-big-to-fail banks” and “restore Glass-Steagall.” That includes breaking up the too-big-to-fail shadow banks. The Clinton position is that shadow banks should be regulated, but not broken up or subject to Glass-Steagall. Her position is the weaker position, and arguments otherwise are obfuscation, at best. Krugman obfuscates this in his actual post, suggesting that Sanders doesn’t think shadow banks are too big to fail.

Krugman appears to have become so much a creature of the status-quo and New York elites he isn’t worth more than a casual dismissal.

I feel bad about Krugman. I remember when he was essentially the only national columnist willing to take on George W Bush.

But one can, I suppose, only expect so much from a man who spent his life at MIT, then Princeton, then writing for the New York Times. I had hoped Krugman would be an exception.

So, Paul:

Or it could be because they are, one and all, corrupt corporate lackeys. I report, you decide.

If it barks like a dog.

I was right about Iraq. I was ahead of the “serious financial experts” on the housing boom and financial crisis. I predicted correctly that the economy would never recover for most people after 2008. I said the next crisis would start in China. I said that America was ripe for a man-on-horseback many years ago (presaging Trump.)

I’m not a “serious” analyst in the way people like Krugman mean it, because I’m a nobody.

Not a member of the club.

But regarding financial reform, I say Sanders is better than Hilary. And regarding health care reform, well, judge for yourself if Sanders proposal is impossible, but it is better policy as policy.

Paul Krugman. Well, he did have one extended period of bravery when it mattered greatly. For someone who is a member of the establishment, that is remarkable. I will remember it, honor its memory, and not be too harsh on him.  Given the world he lives in, his beliefs are not surprising.

I had hoped he would prove to be more than a creature of his circumstances, that he could sustain his bravery and insight, but it was an unreasonable and unfair expectation.

Goodnight Paul. Thank you for standing up when you did.


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Did the Industrial Revolution Require Land Clearances, Slavery, Genocide, and Empire?

2016 January 27
by Ian Welsh

The Leninist argument is that imperialism, industrialization, and capitalism were intertwined. It did not make sense to discuss capitalism or industrialization without discussing Empire, and all its crimes. It is also the common argument that land clearances, in which commons rights were taken away from peasants and serfs, often by law and force, were required to create the industrial workforce.

This is because the early industrial workforce was a terrible place to work and live–and the phenomenon is not temporary, by most measures. It was true for between a hundred and a hundred and fifty years. Maybe longer. You worked longer (six and a half days a week, 12 hours a day was common in certain periods), you lived in urban filth, ate less, were sick more, grew to lower height if born into this, and died younger.

So, clearance was bad for the people who were cleared. I trust I don’t have to explain why European Imperialism was bad for most everyone else. Granted, European Imperialism predates the Industrial Revolution (but not the commercial, wind, and water revolutions), but it goes into overdrive during the Industrial period, and the gains of previous periods are definitely used to support the Industrial Revolution.

There are two questions to answer with regards to the clearance issue. First, whether or not clearances were necessary for the agricultural revolution to occur. With no agricultural revolution, there’s not enough food for expanding city populations.

The orthodox answer to this question is, “No.” But recently, a scholar, Robert C. Allan, went through the agricultural records and compared enclosed field to non-enclosed field production. Common fields were usually somewhat less productive than enclosed fields, but their gains increased almost as fast as enclosed fields did, and were even higher for certain crops (for instance, as with nitrogen fixers, like clover).

In other words, no, the agricultural revolution was not predicated on field enclosure–it just would have happened slightly slower in a non-field-enclosure scenario.

The second question concerns wages for workers, and is trickier. Allan argues that the Industrial Revolution happened in England for a simple reason: The coal was right there and could easily be shipped to factories. Shipping coal was hellishly expensive, and early steam engines were massively inefficient. Industrialization didn’t start in, say, Paris, because it lacked the resources. In Paris, it was cheaper to use more labor rather than to use coal.

Field enclosures made labor cheap in England. Without them, there are a lot less desperate workers, and a lot less desperate workers means higher wages and better treatment of workers (no one’s leaving the peasant village to go work 78 hour work weeks). Higher wages could make steam-driven factories unprofitable. No profit = no revolution.

This is an empirical question, and I don’t see the data to indicate the answer one way or the other. The theoretical point of view is this: Land clearances forced the cost of labor down. The higher wages are, the more you want to use capital (like equipment), not workers. In such a case, again, the Industrial Revolution happens, but it happens closer to Newcastle to keep the cost of coal down, and it is slow to gain traction due to profitability concerns. Once stabilized, however, the incentives for increasing machine efficiency of the machines faster could quite possibly have accelerated the Industrial Revolution faster than how it actually played out. Hard to say, but the argument is sound.

Now, for Empire.

With a very few exceptions, the main one being the USSR, every country which has industrialized, including Britain and the US, has done so with mercantalist policies, that is, behind trade barriers of some sort or another. They become free traders when their industry is well-established, not before.

Mercantalism does not require imperialism, but imperialism can augment mercantilism. When the British invaded India, India had more factories than England. Soon, they didn’t. India was a vast market for British manufacturing and provided raw materials.

The South in the US provided much of the cotton, through slave labor, as did Egypt and various other places which were conquered or absorbed through imperialism. (While the US South was, no, not under British control during this period, the Native Americans were cleared from it by European imperialism and disease and the slaves were brought over on European ships.)

Imperialism provides two things: Markets and cheap supplies for the factories. Even the Chinese opium/tea trade is related. Tea reduces appetites and enables people to work longer, and the British, even with the agricultural revolution, are somewhat underfed. Minus six half-day weeks, of course, they would not need so much food, but they do. (Ever done hard, manual labor all day? I have. I ate A LOT.)

There is clearly a benefit from Imperialism for industrialization under capitalism.

Could industrialization have happened without forcing open these barriers to British exports and without cheaper commodities like cotton, acquired through slave labor, plantations (which require shoving small farmers off the land), and so on?

What would have happened if we didn’t conquer, pillage, and enslave so many people? What would have happened if we didn’t deliberately retard their economic development? If we didn’t kill so many of them?

Perhaps they would have been more prosperous. Granted, many tribal societies have little use for money, but as the Hudson’s Bay experience shows, if you provide goods they really want, they’ll go out of their way to get what you want in return. And India, despite vast numbers of peasants, had vast mercantile cities and trade long before the British, Portuguese, and so on, arrived.

The commodities wouldn’t be so cheap, and Britain may not have gained so near a monopoly in early industrial manufacturing, but other societies would have also been richer–which means more purchasing power. Richer people can pay more.

The British still would have had that huge advantage: Coal near the manufacturing areas and near the coast. It’s an island. You can get what you manufacture to the sea easily, and you can use coal because the coal is near the sea too (everything is near the sea in England, from the Continental point of view).

This scenario suggests that England would have still industrialized first, and the Industrial Revolution still happens in Britain. Is it’s pace slower? Faster? I suspect slower at first, faster later. But it is more humane, and it leads to a better world.

If China and India had industrialized at a faster, more organic pace than they did; if they had been dragged along closer behind, standards of living would have risen faster. But standard of living is negatively correlated to the number of children.

A world in which all (or at least most) boats rise together, with England in the lead, but not excessively so, is one with a lot less of a population problem and a lot less of a poverty problem.

It may just be that being complete bastards to virtually everyone was not required for industrialization. It may be that we would have lived in a vastly better world.

It may not, of course, but I think the argument for “Being Assholes Wasn’t Actually Necessary” is pretty strong.

And I think it’s fairly important, because it’s at the heart of the whole “Is other people’s suffering required for some people to live the good life?” question.

(This is part 3 of a semi-series.  Read part one on “The Death of Capitalism” and part 2 on “What Capitalism is.”)


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