Monday, April 4, 2016

Two Hundred Years of Hiding from the Market

Now that we are reaching the twilight of the western welfare state, it is time to confront our history.

Point One is that nations under capitalism have experienced a Great Enrichment that has raised per capita income from $1-3 per day to $100 per day. As Deirdre McCloskey writes, there has never been anything like it, ever.

Point Two is that nations and peoples have all fought tooth and nail against capitalism: taxing it, restricting it, abolishing it, regulating it, anathematizing it.

On the one hand everyone expects capitalism to deliver ever increasing benefits. On the other hand everyone is outraged whenever it falls short of perfection. And nobody is willing to submit to the market when it tells us unwelcome news.

What is our problem?

Our problem is, I think, that the human response to setback is cornered-rat syndrome. You lash back when you are in trouble, on the chance that force will solve your problem. And if you are being attacked by the neighboring village, it's the appropriate response, because the alternative is death or slavery.

And so the industrial workers naturally fought back against the relentless demands of the international price system. When their employers sought to cut wages in an economic downturn, or improve efficiencies by reallocating or laying off workers to be able to reduce prices to compete against international competitors, they were outraged and fought back.

It is hard, very hard, to accept the verdict of the price system and surrender to its dictates. It is much easier to rail against unfair competition, against cheap imports, against rapacious financiers, against ruthless CEOs and the One Percent.

Also, if you are one of the People of the Subordinate Self then your idea of human socialization is that you surrender your liberty to a great lord or politician or gang boss, and then you are his responsibility.

I have written, in my Little Darlings theory, that anyone that signs up as the retainer of a great lord has really checked out of history. Enrolling as the retainer of a lord is the same as enlisting in the army. From that moment forward you are merely cannon fodder, and sooner or later you will be served up as food for powder. Great lords and political leaders are not interested in you, they are interested in their power project. On this theory, the People of the Subordinate Self are the walking dead. And this was confirmed in Gregory Clark's Farewell to Alms, which argued that prior to 1800 in England, the poor had fewer surviving children than the rich, and so suffered in a society of lowered expectations where the children of the poor did worse than their parents. After 1800, with the Industrial Revolution and capitalism and all, the poor multiplied and their children expected to live better than their parents.

I think that the way out of the demonization of capitalism is to recognize that the price system is not a system, and capitalism is not an ideology, as is socialism. Capitalism and prices are examples of what we now call emergent phenomena, of which the state function in quantum mechanics is perhaps the poster child. Everything in the world is a possibility until there is a transaction. And then the millions of transactions get rendered down into widespread prices. These prices are not the dominatory oppression of some economic  hegemon but a discovery process, the precipitate of millions of human actions.

In my view the answer to all this is a cultural revolution. Just as Christianity asks us to surrender to the power of God's love, capitalism asks us to surrender to the verdict of our fellow consumers and producers in the world market. Until we do, the present alarums and excursions will continue.

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