• Not Capitalism, not Communism

    by  • March 28, 2013 • Everything Else • 6 Comments

    I got an interesting write up on the unemployment / mechanization / income angle from my friend Nathan Koren (he does collaborative futures with Noah Raford at Futurescaper). Nathan’s basic argument is that Ford’s innovation of “make a car your workers can afford” has now been displaced with “race to the bottom” feedback loops in manufacturing, and that only a fairly comprehensive rethinking of how we distribute value can stabilize our social order.

    In the UK we have a long history of struggle over access to land and the value of labour. My own ancestors were cleared from their land in Ayrshire to make room for sheep enclosures, and another very nearly deported to Australia as a Tolpuddle Martyr for labour organizing (the family legend is that he missed the raid by 15 minutes, having left for the pub.)

    There’s an ongoing historical debate about the role of education in the industrial revolution. The common mythology is that the school system we have now (fixed starting times, bells, lockstep production in class rooms) was instituted to condition the children of farm labourers for work in factories. Whether that’s historically true or not, there’s fair evidence that availability of primary education was a bottleneck in industrialization in some countries.

    I think that all of this comes down, in the end, to access-to-capital, including education and know-how. If subsistence agriculturalists have good access to land, and markets where they can sell produce in return for manufactured goods like solar panels, their basic self-sufficiency gives them certain political freedoms. This is the Jeffersonian model. If, on the other hand, their access to capital is contingent because the land is rented / mortgaged, or they are industrial workers working on machines they do not own, in times of hardship or rapid chance, they are left disenfranchised. This is the downside of the Hamiltonian model.

    (A short Alexander Hamilton break)

    (annnnnd we’re back)

    Nearly every challenge faced by today’s developing world was first faced by America.

    The Chinese alternative is the most dangerous. Chairman Mao’s “Combat Liberalism” frames the internal struggle within agrarian communism as being between those with nothing, and nothing to lose, and those who have attained a little comfort and status and want to feather their nests. In the long run, of course, Liberalism won and China is left vulnerable to a second revolution of some kind if their growth slows below the current 7%. The stability of society, even under those conditions, is still based on people who have a little something to hang on to, a little something to lose. It’s the small fences built around each back yard that, collectively, form the great walls of cultural stability.
    “You only have power over people so long as you don’t take everything away from them. But when you’ve robbed a man of everything, he’s no longer in your power – he’s free again.” – Solzhenitsyn

    There’s a new round of argument against the Free Culture movement from thinkers like Bruce Sterling and Jaron Lanier that, in fact, the sharing economy is simply disenfranchising the middle classes from the fruits of their labour from their traditional intellectual toil. I’m not sure buy that argument, but certainly a good case can be made for it. Sterling’s argument is that disintermediation and disruption (“creative destruction”) is wiping out value faster than it is creating it (last 5 minutes) leaving us net-poorer. Lanier suggests that the middle classes can’t survive without the ability to create “micro enclosures.”

    Is it simply pumping wealth from the middle classes into a global commons that differentially empowers the poor? Or are we breaking the ladder that gets out of poverty (through the middle class) and turning the world into a Global Brazil, with open source at the bottom, and boutique capitalism at the top?

    We have to find a mode which is not classical capitalism or communism, which is realistic about the global constraints and risks we face, that has the authority to effectively police nanobio while, at the same time, not being prey to cultural whims and excesses, from beard taxes to the war on drugs.

    Oddly, I’m not pessimistic about our odds of getting there. An entire generation is growing up with always-on networks, and the concept of “I don’t know” is rapidly becoming history, replaced by “let’s look it up.” We have to have faith that the generation coming, with such incredibly different experiences growing up, will be capable of finding a perspective which will maintain our core values, stabilize the damaging discontinuities, and keep the ship afloat.

    We have another shot at the big picture today. The dual dividends of fracking, and the very real prospect of a second “peace dividend” as we recover from the huge costs of the wars now ending, plus the all-important re-opening of the skies as the private space flight industry repaints people’s ideas about the future (“one day I could go to orbit and see the stars, and the earth!” is becoming real for entire generations) – together these things give us a shot at another 1990s-style round of optimism, openness, and technological expansion.

    If there are answers, they are in the future. We have to get there as fast as possible.

    PS: PROUTist cooperatives.

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    Vinay Gupta is a consultant on disaster relief and risk management.


    6 Responses to Not Capitalism, not Communism

    1. Jon Husband
      March 28, 2013 at 4:10 pm

      We have to find a mode which is not classical capitalism or communism, which is realistic about the global constraints and risks we face, that has the authority to effectively police nanobio while, at the same time, not being prey to cultural whims and excesses, from beard taxes to the war on drugs.

      This !

    2. Gaz Hughes
      March 29, 2013 at 9:45 am

      Nathan’s note makes perfect sense. National Dividend has been around for a while, I think we’re finally getting to a point where it’s viable – bring on the post-consumerist society!

    3. March 29, 2013 at 7:38 pm

      What Jon Husband said!

      Regarding the shape of education, I read a different theory back at Uni: we are carrying a legacy of an education system designed to prepare specific people for specific jobs, but it’s not industrial or agrarian, it’s aristocratic.

      The general form of certainly Anglo-Saxon education systems, reflected to greater or lesser extents in other places, is the legacy of a school system largely created and propagated by Dr. Arnold of Rugby in the late eighteenth century. The task of the public schools in society at that time, and there weren’t many, was very simple and clear. Prepare the sons of the gentry and the aristocracy for lives in three careers; civil service, military service or the priesthood.

      The stratification primarily by age, the violence, the strict anti-autonomy, the emphasis on rote recall of culturally significant data (memorise all the Presidents in order! etc.) and classical / literary quotations, the appointment of pupils in direct authority over others (prefects were effectively the non-commissioned officer rank relative to the Masters / Officers) and so on.

      We’ve made some progress in the modern era, but basically, our school system is designed for educating rich boys to become soldiers or bureaucrats, in an era when lectures were a realistic way of distributing data and the best available bandwidth in society was a guy on a horse with a big sack.

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    5. John Parr
      April 25, 2013 at 3:36 pm

      The purpose of an economy is to provide the means of consumption, that is, production, to every individual in the economy concerned.

      Now the productive part of our economy- factories, farms, transport, and so forth- is working just fine. It could easily produce all that we need with comparatively little of the labor that is available, freeing individuals from the drudgery of production towards something better.

      The problem lies in the distributive side- that is, getting those goods to the individuals concerned. The way we do this is with money and prices. The way we have it set up, though, is faulty.

      A business that produces goods of any sort can be regarded, along with its role in producing real goods, as also a manufactory of prices and a distributor of income. Going into the accounting books of any business, excepting ones that are headed for bankruptcy, one can easily see that the costs- and thus prices – created by businesses are higher than the incomes it simultaneously distributes. There is, in short, a “Gap” between income and prices. The gap widens with every increase in automation, as less workers are required- and therefore, less income is being distributed- and as capital creates its own cost without necessarily distributing income. (E.g., a machine may cost thousands of dollars, replacing the wage cost of several workers, but still has the cost of the loan that bought it to be paid off, along with maintenance charges and occasional replacement. Prices may go down, but income goes down much more.)

      So the problem is not an inequitable distribution of income- it is a shortage of it. No confiscatory scheme of guaranteeing an income that does not create new money will ever solve this problem (and may indeed make it worse).

      The solution, then, is to make income equal to prices. There are two general ways to do this. The first is to reduce prices until they equal income, a method of which would involve declaring a universal discount on all final consumable goods, and reimbursing the retailers for the cost incurred by that discount. That way, the consumer can buy more goods, and businesses have increased demand without any effect on their costing.

      The second method is a direct and equal distribution of income to all individuals in the economy concerned- every citizen of a nation, perhaps, or something similar. The Gap is measured, and then money is newly created and distributed to all individuals until income has been made to match prices. (It seems that currently, this figure might be around 500$/month for the U.S.) These two methods could be mixed; so long as they have the effect of distributing all real wealth to all consumers who desire it, it does not matter.

      The term “creating money” has been rather abused. Currently, except in a very few negligible cases, money is created whenever a bank grants a loan or buys a security. However, the bank claims a lien on this money, and eventually, as the banker decides, the money must be paid back. Thus all money has got a corresponding debt with it. The money, when paid back to the bank, or used in purchasing a security from a bank, is destroyed.

      The process of creating money mentioned here is just that- creating it, without debt. I would imagine a department of the government tasked with this responsibility, along with measuring the Gap and distributing the money. The department would have to made to not be susceptible to the capricious wiles of politics, like the BLS.

      I could spend a lot of writing in imagining the beneficial effects this would have, but I’ll try to limit it.

      As productive processes became more efficient and created new forms of wealth, the actual wealth of the nation would increase, instead of the opposite, where the unemployed have lost wealth, and must seek more jobs to compensate (the jobs often being make-work or increasingly useless or inefficient jobs).

      If it only took 10% of our national labor to produce 100% of all the goods we wanted, then 100% of the people would be able to have 100% of the goods with no debt, instead of only 10% of the people having a fraction of all goods.

      Income from labor would be a reward for helping produce the things that the community demanded, instead of being the sole means of survival. I have a feeling that people, having a basic income security, would tend away from jobs that they had no desire to be in aside from the income, and employ themselves more fully and more usefully in the things they really wanted to do. Simultaneously, with consumers having the effective demand to buy ALL goods, the businesses that survive and thrive would tend to be those that provided quality goods with the least cost in human labor, instead of merely providing the cheapest with the least cost in money.

      The general theory under which all this comes is “Social Credit.” It was a rather large movement in the English-speaking world in the 1920’s-1940’s. It may be the solution the world’s been looking for.

    6. John Parr
      April 25, 2013 at 7:10 pm

      I should clarify a couple points.

      Money /is/ created by central banks in the case of quantitative easing. This money, however, never reaches the producing and consuming sections of the economy, but merely acts as reserves for the commercial banks, which then /may or may not/ lend out further money as debt. It does not fix the current means of financing production; it only allows the current system to merrily continue on its destructive way.

      Secondly, I should clarify by what means price rises above income. Conventional thinking is that every dollar in price has got its matching dollar in income somewhere out there, using vague and incorrect appeals to the “circulation of money” to justify that belief.

      There are five main reasons.

      1. Interest. The money to pay for interest on loans is never issued, except on condition of further borrowing (at interest).

      2. Savings. Abstention by consumers from buying goods, instead perhaps using it to pay off loans or simply sticking it under the mattress, automatically reduces effective income such that all prices are not met by all income. Similarly, the charging into prices of profit for reserve by businesses means that a business is asking for more money from the economy than it has paid out. If all businesses are doing this (as most businesses undoubtedly are) there is formed a large discrepancy between total income and total prices.

      3. The creation of a cost without a simultaneous creation of money. Every income paid out creates a cost which is charged into prices. If this income is saved by the consumer instead of being used to liquidate a cost through price, and is used to make a business, this business, too, will pay out money. But now, there are two costs, the cost from the income paid out to the consumer and the cost made by the consumer-now-businessman by using his saved money. However, there is only distributed in income an amount sufficient to liquidate only one of these costs. Thus a fresh cost has been created without an accompanying fresh creation of income.

      4. Difference of circuit velocity between price creation and cost liquidation.
      This can be best explained here, starting at line 4470.

      5. Deflation. That is, banks calling in loans and selling securities. If this policy is actively pursued, businesses start to fail left and right because the scramble to get money to pay the loan jacks the prices of consumable goods up and shrinks the prices of capital goods. Selling securities does much the same to reduce the value of capital assets and can make or break a company.

      I think that’s all I can really say at this point. I am no expert but I’d like to see how an expert considers it, once they understand it.

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