Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Category: Economics Page 44 of 91

Like Manhattan? If You Don’t Live There Now, You Never Will

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On February 10, 2016

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This is what happens to places where the rich want to live, under an oligarchy:

Inflation Adjusted Manhattan Real Estate Prices

Inflation Adjusted Manhattan Real Estate Prices

Yee-ha!

Yeah.  I dunno.  I could write a bunch of stuff, but the chart kind of speaks for itself, doesn’t it?

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More recent, but also striking, is this chart, on commute distance in San Francisco:

San Francisco Commute Dstance

San Francisco Commute Distance

This, by the way, is why the idea that countries like the US and the core European countries can’t tax people is bullshit.

There just aren’t that many cities rich people want to live in, and for Western elites, they are essentially all in Western Europe or the US (maybe Canada, in a pinch). They want to live in your country, or do business there? Then you can tax them. This is especially true of the US, Britain (London), and France (Paris, south of France).

As for the peons, let them live in Detroit. Or Flint, wherever Flint is, in the scabrous country beyond where people who matter live.

 

What Sort of Person Does Evil or Stands by While Evil Is Done?

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On February 8, 2016

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Last month, the media reported on a young man who refused to stand by while a classmate was having an asthma attack and was suspended as a result:

Anthony Ruelas watched for what seemed like an eternity as his classmate wheezed and gagged in a desperate struggle to breathe.

The girl told classmates that she was having an asthma attack, but her teacher refused to let anyone leave the classroom, according to NBC affiliate KCEN. Instead, the teacher emailed the school nurse and waited for a reply, telling students to stay calm and remain in their seats.

When the student having the asthma attack fell out of her chair several minutes later, Ruelas decided he couldn’t take it anymore and took action.

“We ain’t got time to wait for no email from the nurse,” a teacher’s report quotes him as saying, according to Fox News Latino.

And with that, the 15-year-old Gateway Middle School student carried his stricken classmate to the nurse’s office, violating his teacher’s orders.

What sort of person is Ruelas?

Mandy Cortes, Ruelas’s mother, told KCEN that she assumed her son–who has been suspended in the past–was to blame when the school informed her that he had been suspended again.

… “He may not follow instructions all the time, but he does have a great heart,” she said, noting that she was now considering home-schooling him.

The boy is, in other words, a troublemaker with authority issues. Thank goodness, eh?

I imagine most readers are familiar with the Milgram experiment, where university students were told to shock people by authority figures and most did so.

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I’ve always been curious what the people who refused were like, but oddly, that research did not appear to have been done.

Until now (h/t S. Brennan).

A new Milgram-like experiment published this month in the Journal of Personality has taken this idea to the next step by trying to understand which kinds of people are more or less willing to obey these kinds of orders. What researchers discovered was surprising: Those who are described as “agreeable, conscientious personalities” are more likely to follow orders and deliver electric shocks that they believe can harm innocent people, while “more contrarian, less agreeable personalities” are more likely to refuse to hurt others.

“The irony is that a personality disposition normally seen as antisocial—disagreeableness—may actually be linked to ‘pro-social’ behavior,'” writes Psychology Today‘s Kenneth Worthy. “This connection seems to arise from a willingness to sacrifice one’s popularity a bit to act in a moral and just way toward other people, animals, or the environment at large. Popularity, in the end, may be more a sign of social graces and perhaps a desire to fit in than any kind of moral superiority.”

…The study also found that people holding left-wing political views were less willing to hurt others. One particular group held steady and refused destructive orders: “women who had previously participated in rebellious political activism such as strikes or occupying a factory.”

Most people who are popular and too agreeable do not have strong red lines. Their morality is set by authority figures and peer groups. Whatever seems okay with the people around them is okay with them.

I wrote about this in the past in my post on the Decline and Fall of Post-War Liberalism. One key part of breaking an essentially egalitarian economic order was finding and destroying the people who wouldn’t go along to get along, the people who would fight.

Graph of incarceration in the US over time

From Wikipedia

This was done by creating a set of bullshit laws: Drug laws. Consensual activity which harmed no one (especially in the case of marijuana) was made illegal.

The sort of people who wouldn’t obey rules, laws, or orders that didn’t make sense to them disobeyed those laws and went to prison in droves, where they were destroyed politically, economically, and personally. The vast majority had committed no violence.

The gut was ripped out of America’s working and lower class troublemakers.

Since then, our method of child-raising has become one of high-surveillance. “Helicopter parenting” means children rarely spend time doing anything not approved of by parents or other authority figures. Police patrol schools. Children have cell phones, allowing their parents to check on them any time they want. Houses increasingly have internal surveillance systems to keep track of children.

People who are under constant supervision with little time to be alone or to be with friends without authority supervision tend to become “go along to get along” people, unused to thinking for themselves, and used to jumping through hoops for the approval of authority. Their entire lives have been about doing so, after all.

This is especially true of our elites, and while it’s usually been truer of them than the lower orders, it has become even more so than it was in the past. You could get into an Ivy league school in the past based on pure genius and talent; today you need excellent grades, an extra-curricular record which precludes alone time, and an essay which hits all the proper, authority-pleasing conformist points.

Society does not work for everyone when it becomes authoritarian and conformist. People are what they do, to a remarkable degree. We already had a system designed to create conformity (school is nothing but a conformity producing machine: sit down, speak only when called on, and do what you are told to do in exchange for adult approval and a decent future). The system we have now is even more designed to produce people who won’t stand up when asked, frankly, to be Nazis. Or torturers (an activity of which most Americans approve).

The troublemakers are the guarantors of your freedom and prosperity. When they are are broken, both will soon follow.

They were broken. Both followed.

The American Death Wish

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On February 6, 2016

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I wrote this article January 19th, 2009. Obama had just been inaugurated, we knew who his economic team would be, his Chief of Staff (Rahm Emmanuel), and we knew the basics of the stimulus package. 

I knew, then, that the last opportunity for America to avoid catastrophe, as opposed to mere disaster, had passed, and so I wrote this article. It has held up well, and the predicted decline in standards of living is well underway–sooner and faster than even I expected. 

Enjoy.

I’ve been struggling with how to write this post for quite some time. It’s the conversation you have to have with a friend, where you have to say something like: “It’s nice that you’re trying as hard as you can George. I even believe you are, but it doesn’t matter. Because, George, your best just isn’t good enough.”

Or, as Captain Jack Sparrow would put it, all that matters is what a man can do, and what a man can’t do.

Sometimes the world doesn’t grade us on a curve. You need to jump a fence, and you can’t. You need to climb a rock face, and you aren’t good enough. You’re running away from a bear, and you don’t run fast enough. And now you’re dead. You wanted to get into a good grad school, but you don’t have the grades or test scores. You’re in a fight, and the other guy wins, and you wind up on the ground, and he puts the boots to you, and you’re crippled for life. You tried “your best,” but you lost and you’re going to pay the price for losing for the rest of your life. Maybe you lost because he fought dirty, and you’d rather take the chance of being crippled for life than kick someone in the balls. Maybe you lost because he trained harder than you, while you were out drinking with your friends.Or maybe you needed to pay for health care, and you didn’t have the money, and someone you loved died. And they died because you didn’t have the money–because your country didn’t have universal health care. And maybe you always worked as hard as you could, and you campaigned for health care with all your heart. It doesn’t matter, your child, your wife, your husband—they’re still dead. Your best wasn’t good enough.

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Now this is where America is. This is the real world. The United States in aggregate has been living beyond its means for over 30 years now. You have been shipping the real economy overseas. Ordinary families have been going in debt. The government has been going in debt. You’ve been voting yourself lower taxes and not paying for infrastructure reinvestment, or education, or anything else that matters, really. You’ve been spending too much money on guns, not enough on butter. You’ve been pushing the bill off into the future.

And whenever I write about what needs to be done to fix this, about simple things like universal healthcare, which we know for a fact reduces health care costs by 1/3, because it has worked for every single other country that’s ever done it, people come out of the woodwork and they tell me that’s not “politically feasible.” Or perhaps I suggest a 55 mile an hour speed limit, “That’s not feasible.” Or I might suggest spending significantly less on the military, as half the world’s military spending is a bit overboard. “That’s not politically feasible.” Or raising taxes, “That’s not feasible.” Or…but why go on, the list is endless.

Then Obama comes out with a stimulus bill which simply will not do the job. It is not big enough. It is not adequately well-constructed. It has no vision. It won’t work. This isn’t really in question: Even their own report(pdf), which has its thumb heavily on the scale, shows it won’t work if you take the time to look at the job charts.

A lot of people think this is some academic debate that doesn’t matter in the real word, like, “How many angels can dance on the head of a pin?” It’s not, it’s deadly practical. The US is in severe decline. It is past the point where any other country would have flamed out and had an economic collapse (Argentina collapsed with better numbers than the US has now, for example). But, because of America’s privileged position in the world, it’s been able to stagger on.

Now, folks can say, “Ian those things aren’t necessary, I think the following steps will fix it” and that’s fine. I could be wrong. Obviously I don’t think so, or I wouldn’t write what I write, but, hey, plenty of people have been dead certain they were right, and were dead wrong.

But what gets me is that so often what I hear is this refrain: “That isn’t politically feasible. We can’t do that.” Now, when they says “can’t,” they don’t mean, “Those things are impossible” or, “We don’t have the means,” what they really mean is, “We won’t do them, because they would be hard or they’re outside our ideological comfort zone.”

Fair enough. But if those things are necessary, and if you don’t do them, then the consequence is going to be catastrophe. I don’t mean disaster. New Orleans was a disaster, and it wasn’t enough to wake America up. The current financial crisis was a disaster, and so far it’s looking like it wasn’t enough to convince people that real, fundamental changes are needed.

So because no one will do what is necessary, catastrophe will happen. What I mean by this is a severe decline in the US standard of living, probably between 20 percent to 40 percent, starting in 4 to 6 years and taking place for a decade. It might happen sooner if folks keep refusing to do what needs to be done to fix the financial crisis and stop it from turning into a worldwide Great Depression. Even before that happens, you’re going to see real wages declining for Americans while their assets collapse in price.

To see what a precipitous decline in standard of living is like, read up on Russia’s history in the 90’s. A lot of people will die of starvation, cold, heat, lack of medical help, and from violence.

That’s just the way it’s going to be. Because while there are no problems that America has that America can’t fix, it also appears that there are no problems America has that America is willing to fix properly. And it doesn’t matter why. It just doesn’t matter, just as the bear doesn’t care why you couldn’t run fast enough when it mauls you to death. When the economy finally goes into full bore collapse, when all the bills come due and everyone decides to stop paying Americans to consume, it won’t matter why Americans thought they could suspend the economic laws of gravity forever and live beyond their means for decades.

It just won’t matter. You can do what it takes to fix the problems or you can’t. If it’s true that you can’t, then I quite seriously, sadly, and with utmost sincerity, suggest that you either start learning how to survive in a societal meltdown, or you get out, or you hope that your number comes up in the next few years so you don’t have to pay the bill that comes due when people think they can live in fantasy land, on credit, forever.

America elected Barack Obama. He’ll have, essentially, two chances to fix things. He’s failing the first one already, with his botched stimulus bill and that’s going to be disastrous. If he fails the second one, that’ll be catastrophe.

So I sure hope that, yes, America can.

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Problems with Economics: The Cult of Utility

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On February 5, 2016

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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.

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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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Failure Is the Precondition for Fascism

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On February 3, 2016

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Nuremburg

Nuremburg

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.

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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.

The Bailouts Caused the Shitty Economy, Part 2

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On February 1, 2016

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

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On January 27, 2016

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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.

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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” part 2 on “What Capitalism is and part 4 on  “How The Rational Irrationality of Capitalism Is Destroying the World”.)

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What Is Capitalism?

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On January 26, 2016

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The responses to my article The Death of Capitalism made something clear:

Most people don’t know what Capitalism is.

We’ll need two definitions.

Market: An economic arrangement in which price signals direct people’s actions.

Markets are old. There were markets in Sumeria thousands of years ago. Nonetheless, Sumerian society was not Capitalist. Most people were farmers, living on the land. They produced their own housing, their own food, and their own clothes. They bought some goods on the market, sold grain on the market (there was a very active market in loans denominated in grain or silver), but most of their needs were met through non-market methods.

Some people in that society (arguably) had their lives regulated by markets. There were money-lenders, urban inhabitants, merchants and traders, specialists, and so on who used money to buy what they needed. There were other such people who were essentially feudal lackeys; you might be a market scribe working for money, or you might be a palace or temple scribe.

The primary financial markets, by the way, were run out of temples.

But the rule is this: Most people in most agricultural and pre-agricultural societies produced what they needed, generally as part of an extended family, a tribe or some other arrangement. Sumeria was more mercantile than most agricultural societies.

(I am fundraising to determine how much I’ll write this year. If you value my writing, and want more of it, please consider donating.)

Capitalism: An economic system in which people are directed towards particular actions by price signals from markets AND in which they obtain the necessities (and luxuries) of life from markets.

You may measure HOW capitalist a society is by how many people cannot create their own necessities as part of a relatively small group.

Now, let us return to markets. A market says:

  • Do more of what makes more money
  • Do less of what makes less money
  • Stop doing that which is losing money

This is an oversimplification, but it’s less of an oversimplification than it seems. Take Amazon, for example: Amazon did not make a profit for many years.  However, the decision makers at Amazon (Bezos, senior exectives, etc.) made plenty of money from Amazon.

What matters is not whether fictional entities are making money, or even if all human beings are making money, but whether decision makers are making money.

Prices are not set solely by markets, they never have been and they never will be. Governments lean on prices through direct and indirect subsidies, taxes, and so on. Roads are a subsidy for trucking, auto-manufacturing and a host of other businesses, for example.  The US interstate highway system was the death-knell for the hugely powerful railroads that preceded it.

This is true despite the FACT that, if you include all costs, shipping people and (especially) freight by rail is cheaper.  The final price, as it effects the individual decision makers responsible for those individual, economic decisions, is what matters.

Markets are a way of telling people what to do and what not to do and how much of either.

The more money a person makes doing something, the more they try to do of that something (including hiring workers to do it for them).

If a decision maker’s profits are not aligned with social utility, well then, capitalism does not produce results with social utility. Bankers make a lot of money. Their businesses lost so much money the entire world economy could barely contain the damage and trillions of dollars were required to bail them out. So why do bankers keep doing what they were doing? Because they are still, personally, making money.

So what if a few brokerages and banks went out of business? Their executives are still rich.

Capitalism is dis-empowering. Serfs and peasants, for all we sneer at them, could support themselves, because they had access to the land they needed to do so. They spun their own clothes. They raised their own houses.

Peasants and serfs were better off than the industrial workers who replaced them. There is a reason land clearances had to be done by law and force: The peasants and serfs didn’t want to leave. They weren’t stupid, they weren’t fools–they knew they lived better than the people working six and a half days a week, ten to 12 hours a day, in the new factories amidst cities and towns, choking in their own filth before modern sewage was put in place.

Capitalism forces most people to base their decisions on price (salary, comissions, hourly wage vs. goods they buy) levels. It takes away their ability to support themselves without working for someone else.

Capitalism is the concentration of the means of production in the hands of a few people.

This is why it is called Capitalism. Capital is what allows you to make other things. Land can be capital. Machines that make things, even machines as simple as a spinning wheel, are capital. You add labor to capital and you have products.

(It may be, with the rise of the sophisticated automation we call robots, that capital will be able to make capital soon, with little to no human intervention.)

Capitalism removes productive capacity from most people so they can’t support themselves. It orders the behavior of almost everyone through price signals.

Capitalism is a way of making decisions about what people should do, what products should be created, how they should spend their time and so on.

Because Capitalism is one of two major decision making methods in our society, and has been for the most important societies (starting with Britain) for hundreds of years (in varying forms; there are different types of capitalism), it is fair to judge capitalism by the results produced by those societies, especially the economic results.

Capitalism is NOT synonymous with industrialization, but most industrialization (outside the USSR) occurred under capitalism. Capitalism made the decisions about how to industrialize which were not driven by the internal logic of industrialization itself (too big a topic to go into in this article) or by government.

Capitalism fed back into government, however, because pricing matters. That coal was cheaper than solar for most of history (until about last year) mattered. In theory, we could have overridden that decision and said, “At X times the price is worth it and the sooner we make more the sooner the price will drop,” but in practice we did not.

We went with the flow.

Social choices, including those made by government, modify market signals. But when you live in a Capitalist society, you think first about VALUE as PRICE, even though the two are very different. The price of your life can be determined very accurately by life insurance charts (future expected earnings, discounted).

I doubt you consider the insurance market’s valuation of your life as the actual value of your life. If you do? Congratulations! You have splendidly adapted to the mandates of capitalism and markets.

Having read this far, and considered what you have read, next time someone yammers on about capitalism, you will know what they should be talking about. Because most people don’t know what capitalism is, despite living in it, you will also know, perhaps, what they are not talking about.

Capitalism uses markets as the main method to determine human economic behaviour and removes humans’ ability  to support themselves without engaging in the market.

Note the second characteristic listed: Removing humans’ independent means of support. In many cases, this had to be done by force. In others, it was done through blandishments. In both cases, the end result was a reduction in effective power for individuals who do not CONTROL capital–who are not capitalists (ownership is not always control).

To a remarkable extent, people are Skinnerian behavioural machines. Markets are one of the main methods used to condition people, to create their personality, to create them.

To control them.

To control you.

Under Capitalism, virtually everyone is subject to that control and conditioning, on penalty of living a miserable life, or, indeed, of death.

(This is part 2 of a semi-series.  Read part one on “The Death of Capitalism” and part 3 on “Did the Industrial Revolution Require Clearances, Genocide and Imperialism.” and part 4 “How The Rational Irrationality of Capitalism Is Destroying the World”.)

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