Economics, Life ...big summary attempt

A summary of economics...

With Adam Smith came the view that labour was the origins of wealth - not as has been previously thought the physical mass of the commodity gold. This realised that the more people worked the more wealth there was.

Yet labour alone is not enough - a country of Sysyphine workers rolling rocks up mountains is not producing wealth. Labour needs to be mediated by an exchange system that ensures that rewards are produced for that labour which meets demand, and useless labour goes unsupported. This way the energies of labour are evolved en mass to meet the demands of need en mass.

En mass is important because it is through the divison of labour, economies of scale and co-operation that labour is increased, not only through increased working hours. Working hours have increased with industrialisation, but the vast increases in production come more from the efficiency of the system. Reference always to Smith's famous pin factory.

But a problem is also introduced: that of fair wages. In the medieval system wages were set by tradition. Different guilds charged set rates. What changed was the realised in the Classical period was that the market place could get you a higher wage. So wages became open to negotiation. I believe the black plague's decimation of the population was the impulse for discovering this. Workers found that employers were so desperate for labour that they could raise their prices considerably (old Malthusian economics). Division of labour means that labour becomes unspecialised. This means that the available workforce for a job is everyone. The competition drives down wages. Yet the division of labour increases productivity. Who own's this surplus wealth, this profit. Unfortunately this question has never been satisfactorily solved. In default the owner of the capital has earned it - it is their reward, or incentive, for investing in the hardware of the industry. But quite a reward it is! especially when there is little risk (since the hardware can be liquidated) and the wealth that is invested was unlikely to be spent (in the rich). Compare this alleged risk with the risk of employees not finding a job and starving - a risk which carries no returns. The idea of owners being entitled to returns on their investment remains unintuitive and unjustified to my mind.

Capitalism - as this distribution system came to be called - created a division in society between those on the investment side of industry and those on the labour side. The investors gaining huge wealth for little or no labour and little risk, and the labourers receiving little wealth (in comparison) from free-market labour. But wages have been higher under capitalism than they were in the medaeval system - this is how people were often pursuaded to give up their land (they were also forced off the land by law which suggests a less than fair exchange). In the 1980s in UK the climate changed as everyone was encouraged to become capitalists. Capitalists of industry, houses and anything and everything. Risk became spread amongst the masses and with this buffer it became highly expanded and evolved. Now we get to where we are today.

But in this neat convincing picture there are vast and gaping holes. The actual increase in productivity has not been through human labour at all but through machines and the use of fossil fuel. Human energy where once it competed with animal energy (like horse or oxen) now competes with fossil energy in an industrial system. Fossil energy is enormously cheap and extremely flexible. Four times as much energy is fed into the American grain industry than is returned. If this was human labour 3/4 of the population would die of starvation at each harvest. But, it is fossil energy which is so cheap as to make this incredible inefficiency economical. Yet this drives down to extinction the value of human labour in many industries and the results is Unemployment.

Unemployment never existed in the past for if there was no work to do then you were free to amuse yourself. By definition there was enough to eat, because if there wasn't then you had a job to make some! While rents were often paid to invading rulers, the land ultimately belonged to the people. What would an invading people actually want the land itself for! They only wanted a share of the fruits. People thus had access to income at all times and were free to work as they needed.

Famine may have occurred where for some reason labour on the land became unproductive. In this case people would have migrated and competition would have existed in other places. Conceivably people may have accepted slavery in return for food in times of difficulty, or been forced into agreements to return wealth in future times of difficulty. We have the example in the Bible of Egypt storing grain under Joseph (of the technicolour coat) and selling this off at great gain. Such famines only occurred when massive agricultural failures occurred - and note even in ancient antiquity a system of distribution occurred to avoid mass starvation. Outside famines labour was utilitarian. The common sense rules prevailed that excessive consumption would create more work, and exploit resources, and ultimately lead to poverty. Conversely that saving would make what you had go further. It was a system in harmony with the Laws of nature.

In an enforced exchange system however it is famine every day. To get food you are enslaved to an owner of capital because you yourself have nothing to work upon. You cannot decide when to work because you must first pursuade an owner to allow you to work. Quite contrary to the view that capitalism encourages labour, actually it puts up blocks to labour. If you cannot find work then you starve.

In theory you do a Joseph and save while there is labour so you have cash to exchange when labour dries up - voluntarily or involuntary (this is what I am doing). In naive theory the total goods produced should equal the total cash savings - so when all the cash is spent so are all the goods bought and jobs are thus created.

This equation doesn't work however. People can earn a lot more than they will ever consume, and they can consume a lot more than they will ever produce. Both valid solutions to the exchange model. Consider someone who inherits a sum of money and lives off the interest for their life. They have actually contributed no goods to the system at all, yet have somehow gained the right to consume goods. Someone else has thus produced goods that they will never have the right to consume.

As mentioned above a logical construct of the exchange system is unemployment: a completely new concept. In the past the concept was work. A problem, a need, requires a solution and labour. No problem, and no need, then no work. It is a temporary utilitarian event. Human life while certainly largely involved with the maintainence of itself, like all life, is not dominated by labour. Normal human life is a social event involving family interactions, community interactions, shared cultures, arts. It is not utopian to picture communities meeting at sunrise and going to the fields singing and chatting. The labour is not the point, it is circumstantial, it is the stage for a social event. This is (was) existing mountain rural life in Nepal for example.

In the exchange system however everything is turned on its head. In a way this is the genius of the Classical economists. Once upon a time spending would have utilised resources and created more labour so it was frowned upon. The Classical economists changed the rules so that consumption actually stimulated jobs and because jobs were needed to get exchange value this fuelled productivity. Thus consumption actually created wealth. (I see here that maybe the Classical system limits productivity so that it is only allowed when exchange is possible - c.f. Veblen). However massive surpluses could be created with no-one allowd to consume them. The problem now was not making food, but finding something to do to earn a right to that surplus. Even when everything has been harvested and all the houses built we may still be looking for a job because everything is done by machines these days. With things on their heads all the other rules change also. Where modesty in consumption was a way of making resources go further, now modesty in consumption is bringing about economic collapse! we need to spend more to avert economic catastrophy we are told, but we need to exploit less to avery ecological catastrophy. I know which is more important, and I know which is real also.

This absurdity of the exchange system is what has logically mushroomed into the Through The Looking Glass World of modern economics. A planet in the latter stages of destruction. A population still set to double. A world inundated with technological solutions to every problem under the sun. A society which burns billions of tons of oil year to create energy to run labour saving devices and yet we are still expected to work for our living and we still do more work than any other primate (with the possible exception of Chimpanzees) and more than at any time in history (except for the last two centuries). And yet we are still expanding the economy and still increasing our consumption. We still believe that increasing GDP relates to increasing Quality of Life even while the mechanisms and understanding are a shables.

Studies in Happiness show that GDP does relate to increasing happiness. But I suspect this hides a very subtle point about Happiness. When are we most happy? I imagine it is when we get something we want. I notice people very happy when they find a new partner, or especially on their wedding day: yet I know it is too good to last and as predicted that euphoria is short lived. Give a child a toy and its the same response... and you can guarentee that a few years later the toy is in the loft. This type of happiness is the prevanent one today and I suspect the one measured. Types of happiness that correspond to longer lasting satisfactions are subtle, and unconditional happinesses are out of discussion these days. Consumerist economics relies on the former short lived happiness because that is the motivation for shifting large amounts of stock and creating jobs. This is important because we need to work to get a share of excessive profits of the system, yet it runs counter to the fact that the planets resources are limited. A logical implication is that actually consumerist economics promotes Unhappiness because if we were all content and happy then we wouldn't need anything and we would stop working and shopping and settle down to enjoy life. Yet an advert, or our friend pulling up in the latest BMW, is sure to upset that contentment and so we are back at work and at the weekend down the car showroom. Now because we have normalised this process the effect of purchasing that car becomes the thing we celebrate - like the African slave being freed. Yet in both cases we shouldn't be enslaved in the first place, and so it is a hollow victory and I hollow happiness! The records of increasing happiness with GDP are actually records of the desperation and the enslavement of the people to satisfaction!

Another logical implication of the economic perversity is "built in obsolescence". It is cost effective to make products that break just outside their guarentee period to force the customer to buy again (that is if the customer isn't already bored with the product, and the ramping of models and styles and the need to compete with their collegues hasn't already forced them to purchase the same thing again!). The system is perverse yet we (the politicians, economists, and people) seem to think that jobs and shopping is reality! rather than an invented human game.

These are not real things, but logical constructs from the exchange system. Yet what alternatives are there? Someone needs a very clear days thinking to resolve this paradoxical mess.

One thing that has become endemic in the economic system is the exact accounting of value. Its reason is to stop cheating, but it has eliminated the concepts of charity, generosity, trust and helping. Once upon a time all labour was unaccounted. Did people cheat in those days? was it tolerated graciously? Did people even note it? Today DIY, self-grooming, most childcare, most domestic work, gardening, private transport etc are still unaccounted and unpaid. Yet even with accountancy we have seen enormous thefts so we are fully aware that cheating the system is at least today prevalent in humans. And, I suppose the accountancy system enables us to see how huge these thefts are - currently running at trillions of pounds. In a less organised economy these thefts would not have been so obvious. Just how much was taxed from the people of UK during the feudal system? We will never know. (At least it was their fault for losing the Battle of Hastings.) Quite what we did to deserve the current thefts is less clear... or was it our greed in backing high return funds?

People are talking about the resolution of the current depression. Crash Gordon says we need to keep up trade and spending to create the jobs. Yet I don't see people starving - people are quite naturally "tightening their belts". This means they didn't need the things they once bought. This means all those people being made unemployed didn't need to work. All that time and effort wasted and all those resources used up for nothing. If they are hell-bent on creating jobs then rather worrying about economic growth why don't they raise taxes on fuel to make human labour more competative? Or why don't they create financial incentive to employ someone instead of a machine? It is the same result! It just makes the absurdity of the system more acutely visible.

Adding the recent conclusions to the picture we see that the Alice in wonderland world has met a need however. Human beings are easily distracted from Absolute wealth by Relative wealth. As a child when faced with a plate of food that I didn't like my mother would always remind me of the "starving masses in Africa". A very complex cultural statement. Firstly there is the contraditory belief that Africa is both the cradle of mankind yet somehow unable to support itself. This stems from the belief that "we" are better and more advanced than Africa so logically they must have difficulties with survival. The statement is also reminding me that whether I like it or not, food is a fundamental need. That I like peas and not butter beans only makes sense when I am not starving: a plate peas instead of butter-beans is only a relative wealth. Yet almost all of mankind (with very few exceptions) has what he absolutely needs. This is true today, and was becomes ever more true as you go back in time. You don't find people lamenting the poor conditions that Chimpanzees and Gorillas live in - what conditions should they live in? What conditions "should" a human live in? Actually they are not very different in absolute terms (altho paradoxically an "advanced" human would not last very long in the jungle!)

The difference is the result of 10,000 years of cultural evolution. And the impetus for all this evolution? It is status. Long ago humans ceased to be the victims of predators and became the victims of competition with each other. We had to fight for resources. But this is not Hobbes' "nasty, brutish and short" - he obviously didn't examine animals very closely who don't live nasty, brutish or short lives. You don't spend all your time fighting - you would die of exhaustion - you spend your time displaying and pick your fights with the most serious threats like any territorial or herding animal. Human displaying has become the occupation of our lives: from expensive watches, to big houses, to top schools for our kids, to qualifications, to salaries, to cars, to plastic surgery, to social titles, to life span, to space races (In the words of JFK, "we [US] want to go to the Moon because it is hard." - that is no-one else has done it, but we can!), to arms races, to technological progress, to cultural progress - anything you imagine has become aligned on the status scale. Pick anything, take 2 extremes, and you can say which carries the higher status.

Human's inexhaustable need for relative wealth compared with each other has fuelled the economy and drives our lives. Yet it is based upon nothing these days, and it is something that we can freely and without cost chose to ignore.

What is of enormous confusion is the West is this concept of Quality of Life (QoL). I will post soon a rerun of an analysis done years ago on life expectancy. Facts like Plato living into his 80's conflicts with the prevalent view that people live longer today. It is almost the exact oposite of the Medieval view that the ancients were closer to creation, were more perfect and lived longer. Noah, for example, living over 600 years I think, made perfect sense to them. Clearly how long you live is a matter of status. That people in "developing" countries don't live very long is as much fact as prejudice based upon the belief that we are superior. This is the origin of the lament in the Daily Mail that Jade Goody "shouldn't" die at such a young age. Facts are Facts, and Prejudice is Prejudice. Ignoring infant mortality life expectancy actually hasn't changed as much at we would like to believe... evidence to follow. Quite apart from this Quantity of Life and Quality of Life are clearly different things. I'm not completely clear on this matter yet but I'm prepared to propose that Life Expectancy is independent of Quality of Life. We can live a full life in a matter of years with no effect on our quality. A day well lived is better than a century poorly lived! Today in fact - if you follow your Zen Buddhism - is all that matters, be that at the end of a century of existence or just 1 week. The West makes a big deal of long life expectancy but imagine the gene for old age was discovered in China and they could instantly extend the lives of their children by 200 years. Would all us Western adults suddenly go from feeling happy about our life expectancy to feeling unhappy? Our own life expectancy hasn't changed, so why do we go from feeling happy about it to feeling uphappy about it? That is the nonsense of status. It may turn out that status really does 'colour' our whole world filling it with prejudices. Liberating from such relative wealth may be half the battle to liberation all together! Do we really care what other people think? Is it really worth wasting our time on?

So our huge brains (compared to body size), some thousands of years ago, have reached the stage where we can understand evolution. This also marks the moment where we have ceased to be controlled by evolution (the SRH - by self reference hypothesis). We can think outside the box now and take up our Life from the hands of mother nature. But its still a missed moment as people become ever more stuck into evolution struggling for relative supremecy.

For those who have seen the possibility of escape from the cooking pot of evolution we have the teachings that constitute spirituality. The lotus in the banner of this blog the eastern symbol for the rise of purity and beauty from elemental and base beginnings. Yet despite the open invitation to be liberated few have taken it. It seems that like a fledgling bird who has grown the wings to fly, we still wander around ungainly upon the ground in disbelief. Evidence has been published this year that Darwin was motivated as much by cold science as by the need for mankind to realise his common ancestory and brethernhood. Yet far from breaking down the social barriers and the development of an inclusive view of Life, religious societies still battle for supremecy with scientists, and I imagine the US military is trying to evolve ever better solutions to the problem of global domination. What maybe is missing from the theory is the understanding that an animal that can formulate evolution and see the unity of all forms is no longer subject to evolution, natural selection or competition! There is no longer need for status, no longer need for progress, no longer need for employment, and no longer need for economics. But maybe some still chose to evolve further before that day.
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what needs to be examined is the Invisible Hand of the Markets doctrine...