Free Trade and Food Security

Earlier, I wrote about the effects of free trade on its victims in the Irish Famine. Most people are aware by now that Ireland was a net exporter of food at the peak of the famine, even while many people were starving to death. How was this possible? It was all due to the “free market,” in which food goes to the people who can afford it, no matter where they are, rather than the people who need it, even if they produce it themselves. Giving aid to starving people would create a “culture of dependency”; the exact same rhetoric you hear today about giving aid the the victims of globalization.

I hadn’t realized that Ireland was not the only case of free trade ideas causing the deaths of millions of people during this period. The British also used their Indian colony as a laboratory for the ideas of Adam Smith et.al. with even more disastrous results:

Unidentified British Male: “If you talk about atrocities committed in the colonial period by the British Empire most people would just stare at you blankly. They have no idea what you’re talking about. If you talk about Stalin‘s atrocities, they’re fully apprised of those. But Lord Lytton, in India, probably killed as many people as Stalin did, by very similar methods, exporting grain in the midst of a famine, huge, huge quantities of grain, often from places where there was a surplus of production, a very successful harvest, and engineered a famine in which tens of millions of people died. But we hear nothing of this. We know nothing of this.”

NICHOLAS WOODESON (narrator): “How many British students learn about the work of the historian Mark Curtis? Drawing on formerly secret UK government files, he estimates that Britain is complicit in the deaths of over ten million people from countries around the world since 1945.”

The Lottery of Birth (Lumpenproletariat)

Here’s Wikipedia’s entry on the Indian Famine:

Great Famine of 1876–78

In part, the Great Famine may have been caused by an intense drought resulting in crop failure in the Deccan Plateau. However, the commodification of grain, and the cultivation of alternate cash crops also may have played a role, as could have the export of grain by the colonial government; during the famine the viceroy, Lord Lytton, oversaw the export to England of a record 6.4 million hundredweight (320,000 ton) of wheat.

The famine occurred at a time when the colonial government was attempting to reduce expenses on welfare. Earlier, in the Bihar famine of 1873–74, severe mortality had been avoided by importing rice from Burma. However, the Government of Bengal and its Lieutenant-Governor, Sir Richard Temple, were criticized for excessive expenditure on charitable relief. Sensitive to any renewed accusations of excess in 1876, Temple, who was now Famine Commissioner for the Government of India, insisted not only on a policy of laissez faire with respect to the trade in grain, but also on stricter standards of qualification for relief and on more meager relief rations. Two kinds of relief were offered: “relief works” for able-bodied men, women, and working children, and gratuitous (or charitable) relief for small children, the elderly, and the indigent.

And the entry on Lord Lytton. Queen Victoria’s Durbar occurred during the same years that the famine was taking place and millions of Indians were starving. One is reminded of the Presidential Inaugurations in Washington DC taking place miles away from post-collapse neighborhoods ravaged by drugs and crime.

I was reminded in that entry of Mike Davis’ book Late Victorian Holocausts, which details these victims of free trade in detail. I have not read it, but ought to pick it up to give essential details of the results of free trade. Here’s a good discussion on Reddit AskHistorians on the famine.

From my understanding the root cause for the worsening famine in the eighteen seventies was that the British (notably East India company) completely centralized the grain market in just a few years time, thereby destroying the localized market system. at the end of it not only the provinces under drought had to suffer trough famine but provinces with grain surpluses too because the centralized prices completely skyrocketed.

On top of that officials didn’t (want to) realize the extent of the problem and they actually continued to export grain which worsened the famine even further.

I thought this comment was especially interesting.

Polanyi himself writes of the situation (pp. 159-160):

Indian masses in the second half of the nineteenth century did not die of hunger because they were exploited by Lancashire; they perished in large numbers because the Indian village community had been demolished. That this was brought about by the forces of economic competition, namely, the permanent underselling of hand-woven chaddar by machine-made piece goods, is doubtless true; but it proves the opposite of economic exploitation, since dumping implies the reverse of surcharge.

The actual source of famines in the last fifty years was the free marketing of grain combined with local failure of incomes. Failure of crops was, of course, part of the picture, but despatch[sic] of grain by rail made it possible to send relief to the threatened areas; the trouble was that the people were unable to buy the corn at rocketing prices, which on a free but incompletely organized market were bound to be the reaction to a shortage.

In former times small local stores had been held against harvest failure, but these had now been discontinued or swept away into the big market. Famine prevention for this reason now usually took the form of public works to enable the population to buy at enhanced prices. The three or four large famines which decimated India under British rule since the Rebellion were thus neither a consequence of the elements, nor of exploitation, but simply of the new market organization of labor and land which broke up the old village without actually resolving its problems. While under the regime of feudalism and of the village community, noblesse oblige, clan solidarity, and regulation of the corn market checked famines, under the rule of the market the people could not be prevented from starving according to the rules of the game.

The term “exploitation” describes but ill a situation which became really grave only after the East India Company’s ruthless monopoly was abolished and free trade was introduced into India. Under the monopolists the situation had been fairly kept in hand with the help of the archaic organization of the countryside, including free distribution of the corn, while under free and equal exchange Indian perished by the millions. Economically, India may have been–and, in the long run, certainly was–benefited, but socially she was disorganized and this thrown a prey to misery and degradation.

In that post I also mentioned that the “starving African” and “starving Indian” was not a fixture of these societies prior to the last few hundred years. Now this article offers concrete proof of that fact:

An Archaeological Mystery In Ghana: Why Didn’t Past Droughts Spell Famine? (NPR)

The anthropologists in the article found through scientific analysis that there were much more severe famines in the past than the more recent ones in Ghana, yet there was apparently no starvation! People tightened their belts but were able to hold out reasonably well.

In the Banda district of west-central Ghana, July is the hungry season. This year’s sorghum, yams and millet are still young and green in the rain-fed fields, and for most farmers, last year’s harvest is long gone. People survive on cassava. They grind the roots and cook a polenta-like porridge called tuo zaafe and they stir the leaves into a soup. But there isn’t enough to go around always, and the meal lacks protein. It’s hard to know whether autumn will bring more food: Rains in Banda have been erratic lately and harvests sparse. The region has been in the midst of a 40-year drought.

It’s easy to think that life has always been this way in Banda — a poor, mostly agricultural district, a 10-hour drive from Ghana’s thriving capital, Accra. But according to Northwestern University archaeologist Amanda Logan, that could not be further from the truth. Logan says the hungry-season gap likely didn’t exist in the past. In fact, her research shows that before the mid-19th century, people here usually had enough to eat — even when rains failed…Logan reports that food security in Banda peaked about 500 years ago, smack in the middle of an epic drought. By contrast, a much milder dry spell is currently wreaking havoc on local diets.

In the past, droughts were even more severe than the El-Nino influenced droughts that Mike Davis describes in LVH. Yet local economies thrived as did local markets:

From the 11th through 15th centuries…people mostly ate pearl millet, a grain historically loved by communities all over West Africa. Other artifacts…show that during this period, merchants were plugged into trade networks, and local artisans were busy. That suggests there was enough food to feed a significant number of people who weren’t farming. In other words, the people of Banda were thriving.

Then, in the middle of the 15th century, a two-century-long drought set in — sedimentary records from nearby Lake Bosumtwi tell the story.”That drought, in terms of its severity and length, is like nothing we’ve seen in modern Africa,” Logan says. “It’s really intense.”

But here’s the mystery: The archaeological record during this period shows no signs of food stress — no big increase in wild plant remains, which people often eat to get through famines; no shift to less-preferable foods; no major declines in population. People kept eating millet. And a wide range of iron, copper, ceramic, ivory and cloth artifacts show that trade and craft production were still thriving…It wasn’t until the mid- to late 1800s, long after the drought ended, that Logan began to turn up evidence of food stress.

What changed? The anthropologists find it was because they were part of a thriving local economy that had multifaceted aspects and kept most food and economic exchanges local. By contrast, under the free trade regime imposed by Europe, people could not compete with cheaper imports, and the local economy was demolished. People had no other choice than to become export farmers, subject the vagaries of the One Big Market. This meant that in the case of harvest failures, there was no backup plan, and no alternatives.

According to Logan, two key things [changed]: The slave trade siphoned off many young farmers and artisans, and Banda was incorporated into Britain’s Gold Coast colony in the late 1800s. The British wanted to expand markets for their own industrial goods like iron and cloth, so they undercut local production of these items.
“Five hundred years ago, Banda was a producer as well as a consumer of highly sought-after stuff [like] gold, ivory, iron and copper,” she says. “As you get to the colonial period, Banda stops being a producer of anything but agricultural and locally consumed goods” like pottery.

These changes weakened Banda’s economy, and consequently, crippled residents’ ability to survive drought and other disasters. The region remained reliant on agriculture even after Ghana became independent in 1957.

Today, over 70 percent of residents work in farming, fishing or forestry. Because they sell much of their harvest to earn cash, families often run short of food for themselves and have to buy more at the market. If crops fail or prices rise at the wrong time, they go hungry.

In other words, the local culture had evolved over numerous generations to deal with the inevitable crop failures and shortages with minimal disruption. It also provided a wide variety of social niches, and was to some degree self-sufficient.

That local culture was stripped away, just as it was all over the world, as Polanyi describes. In its place, such economies would be “plugged in” by force if necessary, to the One Big Market. Now, the impersonal forces of supply and demand alone would dictate the underlying fabric of society. Economies would become specialized to produce export crops for distant markets, leaving them especially vulnerable to famine.

“It fits really well with the historical record,” says [Scott MacEachern, a professor of anthropology at Bowdoin College and president of the Society of Africanist Archaeologists], who was not involved in the study. “We tend to think of colonization as a fairly dry process, as essentially changes in government. On the ground, they were fantastically disruptive processes to the patterns of everyday life. So it’s entirely plausible that the decline in food security she talks about is associated with those processes.”

Free trade isn’t free after all–someone always pays.

Ancient History Roundup and More

Given the fact that we recently looked at hydraulic empires and the role they played in forming ancient economies, this article is timely. Apparently, solid evidence has been found of massive flooding on the Yellow River in ancient China. These floods were dramatic – we’re talking vast amounts of water destroying communities with regularity. Subduing the waters is tied to the formation of the early Chinese state:

Rocks tell story of China’s great flood (BBC)

Legends say China began in a great flood. Scientists just found evidence that the flood was real. (Washington Post)

The Guardian is running a series on lost cities. What happened to ancient Cahokia?

Lost cities #8: mystery of Cahokia – why did North America’s largest city vanish? (The Guardian)

Via Ran Prieur – an academic paper formalizing something I’ve often speculated on this blog over the years: competitive feasting by early “big men” led to the cultivation of cereal grains not for food, but for fermentation into alcoholic beverages which were used in the collective rituals of the ancient Near East.

A hypothesis that is attracting increasing interest proposes that Epipaleolithic populations exploited and then cultivated cereals, not primarily for food but to brew alcohol for use in competitive feasting… In this view, aggrandizing individuals used alcohol to attract people to feasts and then to manipulate them to acquire political power via reciprocal feasting debts. This “alcohol model” when combined with feasting models explicitly addresses the co-occurrence of two key Neolithic phenomena – cereal agriculture and social inequality – and is supported by a range of archaeological and ethnographic data…The purpose of this paper is to use insights from pharmacology and related disciplines to explore, in more depth, the role of alcohol and other pharmacologically active comestibles in Neolithization such as coca, poppy, and tobacco. In our view, such crops probably constituted one of the important components of early aggrandizer “toolkits” for creating differential power.

Pharmacological Influences on the Neolithic Transition

See also Ran’s page on the origins of agriculture. Wikipedia also has a good page on the Neolithic transition.

Earlier this year, the world’s oldest beer was found in China:

Archaeologists discovered ancient beer-making tools in underground rooms, that were built somewhere between 3400 and 2900 B.C. The discovery was made at a dig site in the Central Plain of China and contained  pots, funnels and specially designed jugs. Objects suggest they were probably used for brewing, filtration and storage of beer…The beer recipe was found to contain broomcorn millet, barley, Job’s tears and tubers….This is the oldest beer-making “factory” ever discovered in China, suggesting that these initial brewers were already using specially designed beer-making tools and advanced techniques for the creation of “liquid gold” (beer).

This says a lot about what it was like in China 5,000 year ago. For one, researchers now know that years before barley was used in food in China, it was being used in drinks. This tells us that brewing beer did not come about because people had an excess of crops and were looking for new and creative ways to use every last bit. This explains that beer was a very important aspect to ancient everyday life. Beer was so important, in fact, that crops were being planted in order to accommodate the growing demand.

5,000 Year Old Beer Recipe Found by Archaeologists (Sciencenews Journal)

We today associate China with rice, but foxtail and broomcorn millets were actually the earliest grains cultivated in ancient China:

Archaeological remains show that these millets became common in their north China heartland around 7,500 years ago. Seeds recovered from sites of different ages show signs of being domesticated and selected — namely, they got bigger and bigger over time. Human skeletons of the same age show that millets were a staple food source.

Later, these millets traveled from north China into Central Asia and Europe, and south through Thailand to India. And nomadic shepherd-farmers were instrumental in this spread, Jones says. He got a chance to see for himself how this might have occurred while in Mongolia. The herders there spend their lives on horseback, he tells The Salt, but they’ll often find a plot of land and scatter millet seeds onto it, returning after a few weeks to harvest the crop.

Millets, Jones says, make a perfect bridge between nomadic life and settled agriculture, because they have a very short growing season – just 45 days, compared to 100 or more for rice – and need very little attention, ideal for nomadic horsemen on the go. “They’d tread the seed in with their horses’ hooves and off they go,” Jones explains, “maybe leaving a couple of teenagers behind to keep an eye on it.”

Meanwhile, in other parts of China, local rice, and wheat and barley from the Near East, were being further domesticated. Roaming shepherds and herders from different regions would have encountered each other, exchanging grains and advice on how to grow them. Evidence of this knowledge-sharing shows up in the archeological record between 2,500 and 1,600 years ago, when “crops that have been there for thousands of years start moving around all over the place,” Jones says. Millets moved into the Fertile Crescent, where wheat and barley were predominant, and wheat and barley moved into northern China.

At the same, Jones’ research shows, agriculture in China moved out of the foot hills — where individual farmers could control the flow of water — and into the valley bottoms.  And as crops grew more diverse and moved downstream, farmers had to work together to manage their increasingly complex agriculture — a need that encouraged settlements and community-building.

Millet: How A Trendy Ancient Grain Turned Nomads Into Farmers (NPR)

Related: are sexual attitudes in China linked to cooperation required in rice cultivation?

For centuries, rice plantation has been prevalent in some provinces, while wheat agriculture has dominated others. The “rice theory” suggests that in China people who grow rice and those who grow wheat may think differently.

I found that people from rice-growing provinces such as Guizhou, Fujian and Sichuan, where a large proportion of farmland is devoted to rice paddies, are significantly more accepting of premarital sex, extramarital sex and homosexuality, when compared with those from wheat-growing provinces such as Jilin and Shaanxi.

A major difference between rice and wheat plantations is the different levels of irrigation required. Rice paddies require a high level of irrigation, while wheat plantations require a substantially lower level. For centuries before the prevalence of modern machines, rice plantations relied heavily on close cooperation between farmers for the provision of irrigation, while wheat tended to be managed by people working alone.

The need of cooperation for the production of food—a necessity for survival —in rice-growing regions may have helped to cultivate a higher level of interpersonal dependence, mutual understanding and tolerance, which makes social marginalization less likely. In contrast, the same senses of interdependence and mutual understanding may be less valued in wheat-growing regions because people do not have to rely on each other for subsistence.

My research suggests that the tolerance of non-conventional sexual behaviors borne out by this need of interdependence in rice-growing areas is key to the liberalization of sexual attitudes.

Are Chinese Views on Sex Linked to the Crops They Grow? (Newsweek) Warning: ad-intense site

A good Reddit AskHistorians comment on: Why did the Australian Aboriginals never progress past hunter/gatherer tribes? Of course, “progress” is highly a matter of perspective.

Slaveholding plantations of the nineteenth century used scientific management techniques. I wonder what this tells us about Latifundia—the plantation system that dominated agriculture in the late Roman Empire. Was it really as “stagnant” was we have been led to believe?

Caitlin Rosenthal pored over hundreds of account books from U.S. and West Indian plantations that operated from 1750 to 1860. She found that their owners employed advanced accounting and management tools, including depreciation and standardized efficiency metrics, to manage their land and their slaves. After comparing their practices with those described in the account books of northern factories, Rosenthal concluded that many plantations took a more scientific approach to management than the factories did.

Speaking of which, the late ecologist Edward Goldsmith wrote a fascinating essay on the reasons for the decline and fall of the Roman Empire:

The fall of the Roman Empire: A social and ecological interpretation

More evidence for drought being the major factor in the collapse of the Lowland Classic Maya:

As it turns out, water reservoirs can actually provide substantial relief during short periods of drought. In the simulations without reservoirs the Mayan population declines after a drought, whereas it continues to grow if reservoirs provide extra water. However, the reservoirs may also make the population more vulnerable during prolonged dry spells. The water management behaviour may remain the same, and the water demand per person does not decrease, but the population continues to grow. This may then prove fatal if another drought occurs resulting in a decline in population that is more dramatic than without reservoirs.

The demise of the Maya civilization: Water shortage can destroy cultures (EurekaAlert!)

Here’s an older article that describes the changing monsoon cycle as the cause of the demise of the ancient Harappan civilization in the Indus River Valley.

Sprawling across what is now Pakistan, northwestern India and eastern Afghanistan, the Indus civilization encompassed more than 625,000 square miles, rivaling ancient Egypt and Mesopotamia in its accomplishments. In its bustling hubs, there was indoor plumbing, gridded streets and a rich intellectual life.

Unlike the Egyptians and Mesopotamians, who used irrigation systems to support crops, the Harappans relied on a gentle, dependable cycle of monsoons that fed local rivers and keyed seasonal floods.But as later generations would discover, it was what the researchers call a “Goldilocks civilization.” After about 2,000 years, the window for agricultural stability closed again.

As time passed, the monsoons continued to weaken until the rivers no longer flooded, and the crops failed. The surplus agriculture was longer there to support traders, artists, craftsmen and scholars. The Harappans’ distinct writing system, which still has not been deciphered, fell into disuse. People began abandoning the cities and moved eastward toward the Ganges basin, where rains were more dependable (though not dependable enough to sustain urban metropolises). The civilization dispersed, fracturing into small villages and towns.

An Ancient Civilization Upended by Climate Change (NYTimes) Interesting that the NYT closed down its green blog a while back. Uncomfortable conclusions?

In eastern North America, the advent of farming was preceded by a population boom, according to a new study.

Another thing I’ve speculated on over the years: North America was populated along the coast instead of following a corridor between the glaciers. I suspect many places on earth were colonized via boats along the coastline rather than overland.

Reddit – what sounds like a bullshit fact but is actually true? Top comment: “We had 50% less people in the world when JFK was prez”

Will skyscrapers outlast the pyramids? (BBC) Of course not. Our drive toward maximum “efficiency” will see to that.

Remarkably, Cleopatra lived closer in history to today’s tallest building – the Burj Khalifa – than she did to this monumental tomb. When the last mammoths died out, it was already 1,000 years old…

In fact, the impressive age of the pyramids is no accident. The ancient Egyptians believed the afterlife would last forever and took great pains to ensure their tombs would too. Pyramid design evolved over thousands of years, as they experimented with the materials and architecture that would live up to their ambitions.

“They were always saying this is a construction ‘for eternity’; ‘for ever and ever’ creeps into their vocabulary constantly,” says Redford, who currently works at Penn State University, Pennsylvania. They were so confident in their abilities, many pyramids were named with the suffix “of millions and millions of years”.

Despite their efforts and hyperbolic claims, the Egyptians didn’t really know what they were doing – and this may have been a distinct advantage. To make up for gaps in their understanding of the laws of physics, early pyramids were heavily over-engineered. They knew about columns, for example, but didn’t know that they could support a roof. They always added extra walls just in case.

Another explanation is sheer size. Take the Great Pyramid. It’s less a building than an artificial mountain, made of nearly six million tonnes of solid rock. Five millennia is no time whatsoever when you consider the limestone had been lying in the ground for 50 million or so.

Modern skyscrapers, in comparison, are positively flimsy. It took just 110,000 tonnes of concrete and 39,000 tonnes of steel to construct the Burj, which is more than six times the height of the Great Pyramid. “They designed these buildings to last forever – nowadays that’s not a priority. We’re designing practical buildings to be lived in,” says Roma Agrawal, a structural engineer who worked on the Shard in London.

It reminds me of a great quote I once in reference to planned obsolescence: “Anyone can build a bridge that stands up, but only an engineer can build a bridge that barely stands up.”

To cope with the unemployment levels of the Great Depression, the United States sent many Mexican immigrants (and even some American citizens) back to Mexico to ensure adequate jobs for Americans.

With a scarcity of jobs during the Depression, more than a million people of Mexican descent were sent to Mexico. Author Francisco Balderrama estimates that 60 percent were American citizens.

America’s Forgotten History Of Mexican-American ‘Repatriation’ (NPR)

Mass Deportation May Sound Unlikely, But It’s Happened Before (NPR)

The “always plentiful jobs” orthodoxy spun by capitalist economists flies in the face of over 200 years of economic history (1811-2016). If immigration doesn’t hurt jobs, then why does literally no country on the face of the earth with a functioning economy have true open borders (no visa requirements, no restrictions on non-citizens, etc.)?

More evidence for Robin Dunbar’s Social Brain Hypothesis:

Large human brain evolved as a result of ‘sizing each other up’ (PsyPost)

Survival of the most Machiavellian certainly seems to be the order of the day in corporatized America. In market-based societies, it is evolutionarily highly advantageous to be a sociopath.

Must-see video that’s been making the rounds about why trains are so bad in America. Not mentioned is the fact that anything besides the private automobile is seen as helping poor people and minorities, and the related idea that anything that costs tax dollars is bad (roads are supposedly paid for by “user fees” – yeah, right).

Is our society beset by the “Behavioral Sink?” This comment by the mysterious Reddit Accountt1234 makes some interesting and disturbing points: Gazing into the behavioral sink.

Two political scientists look at failed states and conclude that “…failed states are not the exception but the norm in human history.”

Failed states seem a novelty only in relation to the bipolar world of the Cold War, …But failure has a long lineage. According to Charles Tilly, in early modern Europe, the very birthplace of the (Weberian) state, “the substantial majority of the units which got so far as to acquire a cognisable existence as states [from 1500 to 1850] still disappeared”

Failure is even more prominent in pre-modern times. While the rise of the homo sapiens occurred 200,000 years ago, civilisations emerged as recently as 6,000 years ago, and only in half a dozen selected world regions. Before the rise of Mesopotamia and Egypt, economic stagnation and conflict had been endemic. Moreover, civilisations were far from irreversible outcomes. By the end of the Bronze Age, major Eastern Mediterranean civilisations had collapsed under the pressure of invasions by less developed societies, the ‘Sea Peoples’. The re-emergence of a civilised order in Mediterranean Europe had to wait for another 500 years. The Roman Empire, the peak expression of the new order, also fell prey to invasions from the Goths, Huns, Vandals and other barbarian tribes.

The common denominator of successful societies, from early civilisations to modern states, is the dual ability to produce surplus (prosperity) and to protect surplus (security). Contemporary cases of state failure are just instances of the large class of societies that failed to produce surplus and protect it. The class is so large that it actually accounts for about 98% of the human timeline, and covers no less than a fifth of the contemporary world.
The perennial nature of state failure, as well as the exceptional character of state formation, is rooted in a simple but powerful paradox. Every society in the process of development faces a fundamental trade-off between prosperity and security. The efforts of a society to create wealth will undermine its own sovereignty if the new prosperity attracts predatory attacks from rival groups (either inside or outside the social territory).

In a recent paper, we introduce the ‘paradox of civilisation’ to characterise the dilemma shared by thousands of early agrarian settlements prior to the rise of pristine civilisations in Sumer and Egypt, hundreds of ports, cities, and villages in Medieval Europe and post-colonial Latin America, and current attempts at reconstruction in the Middle East and sub-Saharan Africa.

Most of these societies, during most of their existence, were trapped between two bleak alternatives. On the one hand, the dangerous option of ‘self-defeating prosperity’, i.e. investment efforts that would induce predatory attacks, and on the other hand the safer but stagnant option of ‘backwardness by design’, which would prevent predation at the cost of keeping economic activity close to subsistence levels, hence shutting down the path toward civilisation.

The reader will have no problem in finding cases of self-defeating prosperity in history books, which are replete with examples of productive polities that, at different stages of development, fell prey to the voracity of economically simple but militarily aggressive societies. By contrast, cases of backwardness by design are ‘dogs that didn’t bark’. Their aborted development implies scarcity of historical traces…

Failed states and the paradox of civilization (VoxEU)

Someone on Reddit posted this paper from historian of technology Lynn White Jr., (PDF) who wrote extensively about how technology transformed the social structure of the Middle Ages:

Until recently, agriculture has been the chief occupation even in “advanced” societies; hence, any change in methods of tillage has much importance. Early plows, drawn by two oxen, did not normally turn the sod but merely scratched it. Thus, cross- plowing was needed and fields tended to be squarish. In the fairly light soils and semiarid climates of the Near East and Mediterranean, this worked well. But such a plow was inappropriate to the wet climate and often sticky soils of northern Europe. By the latter part of the 7th century after Christ, however, following obscure beginnings, certain northern peasants were using an entirely new kind of plow, equipped with a vertical knife to cut the line of the furrow, a horizontal share to slice under the sod, and a moldboard to turn it over. The friction of this plow with the soil was so great that it normally required not two but eight oxen. It attacked the land with such violence that crossplowing was not needed, and fields tended to be shaped in long strips.

In the days of the scratch-plow, fields were distributed generally in units capable of supporting a single family. Subsistence farming was the presupposition. But no peasant owned eight oxen: to use the new and more efficient plow, peasants pooled their oxen to form large plow-teams, originally receiving (it would appear) plowed strips in proportion to their contribution. Thus, distribution of land was based no longer on the needs of a family but, rather, on the capacity of a power machine to till the earth. Man’s relation to the soil was profoundly changed. Formerly man had been part of nature; now he was the exploiter of nature. Nowhere else in the world did farmers develop any analogous agricultural implement. Is it coincidence that modern technology, with its ruthlessness toward nature, has so largely been produced by descendants of these peasants of northern Europe?

This same exploitive attitude appears slightly before A.D. 830 in Western illustrated calendars. In older calendars the months were shown as passive personifications. The new Frankish calendars, which set the style for the Middle Ages, are very different: they show men coercing the world around them–plowing, harvesting, chopping trees, butchering pigs. Man and nature are two things, and man is master.

These novelties seem to be in harmony with larger intellectual patterns. What people do about their ecology depends on what they think about themselves in relation to things around them. Human ecology is deeply conditioned by beliefs about our nature and destiny–that is, by religion. To Western eyes this is very evident in, say, India or Ceylon. It is equally true of ourselves and of our medieval ancestors.

This mental change was borne out in the history of the period, as Brian Fagan writes in The Great Warming:

The scale of deforestation during the warm centuries is mindboggling. In AD 500 perhaps four-fifths of temperate western and central Europe lay under forests and swamps. Half or even less of that coverage remained by 1200, and most of that clearing took place during the Medieval Warm Period in a massive onslaught on the environment…Stripping Europe of its primordial forests was an act thick with cultural, economic, and political overtones. The farmers who cleared the forest deprived themselves of the safety net that a Scandinavian proverb called “the mantle of the poor.” Forests provided building materials, timber, firewood and game, medicinal plants and food, and browse and grazing for farm animals. The medieval farmer used more iron than ever for axes, plows and weapons–the metal smelted with charcoal from the forest. Great trees provided timber for cathedrals and palaces, for ships and humble structures like mills. Water mills were the new machinery of the age, as were windmills constructed almost entirely with wood. There was so much demand for timer for windmill vanes in Northamptonshire, England, in 1322 that complaints arose about deforestation. By the twelfth century, forest use was subject to intricate regulations that covered everything from grazing rights to firewood collection. Many different stakeholders including the crown and the nobility, as well as humble folk, had rights in the forest, such as the right to hunt, to graze animals, and to use clearings. For example, many English peasants had the right to acquire construction timber and firewood, deadwood that was knocked or pulled off trees, “by hook or by crook.” The dense trees and undergrowth were a means for survival. Increasingly complex regulations surrounded the forest and the right to use and clear it, which involved balancing royal privileges and landowners’ rights against the long-established economic needs of the peasants.

[…]

Four hundred years of rapid population growth and relatively plentiful food supplies , or unbridled forest clearing and fast-growing towns and cities: Europe was a very different continent at the end of the warm period. By the late thirteenth century, however, Europe was facing serious economic problems, for population growth had outstripped the previous jumps in agricultural production. By 1300, much of the population was worse off than it had been a century earlier, as inflation undermined wealth and the upper classes placed ever greater demands on the commoners. The farmers responded by taking up marginal lands and by other shortcuts such as shortening fallow periods, which, in a time of relatively predictable summers, may have seemed logical ways of boosting crop yields. Inevitably, farmer’s indebtedness to landholders increased, while economic uncertainty also struck home in cities, where the vagaries of the wool trade and other industries could wreak havoc, and military blockades were a fact of life.

Another Long Hot Summer

I was planning to write a follow-up to the story about technology and the African-American experience that I wrote earlier this year when a funny thing happened.

The city I live in was engulfed in a series of race riots that were telegraphed around the world.

The aftermath has been especially ugly, and of course living here you are fully aware of the ugly racial politics that simmers under the surface and permeates every level of this city. Add to that the causal racism, subconscious emotional biases, rationalizing and petty tribalism that accompanies all of it.

It’s all happened before, of course.

Long hot summer refers to the summer of 1967, which began a year in which 159 race riots erupted across the United States. In June there were riots in Atlanta, Boston, and Cincinnati, as well as the Buffalo riot (in Buffalo, New York), and a riot in Tampa, Florida. In July there were riots in Birmingham, Chicago, New York, Milwaukee, Minneapolis, New Britain, Conn., Rochester, N.Y., and a riot in Plainfield, New Jersey. The most serious riots of the summer took place in July, with the riot in Newark, New Jersey and the Twelfth Street riot, in Detroit, Michigan.

https://en.wikipedia.org/wiki/Long_hot_summer_of_1967

It was at this time that the racial politics of modern-day America were laid down, and everything pretty much follows from that. The rise of Black Lives Matter, driven in large part by social media and the easy videotaping of arrests by cell phones, has driven a seeming repeat of those years all over again, this time with mass immigration and terrorism added to the witches’ brew.

1. The History

When you have a country where you have a large, oppressed minority population that needs to kept in perpetual servitude, you get a violent society where casual viciousness and cruelty permeates every aspect of life. This has been a distinctive feature of America since day one.

As I explained earlier, there were two Great Migrations in the twentieth century, and these have defined American History ever since. The first was essentially a continuation of the Underground Railroad where black migration was driven by the availability of low skill/industrial jobs in the North and the desire to escape the viciously racist apartheid regime instigated in Dixie in the wake of slavery’s demise (Jim Crow). This was from about the first World War to the Great Depression (1918-1929). Often times black labor was used as means of suppressing white wages, leading to racial conflict. This continued a tradition from the very founding of the U.S. to bring in immigrant/migrant labor to hold down wages, and then play off those immigrant groups against one another to keep them from uniting against the moneyed interests profiting from the situation.

The first example of this was the Bacon Rebellion in 1675. This was an alliance of bonded workers and slaves against colonial aristocrats. Alarmed by this development, the aristocrats decided that they needed to play off poor blacks and whites against one another, so gave special privileges based on race to the poor and middle-class white workers. This has been called the “Racial Bribe.”

…The alliance between indentured servants (mostly Caucasians who had under a 50 percent survival rate while enslaved) and Africans (most enslaved until death or freed), united by their bond-servitude, disturbed the ruling class, who responded by hardening the racial caste of slavery in an attempt to divide the two races from subsequent united uprisings with the passage of the Virginia Slave Codes of 1705.

Bacon’s Rebellion (Wikipedia)

The second, and much larger wave, occurred in the aftermath of the Second World War. after the demise of slavery, freed blacks still needed a way to support themselves. Rather than being granted their on land to farm as reparations (“forty acres and a mule”), they were enmeshed in neo-feudal sharecropping arrangements with the white owners of the land.

Some land redistribution occurred under military jurisdiction during the war and for a brief period thereafter. But, Federal and state policy during the Reconstruction era emphasized wage labor, not land ownership, for African Americans. Almost all land allocated during the war was restored to its pre-war owners. Several African American communities did maintain control of their land, and some families obtained new land by homesteading.

Forty acres and a mule (Wikipedia)

By coincidence I ran across this excellent summary of sharecropping by economist Bill Mitchell, who makes the apt analogy in his post between that system and the system being proposed by “sharing economy” giants such as Uber (and I would add, most delivery services that rely on ‘independent contractors’):

Roger Ransome and Richard Sutch analysed the sharecropping system in their excellent 1972 historical article and concluded that (p.642):

Sharecropping allowed the exploitation of the small farmer by the monopolistic financial structure dominated by the local merchant. Unable to obtain alternative sources of credit for supplies he needed, the small farmer was forced to pledge his future crop as a lien against credit advanced for the growing season.

Under the [so-called Crop Lien System…which “was a credit system that became widely used by cotton farmers in the United States in the South from the 1860s to the 1930”], sharecroppers “obtained supplies and food on credit from local merchants … [who] … held a lien on the cotton crop and the merchants and landowners were the first ones paid from its sale.” If nothing was left over after the payments were made then tough luck. The land was owned by the former slave owner and the risk of the enterprise falls back onto the sharecropper. The crop lien system also tied the sharecropper to a particular farmer. Ransom and Sutch found that (p.642):

The crop lien bound the farmer to the merchant and restricted his options to buy elsewhere or dispose of his crop in the most advantageous manner. Through use of his monopoly power, the merchant was able to insist that the farmer concentrate on the production of cotton at the sacrifice of food for home consumption, thereby forcing the farmer to buy his provisions from the merchant. The credit prices charged for these supplies were exorbitant, reflecting not only the local merchant’s inefficiency, but his exploitative powers as the sole source of rural credit.

Ransom and Sutch quote Charles Otken who in 1894 summarised the experiences with sharecropping in this way:

This condition of affairs in the South introduced a credit system whose tremendous evils and exorbitant exactions have brought poverty and bankruptcy to thousands of families. As a policy, it is vindictive in its subtle sophistry; as a system, it has crushed out all independence and reduced its victims to a coarse species of servile slavery.

Why Uber is not a progressive development (billy blog)

So that is the background of the people fleeing to the industrial cities to seek wage labor.

After the Great Depression came the second Great Migration. Blacks who had served in the military saw witnessed first-hand the fact that they could be treated as actual human beings when they served in Europe which did not develop the institutionalized repression of blacks. As they began to demand more rights, the plantation owners decided they did not need the sharecroppers anymore and mechanized cotton production, which became possible due to technical advances and cheap fuel, depriving them of their livelihood.

The displaced sharecroppers migrated to the Atlantic Seaboard, the Ohio Valley, and the Great Lakes regions to seek work in the factories. The West Coast, formerly agricultural, had industrialized as part of the War effort, and was the hub of the newly-minted aerospace industry, which was busy churning out airplanes both for the military and the building out of the new global jet travel industry. The main hubs here were Inland Empire and the southern areas of Los Angeles, and the East Bay cities like Oakland, where aerospace manufacturing was located.

Then automation cleaned them out too. I’ve referred before to the letter sent to Lyndon Johnson in 1964 warning of the dire consequences of automation (note: I frequently lump outsourcing factories and automation together because they are both means to the same end). That letter in the mainstream media narrative has been laughed off as chicken-little style alarmism. Everything went fine, goes the narrative; we just created more jobs than ever before for everyone who wanted them, and life just went on with no trouble.

Tell that to the residents of inner-city ghettos.

Just four months after that letter, the first Civil Rights bill was passed into law. It was signed in the teeth of an automation revolution which was to decimate the low-skilled factory jobs that African-Americans relied upon. The jobs moved to the suburbs or overseas. The new, smaller, automated factories were built on cheap, suburban land and accessible only be the newly-constructed freeways. Land use patterns balkanized the suburbs.

Several things happened simultaneously to create the ghettos.

1.) African-American neighborhoods were torn down to build freeways. These destroyed neighborhoods which were very similar to other ethnic enclaves of times prior. They were segregated, but nonetheless functional communities, with meeting places, face-to-face interactions, viable institutions, and a cross-section of different classes. Bronzeville is a primary example of this in Milwaukee–destroyed (as were other gems such as Milwaukee’s little Italy) in the service of freeways which drained jobs, money and population from the city.

Syracuse, New York…had big dreams of becoming an East Coast hub, since it was close to New York City, Pittsburgh, Cleveland, and Boston. (In the early days of the car, close was relative.) Use federal funds to build a series of highways, planners thought, and residents could easily get to the suburbs and to other cities in the region. After all, who wouldn’t want to live in a Syracuse that you could easily leave by car? And, if they put the highway in just the right place, it would allow the city to use federal funds to eradicate what they called a slum area in the center city.

That neighborhood, called the 15th Ward, was located between Syracuse University and the city’s downtown. It was predominantly African American. One man who lived there at the time, Junie Dunham, told me that although the 15th Ward was poor, it was the type of community that you often picture in 1950s America: fathers going off to jobs in the morning; kids playing in the streets; families gathering in the park on the weekends or going on Sunday strolls. He remembers collecting scraps from the streets and bringing them to the junkyard for pennies, which he would use to buy comics.

To outsiders, though, the 15th Ward was the scene of abject poverty close to two of Syracuse’s biggest draws—the university and downtown. They worried about race riots because so many people were crowded into the neighborhood and prevented from going anywhere else. They decided that the best plan would be to tear down the 15th Ward and replace it with an elevated freeway.

The completion of the highway, I-81, which ran through the urban center, had the same effect it has had in almost all cities that put interstates through their hearts. It decimated a close-knit African American community. And when the displaced residents from the 15th Ward moved to other city neighborhoods, the white residents fled. It was easy to move. There was a beautiful new highway that helped their escape.

The Role of Highways in American Poverty (The Atlantic)

2.) To replace these neighborhoods, cities built “housing projects” which had the effect of concentrating poverty into specific geographical areas. If you concentrate something it becomes more intense, unlike diluting it.

3.) The factories locked their gates and became shuttered, abandoned, boarded-up hulks rusting in the rain and crumbling under the freeze-thaw cycle into dust.

4.) Economic activity moved away to the suburbs leaving a black hole of blight.

The black ghetto in prewar America was a place of deep poverty and…the product of relentless discrimination in housing and employment, which continued after the war. But it was also a place where African American culture thrived, a “city within a city,” in their words. By the 1960s, when Kenneth Clark focused on youth delinquency in Harlem, northern ghettos had grown, and the departure of middle- and upper-income black Americans—and jobs—had begun. A “tangle of pathology” rooted in a sense of powerlessness, Clark argued, now eclipsed cultural vigor and autonomy. That sense of impotence, he emphasized, was well founded: Forces outside the ghetto had begun to erode the black community. Vibrant neighborhoods were razed to make way for highways and public-housing projects, turning the ghetto into a subject colony.

The Destructive Legacy of Housing Segregation (The Atlantic)

5.) A series of blatantly discriminatory housing practices were erected to prevent black people from moving away from the ghetto. These are too numerous to go into, but include things like redlining, blockbusting and contract buying:

Contract buying sprang up in Chicago after the federal government effectively refused to insure mortgages for the vast majority of black homeowners, even as it was insuring the mortgages of white homeowners, and encouraged banks to redline black and integrated neighborhoods. The import of mid-20th century housing policy — along with private actions (riots, block-busting, contract lending, covenants) — has been devastating for African Americans.

Buying on contract meant that you made a down-payment to a speculator. The speculator kept the deed and only turned it over to you after you’d paid the full value of the house — a value determined by the speculator. In the meantime, you were responsible for monthly payments, keeping the house up, and taking care of any problems springing from inspection. If you missed one payment, the speculator could move to evict you and keep all the payments you’d made. Building up equity was impossible, unless — through some Herculean effort — you managed to pay off the entire contract. Very few people did this. The system was set up to keep them from doing it, and allow speculators to get rich through a cycle of evicting and flipping.

The Ghetto Is Public Policy (The Atlantic)

Blatant housing discrimination was slowly chipped away by concerted government action over the years. The sporadic nature of this change had a perverse effect, however. As discriminatory practices fell, the blacks who left the ghetto were typically the most educated, highest achieving ones, leaving the remaining ones with no good influences or role models. This reinforced the social pathologies of those left behind. It became a classic feedback loop. The isolation caused social pathologies to metastasize. As that happened, the social problems caused the area to become more isolated. People who could afford to move out did so, leaving behind the most destitute, whose poverty was then reinforced by living and growing up around people with the same social dysfunction.

The need for low-skilled labor slowly evaporated from the American economy after 1964. There were still jobs left in construction and food service, but construction was mainly located in the suburbs where downscale whites (and later Latin American immigrants) were preferred hires over blacks. White people deny this history. For them, it just didn’t happen.

Then came the riots.

Isolated, impoverished and unemployed, preyed upon by police forces and the financial industry, and with few other options, blacks lashed out en masse. The nation erupted in race riots throughout the 1960’s, and some of these were so bad that it seemed the nation might not survive. It is difficult for those of us not born in that era to understand the fear that such people must have felt. No doubt the reactionary politics and racial resentment so typical of the Baby Boom generation was forged during those years of turmoil. The suburbs became their refuge and bulwark, a parallel economy where they could be safe from the rioters, as well as the forces of globalization and automation. Or so they thought.

In the period leading up to the riots, police racial profiling, redlining, and lack of opportunity in education, training, and jobs led local African-American residents to feel powerless and disenfranchised. In particular, many felt they had been largely excluded from meaningful political representation and often suffered police brutality. Unemployment and poverty were also very high with the traditional manufacturing base having been fully eroded and withdrawn from the Northeast US by 1967. Further fueling tensions was the final decision by the state of New Jersey to clear a vast tract of land in the central ward of its tenement buildings displacing thousands, to build the new University of Medicine and Dentistry facility.

[M]any African Americans, especially younger community leaders, felt they had remained largely disenfranchised in Newark despite the fact that Newark became one of the first majority black major cities in America alongside Washington, D.C. In sum, the city was entering a turbulent period of incipient change in political power. A former seven-term congressman representing New Jersey’s 11th congressional district, Mayor Hugh Addonizio (who was also the last non-black mayor of Newark) took few steps to incorporate blacks in various civil leadership positions and to help blacks get better employment opportunities. Black leaders were increasingly upset that the Newark Police Department was dominated by white officers who would routinely stop and question black youths with or without provocation. Despite being one of the first cities in the U.S. to hire black police officers, the department’s demographics remained at odds with the city’s population… Only 145 of the 1322 police officers were black (11%), mirroring national demographics, while the city remained over 50% black.

This unrest came to a head when two white Newark policemen, John DeSimone and Vito Pontrelli, arrested a black cabdriver, John Weerd Smith. After signaling, Smith passed the double parked police car, was then pursued and pulled over by the officers. He was arrested, beaten by the officers and taken to the 4th Police Precinct where he was charged with assaulting the officers, and making insulting remarks. Residents of Hayes Homes, a large public housing project, saw an incapacitated Smith being dragged into the precinct, and a rumor was started that he had been killed while in police custody (Smith had in fact been released in the custody of his lawyer). When police rushed out of their station wearing hard hats and carrying clubs, people began to throw bricks, bottles, and rocks. At least five police officers were struck by stones, according to one policeman. Some residents went to City Hall and shouted angry protests. After midnight false alarms caused fire engines to race around a six block area along Belmont Avenue in the ghetto area. Looters smashed windows, and threw merchandise onto sidewalks. According to police, liquor stores were the main target of looters.

1967 Newark riots (Wikipedia)

It’s no coincidence that Richard Nixon ran on a “law and order” platform in 1968 and made it the cornerstone of his campaign. He was appealing to whites using the same rhetoric you hear today with dog-whistle phrases like “silent majority” and promising to put down the riots and keep blacks in their place. With his election, two things happened. The Republicans transformed into a white ethnic party. And the policy towards the black underclass would now become based around a policy of heavily militarized internal police forces and mass incarceration.

The drug war was initiated at this time as a pretext for this action, as John Erlichman admitted out in an interview:

“We knew we couldn’t make it illegal to be either against the war or black, but by getting the public to associate the hippies with marijuana and blacks with heroin, and then criminalizing both heavily, we could disrupt those communities. We could arrest their leaders, raid their homes, break up their meetings, and vilify them night after night on the evening news…”Did we know we were lying about the drugs? Of course we did…”

Nixon aide: ‘War on Drugs’ created to target ‘black people,’ anti-war protesters (UPI)

The whites who fled to the suburbs carried with them a profound racial grudge and a newly-found visceral hatred of the Federal Government spurred by Civil Rights that led to the creation of the modern Republican party as we know it out of the previous incarnation of more moderate business-friendly Rotarian-types. That fresh hatred was successfully exploited by the business community in the funding of innumerable think-tanks, foundations, publishing houses, Web sites, university grants and scholarships, and news outlets, all devoted to the idea that government was bad and should be dismantled in favor of the “free” market. The next Republican president elected after Nixon proclaimed such bumper-sticker bromides as:

1.) “Government is the problem, not the solution,” and

2.) “The scariest words in the English language are ‘I’m from the government and I’m here to help.'”

Reagan also touted Cadillac-driving welfare queens, as well as a host of other dog-whistle words and phrases such as ‘state’s rights’. Occasionally, racial appeals would be more direct, such as the infamous Willie Horton ads deployed by George Bush Sr.

You start out in 1954 by saying, “Nigger, nigger, nigger.” By 1968 you can’t say “nigger” — that hurts you. Backfires. So you say stuff like forced busing, states’ rights and all that stuff. You’re getting so abstract now [that] you’re talking about cutting taxes, and all these things you’re talking about are totally economic things and a byproduct of them is [that] blacks get hurt worse than whites. And subconsciously maybe that is part of it. I’m not saying that. But I’m saying that if it is getting that abstract, and that coded, that we are doing away with the racial problem one way or the other. You follow me — because obviously sitting around saying, “We want to cut this,” is much more abstract than even the busing thing, and a hell of a lot more abstract than “Nigger, nigger.”

https://en.wikiquote.org/wiki/Lee_Atwater

Suburban white Americans ate this stuff up. The race riots had radicalized them. What once was confined to the racially-tinged politics of the South went nationwide as whites flocked to the Republican banner. At the same time, politics became more about cheering for your “team” than any sort of consideration of individual candidates’ abilities or honesty, or sensible, rational debates about public policy. Politics became identity politics due to race, beginning the nation’s sad slide to third-world status.

With this ramping up in the name of law-and-order, conditions in African-American ghettos became ever more oppressive, in ways that have only recently come to light:

The Ferguson Kleptocracy (Marginal Revolution)

Ferguson and the Modern Debtor’s Prison (Marginal Revolution)

Ferguson judge behind aggressive fines policy owes $170,000 in unpaid taxes (The Guardian)

Ferguson lawsuit sues city over alleged jailing of people too poor to pay fines (The Guardian)

The blacker a city is, the more it fines its residents (especially black ones) (BoingBoing)

…The 13th Amendment to the Constitution bans slavery except for those convicted of crimes. And it gives the local and federal governments the authority to impose “slave” laws for convicts, of all races. This allows state governments and the feds to practice “convict” laws against everyone convicted. Such “laws” legalize the practice of refusing shelter or housing to convicts, preventing them from voting or running for an electoral office, and keeping them off jury duty. They also limit convicts’ right to public education, bar them from buying weapons for self defense, deny them public benefits (e.g., Social Security, Medicare, Medicaid), outlaw guardianship and executor/executrix rights, reject employment, and more.

Bear in mind that there are 2.3 million people currently incarcerated. An educated guess places twice that many as having been released, or on parole or probation, because convict laws remain in effect. And don’t forget the collateral miseries that befall families, who can lose their houses if a son or daughter violates a “convict” law…Black men represent 14 percent of the USA’s general population and 40 percent of its prison population.

The new Jim Crow inherits the “racial bribe” from slave days (Freedom Socialist Party)

2. Milwaukee

It is well-known that Milwaukee is one of the most racially segregated cities in the nation, by many measures THE most segregated. It’s not as well-known why.

It turns out that blacks arrived much closer to the automation-suburbanization-deindustrialization revolution here than in most other cities. The primary reasons were because 1.) There were plenty of jobs in the metropolis of Chicago just 70 miles to the south, and 2.) There were enough European immigrants and poor whites to fill the unskilled labor pool, This delayed arrival meant that no black middle class had even a chance of forming and blacks went straight to the ghetto without passing ‘Go’ or collecting $200:

Among U.S. cities, Milwaukee has long been an outlier. In the late nineteenth century, it was the most foreign city in the country: By 1890, a mere 13 percent of its inhabitants were the children of American-born parents. For most of the period between 1910 and 1960, the city was governed by Socialist Party mayors. And, as the twentieth century wore on, Milwaukee stood apart for another reason: It remained remarkably and stubbornly white. The Great Migration that had brought some six million African Americans from the South between 1910 and 1930 and in a second wave around World War II transformed just about every major city in the North—except Milwaukee. Few migrants made it past the great sponge of Chicago, in part because there wasn’t a plentiful supply of jobs to entice them:

Milwaukee’s labor market was then amply filled by European immigrants and workers from the declining timber and mining industries up north. By 1960, blacks made up nearly a quarter of Chicago’s population and nearly 30 percent of Detroit’s and Cleveland’s. In Milwaukee, they accounted for less than 10 percent of residents, the smallest proportion of African Americans in any of the 15 largest cities in the country.

It wasn’t until the ’60s that African Americans started to drift into Milwaukee in large numbers. For the next 20 years, the city offered safer streets and better schools than Chicago, and its industrial base was faring better than in many other urban areas. By 1990, Milwaukee’s black population had shot up to 30 percent. Today, it stands near 40 percent, while Hispanics make up another 17 percent.

This delayed arrival would prove highly consequential. Not long after a substantial African American community took shape, Milwaukee’s industrial base began to collapse and its manufacturing jobs disappeared. This left almost no time for the city to develop a black middle class or a leadership elite. Within short order, Milwaukee had some of the most glaring racial disparities in the country. Today, it has the second-highest black poverty rate in the United States, and the unemployment rate is nearly four times higher for blacks than for whites. The city had never been exactly welcoming to African Americans—its tight-knit enclaves of Germans, Jews, and Poles had fiercely resisted housing and school integration. But the decline of the black ghetto so soon after many of its residents had arrived made it easier for white Milwaukeeans to write off the entire African American community, or to blame it for the city’s troubles. White flight, like the Great Migration, came late to Milwaukee, but it came fast and fueled with resentment. Between 1960 and 2010, the population of the three formerly rural counties around Milwaukee County (Waukesha, Ozaukee, and Washington, or the “WOW” counties, for short) nearly tripled, to 608,000.

Scott Walker’s Toxic Racial Politics (The New Republic)

This is one of the best articles I’ve ever read on the city. Here it describes how containment is a very intentional policy enforced by Republican politicians supported by suburban whites:

Wisconsin is run by Gov. Scott Walker, the union-busting conservative Republican. His support base is the Milwaukee suburbs he used to represent as a state legislator. For more than 20 years, he has fought proposals that would make it easier for city residents to get out there.

Walker and other suburban politicians have fended off proposals for an urban-suburban light rail line. They have eliminated or shortened regional bus routes, by one estimate cutting off access to “at least 40,000 jobs” over six years. Last year, it took a lawsuit from a black advocacy group for Walker to agree to set aside $14 million, in a $1.7-billion highway renovation project, to fund three new bus routes to suburban job centres. Temporarily.

Black people, even middle-income black people, can’t just move close to the jobs. For one, they often can’t get mortgages they should qualify for. Milwaukee, Levine said, still has one of the country’s widest racial gaps in loan-denial rates. Well-off blacks are turned down about as often as very-low-income whites.

Black renters face even greater obstacles. Proposals for affordable suburban housing have drawn vitriol from white homeowners. Even when it’s pretty housing.

New Berlin is a tidy city of 40,000. Between an empty swath of “AVAILABLE BUILDING LAND” and a neighbourhood of cookie-cutter houses with two-car garages, there is a new brown-brick lowrise complex that looks like a condo at a ski resort.

It cost the city’s white mayor his political career.

The mayor, Jack Chiovatero, came out in support of a proposal for the rental development in 2010. He soon found his car windows shot out, a sign reading “n—– lover” on his lawn, and a deluge of angry voice mails. “Our city is filled with prejudice and bigoted people,” he lamented in a leaked email. He apologized, then flip-flopped to oppose the project; New Berlin voters still tried to recall him from office, then defeated him in the next election. The complex — which ended up being filled mostly by white people — was approved only after President Barack Obama’s Justice Department sued the city for discrimination.

‘Back in time 60 years’: America’s most segregated city (The Star)

Most articles about Milwaukee’s racially tinged politics emphasize not only the ultra-white suburbs, but also the outsized role talk radio plays in radicalizing them:

Over time, the two [radio talk] shows became known by a single name: “SykesBelling.” In the halls of the statehouse, Milwaukee City Hall, and area county governments, elected officials, particularly insufficiently conservative Republicans, lived in dread of denunciations by the hosts and the tsunami of angry calls from listeners that would follow. Sykes is credited with, among other accomplishments, having blocked public funding for needle-exchange programs and having helped drive into bankruptcy an urban mall after harping on security issues there. In April 2013, he played a clip of “It’s Free (Swipe Yo EBT),” a viral video produced by a right-wing activist in which an African American woman raps about liquor stores where one can allegedly use a food-stamp card. Returning to the same theme later in the year, Sykes declared, “The number of Americans who receive means-tested government benefits— welfare—now outnumbers those who are year-round full-time workers.” No other midsize city has this kind of sustained and energized conservative forum for discussion of local politics….

Milwaukee Burning (Philly.com)

Even the high-speed rail line was opposed because it might give black people chance to get out of the inner-city. This was never stated by Walker himself, only telegraphed through media surrogates.

Over the past few decades, Walker’s home turf of metropolitan Milwaukee has developed into the most bitterly divided political ground in the country—“the most polarized part of a polarized state in a polarized nation,” as a recent series by Craig Gilbert in the Milwaukee Journal Sentinel put it. Thanks to a quirk of twentieth-century history, the region encompasses a heavily Democratic and African American urban center, and suburbs that are far more uniformly white and Republican than those in any other Northern city, with a moat of resentment running between the two zones. As a result, the area has given rise to some of the most worrisome trends in American political life in supercharged form: profound racial inequality, extreme political segregation, a parallel-universe news media. These trends predate Walker, but they have enabled his ascent, and his tenure in government has only served to intensify them.

Scott Walker’s Toxic Racial Politics (The New Republic)

The Republican party in Wisconsin is animated by hatred and resentment of minorities. This is all under the surface. It’s one of those truths that “everyone knows” but no one will admit. Occasionally, however, the truth comes out:

In April 2010, Walker’s former deputy chief of staff Kelly Rindfleisch received an emailed joke from a friend about someone whose dogs supposedly qualified for welfare because they are “mixed in color, unemployed, lazy, can’t speak English and have no frigging clue who their Daddys are.”

Rindfleisch wrote back: “That is hilarious. And so true!”

The emails are around four years old but were disclosed for the first time Wednesday as part of an appeal by Rindfleisch of her conviction for campaigning while being paid to do work for Milwaukee County taxpayers.

Many of the issues at play in those emails, such as a secret email system, were already known in whole or in part. But the racial statements are new to the public.

In another email, sent in July 2010, Thomas Nardelli, Walker’s chief of staff for Walker at Milwaukee County, forwarded Rindfleisch and others a joke about someone who has what he calls a “nightmare” about turning into a black, Jewish, disabled gay man who is unemployed.

“Oh God, please don’t tell me I’m a Democrat,” the email concludes.

In the unguarded emails, other vulnerable groups also came in for criticism from Rindfleisch. She predicted that news coverage of harm to patients at the Milwaukee County Mental Health Complex wouldn’t move voters because “no one cares about crazy people.”

Newly disclosed emails reveal racist jokes by Scott Walker’s ex-aides (JSOnline)

I live here and I can tell you from personal experience this is spot on! Interestingly, Republicans who are furious about Hilary’s secret email server have spent years defending Scott Walker’s.

In Milwaukee, it became a  well-known, if never spoken out-loud secret that areas outside of the inner-city were “sundown towns” Police forces had a “wink-wink” carte blanche to do “whatever it took” to preserve “law and order” i.e. enforce segregation and put down insurrections in the ghetto. Milwaukee’s lily-white police force adopted a code of omertá under it’s notorious police chief Harold Breier, who was appointed in the riot year of 1967. America’s police state was well under way.

3. The Underlying Cause

Why was the above necessary? Simply because you had too many workers for the jobs available. African-Americans have become a “surplus population.”

The need for unskilled labor has by-and-large already been eliminated from the workforce. Let me say that again with no equivocation so that it sinks in:

The need for unskilled labor has largely already been eliminated from the workforce.

Want proof? According to Richard Serlin’s blog (citing statistics from from MIT economist Michael Greenstone and Brookings senior fellow Adam Looney):

1) “Between 1960 and 2009, the share of men [age 25 – 64] without any formal labor-market earnings for an entire calendar year rose from 6 percent to 18 percent.”

2) “The percentage of men working full time [age 25 – 64] has decreased from 83 percent to 66 percent over the same period.”

3) “Nonemployment for an entire calendar year among men without high school diplomas [age 25 – 64] increased by 23 percentage points (from 11 to 34 percent) and among those with only a high school degree by 18 percentage points (from 4 to 22 percent)”.

4) “One way to untangle the two phenomena is to examine the median earnings among all working-age men – this time including those who earn nothing at all. What appeared as stagnant earnings for workers is really an outright decline in wages for the median men of working age. The median wage of the American male has declined by almost $13,000 after accounting for inflation in the four decades since 1969…Indeed, earnings haven’t been this low since Ike was president and Marshal Dillon was keeping the peace in Dodge City.”

5) “Consider just men between the ages of 30 and 50, a group for whom retirement is rare. The median earnings of all men in this group declined by 27 percent between 1969 and 2009, which is nearly identical to the 28 percent decline for those who are 25 to 64 years old.”

6) “Surely, the most astonishing statistic to be gleaned from the trend data is the deterioration in the market outcomes for men with less than a high school education. The median earnings of all men in this category have declined by 66 percent [not a misprint] [from 1969 to 2009]. At the same time, this group has experienced a 23 percentage point decline in the probability of having any labor-market earnings. Roughly 10 percentage points of the 23 percentage points is attributable to the fact that more men are reporting disabilities, even though work in physically demanding jobs has been declining for many decades. Men with just a high school diploma did only marginally better. Their wages declined by 47 percent and their participation in the labor force fell by 18 percentage points.” (page 13)

Robot/AI revolution decimating employment and wages, not just could it happen, has it largely happened already? Surprising data (Richard Serlin)

The only reason jobs were increasing at all during this period was the entry of women into the workforce, which increased the supply of workers, and thus lowered their value. Initially, these positions were treated as “second income” jobs, which also aided in lowering pay, as well as being disproportionately in lower-paying service jobs to begin with. Yet the effects were felt across the population.

Now, it’s true that all of these statistics are just for men. The total number of jobs has increased, due to women entering the labor force en masse, and the population increasing. Still: The total labor force participation rate, which considers all of this, has declined in the last 15 years from about 67%, where it was throughout the 1990’s, to about 64% (from the Current Population Survey).

Male and Female Prime-Age Employment Rates Since 2000 (Brad DeLong)

I submit that the reason these shocking statistics have been absent from the national discourse is because they have been primarily visited upon the black community, who could then be simply written off and ignored, since most white Americans considered them to be “lazy” anyway.

To cope with this destruction of good-paying jobs, we turned to a systematic policy of militarized police and mass incarceration. The United States incarcerates more of its own people than any state in the history of the world. Even if all nonviolent drug offenders were freed, we would still have the largest prison population of any major industrialized nation.

Everything just worked out OK???

The Black community were the sacrificial lambs offered up on the altar of globalization and automation. They also became the scapegoats for everything wrong with the country. The third-world workers took the jobs African American depended on, rendering them redundant to the economic order. Note that all during this time, economists and the media were insisting that none of this was having a negative effect on the workforce, even as the ghettos spiraled into post-apocalyptic hellholes. Yet this has been ignored since the 1960’s!

In the eyes of whites, it wasn’t joblessness and segregation but the poor character of blacks which was to blame, a sentiment which remains to this day. As I pointed out in my previous post, blaming problems with employment and the failure of the Market on “poor character” has been the standard tactic going all the way back to the Irish Famine in the 1840’s, and it is very deliberate. These days, descendants of those famine survivors are busily and eagerly demonizing a new set of scapegoats further down the food chain.

The nation naively thought that the creation of a massive militarized internal police force to suppress a large portion of the population somehow wouldn’t effect it. Yet it transformed the nation. It transformed America into a militant police state, particularly, but not exclusively for black citizens.

But the underlying problems never went away. They just festered under the surface, waiting for a match to set them alight again. It turns out that criminalizing poverty doesn’t make it go away. And it’s expensive.

It’s pretty clear from the vitriol directed against Black Lives Matter that the Republicans are still seen as the party to keep blacks in their place. It’s widely known that Donald Trump based his acceptance speech on  Nixon’s Law and Order speech. I found it amusing in the wake of that  speech how many media outlets bombarded us with mountains of statistics  telling us about how the crime rates are actually at historic lows.

As if it was really about “crime” in the first place. As if reasoning and statistics ever mattered to a frightened electorate. Are the media that naive, or do just they think we are?

Do they really not know what’s going on here?

If you read the comments online, you can see that white people pretty much  consider African Americans as little more than animals in need of corralling. There are constant references to Obama desiring “race war” and  somehow inciting the riots. Supposedly George Soros is single-handedly funding BLM to destabilize the United States. Either that or the violence was deliberately staged by Democrats to elect Hillary Clinton (despite such race riots clearly favoring Trump). Video of blacks baying for whites’ blood and calling for violence in the suburbs went viral on the internet and were circulated enthusiastically and obsessively in right-wing internet media. These were claimed to be “censored” by a news media that is controlled by “Leftists” and “Liberals.”  And, of course, there is plenty of fetishistic gun-stroking. Clearly, there is no logic or rationality at work here.

And that explains much of this election. It’s pretty much a replay of 1968 all over again.

1968 and all that: how Donald Trump channels the spirit of a most violent year (The Guardian)

The reason I write so often about this is because it illustrates so much about
where we are headed. What has politics in the era of 1967-2016 taught us about the effects of globalization and automation on the population?

1.) Surplus populations will continue to be isolated and marginalized–and
it won’t just be based on race.

I find it exceedingly amusing that the same people who stockpile weapons to protect themselves from the “tyranny” of a government that is supposedly out of control condemn African Americans for rioting, and loudly cheer on the government forces riding in in tanks and firing tear gas to put them down. I guess their definition of tyranny is simply taxes that are too high on white people. In any case, these riots show what is in store for any group that gets out of hand and decides to embark on a course of action besides self slaughter.

2.) People redundant to the economic order will be eliminated. This will be wither direct or indirect.

In the case of African-Americans, its was very direct. The ghetto is basically an open-air prison, as we saw above. A very specific policy of predation and incarceration was pursued leading to the wholesale cultural collapse of the black community and the social pathologies which characterize it today. It may be beyond saving.

In the case of the white community it is more indirect. It’s often been said that white people don’t riot. That’s true: because of their culture they internalize their failures and self-destruct instead, which from the perspective of the ruling class is much less messy and more convenient. Poor whites have chosen to eliminate themselves from society via suicide or addiction, placing the fault on themselves in their hyper-individualist culture where the individual alone is responsible for their own failing and socially isolated from those around them. As has been pointed out elsewhere, the increase of the white mortality rate parallels that of the outbreak of the deadly disease AIDS in the 1980’s.

The analysis by Dr. Deaton and Dr. Case may offer the most rigorous evidence to date of both the causes and implications of a development that has been puzzling demographers in recent years: the declining health and fortunes of poorly educated American whites. In middle age, they are dying at such a high rate that they are increasing the death rate for the entire group of middle-aged white Americans…

“Wow,” said Samuel Preston, a professor of sociology at the University of Pennsylvania and an expert on mortality trends and the health of populations, who was not involved in the research. “This is a vivid indication that something is awry in these American households.”

“Stunning” Rise in Death Rate, Pain Levels for Middle-Aged, Less Educated Whites (Naked Capitalism)

When pundits blamed white people for a ‘culture of poverty‘ (The Week)

It’s likely that individual fault will continue to be seen as the root cause of larger and larger portions of the population being made redundant and eliminated. The birth rate in America is at historic lows for these reasons. We’ve seen that riots do no good. A lot of older white voters are turning to Trumpism, more out of hatred of out-groups than any plan to make things better for themselves or their children. It’s likely that race-baiting and identity politics will continue to be highly effective means of keeping the population isolated and divided until the United States ceases to be an effective nation-state, which we are perilously close to already.

There’s always some sort of rationalization for people in the pecking order to justify the treatment of those below them. At different levels of society, the rationalizations may be different, but they are always there nevertheless. It is the most effective form of social control ever devised.

The problem is, with the need for labor ever-diminishing, and with an overpopulated third world able to supply more than enough employees for the rest of time between outsourcing and immigration, there is no incentive for the leaders of wealthy industrialized nations to do anything but feed their populations into the meat grinder of globalization and keep them distracted and at each other’s throats. Either that or ineffective palliative measures which will only help individuals and not solve the large problem (more education, start-ups, etc.). Elites in these societies are protected by their police and surveillance states and have more in common with each other than they do their own citizens. The only options are a slow liquidation of internal populations with all of the political instability and rioting that entails, or some sort of black-swan like collapse event. Neither outcome seems desirable.

After all these words I’m still not sure if I’ve said what I want to say, nor do I have any solutions besides declaring this former British colony a failed experiment and starting over from scratch.

The Philosophy of the Market

Some additional loose ends on TGT:

1. Markets and Energy

I’m sure readers are well aware of the overlap between the rise of the self-regulating globalized Market as described by Polanyi and the expansion of energy use supplied by increasing exploitation of fossil fuels. The explosion of energy production is what made the global self-regulating market a possibility. This allowed self-sufficiency to be cast aside, and enabled the growth of a global monetary economy based on debt. The expansion of industry also provided plenty of jobs for the newly commoditized labor. What fascinates me, though, is the overlap between free market ideas and energy usage. According to Polanyi, market ideas became predominant after 1820, and accelerated after 1830. As we can see from the chart below, this tracks pretty closely to increases in fossil fuel use:

https://ourfiniteworld.com/2012/03/12/world-energy-consumption-since-1820-in-charts/ (Our Finite World)

Now, what will happen as exponential growth comes to an end? As so many people have pointed out, the Market is dependent upon permanent growth. This is why such a novel system could never have come into place before it did. The problem is, it cannot be sustained. Additionally, the current distribution of wealth rests upon the idea that in a growing economy, ownership of wealth is not a zero-sum game. That is, massive the amounts of wealth accruing to the one percent are a driver of even more wealth for the rest of us! This was always a dubious proposition, to put it mildly, but in a low/no growth world, it is demonstrably false. Certainly this growth contributed to the “Hundred Years’ Peace” as surely as haute finance.

2. Institutional Blindness

Conventional economics tends to emphasize the growth and development of institutions, specifically pro-capitalist institutions like absolute ownership of private property, low taxes on wealth accumulation, commodification of land and labor, usury, limited government, and the elimination of tariffs and trade barriers, as the source of our modern economic growth and prosperity. This is the thesis promoted in all economics textbooks and by economic historians like the previously cited Douglass North.

But what if causality is reversed? what if the use of fossil fuels is the root cause of modern prosperity, and we’ve been misattributing it to capitalist institutions that actually cause more harm than good? In essence, this would make economics into one giant Cargo Cult. By convincing us that the wealth-concentrating institutions of capitalism are the root cause of modern living standards, economists prevent any attempt at reform by telling us that we will fall back into the Malthusian Trap by modifying them. But what happens when these aristocratic pro-capitalist institutions run up hard against hard limits thanks to fossil fuels and other environmental limitations? It seem like this is a driver of modern Neofeudalism. Economics is dedicated to furthering this misunderstanding through its dissemination of simplistic libertarian propaganda under the guise of legitimate scientific inquiry.

3. The Irish Case

One thing I was very surprised at in TGT is the lack of mention of the Irish Potato Famine (an Gorta Mór). My guess is that scholarship on the famine was lacking in 1944 when TGT was written. Not only does it back up Polanyi’s thesis, but from a historical standpoint it shows the first attempt at forcibly imposing a market economy upon a pre-market social structure based on the theories of market liberals like Adam Smith. The tragic results of this free-market “experiment” by the English rulers of Ireland was mass emigration and the deaths of millions of people. To this day, Ireland’s population has not recovered. This article tells the story:

Both authors [John Kelly and Tim Pat Coogan] describe the folly and cruelty of Victorian British policy towards its near-forsaken neighbour in detail. The British government, led by Sir Charles Trevelyan, assistant secretary to the Treasury (dubbed the “Victorian Cromwell”), appeared far more concerned with modernising Ireland’s economy and reforming its people’s “aboriginal” nature than with saving lives. Ireland became the unfortunate test case for a new Victorian zeal for free market principles, self-help, and ideas about nation-building.

Ireland still functioned as a basic barter economy—few hands exchanged money and the peasant population relied on their potato crops, which had failed. But rather than provide aid and establish long-term goals for recovery, Trevelyan and his cohorts saw a chance to introduce radical free-market reforms. As Mr Kelly notes, Trevelyan sent his subordinates to Ireland equipped with Adam Smith’s writings, like missionaries sent to barbarian lands armed with bibles. One absurd project to introduce a money economy was part of the public works scheme. Peasants were hired to build unnecessary roads in order to earn money to buy food. But wages were often not enough to match the high food prices enforced by Trevelyan as a measure to attract imports to Ireland, especially from America.

http://www.economist.com/blogs/prospero/2012/12/irish-famine

There was plenty of other food to eat besides potatoes, but in an economy where prices were set by “free and open” markets, the people could not afford to buy any of it. To cover up this tragic failure, the Irish themselves were blamed for their own plight: viciously demonized as lazy, morally inferior cretins having too many kids, and ridiculed for their manners, speech and dress:

The belief that the famine was God’s intention also guided much of Britain’s policy. They viewed the crop failures as “a Visitation of Providence, an expression of divine displeasure” with Ireland and its mostly Catholic peasant population, writes Mr Kelly. Poverty was considered a moral failure. Within a few years Irish immigrants flooded the port cities of Liverpool in England, Montreal and Quebec in Canada and New York. The emigrant was considered an object of horror and contempt, as Mr Kelly writes: “pedestrians turned and walked the other way; storekeepers bolted the door or picked up a broom; street urchins mocked his shoeless feet, filthy clothing and Gaelic-accented English.” Throughout the book, Mr Kelly bemoans the tragic effects of human folly, neglect and Victorian ideology in causing the famine and its aftermath. He rejects the charge of genocide. Tim Pat Coogan, however, takes a more radical view in “The Famine Plot”.

His most compelling argument for British negligence is in the final chapter, in which he recalls the xenophobic images and words commonly used to caricature the Irish in Victorian England. Trevelyan and other architects of the famine response had a direct hand in filling the newspapers with the “oft-repeated theme that the famine was the result of a flaw in the Irish character.” And Punch, a satirical magazine, regularly portrayed “‘Paddy’ as a simian in a tailcoat and a derby, engaged in plotting murder, battening on the labour of the English workingman, and generally living a life of indolent treason,” explains Mr Coogan. The result of such dehumanising propaganda was to make unreasonable policy seem more reasonable and just.

Sound familiar? It’s been the “free market” playbook ever since!

Note that the “Starving Irishman” of the nineteenth century was the precursor to the “Starving African” of the twentieth, and both were blamed on out-of-control reproduction and laziness rather than free market ideas. Note also that out-of-control reproduction and starving masses were not a fixture of Africa or India before colonialism. That’s because before the global Market, people’s breeding habits were adjusted to be in line with the prevailing local conditions. Once you start dumping massive amounts of low-cost subsidized grain from overseas on these countries, reproduction swells to the point where everyone becomes dependent on those imports. Thanks to these massive inflows of imported resources, population outstrips the local carrying capacity.

This is a good thing from an industrial standpoint, because it means lots of cheap labor for the factories and sweatshops, and the more desperate the people, the cheaper the labor. That’s why leaders always favor overpopulation–it provides cheap labor, and they can insulate themselves from its ill effects thanks to Market mechanisms (cheap labor provides high profits for you to provide plentiful resources for yourself and your family in a Market economy). The problem is, a spike in food prices causes catastrophe for everyone else. While the movement of grain around the world has indeed alleviated more famines than it’s caused so far, it’s led to tragic overpopulation and sporadic outbreaks of hunger.

4. The Ideological Underpinnings of the Market

Another thing to note is the development of an ethos that supports the market ideology. It at this time that the philosophy of “self help” becomes a critical feature of capitalism. That is not a coincidence! This phrase–Self Help–was actually the title of the first book outlining this philosophy for British audiences around the time of the Irish Famine by the perversely-named Samuel Smiles. It was called “The Bible of mid-Victorian liberalism.”

Its core philosophy was that poverty and misery can only be caused by “poor character,” and that giving assistance to poor people will only make them degenerate and ultimately worse off, while suffering will spur them to “self improvement.” He gives numerous examples of early inventors and industrialists who were born poor but pulled themselves up by their bootstraps by virtue of thrift and industriousness. “Hard work,” business acumen and entrepreneurship are lionized.

Furthermore, He also argues that a nation’s character is nothing more than the aggregate of the character of the individuals of that nation. Thus, giving help to the poor and downtrodden will invariably drag down the character of the entire nation! I encourage you to read it’s nostrums to see the beginnings of modern-day “Conservative” philosophy. It begins (emphasis mine):

“HEAVEN helps those who help themselves” is a well-tried maxim, embodying in a small compass the results of vast human experience.  The spirit of self-help is the root of all genuine growth in the individual; and, exhibited in the lives of many, it constitutes the true source of national vigour and strength.  Help from without is often enfeebling in its effects, but help from within invariably invigorates.  Whatever is done _for_ men or classes, to a certain extent takes away the stimulus and necessity of doing for themselves; and where men are subjected to over-guidance and over-government, the inevitable tendency is to render them comparatively helpless.

Even the best institutions can give a man no active help.  Perhaps the most they can do is, to leave him free to develop himself and improve his individual condition.  But in all times men have been prone to believe that their happiness and well-being were to be secured by means of institutions rather than by their own conduct.  Hence the value of legislation as an agent in human advancement has usually been much over-estimated.  To constitute the millionth part of a Legislature, by voting for one or two men once in three or five years, however conscientiously this duty may be performed, can exercise but little active influence upon any man’s life and character.  Moreover, it is every day becoming more clearly understood, that the function of Government is negative and restrictive, rather than positive and active; being resolvable principally into protection—protection of life, liberty, and property.  Laws, wisely administered, will secure men in the enjoyment of the fruits of their labour, whether of mind or body, at a comparatively small personal sacrifice; but no laws, however stringent, can make the idle industrious, the thriftless provident, or the drunken sober.  Such reforms can only be effected by means of individual action, economy, and self-denial; by better habits, rather than by greater rights.

The Government of a nation itself is usually found to be but the reflex of the individuals composing it. The Government that is ahead of the people will inevitably be dragged down to their level, as the Government that is behind them will in the long run be dragged up.  In the order of nature, the collective character of a nation will as surely find its befitting results in its law and government, as water finds its own level.  The noble people will be nobly ruled, and the ignorant and corrupt ignobly.  Indeed all experience serves to prove that the worth and strength of a State depend far less upon the form of its institutions than upon the character of its men.  For the nation is only an aggregate of individual conditions, and civilization itself is but a question of the personal improvement of the men, women, and children of whom society is composed.

National progress is the sum of individual industry, energy, and uprightness, as national decay is of individual idleness, selfishness, and vice.  What we are accustomed to decry as great social evils, will, for the most part, be found to be but the outgrowth of man’s own perverted life; and though we may endeavour to cut them down and extirpate them by means of Law, they will only spring up again with fresh luxuriance in some other form, unless the conditions of personal life and character are radically improved.  If this view be correct, then it follows that the highest patriotism and philanthropy consist, not so much in altering laws and modifying institutions, as in helping and stimulating men to elevate and improve themselves by their own free and independent individual action.

http://www.gutenberg.org/files/935/935-h/935-h.htm

So the answer to the starving victims of the Irish Famine, as certainly it is for the denizens of American ghettos, Appalachia, or the Rust Belt today, is simply to “help yourself.”

This was the introduction of “individualist” philosophy – society and its basic institutions are irrelevant; you are a lone individual and are able to accomplish literally anything through dint of sufficient will and hard enough work. Markets rely on this philosophy as surely as they do on prices and profits. Any failures of the system can be pawned off on individual fault and thus the system cannot fail the people, it can only be failed by the people themselves. It’s also the introduction of the apotheosis of hard work and self denial as the foundation of everything that’s good, and the idolization of the wealthy as “great men” who got where they are by working harder than everyone else and who pull society forward toward constant and neverending progress. From chapter 10:

Any class of men that lives from hand to mouth will ever be an inferior class.  They will necessarily remain impotent and helpless, hanging on to the skirts of society, the sport of times and seasons.  Having no respect for themselves, they will fail in securing the respect of others.  In commercial crises, such men must inevitably go to the wall.  Wanting that husbanded power which a store of savings, no matter how small, invariably gives them, they will be at every man’s mercy, and, if possessed of right feelings, they cannot but regard with fear and trembling the future possible fate of their wives and children.  “The world,” once said Mr. Cobden to the working men of Huddersfield, “has always been divided into two classes,—those who have saved, and those who have spent—the thrifty and the extravagant.  The building of all the houses, the mills, the bridges, and the ships, and the accomplishment of all other great works which have rendered man civilized and happy, has been done by the savers, the thrifty; and those who have wasted their resources have always been their slaves.  It has been the law of nature and of Providence that this should be so; and I were an impostor if I promised any class that they would advance themselves if they were improvident, thoughtless, and idle.”

Prior to works like this, individualism was not the guiding philosophy for the economy nor for society itself (remember, they were embedded), Christian charity was. That needed to die in order for the traditional structures of reciprocity, redistribution and householding to be replaced by the impersonal Free Market.

The indifference to the suffering and destitution of those living under the market’s ministrations is crucial to its continuance. The “cult of individual failure” is how this is propagated (read any comments section on the Web). Note how much this philosophy underlies our own attitudes in America toward the poor: they deserve it, it’s their own fault, they are inferior, etc. Only when a majority are made suddenly destitute, as in the Great Depression, does this philosophy fall out of favor.

Eat to much sugar? Obese? It’s your fault for not having enough self-discipline, despite subsidized prices and billions of dollars in advertising put in your face daily. Drink too much? It’s your fault, not that of your genes. Can’t afford a house in an urban area? It’s your fault for not studying hard enough or picking the wrong major. Can’t feed your family? It’s your fault for having children you can’t afford; children are not a blessing, they are a luxury good. Live in an economically depressed area? Just hop in the U-Haul and move, you lazy bum! It allows indifference to the Market’s faults. The Just World/Self Help/It’s Your Fault philosophy is a critical underpinning of the self-regulating market economy. The wholehearted (cold hearted?) embrace of this doctrine is a hallmark of those who support conservative political philosophies (Republicans and Libertarians in the US and Tories in the UK).

It’s a short leap from that to full-bore Social Darwinism. It’s no coincidence that this philosophy, too, appeared under specific economic circumstances, namely the dislocation after the Panic of 1873, which was called the Great Depression at the time (later renamed to the Long Depression). This was also a period of unrestricted free trade and its correspondent extreme wealth and income inequality. At this time, Darwinism was pressed into service to explain how this was the “natural” order of society:

Social Darwinism is a name given to various theories of society which emerged in the United Kingdom, North America, and Western Europe in the 1870s, and which claim to apply biological concepts of natural selection and survival of the fittest to sociology and politics. According to their critics, at least, social Darwinists argue that the strong should see their wealth and power increase while the weak should see their wealth and power decrease. Different social-Darwinist groups have differing views about which groups of people are considered to be the strong and which groups of people are considered to be the weak, and they also hold different opinions about the precise mechanisms that should be used to reward strength and punish weakness. Many such views stress competition between individuals in laissez-faire capitalism…

In 1883, [William Graham] Sumner published a highly influential pamphlet entitled “What Social Classes Owe to Each Other”, in which he insisted that the social classes owe each other nothing, synthesizing Darwin’s findings with free enterprise Capitalism for his justification. According to Sumner, those who feel an obligation to provide assistance to those unequipped or under-equipped to compete for resources, will lead to a country in which the weak and inferior are encouraged to breed more like them, eventually dragging the country down. Sumner also believed that the best equipped to win the struggle for existence was the American businessman, and concluded that taxes and regulations serve as dangers to his survival.

https://en.wikipedia.org/wiki/Social_Darwinism

Meet the man who invented the GOP’s defense of the wealthy—in 1883. (Slate)

Note that our circumstances are very similar to those of back then. The underpinnings are the same – the futile attempts to create the Global Self-Regulating Market. This time the dollar unites the world instead of gold, and just as precariously. Just as back then, there is a “double movement.” Back then it was populists like William Jennings Bryan and the Progressive movement. Today is it Sanders, Trump, Occupy, the Fight for Fifteen, the Five Star Movement Nuit Debout, the Igninados, etc. And, like then, the wealthy and powerful are using Social Darwinism to justify the current state of affairs, this time tastefully rebranded as the “Human Biodiversity Movement.”

Fun Facts

It’s been a while, but here is your latest batch of ‘fun’ facts:

Even though Russia has the world’s largest reserves of natural gas, a third of the country’s households are not connected to gas pipelines.
http://www.bbc.com/news/blogs-news-from-elsewhere-36170117

America now has nearly 5 PR people for every reporter, double the rate from a decade ago.
http://muckrack.com/daily/2016/04/14/america-now-has-nearly-5-pr-people-for-every-reporter-double-the-rate-from-a-decade-ago/

In 2006, 49% of pregnancies were unintended.
http://www.cdc.gov/reproductivehealth/unintendedpregnancy/

GPS devices sold in USA stop working if they reach an altitude of 60,000 feet or a speed of 515 m/s to prevent them from being used as missile guides.
https://en.wikipedia.org/wiki/Global_Positioning_System#Restrictions_on_civilian_use

America’s student-loan debt grows $2,726 every second.
http://www.marketwatch.com/story/every-second-americans-get-buried-under-another-3055-in-student-loan-debt-2015-06-10

The Eiffel tower weighs less than the cylindrical column of air that it sits in.
http://tywkiwdbi.blogspot.com/2016/04/the-eiffel-tower-isnt-very-heavy.html

In its first three decades, the Soviet Union urbanized at about the same rate as China since 1978.
http://marginalrevolution.com/marginalrevolution/2016/05/soviet-union-fact-of-the-day.html

Nearly one in six young men (between the ages of 18-34) in the U.S. were either jobless or incarcerated in 2014.
http://www.breitbart.com/big-government/2016/05/09/cbo-nearly-1-6-young-men-u-s-jobless-incarcerated/

American toddlers have shot 23 people this year.
http://boingboing.net/2016/05/09/american-toddlers-have-shot-23.html

Netflix cuts out over 6 days of commercials from your life per year, compared to cable TV.
http://www.businessinsider.com/netflix-subscribers-save-160-hours-of-commercials-compared-to-cable-2016-5

In April, commercial bankruptcies were up 32 percent on a year over year basis, and Chapter 11 filings were up 67 percent on a year over year basis.
http://theeconomiccollapseblog.com/archives/11-signs-that-the-u-s-economy-is-rapidly-deteriorating-even-as-the-stock-market-soars

If 10% of US Smokers Quit, $63 Billion Would be Saved in the US Alone.
http://sciencenewsjournal.com/10-smokers-quit-63-billion-saved/

Beyoncé “Empower Women” clothing range is made by ‘sweat shop labourers on £4.30 a day’
http://www.telegraph.co.uk/news/2016/05/15/beyonc-clothing-range-is-made-by-sweat-shop-labourers-on-430-a-d/

When Michael Foot was put in charge of a nuclear disarmament committee, The Times reportedly announced the news with the headline “Foot Heads Arms Body.”
https://en.wikipedia.org/wiki/Michael_Foot#Resignation

The American Native American population has recently approached the pre-Columbian population.
http://www.samuelwbennett.com/native-and-white-american-population-past-to-present/

1/3 of All Cash is Owned by 5 US Tech Companies
http://www.usatoday.com/story/money/markets/2016/05/20/third-cash-owned-5-us-companies/84640704/

The Chinese government fabricates nearly 490 million social media posts every year.
http://www.bbc.com/news/magazine-36343744

The cost of “Prometheus” movie budget would be enough to keep the search for real extraterrestrial life going for 52 years.
https://www.reddit.com/r/todayilearned/comments/4ke0xq/til_that_the_cost_of_prometheus_movie_budget/

The largest private landowners in the USA own more land than some states
http://i.imgur.com/lYgqLan.png

Depression, anxiety and aggression are found in 20% of Russian teenagers; the Western average is no higher than 5%. Suicidal thoughts come into the minds of 45% of Russian girls and 27% of young men.
http://www.bbc.com/news/world-europe-36379815

In the 1990s murder coverage increased more than 500 percent in the U.S. — even as homicide rates dropped more than 40 percent.
http://www.huffingtonpost.com/entry/whats-working-all-the-news_b_6603924.html?section=india

The number of cars registered in the U.S. doubled between 1914 and 1916, reaching 3.4 million (compared to 188 million in 2014).
http://phenomena.nationalgeographic.com/2016/05/20/this-1916-guide-shows-what-the-first-road-trips-were-like/

An estimated 900 Jehovah’s Witness followers die every year as a result of refusing blood transfusions.
http://www.krev.info/library/pocetumrti.pdf

Even if all non-violent drug offenders were released from federal and state prisons, the United States would still have the highest incarceration rate in the world.
http://fivethirtyeight.com/datalab/releasing-drug-offenders-wont-end-mass-incarceration/

More than 28,000 people have disappeared in Mexico in the decade since the country began its war on drugs
http://www.telesurtv.net/english/news/28000-People-Missing-in-Mexico-in-the-last-Decade-Report-20160702-0018.html

The average American woman now weighs as much as the average 1960s man.

The average American is 33 pounds heavier than the average Frenchman, 40 pounds heavier than the average Japanese citizen, and a whopping 70 pounds heavier than the average citizen of Bangladesh.

Together, the world’s adult human beings added up to 287 million tons of biomass in 2005. If every country had the same weight distribution as the U.S., the world would be 58 million tons fatter, an increase of 20 percent.
https://www.washingtonpost.com/news/wonk/wp/2015/06/12/look-at-how-much-weight-weve-gained-since-the-1960s/

The latest federal count, conducted in January 2015, placed the number of homeless people in the US at 564,708. That’s almost as many people who live in the entire state of Wyoming.
https://www.theguardian.com/us-news/2016/jul/09/homelessness-us-election-2016-san-francisco-voting

70 percent of all Indian motel owners — or a third of all motel owners in America — are named Patel
www.nytimes.com/1999/07/04/magazine/a-patel-motel-cartel.html?pagewanted=all

We would only need 0.7 earths if every country used resources like India. We would need 5.4 if everyone lived like Australia.
http://qz.com/753603/as-of-today-we-have-used-up-all-the-earths-resources-for-2016/

Though the Empire State Building is less than half the height of the Burj Kalifa, it weighs two-thirds as much.
http://www.bbc.com/future/story/20160808-will-the-skyscrapers-outlast-the-pyramids

Karl Polanyi and the Modern World – Part 7

“I grew up on the butt-end of the English class system. I’m an orphan and I was raised by my grandmother. So I am the greatest example of inter-generational social mobility you’re ever going to see, because I’m a freaking Ivy League professor…How did I do that? because of this thing that gets blamed called the welfare state, that bloated, paternalist, out-of-control, [dis]incentivizing, demotivating piece of crap called the welfare state…”
–Mark Blyth

When I first started writing about The Great Transformation, I had intended to just write one post. That was before I discovered the richness and complexity of Polanyi’s ideas. It also dovetailed well with some other stuff I was already working on regarding the ancient economy and the roots of social institutions.

Here are a couple of good short summaries of Polanyi’s ideas on the Web:

Summary of the Great Transformation by Polanyi (WEA Pedagogy Blog)

Karl Polanyi Explains It All (The American Prospect)

Populist Backlash and Political Economy (Brad DeLong)

The latter one is interesting. It’s a summary of the core ideas of both Polanyi and John Maynard Keynes. The author, Brad DeLong writes: “I find it alarming that here we are, more than one a half decades into the twenty-first century, and the wisdom and true knowledge that is state-of-the-art as far as political economy is concerned is still to be found in the writings of John Maynard Keynes and Karl Polanyi.” The Real World Economics Review blog, a blog of “heterodox” economists and critics of the Neoclassical approach to economics, picked Keynes and Polanyi’s books as #1 and #2 of their ten most influential economics books of the last 100 years. This may explain DeLong’s complaint: one reason why the works of those two economists are ignored is because they had to be ignored in order to make room for the Chicago School free market fundamentalism which has gutted the commons and made the billionaires so much wealthier, even in an era of anemic growth. It’s also interesting to note that DeLong is one of the few economists to openly call himself a Neoliberal (despite the fact that actual Neoliberals typically avoid using that term).

I would be remiss if I didn’t at least mention Neoliberalism. As we saw in our survey, markets are created through government intervention by breaking up pre-existing social structures, especially in a crisis, and imposing them from above. Philip Mirowski, in his book about Neoliberalism Never Let a Serious Crisis Go To Waste, points out that Neoliberals are not in favor of small government at all, rather they desire a powerful state that can impose markets onto every aspect of human life.

He says that in the case of Market failure, the Neoliberal playbook consists of the following steps:

  • Create a “fog of doubt” i.e. confusion, over whether markets really failed at all. This usually takes the form of scapegoating some sort of government “interference” without which things would have been fine. For example, blaming the housing bubble and bust on  government forcing banks to lend to minorities. This has been conclusively disproven, yet market fundamentalists can still insist it’s true because they are in an intellectual echo chamber.
  • Create “new and stranger” markets to solve problems with the previous markets. This has the effect of commodifying even more things, including all of nature itself. The classic case here is creating carbon “cap-and-trade” schemes to deal with climate change rather than just capping emissions.
  • Argue that the market will call forth some sort of “innovation” that will solve the problem. In the case of global warming, this manifests, for example, as Elon Musk worship. The private sector is infinitely innovative, and so long as the “incentives” are right, the Market will solve any problem as long as government doesn’t get in the way. Electric cars, genetically-modified crops, fracking and geoengineering are all proof of this.

He also makes the following points about it:

  • Under Neoliberalism, whoever falls behind has only themselves to blame for not positioning themselves correctly in the Market and not making the most of their “human capital.” That is, there is no one else to blame; it’s all on you and you alone. Failure is your fault, and the self-recrimination and shame of “your fault” culture and an individualist ethos prevents any effective collective response to Neoliberal ideas.
  • Neoliberalism is sustained by a “thought collective” that is structured like a Russian Doll consisting of think-tanks, societies, foundations, universities, professorships, journals, publications, etc., and promoted by well-compensated intellectual prostitutes sustained by money from wealthy donors and corporations who benefit from the philosophy.

I’m a neoliberal. Maybe you are too (Medium)

Neoliberalism, the Revolution in Reverse (The Baffler)

On Neoliberalism: An Interview with David Harvey (Monthly Review)

The crux of the post I was originally going to write was based on a couple articles I read making a similar point: that the reason the so-called “welfare states” provides greater levels of happiness, life satisfaction, stability, and social cohesion is because they “decommodify” things like labor, housing and education to a large extent, removing them from the vagaries of the market and making them into social goods that everyone has access to. At the same time, they retain market institutions for the distribution of genuine commodities. That’s the point of this article, which argues that Bernie Sanders’ ideas of social democracy are rooted in this idea of “decommodification,” and hence those of Karl Polanyi (emphasis mine):

Gøsta Esping-Andersen made a different use of Polanyi in his groundbreaking The Three Worlds of Welfare Capitalism, published in 1990. He found that the right way to understand the differences between the welfare states of the United States, Sweden, and France isn’t necessarily to look at how much money they spend, but at how much they decommodify labor. Decommodification, for him, means that “a service is rendered as a matter of right, and when a person can maintain a livelihood without reliance on the market.” The United States actually spends a lot on welfare, but mostly for people who already have jobs—in the source of income boosts, tax-free benefit packages, and the like—so this spending does little to decommodify labor…

One of the divides within the Democratic primary between Bernie Sanders and Hillary Clinton has been between a social-democratic and a “progressive” but market-friendly vision of addressing social problems. Take, for example, health care. Sanders proposes a single-payer system in which the government pays and health care directly, and he frames it explicitly in the language of rights: “healthcare is a human right and should be guaranteed to all Americans regardless of wealth or income.”

Clinton, meanwhile, describes affordable health care as a right. Clinton also wants higher education to remain a market commodity…Sanders here offers a straightforward defense of decommodification—the idea that some things do not belong in the marketplace—that is at odds with the kind of politics that the leadership of the Democratic Party has offered more or less since Carter and the narrow policy “wonk” focus that tends to dominate coverage.

Whether or not Sanders has read Polanyi—similar language about economic and social rights was also present in FDR’s New Deal, which Sanders argues is the basis of his brand of socialism—Polanyi’s particular definition of socialism sounds like one Sanders would share:

“Socialism is, essentially, the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society. It is the solution natural to industrial workers who see no reason why production should not be regulated directly and why markets should be more than a useful but subordinate trait in a free society. From the point of view of the community as a whole, socialism is merely the continuation of that endeavor to make society a distinctively human relationship of persons.”

Sanders’s particular notion of a political revolution—in which people use democracy to change the rules governing our national political economy—is very Polanyian. Polanyi’s socialism has a certain modern appeal when the more traditionally Marxist idea of having the state seize the means of production has been abandoned even by most who identify as socialists. Instead, Polanyi’s relevance for today lies in his arguments that markets need to be subjected to democratic control, that human beings resist being transformed fully into commodities, and a fully realized market society is both impossible, undesirable, and at odds with genuine liberty and freedom.

Karl Polanyi for President (Dissent)

This article elaborates on that point (emphasis mine):

It is arguably the single most important concept in the entire logic of capitalism: commodification, more specifically the commodification of labour. A commodified world is one in which the vast majority of the population is dependent for their economic survival on the sale of their labour power as a commodity in the form of wage or salary work. In other words, to survive, people must sell their ability to work in the same kind of market that exists for any other commodity. As the 18th-century political economist Adam Smith noted, the demand for men is like that for any other commodity. Whatever the many positive and commendable aspects of the market economy, the reduction of people to commodities comes with two negative consequences.

First, when people become commodities they become subject to pitiless market forces beyond their control. They face a world characterised by chronic insecurity, since the market for the sale of their labour is, like the market for any commodity, subject to uncontrollable fluctuation. People become dependent on forces indifferent to them, or to any individual. As the Danish sociologist Gøsta Esping-Andersen put it in The Three Worlds of Welfare Capitalism (1990), ‘the market becomes to the worker a prison’. To survive and try to flourish, people adopt the values and norms of the market prison – competitive individualism, egotism, a focus on short-term material gain. In practice, these values detract from a satisfying life.

Commodification has another, equally destructive aspect. When people are reduced to commodities, they lack the ability to make moral claims on society. Just as we have no moral responsibility to bushels of wheat or consignments of mobile phones, we have no moral responsibility to workers who are conceived of as commodities, labour units instead of people. Not only is a commodity without a right to a job to begin with, it certainly has no right to paid sick days or vacation time, to pensions or healthcare, or to protection against arbitrary dismissal, to say nothing of a guaranteed severance package or similar redundancy benefits.

Rather than being treated with dignity and respect – as valued members of a community whose work contributes to the general good – workers as commodities are merely another factor of production, no more worthy of considerate treatment than the machines they manipulate.

If commodification is so harmful to humans, while the greater market system itself contributes so much to human society, the obvious solution is to maintain the essential features of the market while introducing public policies that serve to ‘decommodify’ workers and their families. Simply put, a society is decommodified to the extent that individuals can maintain something like a middle-class existence if they are unable to successfully sell their labour power as a commodity due to illness, old-age, disability, the need to care for a family member, the desire to improve one’s position through further education, or simply the inability to find (good) jobs when times are hard. The greater the level of decommodification, the easier it is for more people to survive without winning in the labour market.

The creation of a social safety net (the much-maligned ‘welfare state’) is essential to decommodifying people. It assures that those unable to find work will be provided with a minimum income, coupled in its most expansive form with other programmes that limit the extent to which one’s wellbeing is dependent on income – such as ‘family allowances’ (ie child support payments provided by the public), subsidised daycare and housing, and the availability of healthcare as a social right, ie as something (like police protection) that one receives because one is a citizen, not because one can pay for it.

Which political system does happiness economics support (Aeon)

That social democracies are far superior for human happiness is beyond dispute:

Using both individual- and aggregate-level data, I find that life satisfaction is higher in those countries that have the highest levels of decommodification…Critically, all of these relationships obtain regardless of one’s income or social status. Everyone benefits from a more generous welfare state…The fact is that, however we approach the subject empirically, human happiness increases as the level of decommodification increases.

The author then asks an important question:

If there is a strong link between the social-democratic vision of politics and human wellbeing, why does that vision appear to be in retreat? If ‘big government’ makes people happy, why do voters seem to be more inclined to elect governments that are committed to unfettered markets, ‘flexible’ labour laws, and ever-lower social spending?

The author answers that we’re bad at judging what makes us happy. He also points out the obvious–that politics reflects the priorities of the wealthy rather than those of the common people. Surveys over the years have shown that most people support things like universal health care and education, better schools, help for the unemployed, housing for all, a smaller military, etc.

I’ve referred to the book The Power of Market Fundamentalism before. In this review, the author points out why free market fundamentalism is such a seductive philosophy for a lot of people:

..Social naturalism, the idea that markets are pre-political, autonomous, and ultimately guided by natural laws, is not simply something embraced by Chicago school economists or policymakers. Market fundamentalism taps into our individualism, our independence, our conception of freedom, our sense of self, our very ethos. The authors write, “Its exceptional powers, we believe, are rooted in its promise of a world without politics, a world of almost complete individual freedom where the role of government—so often feared as coercive and threatening to our rights—would be kept to an absolute minimum.” This is why the idea of a free market can strike people as intuitive when it is clear it doesn’t work according to the theory.

…Another powerful justification of market fundamentalism, what Albert Hirschman called “the perversity thesis,” has become the guiding ideology of political campaigns to limit government intervention. The thesis holds that the market is “an equilibrium of self-adjustment” and that redistributive social policies to mediate market outcomes actually distort the market mechanism and hurt the people they are intended to help.

TPMF, importantly, contributes new research that pinpoints the moment in history when these ideas—social naturalism and the perversity thesis—became popularized. In 1795, in a small English town called Speenhamland, squires decreed that the poor would be entitled to welfare depending on the going price of bread and their family size. In 1798, Thomas Malthus reacted hostilely in his Essay on the Principle of Population, and argued that poor relief eliminates the scarcity that creates work incentives, thereby creating market disfunction. But this did not immediately translate into legislative change. Many elites worried that abolishing the Poor Law would trigger revolution in the countryside. But in 1834, after push-back from landed elites and clergy and with a new Whig government in power, a Royal Commission Report issued a damning critique of the program, spreading the ideas of Malthus to the population. The Report reframed the agricultural downturn as an “enduring parable of the dangers of government ‘interference’ with the market.” The result was welfare retrenchment, the New Poor Law, which substituted workhouses for relief and laid a foundation for social naturalism that persists today. Markets became embedded in ideas.

The Power of Bad Ideas (Boston Review)

This idea of decommodification – the idea of taking certain things out of the economic sphere and moving them back into the social/political, is a critical one. I’m convinced that it’s something that needs to happen, and that this will become ever more urgent as 1.) Growth comes to an end, and 2.) Formal jobs disappear. This takes us beyond the simplistic dichotomy of our only options being either “free markets” or “central planning.” Rather, it puts the market in its proper place vis-à-vis society:

According to a libertarian way of thinking, the product of the market is just while taxes are a form of theft. The pre-tax distribution of income is fair, while the post-tax one is the result of government “interference” in the economy. But to a Polanyian, this is nonsense, because the pre-tax distribution of income is just as much a product of social and political institutions as is the post-tax distribution. States don’t interfere with markets—they create them. That doesn’t mean that all markets are bad, and Polanyi never imagined that they would all end. It just means that if markets are interfering with other social priorities (like democracy, for example), or producing bad outcomes, you can change the rules that govern what parts of society operate with what kinds of markets.

Polanyi might also point out that even when the market is supposed to be “natural” and self-sustaining, states need to step in to ensure that they work. This was clearly the case in the financial crisis, when the financial markets imploded rapidly, putting the entire payments system and healthy firms at major risk. But it’s also clear in the European Union. The central bank controlling the euro took specific actions to drive Spain and Italy into market chaos to force austerity and neoliberal reforms. This didn’t simply happen on its own; the state had to intervene through markets.

[…]

Polanyi also offers a method of left analysis that doesn’t invoke Marxism. Polanyi was influenced by Marxism but his framework doesn’t sit easily with it; for example, he defines classes as cultural formations rather than by their relationship to the means of production. For this reason, as the writer Peter Frase notes, Polanyi has been more popular with theorists and academics seeking “a non-Marxist form of social democracy” that is robust and deeply theorized…

And the political movements arising due to the inability of people to sell their labor power in the Market are exactly in-line with what Polanyi predicted. We have a labor and housing crisis caused by the market – people can no longer afford homes, and the four-decade trend to “discipline” labor has strained society to the breaking point…

Polanyi wouldn’t have been surprised by the rise of Trump. He knew that the double movement—the protective steps that people take when exposed to too much unfettered capitalism—does not always benefit the left. Trump supporters clamoring to make America great again reflect one version of this; they hearken to a time when life was more secure and stable, at least for certain types of working- and middle-class whites.

For Polanyi, it would make sense that the Sanders and Trump insurgencies happened simultaneously, and that there are some people who would rank those two as their favored candidates, in spite of them seeming to come from opposite ends of the political spectrum. Both campaigns are based in part in complaints about the corrosive effects of exposure to global markets. Both are against so-called “free trade” and skeptical of open borders…in spite of all their differences, both Sanders and Trump look like expressions of “double movement” politics.

So that sums up the points I originally wanted to make, but I’d like to make a few more.

I think the above explains the tragic impotence of our politics. Since we’ve completely divided the economic sphere from the political sphere, politicians can do nothing about our exploding social problems except talk about growing the economy and hope for the best. Most of our lives are spent in the economic sphere after all–we need it to procure our food, clothing and shelter. We spend most of our lives “at work”– a totalitarian arrangement where democracy is banished and where you can be commanded what to do and when to do it with no recourse. In the economic sphere we are, essentially, slaves, and it is in this sphere that we spend most of our time.

So we vote for Democrats and Republicans to no avail – they can do nothing but preside over whatever the economic system decrees. If the economic system decrees, for example, that half of the population is redundant to the economic order, or that vast swaths of the country become economic “sacrifice zones,” well then, that’s a shame, but nothing can be done. It’s the “logic” of the economy. Our priority is never to “interfere” in the workings of the Market, because that will make us all worse off, or at least that’s what our leaders say. So we cycle randomly between political parties looking for a savior–from Republicans to Democrats back to Republicans–from Bush to Clinton, to Bush, to Obama, to Clinton–and nothing changes! This is because both parties can do nothing but promise more growth. That’s the extent of their ability to tackle real problems. But, of course, politicians can’t create growth. Sure, they’ll claim once their tax cut passes, or once we repeal this or that regulation, or some other “pro-growth” policy, things will change. But it doesn’t work. Voting doesn’t change anything. It can’t by design.

Think of how we’re supposed to find work now. We’re just tossed into the impersonal market, sink-or-swim style, with some vague notion of finding something to do that we’re “passionate” about. Most people aren’t passionate about any of the crap we are forced to do to earn money. We’re also told that we’re worthless without a college degree, meaning that colleges have become tollbooths to jobs, and charge accordingly. So we become indentured servants, going deeply into debt just to get a mere chance at a job. We are turned into high-risk indebted gamblers just to survive! Think of how insane that is.

We must simply conform to what the market decrees. If that means becoming rootless flotsam hopping in the U-Haul every few years and moving to a new location gambling that there will be jobs there, well, then, you simply have to do that and not complain. If you need to abandon the neighborhood your parents and grandparents and grew up in to look for ajob, then that is what you must do. You must conform to the economy, not the other way around. No wonder social bonds are so strained. And anyone who falls behind, well, they alone are responsible for their plight.

It also indicates why we are addicted to permanent growth. Once growth slows the market stops working and society is thrown into chaos. Unemployment, poverty, homelessness, crime, all increase, and nothing can be done so long as the foundation of society is simply economic market exchange.

The idea that we are all “rugged individualists” engaged in constant, unremitting competition in the market arena is incredibly toxic. No wonder we are constantly at each other’s throats. No wonder we have so many mass shootings. The idea of the market is competition, but competition is not a social glue–it’s a solvent. A society of markets becomes Hobbes’ “warre of all against all.” Here’s a good Reddit comment:

The idea that “competition” is a natural order of things is completely fabricated. Competition is a learned behavior and value, 100%.

A think tank back in the 50s-60s proved this to be true. I forget off-hand which it was, I think the Rand corporation. As I recall after coming up with “game theory” as a way to predict human behavior, they did studies and found that nobody in their studies behaved with the “rational self interest” in the way they had predicted; everyone cooperated with each other instead. And rather than re-evaluating their hypothesis, they just assumed the testing was an anomaly and steamrolled right into the cold war continuing to utilize game theory as their primary model for fighting it.

Cooperation is the natural human tendency, not competition. Competition has simply been heavily indoctrinated into people for the last 50 years or so.

Competition for resources only occurs when there is a perceived threat to one’s own access for those resources. But if there is no threat, then there is no reason for competition (putting yourself at risk of losing out) to be preferred over cooperation (ensuring everyone, including oneself, gets a share of the resources).

Sociopaths got into power during a period of intense paranoia, and they have built the world around them to suit that vision.

I believe that story was told by Douglas Rushkoff in his book Life Inc. Indeed, that cooperation, not competition, was the foundation for human society was pointed out by Peter Kropotkin.

Here’s another good Reddit comment:

The Anglosphere/West Europeans don’t understand how important having a semblance of community which their societies almost totally lack, matters. They depend on money, the state and technology for almost everything so when those mechanisms break their societies will not function.

This makes me think about the book Reinventing Collapse. The thesis of that book is that the United States would be much more vulnerable to an economic collapse than the Soviet Union was. Well, now we can clearly see why. Every aspect of modern American life is utterly dependent on functioning Markets! The Soviet Union was mostly a non-market economy. Yes, it was less “efficient,” but it was far more resilient: even without paychecks, people showed up for work to keep the lights on, the trains running, and the hospitals staffed. People didn’t lose their homes or their jobs. People were less dependent on a market which didn’t deliver goods anyway, as empty shelves and lines testified, so they lived in what was essentially a “pre” market economy: growing their own food, living with relatives in apartments which could not be sold, and bartering for basic supplies. This was how most societies functioned prior to the last two hundred years, making “collapse” a much different concept than how we think of it today.

It’s interesting to contemplate how the Market changes people’s behavior. People are assumed naturally to be acquisitive, competitive, lazy, status seeking, eager to accumulate goods and gain the most money for the least effort, and so forth. Thus, the market is portrayed as a natural extension of human behavior. But as we’ve seen, the idea that all of us need to claw everything we need from the impersonal Market is a very new one. It has never existed before the present. As Polanyi states, “Previously to our time, no society has ever existed that, even in principle, was controlled by markets”. There is nothing natural about how it makes us behave—like greedy, selfish, assholes. So to what extent is our behavior shaped by market institutions, and then the resulting behavior is claimed as our “natural” human nature, and anything going against it “unnatural” and doomed to fail? As David Graeber says:

“At this point, it’s easier to understand why economists feel so defensive about challenges to the Myth of Barter, and why they keep telling the same old story even though most of them know it isn’t true. If what they are really describing is not how we ‘naturally’ behave but rather how we are taught to behave by the market—well who, nowadays, is doing most of the actual teaching? Primarily, economists. … [I]s economics instead a technique of operating within a world that economists themselves have largely created?”

Another side-effect is that everything we do is evaluated through the lens of short-term profit. Nothing can be done that looks to future generations, only immediate profit.  In pre-market societies, the foundations of life were social/religious, rather than productivism/profit. You could never have something like the Gothic cathedrals, which took several lifetimes to build, under the current system. No wonder our culture and built environment are so impoverished.

There are a lot more ideas to discuss based on this, but I’ll end it here.

Now, there’s a guy called Karl Polanyi. Karl Polanyi was a Hungarian refugee writing at the same time as Hayek. and he wrote a book in 1944, the same time he wrote his most famous book The Road to Serfdom, called the Great Transformation. And in the Great Transformation he said, whenever we try to make markets, we forget that they don’t come out of the ground and they’re not given by God. It’s just like globalization. The entire architecture of globalization depends upon legal treaties. When we talk about financial markets and people trading derivitives, we figure these are legal contracts. These are things made by men and women.

Now what Polanyi pointed out is was, when you liberalize to use our contemporary language; when you privatize, integrate, when you create global supply chains, when you outsource, when you do all these things, the people who get hurt by this do not get automatically compensated. And when they figure out that they’re never going to be compensated, they invented democracy. And then they come after the people who have done this to them through the ballot box. There’s no guarantee that you get a nice outcome. There’s no guarantee that you end up with a nice New Deal order with a little bit of redistribution. Let’s remember that Adolf Hitler was voted into power. And at the 1934 election the Nazis got 43.1 percent of the vote…

–Mark Blyth

Karl Polanyi and the Modern World – Part 6

Last time we saw how the utopian project championed by economic liberals–the global “One Big Market” –was created by the forced commodification of land, labor and capital into factors of production, and the institutional separation of society into a totally separate economic sphere and  political sphere. The economy was now “disembedded” — something wholly separate from the wider society and subject to its own “economic” laws, to be kept free from outside “interference.” A new class of professional economists came into being at this time, dedicated to uncovering the deterministic “laws” of the self-regulating marketplace that were as regular and predictable as the laws of physics.

In order to construct the global self-regulating market, economic liberals championed three core concepts after 1820. These were that:

  • Labor should find its price on the market.
  • The creation of money should be subject to an automatic mechanism.
  • Goods should be free to flow from country to country without hindrance or preference.

These led to the following institutions:

  • A competitive labor market
  • The automatic gold standard
  • International free trade.

Polanyi says that after 1830, the concept of market liberalism went from “academic interest” to “boundless activism.” One of these activities was the repeal of the Speenhamland system in England, a sort of Universal Basic Income scheme, and its replacement with the New Poor Law, which was expressly designed to force people into the labor market, designating horrible “workhouses” for those who could not find paid work. Now everyone would have to compete against one another in the labor market to survive.

Although the Poor Law Amendment Act did not ban all forms of outdoor relief, it stated that no able-bodied person was to receive money or other help from the Poor Law authorities except in a workhouse. Conditions in workhouses were to be made harsh to discourage people from claiming…The Poor Law Commissioners were to be responsible for overseeing the implementation of the Act…Despite the aspirations of the reformers, the New Poor Law was unable to make the Workhouse as bad as life outside. The primary problem was that in order to make the diet of the Workhouse inmates “less eligible” than what they could expect outside, it would be necessary to starve the inmates beyond an acceptable level. It was for this reason that other ways were found to deter entrance to the Workhouses. These measures ranged from the introduction of prison style uniforms to the segregation of ‘inmates’ into yards – there were normally male, female, boys’ and girls’ yards.

New Poor Law (Wikipedia)

Polanyi explains that the gold standard was an innovation expressly designed to put the theory of self-regulating markets in place and make it appear as if it were a natural development. That is, it was an institution specifically designed to drive the necessity of global trade. How did it work?

Market liberals wanted to create a world with maximal opportunities to extend the scope of markets internationally, but they had to find a way that people in different countries with different currencies could freely engage in transactions with each other. They reasoned that if every country conformed to three simple rules, the global economy would have the perfect mechanism for global self-regulation.

  • First, each country would set the value of its currency in relation to a fixed amount of gold and would commit to buying and selling gold at that price.
  • Second, each country would base its domestic money supply on the quantity of gold that it held in its reserves, its circulating currency would be backed by gold.
  • Third, each country would endeavor to give its residents maximal freedom to engage in international economic transactions.

The gold standard put a fantastic machinery of global self-regulation into place. Firms in England were able to export goods and invest in all parts of the world, confident that the currencies they earned would be as “good as gold.” In theory, if a country is in a deficit position in a given year because its citizens spent more abroad than they earned, gold flows out of that country’s reserves to clear payments due to foreigners. The domestic supply of money and credit automatically shrinks, interest rates rise, prices and wages fall, demand for imports declines, and exports become more competitive. The country’s deficit would therefore be self-liquidating.

Without the heavy hand of government, each nation’s international accounts would reach a balance. The globe would be unified into a single market place without the need for some kind of world government or global financial authority; sovereignty would remain divided among many nation-states whose self-interest would lead them to adopt the gold standard rules voluntarily.

http://dieoff.org/_History/TheGreatTransformation.htm

By the 1800’s the idea that money’s value derived from gold was treated as received wisdom and was generally accepted by people of different political persuasions in all major industrialized countries:

Belief in the gold standard was the faith of the age…namely, that banknotes have value because they represent gold.Whether the gold itself has value for the reason that it embodies labor, as the socialists held, or for the reason that it is useful and scarce, as the orthodox doctrine ran, made for once no difference. The war between heaven and hell ignored the money issue, leaving capitalists and socialists miraculously united… It would be hard to find any divergence between utterances of Hoover and Lenin, Churchill and Mussolini, on this point. Indeed, the essentiality of the gold standard to the functioning of the international economic system of the time was the one and only tenet common to men of all nations and all classes, religious denominations, and social philosophies [26]

The three mechanisms above were all interlocking: they formed a tripod, with the removal of any single leg causing the whole thing to collapse. Polanyi tells us “The sacrifices involved in achieving any one of them were useless, if not worse, unless the other two were equally secured. It was everything or nothing.” That’s why even if one of those things ran into a problem–such as the gold standard– they had to remain in place, because each interlocking piece was needed to reinforce the other.

All Western countries followed the same trend, irrespective of national mentality and history With the international gold standard the most ambitious market scheme of all was put into effect, implying absolute independence of markets from national authorities. World trade now meant the organizing of life on the planet under a self-regulating market, comprising labor, land, and money, with the gold standard as the guardian of this gargantuan automaton. Nations and peoples were mere puppets in a show utterly beyond their control. They shielded themselves from unemployment and instability with the help of central banks and customs tariffs, supplemented by migration laws. These devices were designed to counteract the destructive effects of free trade plus fixed currencies, and to the degree in which they achieved this purpose they interfered with the play of those mechanisms.

The international gold standard and fixed rates meant that a trade imbalance would lead to devastating deflations in the domestic economy. Exports were cheaper for manufacturers, but the rest of the domestic economy would have to cope with falling prices and falling wages. This caused the credit system to frieze up which damaged the domestic economy. To cope with falling wages, grain would have to be as cheap as possible, which necessitated a global grain market free from any price supports for domestic producers. The only way to rectify the imbalance was to increase foreign exports, which meant an elimination of all tariffs and trade barriers. All these parts were interlocking, and the removal of one would cause the system to fail:

Anybody could see that the gold standard, for instance, meant danger of deadly deflation and, maybe, of fatal monetary stringency in a panic.The manufacturer could, therefore, hope to hold his own only if he was assured of an increasing scale of production at remunerative prices (in other words, only if wages fell at least in proportion to the general fall in prices, so as to allow the exploitation of an everexpanding world market)…Nothing less than a self-regulating market on a world scale could ensure the functioning of this stupendous mechanism. Unless the price of labor was dependent upon the cheapest grain available, there was no guarantee that the unprotected industries would not succumb in the grip of the voluntarily accepted taskmaster, gold.

The expansion of the market system in the nineteenth century was synonymous with the simultaneous spreading of international free trade, competitive labor market, and gold standard; they belonged together. No wonder that economic liberalism turned almost into a religion once the great perils of this venture were evident.

What Polanyi calls “token money” was created and regulated by the state to cope with the needs for credit and stable purchasing power in the domestic economy:

But for domestic purposes…specie is an inadequate money just because it is a commodity and its amount cannot be increased at will. The amount of gold available may be increased by a small percentage over a year, but not by as many dozen within a few weeks, as might be required to carry a sudden expansion of transactions.

Token money was developed at an early date to shelter trade from the enforced deflations that accompanied the use of specie when the volume of business swelled. No market economy was possible without the medium of artificial money.

In the absence of token money business would have to be either curtailed or carried on at very much lower prices, thus inducing a slump and creating unemployment.

In its simplest form the problem was this: commodity money was vital to the existence of foreign trade; token money, to the existence of domestic trade. How far did they agree with each other?

To spread the risks around to the widest extent, token money needed to be centrally managed. This led to the establishment of various central banks. This means that: central banks were first created to cope with the effects of the gold standard! This shows the ignorance of the Libertarian/Austrian insistence on the gold standard with the simultaneous efforts to dismantle central banking. The use of token money once again meant that the “free” market required government management (Bitcoin advocates, please note):

Under nineteenth-century conditions foreign trade and the gold standard had undisputed priority over the needs of domestic business. The working of the gold standard required the lowering of domestic prices whenever the exchange was threatened by depreciation. Since deflation happens through credit restrictions, it follows that the working of commodity money interfered with the working of the credit system. This was a standing danger to business. Yet to discard token money altogether and restrict currency to commodity money was entirely out of the question, since such a remedy would have been worse than the disease.

Central banking mitigated this defect of credit money greatly. By centralizing the supply of credit in a country, it was possible to avoid the wholesale dislocation of business and employment involved in deflation and to organize deflation in such a way as to absorb the shock and spread its burden over the whole country. The bank in its normal function was cushioning the immediate effects of gold withdrawals on the circulation of notes as well as of the diminished circulation of notes on business.

The case of money showed a very real analogy to that of labor and land. The application of the commodity fiction to each of them led to its effective inclusion into the market system, while at the same time grave dangers to society developed. With money, the threat was to productive enterprise, the existence of which was imperiled by any fall in the price level caused by use of commodity money. Here also protective measures had to be taken, with the result that the self steering mechanism of the market was put out of action.

Now the institutional separation of the political and economic spheres had never been complete, and it was precisely in the matter of currency that it was necessarily incomplete; the state…was in fact the guarantor of the value of token money, which it accepted in payment for taxes and otherwise. This money was not a means of exchange, it was a means of payment; it was not a commodity, it was purchasing power; far from having utility itself, it was merely a counter embodying a quantified claim to things that would be purchased. Clearly, a society in which distribution depended upon the possession of such tokens of purchasing power was a construction entirely different from market economy.

Libertarians often point to the United States during this period as the exemplar of a self-regulating market delivering prosperity free from government interference. This is their ideal “golden age.” But Polanyi points out that this was only possible due to an endless supply of the “fictitious commodities” of land and labor. Once those failed to grow, the system broke down:

America has been adduced by economic liberals as conclusive proof of the ability of a market economy to function. For a century, labor, land, and money were traded in the States with complete freedom, yet allegedly no measures of social protection were needed, and apart from customs tariffs, industrial life continued unhampered by government interference.

The explanation, of course, was simply free labor, land, and money. Up to the 1890s the frontier was open and free land lasted; up to the Great War the supply of low standard labor flowed freely; and up to the turn of the century there was no commitment to keep foreign exchanges stable. A free supply of land, labor, and money continued to be available; consequently no self-regulating market system was in existence. As long as these conditions prevailed, neither man, nor nature, nor business organization needed protection of the kind that only intervention can provide.

As the lower ranges of labor could not any more be freely replaced from an inexhaustible reservoir of immigrants, while its higher ranges were unable to settle freely on the land; as soil and natural resources became scarce and had to be husbanded; as the gold standard was introduced in order to remove the currency from politics and to link domestic trade with that of the world, the United States caught up with a century of European development: protection of the soil and its cultivators, social security for labor through unionism and legislation, and central banking—all on the largest scale—made their appearance…Thus America offered striking proof, both positive and negative, of our thesis that social protection was the accompaniment of a supposedly self-regulating market.

In fact, the gold standard led to all sort of problems for domestic businesses, which sought ways to limit the damage, something omitted in the happy tales and sunny depictions of yeoman farmers, cattle ranchers, general store owners, and other “rugged individualists” of this time period spun by libertarians:

This aggressive push to wean the economy off of paper currency—and onto hard money—strained the banking system. Demand for specie by customers in New York City exceeded supply, and, on May 9, 1837, banks there responded by refusing specie withdrawal. The suspension of convertibility in the nation’s financial center caused panic that quickly spread to the rest of the country. Banks, looking to replenish the specie in their vaults, refused to make new loans and called in existing loans, triggering a collapse of credit and a severe and prolonged decline in production and employment across the country.

The Man on the Twenty-Dollar Bill and the Panic of 1837 (Liberty Street)

The [1849 California] gold rush constituted a positive monetary supply shock because the United States was on the gold standard at the time. The nation had switched from a bimetallic (gold and silver) standard to a de facto gold standard in 1834. Under the latter, the U.S. government stood ready to buy gold for $20.67 per ounce, a parity that prevailed until 1933. That commitment anchored prices, but the large gold discovery functioned like a monetary easing by a central bank, with more gold chasing the same amount of goods and services. The increase in spending ultimately led to higher prices because nothing real had changed except the availability of a shiny yellow metal.

In his excellent essay on gold standards, the economic historian Michael Bordo documents that the average annual U.S. inflation rate was many times lower under the gold standard (between 1880 and 1914) than in the subsequent 1946-2003 period. However, he shows that the gold standard led to more volatile short-term prices (including bouts of pernicious deflation) and more volatile real economic activity (because a gold standard limits the government’s discretion to offset aggregate demand shock). Bordo documents that short-run prices and real output were many times less volatile after the United States left the gold standard than before. Apart from their macroeconomic disadvantages, gold standards are also expensive; Milton Friedman estimated the cost of mining the gold to maintain a gold standard for the United States in 1960 at 2.5 percent of GDP ($442 billion in today’s terms).

The California Gold Rush and the Gold Standard (Liberty Street)

In the late 1800s, a surge in silver production made a shift toward a monetary standard based on gold and silver rather than gold alone increasingly attractive to debtors seeking relief through higher prices.The U.S. government made a tentative step in this direction with the Sherman Silver Purchase Act, an 1890 law requiring the Treasury to significantly increase its purchases of silver. Concern about the United States abandoning the gold standard, however, drove up the demand for gold, which drained the Treasury’s holdings and created strains on the financial system’s liquidity. News in April 1893 that the government was running low on gold was followed by the Panic in May and a severe depression involving widespread commercial and bank failures.

Gold, Deflation, and the Panic of 1893 (Liberty Street)

Polanyi also argues that colonialism was another response to these problems. In theory the global marketplace was anti-colonial, since everyone had access and any country could enter it and trade on equal terms with everyone else. In practice, however, the world organized into trade blocks behind barriers to protect themselves. By colonizing large parts of the globe, nation-states ensured a reliable source of raw materials (rubber in the Belgian Congo, for example) and reliable export markets for domestic producers. This drove the rush for colonies in Africa and Asia:

The import tariffs of one country hampered the exports of another and forced it to seek for markets in politically unprotected regions. Economic imperialism was mainly a struggle between the Powers for the privilege of extending their trade into politically unprotected markets. Export pressure was reinforced by a scramble for raw material supplies caused by the manufacturing fever. Governments lent support to their nationals engaged in business in backward countries. Trade and flag were racing in one another’s wake. Imperialism and half-conscious preparation for autarchy were the bent of Powers which found themselves more and more dependent upon an increasingly unreliable system of world economy. And yet rigid maintenance of the integrity of the international gold standard was imperative. This was one institutional source of disruption.

At this same time, to cope with the effects of trade and industrialism, you also saw the trend of nation-states becoming larger and more centralized. This was to seek ever-bigger internal markets to secure a competitive advantage. Get big or get out. The large, centralized states we take for granted today, such as Germany and Italy, came into being in the 1870’s. The two great terrestrial empires – the United States and Russia, expanded ocean to ocean while gobbling up territory from their neighbors.

This leads to one of the “paradoxes” of the market—It created an enormous expansion–not contraction–in centralized state power and the reach of the nation-state. Even today we see that the largest capitalist economies always have the largest governments, because they are required to ensure that the system functions as designed:

There was nothing natural about laissez-faire; free markets could never have come into being merely by allowing things to take their course. Just as cotton manufactures—the leading free trade industry—were created by the help of protective tariffs, export bounties, and indirect wage subsidies, laissez-faire itself was enforced by the state. The [eighteen] thirties and forties saw not only an outburst of legislation repealing restrictive regulations, but also an enormous increase in the administrative functions of the state, which was now being endowed with a central bureaucracy able to fulfil the tasks set by the adherents of liberalism…

The road to the free market was opened and kept open by an enormous increase in continuous, centrally organized and controlled interventionism. To make Adam Smith’s “simple and natural liberty” compatible with the needs of a human society was a most complicated affair. Witness the complexity of the provisions in the innumerable enclosure laws; the amount of bureaucratic control involved in the administration of the New Poor Laws which for the first time since Queen Elizabeth’s reign were effectively supervised by central authority; or the increase in governmental administration entailed in the meritorious task of municipal reform. And yet all these strongholds of governmental interference were erected with a view to the organizing of some simple freedom—such as that of land, labor, or municipal administration.

Just as, contrary to expectation, the invention of laborsaving machinery had not diminished but actually increased the uses of human labor, the introduction of free markets, far from doing away with the need for control, regulation, and intervention, enormously increased their range. Administrators had to be constantly on the watch to ensure the free working of the system. Thus even those who wished most ardently to free the state from all unnecessary duties, and whose whole philosophy demanded the restriction of state activities, could not but entrust the self-same state with the new powers, organs, and instruments required for the establishment of laissez-faire. [146-147]

Consider, for example, the vast bureaucracy involved in credit scores – numbers that track every individual’s behavior to assess their “credit risk.” Or bond ratings agencies. Or the public school and university system. Or the vast bureaucracy which is dedicated to policing people on public assistance to make sure they are spending the money properly and are looking for jobs. Or the vast prison gulags which house the unemployed (modern workhouses). Or the vast system of state-owned and supported roads, ports, and other infrastructure. Or the regulatory apparatus designed to ensure trust and fair-dealing which is necessary for exchange. It takes a lot of bureaucrats–government and otherwise–to make “free and open” markets work properly.

While the drive to create the laissez-faire economy was planned from the top-down and put into place by legislation (or its repeal), the drive to protect society from its ill-effects through some sort of collective protection was spontaneous and unplanned. this leads to one of Polanyi’s most often cited quotes: “laissez faire was planned; planning was not.” While establishing the global market was top-down unified intellectual movement advanced by market liberals, the drive to protect workers and  communities from devastation emerged spontaneously and piecemeal in multiple countries via grass-roots efforts, only later coalescing into broad-based popular movements. Thus, the market project is more accurately described as “collectivist,’ while the drive to rein it in was individualistic:

The countermove against economic liberalism and laissez-faire possessed all the unmistakable characteristics of a spontaneous reaction. At innumerable disconnected points it set in without any traceable links between the interests directly affected or any ideological conformity between them.[156]

The great variety of forms in which the “collectivist” countermovement appeared was not due to any preference for socialism or nationalism on the part of concerted interests, but exclusively to the broad range of the vital social interests affected by the expanding market mechanism.

For if market economy was a threat to the human and natural components of the social fabric, as we insisted, what else would one expect than an urge on the part of a great variety of people to press for some sort of protection?…Also, one would expect this to happen without any theoretical or intellectual preconceptions on their part, and irrespective of their attitudes toward the principles underlying a market economy. Again, this was the case…[156-157]

As he points out, social protection legislation emerges at about the same time in Victorian England and Bismarck’s Prussia, two radically different societies with no ideological connection or coordination between them. By contrast, market institutions such as the dismantling of tariffs and the gold standard were planned, executed and coordinated simultaneously by global elites and bureaucrats as part of a top-down project; indeed they could only emerge this way. An automatically-adjusting global trading mechanism does not just “happen” despite what libertarians claim.

“Collectivist” social movements were constantly scapegoated by market liberals for the system’s failures. According to them it was the  “greedy” businessmen, monopolists, leftist intellectuals, and trade unions whose “lack of faith” was responsible for not adhering to the letter of the program, giving them a built-in excuse:

While in our view the concept of a self-regulating market was Utopian, and its progress was stopped by the realistic self-protection of society, in their view all protectionism was a mistake due to impatience, greed, and shortsightedness, but for which the market would have resolved its difficulties…[148]

When around the 1870s a general protectionist movement—social and national—started in Europe, who can doubt that it hampered and restricted trade? Who can doubt that factory laws, social insurance, municipal trading, health services, public utilities, tariffs, bounties and subsidies, cartels and trusts, embargoes on immigration, on capital movements, on imports—not to speak of less-open restrictions on the movements of men, goods, and payments—must have acted as so many hindrances to the functioning of the competitive system, protracting business depressions, aggravating unemployment, deepening financial slumps, diminishing trade, and damaging severely the self-regulating mechanism of the market?

The root of all evil, the liberal insists, was precisely this interference with the freedom of employment, trade and currencies practiced by the various schools of social, national, and monopolistic protectionism since the third quarter of the nineteenth century; but for the unholy alliance of trade unions and labor parties with monopolistic manufacturers and agrarian interests, which in their shortsighted greed joined forces to frustrate economic liberty, the world would be enjoying today the fruits of an almost automatic system of creating material welfare. Liberal leaders never weary of repeating that the tragedy of the nineteenth century sprang from the incapacity of man to remain faithful to the inspiration of the early liberals; that the generous initiative of our ancestors was frustrated by the passions of nationalism and class war, vested interests, and monopolists, and above all, by the blindness of the working people to the ultimate beneficence of unrestricted economic freedom to all human interests, including their own. A great intellectual and moral advance was thus, it is claimed; frustrated by the intellectual and moral weaknesses of the mass of the people…

This, indeed, is the last remaining argument of economic liberalism today. Its apologists are repeating in endless variations that but for the policies advocated by its critics, liberalism would have delivered the goods; that not the competitive system and the self-regulating market, but interference with that system and interventions with that market are responsible for our ills.

The shorthand used by libertarians today is “capitalism would be a great system if it were ever tried,” or their constant carping about “crony capitalism.”

Polanyi says that neither the spread of the market, nor the counterreaction to it, breaks down simply along class divisions. This is probably in response to Marx’s analysis. Concerning the Market, he says, “The spread of the market was thus both advanced and obstructed by the action of class forces. [162]” Similarly, the response to it was not as simple as the working classes in opposition to the wealthier classes; for example, many small businessmen and landowners wanted protection from the vagaries of the market too: “Briefly, not single groups or classes were the source of the so-called collectivist movement, though the outcome was decisively influenced by the character of the class interests involved.”

One of the side-effects of this interlocking trade mechanism was what Polanyi called “The Hundred Years’ Peace” in Europe from the end of the Napoleonic Wars to the outbreak of World War One. Conflicts at this time were mainly sporadic colonial conflicts (e.g. Boer War, Crimean War, war in the Congo, etc.). What caused this extraordinary historical circumstance? Polanyi attributes it to what he calls haute finance:

For an explanation of this amazing feat, we must seek for some undisclosed powerful social instrumentality at work in the new setting, which could play the role of dynasties and episcopacies under the old, and make the peace interest effective. This anonymous factor, we submit, was haute finance.

Haute finance an institution sui generis, peculiar to the last third of the nineteenth and the first third of the twentieth century, functioned as the main link between the political and the economic organization of the world. It supplied the instruments for an international peace system, which was worked with the help of the Powers, but which the Powers themselves could neither have established nor maintained… Organizationally, haute finance was the nucleus of one of the most complex institutions the history of man has produced.[10]

Polanyi calls this new international system comprised of the gold standard, haute finance and constitutionalism the “balance of power system.” The balance of power system meant that nations gained more from peace than by war.

The influence that haute finance exerted on the Powers was consistently favorable to European peace. And this influence was effective to the degree to which the governments themselves depended upon its cooperation in more than one direction. Consequently, there was never a time when the peace interest was unrepresented in the councils of the Concert of Europe. If we add to this the growing peace interest inside the nations where the investment habit had taken root, we shall begin to see why the awful innovation of an armed peace of dozens of practically mobilized states could hover over Europe from 1871 to 1914 without bursting forth in a shattering conflagration. [14]

The vast majority of the holders of government securities, as well as other investors and traders, were bound to be the first losers in such wars, especially if currencies were affected. …Finance…acted as a powerful moderator…Loans, and the renewal of loans, hinged upon credit, and credit upon good behavior…behavior is reflected in the budget and the external value of the currency cannot be detached from the appreciation of the budget, debtor governments were well advised to watch their exchanges carefully and to avoid policies which might reflect upon the soundness of the budgetary position… [14]

Trade had become linked with peace. In the past the organization of trade had been military and warlike… Trade was now dependent upon an international monetary system which could not function in a general war. It demanded peace, and the Great Powers were striving to maintain it. But the balance-of-power system, as we have seen, could not by itself ensure peace. This was done by international finance, the very existence of which embodied the principle of the new dependence of trade upon peace. [15-16]

Polanyi sees the breakdown of the market system and conflicts over colonialism as the fundamental cause of the First World War. This article gives some detail of the economic origins of the war:

The Economic Causes of the First World War (Socialist Standard)

Following that conflagration, Polanyi says that the nations failed to learn the lessons of the War and sought to reactivate the market society as it had been before, complete with open global trade and the gold standard. This simply set the stage for the Second World War.

In 1924 and after, Europe and the United States were the scene of a boisterous boom and drowned all concern for the soundness of the market system. Capitalism was proclaimed restored. Both Bolshevism and fascism were liquidated except in peripheric regions. The Comintern declared the consolidation of capitalism as a fact; Mussolini eulogized liberal capitalism; all important countries except Great Britain were on the upgrade. The United States enjoyed a legendary prosperity, and the Continent was doing almost as well. Hitler’s putsch had been quashed; France had evacuated the Ruhr; the Reichsmark was restored as by miracle; the Dawes Plan had taken politics out of reparations; Locarno was in the offing; and Germany was staring out on seven fat years. Before the end of 1926 the gold standard ruled again from Moscow to Lisbon.

It was in the third period–after 1929–that the true significant of fascism became apparent. The deadlock of the market system was evident. Until then fascism had hardly been more than a trait in Italy’s authoritarian government, which otherwise differed but little from those of a more traditional type. It now emerged as an alternative solution of the problem of an industrial society. Germany took the lead in a revolution of European scope and the fascist alignment provided her struggle for power with a dynamics which soon embraced five continents. History was in the gear for social change.

An adventitious but by no means accidental event started the destruction of the international system. A Wall Street slump grew to huge dimensions and was followed by Great Britain’s decision to go off gold and, another two years later, by a similar move on the part of the United States. Concurrently, the Disarmament Conference ceased to meet, and, in 1934, Germany left the League of Nations.

These symbolic events ushered in an epoch of spectacular change in the organization of the world. Three powers, Japan, Germany, and Italy, rebelled against the status quo and sabotaged the crumbling institutions of peace. At the same time the factual organization of the world economy refused to function. The gold standard was at least temporarily put out of action by its Anglo-Saxon creators; under the guise of default, foreign debts were repudiated; capital markets and world trade dwindled away. The political and economic system of the planet disintegrated conjointly.[243-244]

Eventually, the world fell into the biggest bust of them all–the global Great Depression. Polanyi argues that one again, the crisis was caused by the adherence to the gold standard and fixed exchange rates that market liberals championed to facilitate free trade. The 1930’s saw the second major breakdown of the international market system. Once again, unemployment soared and countries passed tariffs to try and limit the damage. Polanyi sees the rise of fascism and communism as an inevitable response to the failure of market society: “In reality, the part played by fascism was determined by one factor: the condition of the market system.”

These articles describe the role gold played in the economic disintegration of the world’s major industrial powers which led to the rise of fascism and the Second World War:

What was [the] gold standard and why was it under pressure in 1931?

The idea was that gold reserves represented a foundation for a nation’s currency and securities, allowing government notes to be exchanged for gold at any time at fixed rates. Exchange rates were stable among nations maintaining the gold standard. If a state began spending beyond its means and running deficits, those holding its notes would start converting them to gold, worrying that inflation would devalue the dollar, pound or franc. Conversions could exhaust a country’s gold reserves, punishing the government and the economy. Reserve levels determined how much currency nations could issue, and hence the money supply.

During the Depression, as revenues fell, governments trying to provide services ran growing budget deficits. This unnerved banks and wealthy investors, domestic and foreign, spurring waves of cash-outs (“Here’s your paper money; give me my gold!”). Banks and individuals then hoarded the gold, rather than using it for making loans or new investments.

The result was a continuing spiral of contraction. Credit was throttled, prices and wages fell (there wasn’t enough money moving to sustain them), debtors were hammered (their payments were fixed as their incomes shrank), and ultimately there were widespread defaults on economic commitments (bankruptcies, inability to pay interest due, abandonment of loans, expanding layoffs).

Gold withdrawals gutted the German financial system in the summer of 1931. When the state stopped shipments through exchange controls, the virus spread to Britain. As money evaporated from the banking system, economic activity floundered. Governments had two main options: Defend the exchange value of their currency to prevent inflation, at the price of further slowing the economy, or let the currency devalue to whatever level markets would determine, undermining exchange rates and purchasing power, in the hope that money “rightly priced” would begin circulating more fluidly.

Germany held the mark at a fixed rate, which turned out to be the wrong strategy. Britain let the pound float, at the mercy of the market. Initially the pound fell from $4.85 to less than $4.00. Then it rose to $4.22 before dropping again to $3.91 in early 1932. Bonds denominated in pounds had lost between 15 and 20 percent of their exchange value, but British products suddenly were 15 to 20 percent cheaper to sell abroad. Such tradeoffs punished investors but advantaged exporters. More than a dozen other nations soon followed Britain in abandoning the gold standard.

But France and the U.S. didn’t — with harsh implications before long.

The Gold Standard and the Great Depression: Echoes (BloombergView)

Under a pure gold standard, the government would stand ready to trade dollars for gold at a fixed rate. Under such a monetary rule, it seems the dollar is “as good as gold.”

Except that it really isn’t– the dollar is only as good as the government’s credibility to stick with the standard. If a government can go on a gold standard, it can go off, and historically countries have done exactly that all the time. The fact that speculators know this means that any currency adhering to a gold standard (or, in more modern times, a fixed exchange rate) may be subject to a speculative attack.

A gold standard only works when everybody believes in the overall fiscal and monetary responsibility of the major world governments and the relative price of gold is fairly stable. And yet a lack of such faith was the precise reason the world returned to gold in the late 1920’s and the reason many argue for a return to gold today. Saying you’re on a gold standard does not suddenly make you credible. But it does set you up for some ferocious problems if people still doubt whether you’ve set your house in order.

After suspending gold convertibility in World War I, many countries stayed off gold and experienced chaotic fiscal and monetary policies in the early 1920’s. Many observers reasoned then, just as many observers reason today, that the only way to restore fiscal and monetary responsibility would be to go back on gold, and by the end of the 1920’s, most countries had returned to the gold standard.

…The longer a country stayed on the gold standard, the more overall deflation it experienced. Many of us are persuaded that this deflation greatly added to the economic difficulties of those countries that insisted on sticking with a fixed value of their currency in terms of gold.

13 other countries besides the U.K. had decided to abandon their currencies’ gold parity in 1931…the average growth rate of industrial production for these countries…was positive in every year from 1932 on. Countries that stayed on gold, by contrast, experienced an average output decline of 15% in 1932. The U.S. abandoned gold in 1933, after which its dramatic recovery immediately began. The same happened after Italy dropped the gold standard in 1934, and for Belgium when it went off in 1935. On the other hand, the three countries that stuck with gold through 1936 (France, Netherlands, and Poland) saw a 6% drop in industrial production in 1935, while the rest of the world was experiencing solid growth.

The gold standard and the Great Depression (Econbrowser)

Polanyi published the book as World War Two was raging around the globe. His conclusion was that these events were ultimately caused by the failure of market society. He concluded that that the ideal market society championed by market liberals, where everything (including land, labor and capital) was a mere factor of economic production, and where society was just an accessory to the One Big Market was not only utopian, but ran contrary to fundamental human nature, which is why attempts to construct it would always be doomed to fail (emphasis in the original):

If industrialism is not to extinguish the race, it must be subordinated to the requirements of man’s nature…Nineteenth century society assumed that in his economic activity man strove for profit, that his materialistic propensities would induce him to choose the lesser instead of the greater effort and to expect payment for his labor; in short, that in his economic activity he would tend to abide by what they described as economic rationality, and that all contrary behavior was the result of outside interference.

It followed that markets were natural institutions, that they would spontaneously arise if only men were let alone. Thus, nothing could be more normal than an economic system consisting of markets under the sole control of market prices, and a human society based on such markets appeared, therefore, as the goal of all progress. Whatever the desirability or undesirability of such a society on moral grounds, it practicability–this was axiomatic–was grounded in the immutable characteristic of the race.

Actually, as we now know, the behavior of man both in his primitive state and right through the course of history has been almost the opposite of that implied in this view…The tendency to barter, on which Adam Smith so confidently relied for his picture of primitive man, is not a common tendency of the human being in his economic activities, but a most infrequent one. Not only does the evidence of modern anthropology give the lie to these rationalistic constructs, but the history of trade and markets has also been completely different from that assumed in the harmonistic teachings of nineteenth century sociologists.

Economic history reveals that the emergence of national markets was in no way the result of the gradual and spontaneous emancipation of the economic sphere from governmental control. On the contrary, the market has been the outcome of a conscious and often violent intervention on the part of government which imposed the market organization on society for noneconomic ends. And the self-regulating market of the nineteenth century turns out on closer inspection to be radically different from even its immediate predecessor in that it relied for its regulation on economic self-interest. The congenital weakness of nineteenth century society was not that it was industrial but that it was a market society. Industrial civilization will continue to exist when the utopian experiment of a self-regulating market will be no more than a memory[250]

Polanyi was confident that we could only be saved by pulling back from “pure” market society and re-embedding our economic life in social institutions. In his time, he believed that this was finally starting to happen through things like the abandonment of the gold standard during the war, and political movements like the New Deal and its “Four Freedoms,” including a guarantee of housing and work for everyone. He thought we might finally be learning our lesson.

Sadly, we now know that’s not what happened. After the oil crisis of the 1970’s, Keynsianism, designed to manage the recurring crises of the market and smooth out its excesses, was replaced by a global movement to create a “pure” market society based solely on unremitting competition. Citizens would be replaced with “consumers” transacting in the Market. Government would shrink,at least in theory.

Polanyi would be quick to point out how much Neoliberalism—just as much as its nineteenth-century predecessor—was an artificial creation of central state power rather than its absence. He would point to transnational institutions such as the World Bank, the International Monetary Fund, the Maastricht Treaty, the European Union, NAFTA, and the World Trade Organization, and other organizations/agreements. He would point to the role of the United States military in maintaining this system, as the British Empire did in years prior. He would note the dollar’s role as the world’s reserve currency. He would point to the artificial recasting of the natural world as “natural capital,” a fictitious commodity if there ever was one. He would point to the privatization of essential public services sustained by taxpayer dollars. He would point to what has happened in China over the past several decades as proof that the Market is a creation of strong central governments. He would say it is almost a reenactment of what took place in Britain, with its displaced rural proletariat heading into urban factories, its state supported industries, its trade protections and export-led model, its public infrastructure, it’s police state, its infrastructure development, and so forth. He would point to copyright protections and intellectual property laws. He would point to “welfare to work” schemes as the new poor law. He would point to the fact that the creators of Neoliberalism openly admit that it is imposed from above after some sort of crisis (the Shock Doctrine). And he would point to things like TPP/TTIP/TISA as not a lack of rules, but as a rewriting of them to benefit the needs of stakeholders like international corporations and the investor class over those of the citizenry. Finally, he would point out that the Euro works exactly like the gold standard did, with exactly  the same catastrophic results. Rather than dismantle or limit the market society, we have instead put it on steroids.

And now once again the world is on the brink of collapse…

BONUS: Barter in the modern world.

Soylent Burgers and Cockroach Milk

“The profitability of production cannot expand indefinitely. Any increase in the quantity of soil, water, minerals, or plants put into a particular production process per unit of time constitutes intensification. It has been the burden of this book to show that intensification inevitably leads to declining efficiencies. That declining efficiencies have adverse effects upon the average standard of living cannot be doubted.’
-MARVIN HARRIS, ‘Cannibals and Kings’

This comment made me chuckle: “The futurology future is starting to look worse than the collapse future.” This was on Reddit in response to an article about cockroaches providing the “milk of the future”:

Scientists think cockroach milk could be the superfood of the future (Science Alert)

This really does seem like The Onion at this point. Someone suggested that Reddit’s collapse and futurology boards should merge at some point. Believe it or not, they aren’t all that far apart.

We’ve already been treated to an endless litany of articles about how insect ranching will provide the protein of the future. Then there’s the meat grown in a petri-dish, and the nutrition shake cheekily named Soylent scarfed down by the Silicon Valley crowd so they can cram in a few more hours of work after popping their Ritalin. Now people are questioning whether the government should step in and force us to eat less meat.

And yet we are still simultaneously told that overpopulation and resource depletion are not a problem, and that more growth is good.

This is progress???

One of the things I’ve written about over the years is this idea that technological innovations are inherently good. But it’s clear what’s really going on: desperately trying to maintain the status quo in the face of increasing population pressure and declining resources. There’s a technical term for this: intensification.

Marvin Harris, whose works serve as a guidepost for this blog, warned us that intensification always leads to lower living standards for the majority of people in the long run, while only benefiting a tiny handful. This is a law of history. Over the years, I’ve tried to point out the difference between true innovation which solves problems or allows us to do things we could not do before, and intensification, which is essentially squeezing blood from a stone. In the former category are things like antibiotics and radio, which solve problems (killer infections) or allow us to do new things (communicate globally). In the latter category are things like electric cars (attempting to keep the unsustainable automobile infrastructure alive) and aquaculture (to make up for stripping the oceans bare of wild fish).

For the majority of people, there is no difference, since both are “growth” and growth is always good, full stop. GDP, the yardstick by which we measure progress in the modern world (which even its creator warned us against) is agnostic as to the source of growth, whether it is producing more food to feed hungry people or asthma inhalers to deal with the lung irritants from air pollution.

People tend to forget we’ve been here before.

Back during the Ice Age (late Pleistocene), we H. sapiens lived primarily off of herds of large fauna, especially reindeer, mammoth and bison. This was supplemented with wild salmon in season. The fattiest parts of the animal were the most prized and sought after. Bones were cracked and boiled to extract the grease. Most calories came from nutrient-dense meat and fat, while plants were consumed for their beneficial vitamins and minerals (plants are less calorie dense).

Then the large fauna started to die off. They died off due to a double-blow of a changing climate and increasing human predation. Scientists debate about which was the primary cause, but it’s pretty clear that whenever humans showed up in a pristine environment, the large animals went extinct shortly thereafter. Many of these animals had survived previous climatic changes, so it’s doubtful that climate change alone was responsible. Skeletons riddled with spear points provide more damning evidence for our species.

In response, we launched a broad spectrum revolution – using our omnivorous diet to exploit a wider variety of foodstuffs, particularly plant foods. This began with acorns and pistachios, but soon moved to grass seeds, sedges and pulses. Meanwhile, the prey animals got smaller and smaller, from reindeer and bison, to gazelles and fallow deer, to hares and waterfowl. Instead of the nutritious and diverse food sources of their ancestors, we became more and more dependent upon eating pulverized grass seeds, obtained at the cost of backbreaking labor for harvesting, threshing and grinding.

The human population became mostly vegetarian by necessity, and remained so for roughly the next 8,000 or so years. The problem is, a vegetarian diet doesn’t provide a lot of necessary vitamins, minerals and nutrients for optimal health. Today’s vegetarians can choose from a plethora of foods year round that simply weren’t available to ancient people. They don’t have to worry about what is in season and have the entire world as their larder. In the past, however, the vast majority of people ended up subsisting on a diet of weak beer and gruel. Regular meat consumption became a privilege restricted to the wealthy upper classes, while everyone else went begging. Hunting, an activity once done by all humans everywhere since time immemorial, became the exclusive provenance of kings and princes – society’s rulers. While it is true that too much meat can be detrimental to health, too little is perhaps even more damaging. Humans are meat-eaters, and a certain level of fat and protein is required for optimal health. The protein in grains and legumes is incomplete (the body needs 22 different types of amino acids to function properly; adults can synthesize 13 of those internally, but the other 9 must be obtained from food), and there are no fats (the human brain is over 60 percent fat). Grains produce an over-abundance of omega-6 fatty acids, poisonous lectins to prevent their consumption, have low nutrient density, and high acidity. They are actually a terrible thing to base a primate diet around. But we had no other choice, thanks to intensification.

And this is dramatically reflected by the skeletons of ancient peoples, who show major signs of malnutrition, disease, and stunted growth. At the same time, arthritis and other signs of wear and tear make their appearance on the bones of people who now have to spend hours a day grinding grain in a saddle quern rather than fishing and chasing after wild animals. This gruel also breaks down into simple sugars in the mouth during digestion, meaning that cavities and premature tooth decay became endemic as well.

As population pressure grew, grains, pulses and sedges, once “unpalatable” dietary supplements cultivated by hunter-gatherers for times of extreme scarcity or fermentation into medicinal beverages, became the chief dietary staple for most people. At the same time, humans found themselves preyed upon by a new class of predator: their own kind, which continues unabated to this day.

In order to keep large herbivores from going totally extinct, we embarked upon what Harris called “the greatest conservation project in history”: animal domestication. Meanwhile, cheap carbohydrates from grain are what kept most of the human population alive from day-to-day for thousands of years, such that “bread” is synonymous in all ancient cultures with “food.”

All this came from attempting to exploit resources more intensively from our environment in the face of increasing population pressure.

This sad tale, memorably spun by Jared Diamond some years ago, reflects Harris’ principle: intensification inevitably leads to benefits for the few; misery and oppression for the many.

During periods of deintensifcation, we actually recovered some of the losses. This was due to either 1.) a reduced population or 2.) new lands and resources opened up for exploitation. For example, signs of health improve after the Black Death in Europe for the survivors, due to the reduced population pressure. There were more resources to go around per head. Also, the opening up of the new lands due to colonization (and the dieoff of the native peoples), brought vast new areas of virgin land under cultivation. This led to more wealth, as well as political freedoms. Serfdom waned after the black death, and the American Revolution put Enlightenment principles of representative democracy and justice into practice. Perhaps the most dramatic result came from the harnessing of millions of years of stored sunlight in fossil fuels, combined with the scientific method. This allowed many more people a higher standard of living, even in the face of increasing population and intensifying resource use. It was during this period that “economics” became the guiding principle of our civilization, and it chalked up all benefits to “institutions”–typically capitalist market institutions–rather than a temporary superabundance of energy and resources.

Thomas Jefferson once noted that the Americans in the room were all a head taller than their European counterparts. That’s what happens when you have plenty for everybody. The first Europeans in North America also noted how much taller the Native Americans were. As this article notes, in the past, Americans ate more meat than today, and were healthier as well:

How Americans Used to Eat (The Atlantic)

Eventually, the Malthusian cycle kicked in again. Population grew, the empty spaces filled up, and the frontier was closed. Increasing competition caused wages and purchasing power to drop. People gradually lost what self-sufficiency they had, allowing the elites to consolidate power. People once again began working longer, harder, for less. Sound familiar?

We intensified again – in order to keep up with the demand for meat, we crowded animals together into feedlots in unsanitary conditions and fed them cheap corn (maize), which they are not adapted to eat. To cope with the inevitable sickness which resulted, we pumped the animals full of antibiotics (which has a side effect of increasing growth). It is these miserable and tortured animals which most of us are forced to eat now, thanks to intensification.

However, domesticated meat is less nutritious than the wild variety. The Omega-3/Omega-6 profile is altered, and there are less antioxidants. Omega-6 fatty acids reduce inflammation, which is increasingly being pinpointed as the root cause of just about every disease you care to name, from autoimmune diseases, to Alzheimer’s, to arthritis, to chronic pain, depression, and cancer. At the same time, it’s been shown that grains actually increase inflammation, and are implicated in a host of metabolic diseases:

This Is Your Brain on Gluten (The Atlantic)

While grass-fed, hormone-free beef is still available, it costs more, meaning it is restricted to those with high incomes, just like in the past. And hunting is still primarily an elite sport for the rich in many places (especially outside North America). Just like in the past, the poor people trapped in “food deserts” feed themselves with cheap carbohydrates, now in the form of processed corn and sugar products made by the industrial food system, while the wealthy can purchase boutique ‘lifestyle” products at Whole Paycheck Foods. Malnutrition now takes the form of obesity as well as starvation, although much of the non-industrialized world still deals with empty bellies, stunted growth and vitamin deficiencies, including many of those who produce export crops for the West. That’s on top of poverty and pollution.

When we scraped the oceans clean of fish and poisoned our air and waterways due to industrial pollutants (e.g. mercury ash is a side effect of coal power generation) we turned to fish farming, (aquaculture) – one of the favorite high-tech “innovations” of the futurist crowd. But farmed fish are nutritionally inferior to wild ones. Wild fish travel widely and get their food from a great variety of sources. This means that they have a much better Omega-3 fatty acid profile (which prevents inflammation and helps brain growth). But farmed fish have to be fed. This means their diet is far more restricted, and hence their meat less nutritious (more Omega-6’s). In fact, salmon needs to be fed a pill in order to turn them pink so that consumers will buy them since their meat does not develop its natural color from their diet. As Spencer Wells notes in Pandora’s Seed, were now doing for fish what we did for ungulates some 8000 years ago: a desperate attempt to preserve what remains. Farmed fish is replacing wild fish in supermarkets. As with grass-fed meat, the wild variety is now sold at a premium affordable only to those with high incomes (sound familiar)?

In each and every case, intensification had led to far more work for ultimately inferior products. This is always the result of intensification in the long run.

We are constantly told we can’t go back to hunting and gathering (even if we wanted to). Why is that? What’s left unsaid is the reason: too many people and too much environmental degradation as the result of 6-8,000 years of intensification, which also brought about disease, governments, wars, taxes, poverty, inequality, and so on. Now we’re told we’ve got to eat less meat (which means more grains), live in small, tightly sealed houses, use less water, take shorter showers, and so forth. In essence, that we will “innovate” our way to success. But all of these are signs of lower living standards. And no wonder: seven billion-plus people, all quarters of the earth occupied and brought under the plow, rain forests being chopped down, the most easily accessible fossil fuels plateauing, toxic pollution of the air, land and water, overpumping of ground water, and the stable climate of the Holocene threatened by carbon levels. Intensification caused all of these things; it is not the solution. The next phase of intensification isn’t going to lead to better living standards any more than the last few rounds. Yet we’ve been tricked into thinking it will, because we don’t realize that fossil fuels are what are ultimately responsible for our current living standards (us Westerners, that is), not intensification. And even then, given the levels of stress, overwork, social dysfunction, health maladies and mental disease in industrialized societies, we might be tempted to wonder if even our living standards are all that great to begin with.

Furthermore, we are told that a healthy diet centered around pastured meat, plants and nuts is just not possible because it’s too damaging to the environment, or too “expensive.” That is, “we” need to “feed the world!” But according to the elites (the ones who benefit from intensification, remember) the answer isn’t less people, or curtailing economic growth. No, instead it’s new “innovations” that are profitable to the parasitical corporate owners of this planet: lab-grown meat, hydroponics, vertical gardens, meal-replacement shakes, protein powder from ground-up crickets, steel-and-glass human anthills. “The futurology future is starting to look worse than the collapse future.” Maybe that’s because the collapse future has more room to grow actual real food, live in a house you built yourself with your friends and family, spend time in nature, work less, play more, and get in touch with what we really are, deep down, instead of what industrial society wants to mold us to be.

Now, for the record, I have no problem with eating bugs. The Permaculturist in me says we should exploit all sources for sustenance in our environment such that they work together in a sustainable, harmonious way in line with the earth’s natural ecosystems. Raising insects, as we now do with bees, makes sense. And, yes, the overconsumption of Americans is grotesque and makes us unhappy, and we’d be better off ditching it (which I already do voluntarily). So to be clear: what I am criticizing is not eating insects or deriving milk from cockroaches per se. Nor am I defending the overconsumption produced by status-driven consumer capitalism. Rather, I am critiquing the idea that these futurology trends are signs of progress rather than collapse. Which is why r/collpase and r/futurology increasingly appear to be turning into the same thing.

P.S This comment nails it.

Karl Polanyi and the Modern World – Part 5

It’s a truism that materials and resources are not scattered uniformly about the earth’s surface. Due to the geological formation of the earth, resources are scattered widely in geographical space. Some places have petroleum, others not; some places have ores, others not; some places have gemstones, others not; some places have quarrying stone, others not; some timber and some not; and so forth.

Similarly, geographical features vary widely. Different places have different climates, soil types, rainfall, native plants and animals, prevailing winds, and so forth. This means that certain crops can only grow in certain locations (wine grapes, for example). Even within small societies, a coastal village will trade products with a forest village which has different resources (one has twine for fishing nets and wood for boats, the other fish, shellfish, and pearls, for example).

Similarly, there exists a division of labor between people. Potters, builders, and metalworkers are just a few examples of people who specialize in one task in complex societies. As society learns to do more, people need to specialize. This means that some sort of exchange must take place, although as we saw previously, that typically took the form of reciprocity, redistribution and householding, rather than buying and selling in “free and open” markets.

We earlier cited Çatalhöyük as an example. Built near a volcano, it was a source of rare and valuable obsidian. It was also the convergence of several different cultures and trade routes. Thus, a proto-city, with a sedentary population, was formed, one of the earliest such places that we know of. Michael Hudson claims that early cities formed in locations where disparate groups came together to conduct trade. Because such places were likely to have permanent occupation, it’s possible that this was the impetus to cultivate and store crops to feed people year round – Catalhoyuk was one of the earliest areas of grain cultivation. Thus, Jane Jacobs’ ideas about intensive agriculture developing as a way to feed cities may not be so far-fetched after all.

Catal Huyuk, located near rivers in a flat, game-filled plain, was an ideal trading site for the obsidian. In “The Time Falling Bodies Take To Light”, W.I. Thompson likens the obsidian to “a dark, cthonic milk which flowed out of the breast of the volcano, Hasan Dag,” and suggests that “Even as far back as the neolithic, religion was good for business…. The relationship between neolithic religion and economics may have been as intimate as the more familiar ‘Protestant Ethic and the Spirit of Capitalism,” Thus, Catal Huyuk was perhaps built on religion and obsidian, and very probably on the “Religion of Obsidian.”

Jericho, which began as a village in about 9,000 B.C.. is also sometimes called the first city. A thousand years before people set foot in Catal HUyak, Jericho was surrounded by walls ten feet thick and fifteen feet tall. But neolithic Jericho at its biggest was substantially less than half the size of Catal Huyuk, and it was clearly only an armed trading post and village, a secular place very different from the unwalled Temple City of Catal Huyuk. Jericho and Catal Huyuk seem to have formed the two ends of a trading network that made possible the spread of agriculture, pottery, durable buildings, and metallurgy (and possibly philosophy, religion. and the crude beginnings of writing, mathematics, and astronomy) throughout the Mediterranean basin, and eventually into Mesopotamia to the east.

http://www.telesterion.com/catal2.htm

The key driver of the expansion of international trade appears to have been the discovery of bronze, which is why the Bronze Age sees the formation of the earliest vast, complex trade routes:

…it was the introduction of metal and the development of metallurgical science that more than anything else made trade essential. The smith had no time for anything outside his own profession, and he was manufacturing things which other people could not make but everybody needed; exchange therefore was a mutual necessity. But the smith’s raw material was seldom to be found close at hand; he had to rely upon large-scale imports, which again had to be paid for, and that meant organization of a far-reaching sort; the retail trade with his neighbors at home was easy enough, but the importation of ore or crude metal from abroad was a business with which he could not cope himself. [1]

All this is to say that trade has been going on since time immemorial. Sometimes that trade has been organized into markets, where large numbers of people come together to buy and to sell. This is not in dispute.

But a common misunderstanding of Polanyi’s ideas is a misunderstanding of what he means by Market*. He does not mean the above, he means the internal self-regulating market as the sole organizing principle of society. Based on his studies of anthropology and history, it was clear to him that this was not a “natural” development emerging out of earlier markets, but something entirely new and different which had to be imposed from above by the power of organized elites. In order to do this, the previous social order had to be broken down and swept away. This could only be accomplished by state violence, direct and indirect.

Also, Polanyi does not argue that people never, ever acted for the rationale of gain, or that they never calculated profit and loss. Rather, only that these were not the primary motivations of most people prior to the early modern period in Western Europe. Where you lived and what you did for a living were not just arbitrary things subject to the impersonal market forces beyond your control; they were determined by ancestry, tribe, nation, guild, custom, tradition, and so forth. Until relatively late in the modern era, economic subsistence rather than pecuniary gain; in his words, “habitation versus improvement,” was the driving force behind economic activity, as Mark Blyth describes:

Until relatively recently then, the economy was not a separate sphere of activity governed by laws of supply and demand. Rather, market forces were “embedded” in a series of social relationships that facilitated subsistence. Reciprocity, householding, and redistribution existed alongside exchange undertaken for gain; and in such an Aristotelian world, trade and profit were the exception rather than the rule. [2]

Embeddedness is a crucial concept for Polanyi and something often difficult to comprehend in our modern market-dominated world. According to Wikipedia“Embeddedness refers to the degree to which economic activity is constrained by non-economic institutions…in non-market societies there are no pure economic institutions to which formal economic models can be applied. In these cases economic activities such as “provisioning” are “embedded” in non-economic kinship, religious and political institutions. In market societies, in contrast, economic activities have been rationalized, and economic action is “disembedded” from society and able to follow its own distinctive logic, captured in economic modeling.”

Alienability is another important concept. In traditional cultures, land, labor and even certain goods were intimately bound up with the people who made them, essentially forever. The Crown Jewels are often used as an example. They are part of the very existence of England; they cannot simply be sold off to a willing buyer. They are not for sale at any price, and even if they were sold, they would always be associated with England no matter who happened to own them. In the past many items were like this–they retained intimate connections to their owners and makers, even after exchange (such as in the Kula Ring). Certainly land was associated with the people who had lived on it for generations, for example (which is why to the Native Americans “selling” land made no conceptual sense to them).

A market society, by contrast, requires everything to be alienable. If I buy a house or a car from you, you have no claim on, nor connection to those things from this point forward. The same can be said for the work you do every day – it is just something to be bought and sold. This is what Marx meant by the “alienation” of labor as one of the defining features of capitalism. The framers of the U.S. Constitution argued that certain rights were inablienable – they cannot be bought and sold at any price but are simply a part of being a human being. Libertarians disagree; to them, everything should be alienable. Many of them argue that you should be able to sell yourself into slavery, for example.

Polanyi additionally distinguishes between two different modes of social relationship: status and contractus. Status is a way of relating to people based upon your relative social position. Contractus is relating to people through some sort of formal legal agreement. Both often co-existed in the past, but the prior one was primary mode for most of human existence.

Those are some of the crucial differences between societies with markets and a market society. In one markets are run as an adjunct to society, in the other, the whole society is run as an adjunct to what Polanyi called the “One Big Market.” This second definition of market necessitated the demolition of all social institutions that had hitherto served as the foundations of society, and this was brought about deliberately by the state power. It was anything but a “natural” outgrowth of previously established markets and trading.

Another common mistake is to see prices and wages in past historical eras and assume that this meant that such societies were also market societies and that markets were central to how they operated. Hence, the thinking goes, the modern world is simply a change of degree, not kind, and people in the past lived much the way we do today; buying and selling for profit and working for wages. This, too, is misunderstanding of Polanyi’s thesis. Mark Blyth responds to criticism of Polanyi by two prominent free-market economists:

…is evidence of prices evidence of either gainseeking, or indeed, of a market society? A thought experiment problematizes this evidence. Imagine that the USA and the USSR had a nuclear exchange and both civilizations were destroyed. Now, 1000 years later, archeologists dig down and find a supermarket. In the supermarket there are thousands of tins and boxes with prices on them. Clearly this shows that markets existed. Or does it? For if this was a Soviet supermarket (yes, they did exist) then does the existence of prices prove that the USSR was a market society? Does it demonstrate that Soviet individuals engaged in gain seeking? Prices are simply signals, and like all signals they are ambiguous at best and do not telegraph how an economy is constructed.

But what of evidence concerning motives? After all… Mayan Obsidian manufacturers exhibited cost sensitivity; Seventeenth century husbanders wrote allegorical verse about financial prudence; and even Roman intellectuals opined that buying a house was a risky proposition. But once again, what does this show us, or rather, what does it allow us to claim? For Obsidian workers, scarcity is an issue. Hence if Obsidian is scarce, price goes up. Price is a rationing device. Yet does this make Mayan society capitalist? Similarly, profit and loss aphorisms…in the seventeenth century are indeed evidence of cost-benefit thinking. Yet such statements are replete throughout the Bible, for example; so are we to conclude that King David et al., were the antecedents of Adam Smith? Likewise, it appears that Cicero was worried about negative equity in his new home. Does this make the Roman Empire was a capitalist market economy? Indeed, what is the point of making such a claim? Hejeebu and McCloskey seem to be saying that if prices and notions of gain have always been around, then QED, markets have always been around; and if markets have always been around, then there cannot have been a great transformation. But this runs into two rather obvious objections.

First of all, regardless of when its dated, the proposition that there was a fundamental transformation in the way the world economy was organized in the nineteenth century is relatively uncontestable. And Polanyi tells us how: the rise of One Big Market where everything is for sale since – the commodification of all factors. This was a qualitatively new development. If this was not, then we have really misunderstood a lot of history. For example, were slavery and feudalism vastly overblown or otherwise restricted to small segments of the population? Were they aberrations of otherwise functioning capitalist labor markets? [Slaves] had prices to be sure, but it is perhaps better to think of a slave society as one of domination than one of capitalism. What Polanyi was suggested was that it is not the presence of markets in goods that matters, but the presence of relatively complete markets in factors that make a market society. All of Obsidian manufacture and Roman house trading in history is simply different in kind.

While gain seeking has indeed existed throughout history, …the historical oddity was that gain-seeking became equated with market transactions only relatively recently. This was a qualitative and not a quantitative change; otherwise Incas, Mayans, Romans, and contemporary Britons were/are all living is societies that were more or less similar in their economic structure, despite the differences in, for example, the presence of slaves. Painting the history of all hitherto existing societies as the history of capitalism in vitro probably obscures more economic history than it illuminates…[3]

This comment gives additional information on what Polanyi meant by markets and embeddedness:

Actually, [Polanyi] does not say that markets are unusual. In fact he says that they are almost universal, just that they were never so important before. They were not socially integrative. If you were to remove them from a given society, it would not fundamentally change it.

In The Economy As An Instituted Process, he identifies three types of exchange: Operational exchange (which is movement in location through trade); Decisional exchange (which is exchange at a fixed price like a local market); and, Integrative exchange (at a bargained rate – in other words what we today call markets). He also draws the distinction between ritualised market bargaining in which participants really know the final price that will be agreed, and actual price-making markets (like a stock exchange).

The important thing is that the other forms or market at not integrative. The prices are fixed by other factors, and those other factors integrate society. And even price-making markets are only integrative if they link up in a system that tends to spread the effects of prices to other markets.

So it is important to understand what he means by markets. He is not concerned with markets that merely facilitate the movement of goods from one place to another. This is very common throughout history, and not what he is concerned about.

He is also arguing that the focus of economics (and psychology) on the individual is wrong, and that to understand economics we need to understand not individual actions themselves, but what motivates them. This is the important thing. And the sources for that action are not individual, but derived from social structure. You cannot share on your own. And you cannot trade on your own. He is not saying that premodern people were all delightful and that modern people are all selfish etc. He is just saying that motivations for action are socially derived, and that the claim that homo economicus is ‘natural’ is clearly disproved by the historical evidence in which communistic action is more common than individualism.

Polanyi on the market (Understanding Society)


Polanyi distinguishes between three different kinds of trade:

  • External (a.k.a export or long-distance) Trade
  • Local Trade
  • Internal (or national) Trade.

The first two he describes as essentially noncompetitive. They were not about maximizing profits or competition, rather they were simply procuring goods which were not available locally, either due to geography or economic specialization (as described above). We’ve already seen them at work a far back as ancient Mesopotamia/Egypt. However, he points that all of these existed external to the societies in which they operated. That is, they did not effect the underlying social relations.

Long-distance trade was primarily conducted in places where traders came together to conduct business, usually on seaports and waterways, or where overland routes converged (as with the Silk Road). Medieval Champagne fairs are one example of this. But strict protections were put in place to prevent this type of trading from affecting the underlying society. This took the form of designating specific trading times and places and enforcing strict rules on commercial behavior. The commercial sphere was kept separate and distinct from the governing sphere. Markets did not affect fundamental social relations. This can be seen, for example, by the many sumptuary laws put in place, which lasted through Elizabethan times.

In fact, early cities seem to have been expressly designed to keep trading at arm’s length, as Sir Leonard Wooley describes of ancient Mesopotamia (emphaisis mine):

Outside of the eastern rampart of the walled native town of Ganeš there stretched a built-up area of rather more than a kilometer’s length which was for the exclusive use of the merchants of Assur. Clearly they were not allowed to live inside the town but were isolated and kept at arm’s length–probably as much by their own wish as by the prejudice of the Anatolians; the Karum, as their quarter was called, might be compared with the ‘factory’ established by the old East India Company outside Calcutta, or…with the town of Naukratis which the Egyptian government assigned to the Greek traders of the seventh century BC…Their main business was the export of copper and as the tablets found in their archives prove they had by their strict application to the business brought their commercial technique, also the legal practices arising from their profession, to a stage even more advanced than that of their colleagues at home.

Kultepe is not the only Anatolian site where a Mesopotamian trading outpost has been discovered; there was one at Bogazköy, and there were probably others conforming more or less to the same pattern. For the pattern has its analogies elsewhere. At Ur itself there was a karum lying outside the walls of the city, and as appears from one of the phrases used, administratively distinct from it; merchants were members of the karum, they settled their accounts there, they could keep their business assets there and if they managed their assets from there they did so as members of the merchants’ guild. It was not a residential area as the Ganeš karum was forced by local conditions to be, but more like what the Royal Exchange was for eighteenth-century London, and a member of it was supposed to act ‘like a gentleman’–mâr awēlim–that is, to observe certain ethical and social standards of conduct; all agreements were made and contracts lodged in the local temple of Shamash the Sun god, so that religious sanction re-enforced the moral code.[4]

Which reinforces Polanyi’s claim that cities and ports were designed as much to protect societies from trade as to encourage it. Japan’s confinement of foreign trade to specific ports during the Sakoku period is another prominent example.

Local trade was the exchange of surplus commodities that took place among specialized producers in shops and market halls on specific days and times. This is the fabled “farmer’s market” of the fair, souk and bazaar. What took place there, however, didn’t much affect your day-to-day life (unless you were a trader, that is). The average person did not need to interact with the market to survive. That is, markets were established to cater to wants, rather than needs. So rather than trade starting out between local villagers and expanding from there to grow into world trade, long-distance trade was primary and slowly seeped down into the daily life of the average person as trade expanded. That is, the history of markets is trickle-down, not percolate-up.

…from the economic point of view external markets are an entirely different matter from either local markets or internal markets. They differ not only in size; they are institutions of different function and origin…

External trade is carrying; the point is the absence of some types of goods in the region; the exchange of English woollens against Portuguese wine was an instance…

Local trade is limited to the goods of the region, which do not bear carrying because they are too heavy, bulky, or perishable.

Thus both external trade and local trade are relative to geographical distance, the one being confined to the goods which cannot overcome it, the other to such only as can. Trade of this type is rightly described as complementary. Local exchange between town and countryside, foreign trade between different climatic zones are based on this principle. Such trade need not involve competition, and if competition would tend to disorganize trade, there is no contradiction in eliminating it…

It might seem natural to assume that, given individual acts of barter, these would in the course of time lead to the development of local markets, and that such markets, once in existence, would just as naturally lead to the establishment of internal or national markets. However, neither the one nor the other is the case. Individual acts of barter or exchange…do not, as a rule, lead to the establishment of markets in societies where other principles of economic behavior prevail. Such acts are common in almost all types of primitive society, but they are considered as incidental since they do not provide for the necessaries of life.

Indeed, on the evidence available it would be rash to assert that local markets ever developed from individual acts of barter…Obscure as the beginnings of local markets are, this much can be asserted: that from the start this institution was surrounded by a number of safeguards designed to protect the prevailing economic organization of society from interference on the part of market practices...Towns, insofar as they sprang from markets, were not only the protectors of those markets, but also the means of preventing them from expanding into the countryside and thus encroaching on the prevailing economic organization of society.

In other words, both these types of trade existed for thousands of years without sacrificing all of society to the Market god. They are not the source of the “Market” as described by economists today. Governments commonly enforced a “wall of separation” between external trade and internal markets. For example, the following description of the port of Whydah on the Guinea coast illustrates the role of markets in a traditional society:

At Whydah, the isolation of places of trade from market place is the basis for the administrative divisions of the town. Each of the European forts, with its surrounding native settlement, constitutes a separate town under administration…All of these separate quarters have their own governors, under the jurisdiction of the Viceroy of Whydah. While the governors of European towns are usually of their respective European nationality, the caboceer of the Market Town is a native official [compare to Mesopotamia, above- CH]

These administrative divisions facilitate the regulation of trade. Access to trade at the European forts is permitted only to those natives authorized to trade. Since exports must be licensed, and an export duty paid by the seller, the royal officials who ‘exercise the refusal of all commerce;’ have the means to control dealings between natives and Europeans. Any indiscriminate traffic with the Europeans..brought immediate reprisal…that is, the cutting off of trade with the fort in question.

This physical separation of trade and market emphasizes the difference in function. Trade in stocks the palace, the army, and the houses of the great. The market caters to the common wants of the population. The great ones of the lands have no needs to resort to the market place for their provisions. Their tables are supplied from their own plantations, and their cloth and military stores from the warehouses of the Europeans in return for slaves.

The market is for common folk and, in the port of trade, also for the foreigner. It is the “working man” taking his breakfast and dinner “in the alley,” or the women selling in the market place, who have need of the piece of firewood or the two-cowrie mouthful of cooked meat. The resident native population of Whydah, belonging to one or the other European forts and subject to labor service for their masters, are “hired out” in menial capacities to the traders and receive “subsistence,” partly in kind and partly in cowries, with which they can feed themselves in the market.

There is also the large floating population of a port town to be supplied with food and neceassaries [sic], men with no hearth or kin to care for them in Whydah; canoemen and carriers from other points on the coast, temporarily beached in Whydah; fishermen from the rivers and lagoons; and, after Britain’s abolition of the slave trade, the liberated slaves dumped in Sierra Leone and finding their way back by stages to their native countries.[5]

We can envisage a similar scene, then, in trading ports in various times and places, from the Mesopotamian entrepôt of Dilmun, to the Roman port of Ostia, to the medieval quays of Antwerp, London, and Genoa. None of these indicated the presence of a market society in the modern sense, however.

Internal markets, however, are a totally different story. These did not “grow out of” the previous two types of markets. It is here where we have multiple sellers and buyers competing against one another for profit. This was not a “natural” outgrowth of either local or long-distance trade. Rather, this was a creation of the state from the very beginning:

These three types of trade which differ sharply in their economic function are also distinct in their origin…even where the towns were founded on the sites of external markets, the local markets often remained separate in respect not only to function but also to organization. Neither the port nor the fair nor the staple was the parent of internal or national markets.

In contrast to both external and local trade, internal trade…is essentially competitive; apart from complementary exchanges it includes a very much larger number of exchanges in which similar goods from different sources are offered in competition with one another. Accordingly, only with the emergence of internal or national trade does competition tend to be accepted as a general principle of trading.

The typical local market on which housewives depend for some of their needs, and growers of grain or vegetables as well as local craftsmen offer their wares for sale…are not only fairly general in primitive societies, but remain almost unchanged right up to the middle of the eighteenth century in the most advanced countries of Western Europe…they nowhere show any sign of reducing the prevailing economic system to their pattern. They are not starting points of internal or national trade…neither long-distance trade nor local trade was the parent of the internal trade of modern times—thus apparently leaving no alternative but to turn for an explanation to the deus ex machina of state intervention…

Internal trade in Western Europe was actually created by the intervention of the state. Right up to the time of the Commercial Revolution what may appear to us as national trade was not national, but municipal…Trade was limited to organized townships which carried it on either locally, as neighborhood trade, or as long-distance trade—the two were strictly separated, and neither was allowed to infiltrate into the countryside indiscriminately…An increasingly strict separation of local trade from export trade was the reaction of urban life to the threat of mobile capital to disintegrate the institutions of the town.

In practice this meant that the towns raised every possible obstacle to the formation of that national or internal market for which the capitalist wholesaler was pressing. By maintaining the principle of a noncompetitive local trade and an equally noncompetitive long-distance trade carried on from town to town, the burgesses hampered by all means at their disposal the inclusion of the countryside into the compass of trade and the opening up of indiscriminate trade between the towns of the country. It was this development which forced the territorial state to the fore as the instrument of the “nationalization” of the market and the creator of internal commerce. Deliberate action of the state in the fifteenth and sixteenth centuries foisted the mercantile system on the fiercely protectionist towns and principalities…

Fundamental to this change was the “great transformation” of land, labor and capital into commodities.

For Polanyi, commodities are things produced expressly to buy, sell, or trade. Land and labor are decidedly not commodities– they are the very foundations of human life itself. Transforming them into chattel to be sold in markets was profoundly unnatural, despite its normalization in our world. Similarly, there is nothing “natural” about capital; it is entirely a creation of state finance, and was brought about by specific decisions and institutional arrangements. For this reason, Polanyi calls these things “fictitious commodities:”

Production is  interaction  of man  and nature;  if this  process  is to be  organized through  a  self-regulating mechanism  of barter  and  exchange, then man and nature must be brought into its orbit; they must  be  subject to supply and demand, that is, be dealt with as commodities, as goods produced for sale.

Such  precisely was the  arrangement under  a market system.  Man under the name of labor, nature under the name  of land, were made available for sale; the use of labor power  could be  universally bought  and sold at a price called wages, and the use of land could be negotiated  for a price  called rent. There was a market in labor as well as in land, and supply and demand in either was regulated by the height of wages  and rents, respectively; the fiction that labor and land were produced  for sale was consistently upheld. Capital invested in the various combinations of labor and land could thus flow from  one  branch of production to another, as was required for an automatic leveling of earnings in the various branches.

But, while production could theoretically be organized in this way, the commodity fiction disregarded the fact that leaving the fate of soil and people to the market would be tantamount to  annihilating them.

Polanyi goes deep into the history and sees that it was a rewriting of society’s rules, primarily to benefit the elites, was the source of the change, not some “natural’ evolutionary process. Concerning land, for example, Polanyi declares:

What we call land is an element of nature inextricably interwoven with man’s institutions. To isolate it and form a market for it was  perhaps the weirdest of all the  undertakings of our ancestors. Traditionally, land and labor are not separated; labor forms part of life, land  remains  part  of nature, life  and  nature  form  an  articulate whole. Land is thus tied up with the organizations of kinship, neighborhood, craft, and creed—with tribe and temple, village, guild, and church.
186

Economic historian Douglass North describes how land in the Middle Ages was not owned outright, but subject to the needs of a variety of overlapping stakeholders:

Feudal law did not recognize the concept of land ownership. It basic characteristic was that several persons had jurisdiction or held and shared particular rights to the same piece of land. The [kings, the lords and the peasants] each held particular rights to receive income, called incidents, from the land.

There existed two ways to transfer land, by substitution, or by subinfeudation. The former required that the land be surrendered to the lord who would in turn grant the land to another, and the second, that the tenant in turn grant the land to another, the tenant becoming the lord of the person to whom he conveyed the land. The incidents or obligations of the land remained in either case. Sub-infeudation, however, added another tenant to the feudal chain. The lord, in the event of a dispute, could move only against his tenant and not his tenant’s tenant. Should his tenant disappear, the higher lords were apt to lose their incidents since they had no legal recourse against the person actually in possession of the land.

The rising real value of land provided incentives to establish, re-establish and define the claims to land by rival groups in the society. Two key statutes in this regard were: Merton in 1235 and Westminster in 1285. These permitted the manorial lord to enclose wasteland so long as sufficient land was left to the tenants. Thus the lords obtained the exclusive right to substantial areas of the manor’s land formerly belonging to all of the inhabitants.

It is revealing to inquire how the freeholders in England acquired the right to alienate their lands in sum, obtaining a property right approaching fee-simple ownership. The Norman conquest had resulted in a stronger central government in England than existed in the rest of the feudal world. The centralized authority of the king’s court in England had no exact parallel on the continent. During the thirteenth century the King’s Court gradually expanded its jurisdiction relative the the seigneurial courts. One of the key precedents that emerged from this struggle was the recognition that the King’s Court held jurisdiction over free men. A freeman came to be defined as a man whose obligations were strictly defined. As the manorial lords lost jurisdiction over the freeman, they also lost control over his land holdings. [6]

Thus we see once again that is was a strong government, not a weak one, which was required to bring about the state project of capitalism.

Labor, too, became a commodity to be bought and sold, rather than something done for its own sake. This was partly accomplished by the destruction of the guild system, which had put in place very strict safeguards as to both internal and foreign competition, quality control, and best practices. Rather than work on your own behalf, work would be done by contract:

Of the three, one stands out: labor is the technical term used for human beings, insofar as they are not employers but employed; it follows that henceforth the organization of labor would change concurrently with the organization of the market system. But as the organization of labor is only another word for the forms of life of the common people, this means that the development of the market system would be accompanied by a change in the organization of society itself. All along the line, human  society had become an accessory of the economic system.

To  separate  labor from other activities of life and to subject it to the laws of the market was to annihilate all organic forms of existence and to replace them by a different type of organization, an atomistic and individualistic one. Such a scheme of destruction was best served by the application of the principle of freedom  of contract. In  practice  this  meant  that the noncontractual organizations of kinship, neighborhood, profession, and creed were to be liquidated since they claimed the allegiance of the individual and thus restrained his freedom. To represent this principle as one of noninterference, as economic liberals were wont to do, was merely the expression of an ingrained prejudice in favor of a definite kind of interference, namely, such as would  destroy noncontractual relations between  individuals and prevent their spontaneous  reformation.

Lewis Mumford describes the medieval guild system and what replaced it:

The prime agents of this industrial freedom were the craft guilds: independent self-governing bodies, established typically in equally self-governing cities, which provided for the education, the discipline, and the sustenance of their members, from youth to old age, in sickness and health, and cared for the widows and orphans of their brothers in need. Not least, the guilds set for themselves standards of qualitative performance: quantity production, as such, did not play a part except where the guild system itself had broken down.

Even before the mechanization of production, some of this freedom had been whittled away by the mercantile practices that favored the bigger masters in the wholesale trades, who formed a ruling oligarchy and who, after the sixteenth century, farmed out work to unprotected handicraft workers in the rural or even suburban areas outside the jurisdiction of the guild. The legal abolition of the guilds, which followed, opened the way for the dehumanized practices of early machine industry. Thus the new freedom proclaimed by the advocates of ‘laissez-faire,’ like Adam Smith, was freedom to abandon the medieval system of guild protection and social security and to be exploited by those who owned the costly new machinery of production.

By a mental sleight of hand, this accompaniment of mechanical progress was minimized by those committed to the system: in proclaiming the immense economies of mass production, they ignored the fact that the landless and the homeless proletarians, forced into the new factories by the price-undercutting of handicraft labor were worse off, in food, sanitary facilities, water supply, and environmental amenities than the agricutural workers of their own time: a fact established by the English life-insurance tables, which show that farm laborers still have a notably higher expectation of life. The factory system degraded the worker into a wage slave instead of using its power machines to abolish slavery.[7]

The Enclosure movement turned both land and labor into commodities to be bought and sold. As common land became enclosed, and with no other means to support themselves, the deracinated laborers had no other choice but to sell their labor at a rate (wage) to those willing to buy it in order to procure the necessities of life. That is, they must be compelled to work for others by depriving them of self-sufficiency. This catastrophic process was hardly as “natural” as libertarians claim:

Enclosures have appropriately been called a revolution of the rich against the poor. The lords and nobles were upsetting the social order, breaking down ancient law and custom, sometimes by means of violence, often by pressure and intimidation. They were literally robbing the poor of their share in the common, tearing down the houses which, by the hitherto unbreakable force of custom, the poor had long regarded as theirs and their heirs’. The fabric of society was being disrupted; desolate villages and the ruins of human dwellings testified to the fierceness with which the revolution raged, endangering the defences of the country, wasting its towns, decimating its population, turning its overburdened soil into dust, harassing its people and turning them from decent husbandmen into a mob of beggars and thieves.

Though this happened only in patches, the black spots threatened to melt into a uniform catastrophe. The King and his Council, the Chancellors, and the Bishops were defending the welfare of the community and, indeed, the human and natural substance of society against this scourge. With hardly any intermittence, for a century and a half—from the 1490s, at the latest, to the 1640s they struggled against depopulation…

Polanyi sees the same principle at work during Europe’s colonial expansion. In traditional societies, no individual starves; rather the whole society maintains food reserves and tightens their belts. But to get people to work, there needs to be the whip and the lash of hunger and destitution to get them to sell their labor to the highest available bidder, part of the same carrot-and-stick approach that compels us to work today. To accomplish this, traditional social bonds, which made sure no one went hungry, had to be destroyed. The “starving African” cliche is entirely a creation of  Western colonialism:

This effect of the establishment of a labor market is conspicuously apparent in colonial regions today. The natives are to be forced to make a living by selling their labor. To this end their traditional institutions must be destroyed, and prevented from reforming, since, as a rule, the individual in primitive society is not threatened by starvation unless the community as a whole is in a like predicament. Under the kraal-land system of the Kaffirs, for instance, “destitution is impossible: whosoever needs assistance receives it unquestioningly.” No Kwakiutl “ever ran the least risk of going hungry.” “There is no starvation in societies living on the subsistence margin.” The principle of freedom from want was equally acknowledged in the Indian village community and, we might add, under almost every and any type of social organization up to about the beginning of sixteenth-century Europe, when the modern ideas on the poor put forth by the humanist Vives were argued before the Sorbonne…

It is the absence of the threat of individual starvation which makes primitive society, in a sense, more humane than market economy, and at the same time less economic. Ironically, the white man’s initial contribution to the black man’s world mainly consisted in introducing him to the uses of the scourge of hunger. Thus the colonists may decide to cut the breadfruit trees down in order to create an artificial food scarcity or may impose a hut tax on the native to force him to barter away his labor. In either case the effect is similar to that of Tudor enclosures with their wake of vagrant hordes.

A League of Nations report mentioned with due horror the recent  appearance  of that ominous figure of the sixteenth-century European  scene, the  “masterless  man,” in the African bush. During the late Middle Ages he had been found only in the “interstices” of society.” Yet  he  was the forerunner of the nomadic laborer of the nineteenth century…There  is  close  analogy  between  the  colonial  situation  today  and that of Western Europe a century or two ago. But the mobilization of land which in exotic regions may be compressed into a few years or decades may have taken as many centuries in Western Europe.

Internal markets can only exist in a “market society” where everything is for sale. In such a society, land and labor must no longer be “embedded,” but must be separated. They must alienable from their owners.  This leads to the creation of an “economic” sphere totally separate from the social and political spheres.

A self-regulating market demands nothing less than the institutional separation of society into an economic and a political sphere…True, no society can exist without a system of some kind which ensures order in the production and distribution of goods. But that does not imply the existence of separate economic institutions; normally, the economic order is merely a function of the social order. Neither under tribal nor under feudal nor under mercantile conditions was there, as we saw, a separate economic system in society…Such an institutional pattern could not have functioned unless society was somehow subordinated to its requirements.

A market economy can exist only in a market society…A market economy must comprise all elements of industry, including labor, land, and money…But labor and land are no other than the human beings themselves of which every society consists and the natural surroundings in which it exists. To include them in the market mechanism means to subordinate the substance of society itself to the laws of the market.

The crucial point is this: labor, land, and money are essential elements of industry; they also must be organized in markets; in fact, these markets form an absolutely vital part of the economic system…The extension of the market mechanism to the elements of industry labor, land, and money— was the inevitable consequence of the introduction of the factory system in a commercial society. The elements of industry had to be on sale…But labor, land, and money are obviously not commodities; the postulate that anything that is bought and sold must have been produced for sale is emphatically untrue in regard to them…But the fiction of their being so produced became the organizing principle of society.

What was the reason for this fundamental change? There are many answers, but in Polanyi’s view, the primary cause was the application of machines to the production process. This new production process required the creation of universal markets where land, labor, and capital were the necessary inputs:

We submit that an avalanche of social dislocation, surpassing by far that of the enclosure period, came down upon England; that this catastrophe was the accompaniment of a vast movement of economic improvement; that an entirely new institutional mechanism was starting to act on Western society; that its dangers, which cut to the quick when they first appeared, were never really overcome; and that the history of nineteenth-century civilization consisted largely in attempts to protect society against the ravages of such a mechanism. The Industrial Revolution was merely the beginning of a revolution as extreme and radical as ever inflamed the minds of sectarians, but the new creed was utterly materialistic and believed that all human problems could be resolved given an unlimited amount of material commodities.

The story has been told innumerable times: how the expansion of markets, the presence of coal and iron as well as a humid climate favorable to the cotton industry, the multitude of people dispossessed by the new eighteenth-century enclosures, the existence of free institutions, the invention of the machines, and other causes interacted in such a manner as to bring about the Industrial Revolution. It has been shown conclusively that no one single cause deserves to be lifted out of the chain and set apart as the cause of that sudden and unexpected event.

But how shall this revolution itself be defined? What was its basic characteristic? Was it the rise of the factory towns, the emergence of slums, the long working hours of children, the low wages of certain categories of workers, the rise in the rate of population increase, or the concentration of industries? We submit that all these were merely incidental to one basic change, the establishment of market economy, and that the nature of this institution cannot be fully grasped unless the impact of the machine on a commercial society is realized. We do not intend to assert that the machine caused that which happened, but we insist that once elaborate machines and plant were used for production in a commercial society, the idea of a self-regulating market system was bound to take shape.

As for ‘capital’, this was entirely a creation of the state as we saw last time. Money issued by the state and demanded for the extinguishing of tax liability was the driver of internal markets, rather than government “stealing” from the merchants. Governments do not need the taxes in order to operate, rather they require taxes to facilitate market operations. Government financial operations were used to create the “capital.” on which the merchants depended for their enterprise. Chartered corporations such as the Dutch East India company, were entirely the creations of central governments. The creation of these companies gave rise, in turn, to stock markets. One prominent example is the use of money to commercialize labor in Africa. Here markets, unlike the one described above in Dahomey, were entirely creations of the central state:

In his study of colonial Africa, Forstater similarly concludes that by imposing a debt obligation (taxes) on colonial Africans denominated in foreign currency (British Pounds), the British were able to dismantle the pre-existing economic structure in Africa and to monetize its whole economy and population (2005).  In other words, the British government succeeded in creating a new money of account (British Pounds) in colonial Africa by coercively indebting the population and demanding British Pounds as the only means of payment to extinguish the Africans’ liabilities to the colonial government.  This effectively moved the African labor power to production desired by the British colonizer since the only means to acquire British Pounds were to work at British farms or mines (Forstater, 2005).  British Pounds immediately became the new money used by the colonial Africans.  Hence, levying a tax liability denominated in foreign currency was sufficient (though not necessary) not only to compel the population to use new money but also to move labor power to desirable areas.  Note that in this process the British Pounds must first be spent into the hands of the colonial Africans to allow for any tax payment.

Vincent Huang: On the Nature of Money (Naked Capitalism)

But demolishing society and turning it all into One Big market threatened to tear the very fabric of society apart. To cope with this, societies fought back against the social engineering of market liberals. This took the forms of rebellions and social movements, which raged throughout the nineteenth century and beyond. For Polanyi, these “double moments” were the defining events of the previous 150 years of European and world history (also argued by Eric Hobsbawm):

To allow the market mechanism to be sole director of the fate of human beings and their natural environment indeed, even of the amount and use of purchasing power, would result in the demolition of society…While on the one hand markets spread all over the face of the globe and the amount of goods involved grew to unbelievable dimensions, on the other hand a network of measures and policies was integrated into powerful institutions designed to check the action of the market relative to labor, land, and money…Society protected itself against the perils inherent in a self-regulating market system—this was the one comprehensive feature in the history of the age.

Government’s job had been relegated to merely being a hands-off manager for the markets. But as the common people became subject to near-constant booms and busts, leading to poverty, destitution, and even starvation for large swaths of the population (conveniently exorcised from the official history of capitalism), they demanded the authorities step in and rein in the abuses of the Market, preventing the “pure” market of libertarian dreams from ever coming to fruition. This is what Polanyi calls the “double movement” – the closer authorities try to get to the “pure” market economy, the more society pushes back against it, as Fred Block describes: “In this sense one might say that disembedding the market is similar to stretching a giant elastic band. Efforts to bring about greater autonomy of the market increase the tension level. With further stretching, either the band will snap—representing social disintegration—or the economy will revert to a more embedded position.” [8]

As long as the economy is not totally “pure” that is, not free from government “interference,” libertarians can chalk up any sort of market failure to government intervention, exactly as they do today. To them, any role for government whatsoever becomes an all-purpose “get out of jail free” card: “crony capitalism.” Indeed, most “burdensome regulations” are put in place to deal with market failures, and then libertarians turn around blame the regulations for the failure of markets in the first place! But as Polanyi argues, abolishing the government and leaving it all up to the market is impossible:

Modern economics starts by pretending that these fictitious commodities will behave in the same way as real commodities, but Polanyi insists that this sleight of hand has fatal consequences. It means that economic theorizing is based on a lie, and this lie places human society at risk.

Even though the economy is supposed to be self-regulating, the state must play the ongoing role of adjusting the supply of money and credit to avoid the twin dangers of inflation and deflation. Similarly, the state has to manage shifting demand for employees by providing relief in periods of unemployment, by educating and training future workers, and by seeking to influence migration flows. In the case of land, governments have sought to maintain continuity in food production by a variety of devices that insulate farmers from the pressures of fluctuating harvests and volatile prices. In urban areas governments manage the use of the existing land through both environmental and land-use regulations. In short, the role of managing fictitious commodities places the state inside three of the most important markets; it becomes utterly impossible to sustain market liberalism’s view that the state is “outside” of the economy.

The fictitious commodities explain the impossibility of disembedding the economy. Real market societies need the state to play an active role in managing markets, and that role requires political decision making; it cannot be reduced to some kind of technical or administrative function.” When state policies move in the direction of disembedding through placing greater reliance on market self-regulation, ordinary people are forced to bear higher costs. Workers and their families are made more vulnerable to unemployment, farmers are exposed to greater competition from imports, and both groups are required to get by with reduced entitlements to assistance. It often takes greater state efforts to assure that these groups will bear these increased costs without engaging in disruptive political actions. This is part of what Polanyi means by his claim that “laissez-faire was planned”; it requires statecraft and repression to impose the logic of the market and its attendant risks on ordinary people.

Because societies invariably draw back from the brink of full-scale experimentation with market self-regulation, its theorists can always claim that any failures were not the result of the design but of a lack of political will in its implementation. The creed of market self-regulation thus cannot be discredited by historical experiences; its advocates have an airtight excuse for its failures.

As Michael Hudson has said, “all economies are planned, the only question is who does the planning.”

David Harvey in “A Short History of Neoliberalism,” summarizes the many ways in which government action creates the market, both back then, and now more recently under Neoliberalism:

…These include the commodification and privatization of land and the forceful expulsion of peasant populations; conversion of various forms of property rights (common, collective, state, etc.) into exclusive private property rights; suppression of rights to the commons; commodification of labour power and the suppression of alternative (indigenous) forms of production and consumption; colonial, neocolonial, and imperial processes of appropriation of assets (including natural resources); monetization of exchange and taxation, particularly of land; the slave trade (which continues particularly in the sex industry); and usury, the national debt and, most devastating of all, the use of the credit system as a radical means of accumulation by dispossession. The state, with its monopoly of violence and definitions of legality, plays a crucial role in both backing and promoting these processes.

Comments on David Harvey’s “A Brief History of Neoliberalism” (Naked Capitalism)


Which brings us to today. Now the needs of the Markets dominate the world, all of us need to sell our labor to survive as Naked Capitalism points out:

What is remarkable is how we’ve blinded ourselves to the coercive element of our own system. From Robert Heilbroner in Behind the Veil of Economics:

“This negative form of power contrasts sharply with with that of the privileged elites in precapitalist social formations. In these imperial kingdoms or feudal holdings, disciplinary power is exercised by the direct use or display of coercive power. The social power of capital is of a different kind….The capitalist may deny others access to his resources, but he may not force them to work with him. Clearly, such power requires circumstances that make the withholding of access of critical consequence. These circumstances can only arise if the general populace is unable to secure a living unless it can gain access to privately owned resources or wealth…”

“The organization of production is generally regarded as a wholly “economic” activity, ignoring the political function served by the wage-labor relationships in lieu of baliffs and senechals. In a like fashion, the discharge of political authority is regarded as essentially separable from the operation of the economic realm, ignoring the provision of the legal, military, and material contributions without which the private sphere could not function properly or even exist. In this way, the presence of the two realms, each responsible for part of the activities necessary for the maintenance of the social formation, not only gives capitalism a structure entirely different from that of any precapitalist society, but also establishes the basis for a problem that uniquely preoccupies capitalism, namely, the appropriate role of the state vis-a-vis the sphere of production and distribution.’

What struck me about Heilbroner’s discussion, as if he was tip-toeing around the issue, and it was not clear whether because he could not formulate a crisp description of the power relationships, or that it was clear to him but he really didn’t want to come out and say what he saw.

Ian Welsh ventures where Heilbroner hesitated to go:

“The fundamental idea of our current regime is one that most people have forgotten, because it is associated with Marx, and one must not talk about even the things Marx got right, because the USSR went bad. It is that we are wage laborers. We work for other people, we don’t control the means of production. Absent a job, we live in poverty. Sure, there are some exceptions, but they are exceptions. We are impelled, as it were, by Marx’s whip of hunger. It took a lot of work to set up this system, as Polyani notes in his book “the Great Transformation”, but now that it has happened, it is invisible to us.”

We have to sell our labor (or be supported by someone who does that) as a condition of survival. Now that may not seem peculiar since that has been the state of affairs in most advanced economies for generations. The seeming exceptions, like farmers and even fishermen, are now little capitalists; they own equipment and sell their goods to wholesalers of various sorts. This order was imposed after the feudal era. As Yasha Levine explained, citing Michael Perelmen’s The Invention of Capitalism:

“Faced with a peasantry that didn’t feel like playing the role of slave, philosophers, economists, politicians, moralists and leading business figures began advocating for government action. Over time, they enacted a series of laws and measures designed to push peasants out of the old and into the new by destroying their traditional means of self-support.”

“‘The brutal acts associated with the process of stripping the majority of the people of the means of producing for themselves might seem far removed from the laissez-faire reputation of classical political economy,” writes Perelman. “In reality, the dispossession of the majority of small-scale producers and the construction of laissez-faire are closely connected, so much so that Marx, or at least his translators, labeled this expropriation of the masses as ‘‘primitive accumulation.’'”

“Perelman outlines the many different policies through which peasants were forced off the land—from the enactment of so-called Game Laws that prohibited peasants from hunting, to the destruction of the peasant productivity by fencing the commons into smaller lots—but by far the most interesting parts of the book are where you get to read Adam Smith’s proto-capitalist colleagues complaining and whining about how peasants are too independent and comfortable to be properly exploited, and trying to figure out how to force them to accept a life of wage slavery.”

And this might put the “failure of capitalism” theme in context. If you have a system that requires that people sell their labor as a condition of survival, yet fails to provide enough opportunities to sell labor to go around, you have conditions for revolt. Hungry, desperate people having nothing to lose. That, and not charity, is the root of the welfare state, to provide a buffer for when the capitalist system chokes up and presumably on a short-term basis, fails to provide enough jobs (that and to provide for people who are infirm, handicapped, or otherwise cannot work, which communities in England did in the early modern era).

So you can see the obvious tension: the capitalist classes in America, to increase their riches further, have been squeezing workers harder by not hiring as they did in the past. We’ve never had a “recovery” in the post-WWII era with so little of GDP growth going to labor (meaning both hiring and wage increases). In the past, the average was over 60% and the lowest was 55%. I haven’t seen a recent update, but the last figures I saw was that the level for this “recovery” was under 30%. Yet simultaneously, there’s a full-bore effort on to gut the remaining safety nets. If this isn’t a prescription for social and political instability, I don’t know what is.

The Coercive Power of Capitalism (Naked Capitalism)

Which brings us to the crisis of the modern world. We’ll be talking about that next time.

* I often capitalize the word Market to make this distinction. In English, we unfortunately have the same word for these different concepts. Places where goods are bought and sold is a small-m market, like a farmer’s market. The big-M Market is the One Big Market who must be constantly be appeased and whose “demands” we must carry out. That’s the other reason I like to capitalize it – to emphasize the fact that it has become the quasi-deity of the modern world: omniscient, all-powerful, capricious, inscrutable, unfathomable, and never to be questioned, with economists as its high priests. Polanyi points out that the dramatic swings and cycles in the One Big Market are the equivalent to floods and famines in ancient times, except ours are self-inflicted.

[1] Sir Leonard Wooley; The Beginnings of Civilization, p. 321

[2] Mark Blyth; The Great Transformation in Understanding Polanyi: A Reply to Hejeebu and McCloskey, p. 3 http://www.markblyth.com/wp-content/uploads/2013/08/BlythCR.pdf

[3] ibid. pp. 7-9

[4] Wooley, p. 335-336

[5] Polanyi, K. ed.; Trade and Markets in Early Empires, pp. 182-183

[6] Douglass North, The Rise of the Western World: A New Economic History, pp. 63-64

[7] Lewis Mumford; The Myth of the Machine, Vol. 1, pp. 133-134

[8] From the introduction, see http://dieoff.org/_History/TheGreatTransformation.htm

Karl Polanyi and the Modern World – Part 4

Karl Polanyi does not talk about the origins of money in any detail in TGT, yet it is extremely important to his argument. If social relations were centered around markets, and markets around monetary exchanges as libertarians claim, then we would expect money to be a very early invention. In fact, we would expect money and markets to predate the state, or to emerge even in the absence of a central state.

Yet this is not what we find. Recently, a number of economists, historians and anthropologists have probed deeply into the origins of money. What they find is that money began not to facilitate individuals trading in imaginary markets, but as systems of debits and credits that formed when societies grew too large for the basic institutions of reciprocity and redistribution to function at the community level. The systems of debits and credits facilitated redistributive temple and palace economies using the new invention of writing long before they were represented by the paper and metal tokens we now think of as money.

In contrast, the standard “just-so” story of money proposed by economists from Adam Smith onward is this: Money spontaneously evolved because it facilitated trade in an imaginary stateless society. Money evolved by mutual consent to facilitate trading among primitive proto-capitalists for all the stuff they needed. Precious metals were commonly agreed upon as an “intermediate good” that everybody wanted, eventually evolving into standardized coins with standardized weights. The value of the coins derived solely from the amount of precious metal they contained. To remove metal from coins – “debasing” them – was accomplished by government “interference” in the economy causing trade to falter and empires to collapse. Paper is only a representation of precious metal held in a vault somewhere, which is the only “real” money.

Bolstering Polanyi’s argument is the fact that “money” as we know it is a fairly recent invention. Most “primitive” peoples don’t use it. We’ve seen that societies like Egypt, Mesopotamia, pre-classical Greece, and Peru managed to run fairly complex economies using no “money” whatsoever. The first coins were minted in about 600 B.C., and paper money in the West had to wait until the 1600’s (earlier in China) to be widely circulated. Yet the Bronze Age had trading regimes so complex that it has been termed “the first global economy.”

The Lydian Lion is the one coin I’d personally call “The Coin.” It directly preceded ancient Greek coinage, which through Rome begot all Western coinage, and which through the Seleukids, Parthians, and Sassanians begot all Islamic coinage. Indian coinage has largely been a product of Greek, Roman, and Islamic influences. Chinese coinage, though it probably developed independently, was succeeded by Western-style coinage in the late nineteenth century. Other countries in Asia, in Africa, and elsewhere have adopted the Western approach to coinage as well. It’s not chauvinistic, and it’s only mildly hyperbolic, to suggest that virtually all coinage in use today is the progeny of the Lydian Lion, that it’s the Adam of coins…Even though coinage doesn’t appear to have initially served commerce or trade, it’s likely that the Lydians created coins as we know them because they were the first to recognize their profit-making potential, as will be shown below. It would still be possible of course for later governments to earn seigniorage profits by issuing coins in pure gold and silver, just not as easy…

The first coins – no ‘means of market exchange’ but ‘means of gift exchange’? (Real World Economics Review)

As we’ve seen, the economies of true stateless societies were governed by redistribution, reciprocity, and gift exchange, not by money and markets. The redistributor chiefs gave everything away; they didn’t take everything away from the people and charge them money for its use (where would they get the money to pay for it?). It was more akin to “primitive communism” than anything libertarians envision.

The fetishization of money, markets and trade, along with the stateless theories of the origin of money arising spontaneously out of barter, were all part of the formation of “classical” or “Neoclassical” economics in the late eighteenth century and after. This also informed Hobbes’ (mistaken) theories of state formation as solitary individuals mutually agreeing to form a state by voluntarily coming together and giving up a portion of their freedom to a sovereign.

But these are classic cases of what the authors of Sex at Dawn call the “Flintstonization” of history: the erroneous projection contemporary conditions back onto the distant past. If our entire lives are determined by buying and selling in markets and working at jobs, we think, then surely that must have been how people lived their lives in the past as well, right? Wrong!

…Now for [Adam] Smith, the most important function of money is to serve as a medium of exchange.  Because once this is established his apocryphal story expands. As a medium of exchange money facilitates trade, encourages greater specialization and productivity, reduces transactions costs, and allows for the further flowering of capitalism.  It also serves as the beginning of the banking system.  As metals become the preferred medium of exchange, banks are created to store and manage these wealth holdings.  The coining of metal by state governments facilitates this process by standardizing weights and degrees of alloyed purity. The bankers than issue receipts describing the amount of gold stored or deposited on its premises.

Over time, bankers realize that these gold receipts are circulating as money.  They also realize that only a fraction of their holdings are called for on any given day.  Thus they can make loans at interest and issue gold receipts far in excess of their actual holdings.  This emergence of credit further greases the wheels of capitalist exchange, savings, and investment.  However, in the overall economy, money only affects prices and not the process of actual physical production.

Even peak oil author Richard Heinberg repeats this myth:

While early forms of money consisted of anything from sheep to shells, coins made of gold and silver gradually emerged as the most practical, universally accepted means of exchange, measure of value, and store of value.

Money’s ease of storage enabled industrious individuals to accumulate substantial amounts of wealth. But this concentrated wealth also presented a target for thieves. Thievery was especially a problem for traders: while the portability of money enabled them to travel for long distances to purchase rare fabrics and spices, highwaymen often lurked along the way, ready to snatch a purse at knife-point. These problems led to the invention of banking—a practice in which metal-smiths who routinely dealt with large amounts of gold and silver (and who were accustomed to keeping it in secure, well-guarded vaults) agreed to store other people’s coins, offering storage receipts in return. Storage receipts could then be traded as money, thus making trade easier and safer.

Eventually, goldsmith-bankers realized that they could issue paper receipts for more gold than they had in their vaults, without anyone being the wiser. They did this by making loans of the receipts, for which they charged a fee amounting to a percentage of the loan.

Economic History in 10 Minutes (Resilience.org)

This the the “evolutionary origin of money” proposed by Austrian Economist Carl Menger. Menger’s theory is based on the model of thousands of anonymous individuals transacting for their daily needs in “free and open” markets that we have thoroughly debunked over the last few posts:

Karl Menger, an Austrian economist, set out one school of thought as long ago as 1892. In his version of events, the monetisation of an economy starts when agricultural communities move away from subsistence farming and start to specialise. This brings efficiency gains but means that trade with others becomes necessary. The problem is that operating markets on the basis of barter is a pain: you have to scout around looking for the rare person who wants what you have and has what you want.

Money evolves to reduce barter costs, with some things working better than others. The commodity used as money should not lose value when it is bought and sold. So clothing is a bad money, since no one places the same value on second-hand clothes as new ones. Instead, something that is portable, durable (fruit and vegetables are out) and divisible into smaller pieces is needed. Menger called this property “saleableness”. Spices and shells are highly saleable, explaining their use as money.

Government plays no role here. The origin of money is a market-led response to barter costs, in which the best money is that which minimises the costs of trade. Menger’s is a good description of how informal monies, such as those used by prisoners, originate.

On the origin of specie (The Economist)

This is at the core of the libertarian argument. Money and trading does not need the state at all, they say. It is all about individuals making mutually-beneficial trades in free markets with a mutually-agreed upon medium of exchange which evolves spontaneously over time, they say. If the state just “went away” instead of taking from the “makers,” economic life would go on just fine, they argue. Also, in this estimation, a finite stock of precious metals are the only “real” money, and “fiat currency” is an abomination that can only lead to doom.

The problem is that, historically speaking, these ideas are all incorrect. In fact, logic alone uncovers problems with this approach:

In terms of logic, [Adam] Smith’s story is simply not convincing…the barter story that emerged from Smith contradicts both the logic and the historical record… For example, if you grew up in a small town in the western US in the 1970s, you might remember that you could go to the grocery store, pick up groceries, and simply sign a slip a paper acknowledging your receipt of the groceries.  The same could be done in Smith’s hypothetical example.  If the shoe seller or potato seller were trustworthy, the shoe seller could simply create a record of the shoes purchased on credit by the potato seller/shoe buyer and their value in some agreed upon unit of account.  This is not barter and it is not a purchase using a medium of exchange.  Instead it is “the exchange of a commodity for a credit.”  And it is far easier that the use of a medium of exchange.

Was Money Created to Overcome Barter? (Naked Capitalism)

In fact, this actually happened in the real world:

To prove his core point – that money is not currency – [Author Felix] Martin reminds readers of a previous crisis 43 years ago in Ireland. Following an industrial dispute, the nation’s banking system shut down for nearly seven months, with customers unable to withdraw or deposit money. Yet instead of the country grinding to a halt as anticipated, people began accepting cheques or IOUs based on their own assessments of risk. So in a rich and developed economy, albeit one with strong communal links, institutionalised banking was replaced by a personalised credit system – proving, he says, “the official paraphernalia” of banks, credit cards and notes, can disappear “and yet money still remains”.

Money: a Biography by Felix Martin – Review (The Guardian)

So money was not “invented” to overcome barter. Rather, it goes back to the early redistributive economies that we’ve been discussing.

So if there has never been a land of barter, then where did we get money and credit from? A British diplomat named Alfred Mitchell-Innes was one of the first to write about the true origins of money. He published an essay entitled “What is Money” back in 1913:

[Mitchell] Innes (p. 397) argues that systems of credit pre-date coins by over a thousand years.  “The earliest known coins of the western world are those of ancient Greece, the oldest of which, belonging to the settlements on the coast of Asia Minor, date from the sixth or seventh centuries B.C.”  In contrast, the law of debt goes back to at least the Code of Hammurabi in Babylonia 2000 years B.C.  Innes saw that the foundation of society and thereby of credit was that promises or obligations were and are viewed as sacred.  In all societies (p. 391) the breaking of the pledged word, or the refusal to carry out an obligation is held equally disgraceful.”

He goes on to explain how wooden tally sticks and clay shubati tablets were used to track credits/purchases and debits/sales long before the existence of coins.  And that one could repay a debt by returning a credit of the same amount to the lender.  In fact, village fairs were convened so that those holding the debts of others could match credits and debits together and thereby clear their accounts.  Over time others showed up to buy and sell other goods and services or to cater to those in this most basic business of banking.

Was Money Created to Overcome Barter? (Naked Capitalism)

…the earliest uses of money in recorded civilization were not coins, or anything like them. They were tallies of credits and debits (gives and takes), assets and liabilities (rights and responsibilities, ownership and obligations), quantified in numbers. Accounting. (In technical terms: sign-value notation.) Tally sticks go back twenty-five or thirty thousand years. More sophisticated systems emerged six to seven thousand years ago (Sumerian clay tablets and their strings-of-beads predecessors). The first coins weren’t minted until circa 700 BCE — thousands or tens of thousands of years after the invention of “money.”

These tally systems give us our first clue to the nature of this elusive “social construct” called money: it’s an accounting construct. The earliest human recording systems we know of — proto-writing — were all used for accounting. So the need for social accounting may even explain the invention of writing.

This “accounting” invention is a human manifestation of, and mechanism for, reciprocity instincts whose origins long predate humanity. It’s an invented technique to do the counting that is at least somewhat, at least implicitly, necessary to reciprocal, tit-for-tat social relationships.

None of this is to suggest that explicit accounting is necessary for social relationships. That would be silly. Small tribal cultures are mostly dominated by “gift economies” based on unquantified exchanges. And even in modern societies, much or most of the “value” we exchange — among family, friends, and even business associates — is not accounted for explicitly or numerically. But money, by any useful definition, is so accounted for. Money simply doesn’t exist without accounting.

Coins and other pieces of physical currency are, in an important sense, an extra step removed from money itself. They’re conveniently exchangeable physical tokens of accounting relationships, allowing people to shift the tallies of rights and responsibilities without editing tally sheets. But the tally sheets, even if they are only implicit, are where the money resides.

Did money evolve? You might not be surprised (Evonomics)

This comment sums it up succinctly:

Money (a standard unit of account, used to denote debts or assess value) predates coins by millennia, and coins only ever comprised a small fraction of the money in daily use. Most ancient money was in the form of marks on clay tablets or notes on pieces of papyrus, just as it is today (computers replacing clay or papyrus).

A Roman who bought an estate in Italy qualifying him for the equestrian order (one million sesterces) did not haul a cartload of silver around. He arranged for his banker to transfer a sum from his account to that of the vendor, again just as we would today. Ditto mercantile debts. Coins were for spot transactions, untrusted persons and ceremonial gifts (donatives). The real cost of making money was and is in establishing and maintaining the trust needed to support it.

The real costs of making money 2. Where did the silver used to buy Josef come from?

A more recent take on the origins or money is the book Money: A Biography by Felix Martin:

[Felix] Martin sees [money] as based upon a system of credit and clearing from the start. … he says we should view money as a social technology, a set of ideas and practices for organising society. It was created after the collision of Mesopotamian inventions of literacy, numeracy and accounting with Greek notions of equality, and evolved amid struggles for supremacy between sovereigns and their subjects. Ultimately, it was a liberating force for individuals against the state – but also something prone to near-ceaseless speculation and financial crises.

Money: a Biography by Felix Martin – Review (The Guardian)

In fact, the state played a crucial role in the creation of money:

…Take the widespread use of precious metals as money. A Mengerian would say that this happens because metals are durable, divisible and portable: that makes them an ideal medium of exchange. But it is incredibly hard to value raw metals…so the cost of using them in trade is high. It is much easier to assess the value of a bag of salt or a cow than a lump of metal. Raw metals fail Menger’s own saleableness test.

This problem explains why metal money has circulated not in lumps but as coins, with a regulated amount of metal in each coin. But history shows that minting developed not as a private-sector attempt to minimise the costs of trading, but as a government operation. It was state intervention, not the private market, that made metal specie work as money.

That suggests another theory is needed, in which the state plays a bigger role in the origin of money…The fiscal wing of government has a huge incentive to move its economy away from barter. Once money exists, income and expenditure can be measured. That means they can be taxed. And the public purse gets a second boost from seigniorage, the difference between the value of the coins and the cost of producing them. On this account, governments impose taxes payable only in money, creating a demand for money that means it will be widely accepted as payment for goods. The state forces the economy away from barter for its own fiscal purposes.

On the origin of specie (The Economist)

In other words, the use of money created markets, not the other way around! And they were both intentional creations of central states. Charles Goodhart of the London School of Economics published a paper arguing this in 1998:

Mr Goodhart used monetary history to test these competing theories. He examined the overthrow of Rome and a period in the tenth century when the Japanese government stopped minting coins. If the origin of money were purely private, these shocks should have had no monetary effects. But after Rome’s collapse, traders resorted to barter; in Japan they started to use rice instead of coins. There is a clear link between fiscal power and money. The evidence suggests that only “informal” monies can spring up purely privately…

On the origin of specie (The Economist)

Just how much of a state invention is detailed by the book Making Money by Christine Desan; like Felix Martin’s book, a history of money, in this case from late medieval and early modern Europe. This book covers the history of money at the same time as market exchanges were emerging to become central in the social relations of Western Europe:

The central assumption of [the conventional] story is that coins were simply a package in which precious metal traveled. Hence “they had to be assayed and weighed to determine their value in the best of times.” But even that is too optimistic, if the question is whether coins serve as safe assets. Coins did have a metal value, since they could theoretically be converted into bullion, which had its own price, albeit at some cost. But they also had a coin value, which was simply the value dictated by the sovereign, since coins could be used to pay taxes.

The metal value and the coin value were related, but they were related in the sense that the value of a currency today is related to the economic fundamentals of the country that issues it. That is, the relationship between metal value and coin value was managed by the government using a variety of policy instruments. One of those was setting the number of coins that would be minted from a given quantity of metal (and the number of those coins that would be skimmed off the top for the sovereign).

A central principle of late medieval English law..was that the sovereign had the absolute right to dictate the value of money…If Queen Elizabeth said that worn, clipped coins had the same value as brand-new coins from the mint, even if the former had only half the silver content of the latter, then they had the same value. She could say that because the value of pieces of metal depends on what you can use them for, and so long as you (or someone else) can use them to pay debts and taxes, they have value…money was never simply precious metal in another form, but an instrument of commerce artificially created by kings.

Even in the heyday of coins, they were hardly the only form of money. For one thing, most everyday transactions were conducted using debt—what we would call trade credit, although it was used by consumers as well as businesses—because the smallest coin was simply too big to pay a day’s wages, let alone buy a beer, at least in England. For another, as early as the 14th century, carved sticks of wood known as tallies were circulating as money.
Tallies began as records of taxes collected, then became receipts the crown gave to tax collectors for advances of coin (the idea being that, at tax time, the collector could show the tally and say, “I already paid”), and finally evolved into tokens that the government used to pay its suppliers (who could then cash them with tax collectors, who would use them at tax time). In most of the 15th century, a majority of tax receipts came in the form of tallies rather than cash (p. 177). Again, if the government is willing to take take something in payment of taxes, it becomes money.

Similarly, it is true that “problems with coins” led to the development of other forms of money—beginning with trade credit and tallies—but for the most part they were not the transactional problems faced by households and firms, but fiscal and military problems faced by governments.

The Bank of England, which issued the first recognizably modern paper currency, was created because William III needed money to fight wars on the Continent, but there simply wasn’t enough coin in the country to both pay the required taxes and keep the economy functioning. Bank notes were able to function as money because the government was willing to accept them in payment of taxes—which was not true of the notes issued by purely private goldsmith-bankers. In other words, what made Bank notes money, rather than simply paper records of debt, was a political decision necessitated by a fiscal crisis.

Mysteries of Money (The Baseline Scenario)

In fact, metal coins were fiat currency! Both Martin and Desan point to John Locke as the chief culprit in the redefinition of money as a finite stock of precious metals which dominates libertarian thinking today:

…the Bank of England’s formation…coincided with the reconceptualization of money as simply precious metal in another form—a fable told most prominently by John Locke.

In earlier centuries, everyone accepted that kings could reduce the metal content of coins and, indeed, there were good economic reasons to do so. Devaluing coins (raising the nominal price of silver) increased the money supply, a constant concern in the medieval and early modern periods, while revaluing coins (keeping the nominal price of silver but calling in all old coins to be reminted) imposed deflation on the economy. But Locke was the most prominent spokesperson for hard money—maintaining the metal content of coins inviolate. The theory was that money was simply metal by another name, since each could be converted into the other at a constant rate.

The practice, however, was that the vast majority of money—Bank of England notes, bills of exchange issued by London banks, and bank notes issued by country banks—could only function as fiat money. This had to be the case because the very policy of a constant mint price had the effect of driving silver out of coin form, vacuuming up the coin supply. If people actually wanted to convert their paper money into silver or gold, a financial crisis could be prevented only through a debt-financed expansion of the money supply by the Bank of England—or by simply suspending convertibility, as England did in the 1790s.

To paraphrase Desan, at the same time that the English political system invented the modern monetary system, liberal theorists like Locke obscured it behind a simplistic fetishization of gold. The fable that money was simply transmutated gold went hand in hand with the fable that the economy was simply a neutral market populated by households and firms seeking material gain. This primacy of the economic over the political—the idea that government policy should simply set the conditions for the operation of private interests—is, of course, one of the central pillars of the capitalist ethos. Among other things, it justified the practice of allowing private banks to make profits by selling liquidity to individuals (that’s what happens when you deposit money at a low or zero interest rate)—a privilege that once belonged to sovereign governments.

Mysteries of Money (The Baseline Scenario)

Thus we see that money is not “thing” that we can run out of. In our societies, those who control the management and issuing of currency, like the Mesopotamian priests of old, control the society. But this is a social choice as much as anything else. The bankers use their knowledge of the system to enforce an artificial scarcity of money for everyone but themselves.

As David Graeber points out, throughout history, money has circulated between periods where it has been seen primarily as a commodity, and periods where it is seen primarily as a social relationship. These are associated with changes in the underlying society, particularly with periods of either centralized state expansion or collapse. In societies and political regimes with highly centralized and functional bureaucracies which can establish standards, enforce contracts, and adjudicate disputes, money is primarily credit. In circumstances of state breakdown, money once again reverts to commodities, and autarky, rather than market exchanges, prevail. Traveling becomes unsafe, and long-distance trade breaks down. Self-sufficiency becomes paramount. Barter usually becomes prevalent in cases after the breakdown of central states; it’s not the source of markets as we know them:

One of my inspirations for ‘Debt: The First 5,000 Years’ was Keith Hart’s essay ‘Two Sides of the Coin’. In that essay Hart points out that not only do different schools of economics have different theories on the nature of money, but there is also reason to believe that both are right. Money has, for most of its history, been a strange hybrid entity that takes on aspects of both commodity (object) and credit (social relation.) What I think I’ve managed to add to that is the historical realization that while money has always been both, it swings back and forth – there are periods where credit is primary, and everyone adopts more or less Chartalist theories of money and others where cash tends to predominate and commodity theories of money instead come to the fore. We tend to forget that in, say, the Middle Ages, from France to China, Chartalism was just common sense: money was just a social convention; in practice, it was whatever the king was willing to accept in taxes…

As I said Eurasian history, taken in its broadest contours, shifts back and forth between periods dominated by virtual credit money and those dominated by actual coin and bullion. The credit systems of the ancient Near East give way to the great slave-holding empires of the Classical world in Europe, India, and China, which used coinage to pay their troops. In the Middle Ages the empires go and so does the coinage – the gold and silver is mostly locked up in temples and monasteries – and the world reverts to credit. Then after 1492 or so you have the return world empires again; and gold and silver currency together with slavery, for that matter.

What’s been happening since Nixon went off the gold standard in 1971 has just been another turn of the wheel – though of course it never happens the same way twice. However, in one sense, I think we’ve been going about things backwards. In the past, periods dominated by virtual credit money have also been periods where there have been social protections for debtors. Once you recognize that money is just a social construct, a credit, an IOU, then first of all what is to stop people from generating it endlessly? And how do you prevent the poor from falling into debt traps and becoming effectively enslaved to the rich? That’s why you had Mesopotamian clean slates, Biblical Jubilees, Medieval laws against usury in both Christianity and Islam and so on and so forth.

Since antiquity the worst-case scenario that everyone felt would lead to total social breakdown was a major debt crisis; ordinary people would become so indebted to the top one or two percent of the population that they would start selling family members into slavery, or eventually, even themselves.

Well, what happened this time around? Instead of creating some sort of overarching institution to protect debtors, they create these grandiose, world-scale institutions like the IMF or S&P to protect creditors. They essentially declare (in defiance of all traditional economic logic) that no debtor should ever be allowed to default. Needless to say the result is catastrophic. We are experiencing something that to me, at least, looks exactly like what the ancients were most afraid of: a population of debtors skating at the edge of disaster.

And, I might add, if Aristotle were around today, I very much doubt he would think that the distinction between renting yourself or members of your family out to work and selling yourself or members of your family to work was more than a legal nicety. He’d probably conclude that most Americans were, for all intents and purposes, slaves.

Since we looked at the South Seas before for clues to the origin of states, let’s see if they can offer us a clue to the origin of money.

On the Pacific island of Yap, Rai Stones are used in trade and as a from of currency. These are large, circular stone discs carved out of limestone formed from aragonite and calcite crystals. The limestone is not available on Yap itself, only on neighboring islands, so these stones were considered rare and valuable by people. They vary greatly in size: the smallest are measured in centimeters, the largest are several tons. Their value is partly determined by not only their size, but by the difficulty in securing them: “If many people—or no one at all—died when the specific stone was transported, or a famous sailor brought it in, the value of the rai stone increases by reason of its anecdotal heft.”

Rai stones were, and still are, used in rare important social transactions, such as marriage, inheritance, political deals, sign of an alliance, ransom of the battle dead or, rarely, in exchange for food. Many of them are placed in front of meetinghouses or along pathways.

The physical location of the stone may not matter—though the ownership of a particular stone changes, the stone itself is rarely moved due to its weight and risk of damage. The names of previous owners are passed down to the new one. In one instance, a large rai being transported by canoe and outrigger was accidentally dropped and sank to the sea floor. Although it was never seen again, everyone agreed that the rai must still be there, so it continued to be transacted as genuine currency. What is important is that ownership of the rai is clear to everyone, not that the rai is physically transferred or even physically accessible to either party in the transfer.

While the monetary system of Yap appears to use these giant stones as tokens, in fact it relies on an oral history of ownership…As long as the transaction is recorded in the oral history, it will now be owned by the person you passed it on to—no physical movement of the stone is required.

https://en.wikipedia.org/wiki/Rai_stones

So, we see that the “unit of account” function seems to have been primary, and preceded the “medium of exchange” aspect of money by several millennia at least. Similarly, Yap indicates that the “store of value” function also predates the “medium of exchange” aspect, and that physical transfers of a commodity were less important than social relations. Ownership of stone money was merely transferred from one party to another by collective agreement, without recourse to the actual physical object in question (in this case by oral agreement rather than by writing).

Similarly, precious metals originally seem to have been used primarily to conduct symbolic gift giving (such as in the Kula ring), since they were far too limited and too valuable to be used for day-to-day economic transactions. Both stone money and early coins seem to have been connected to gift-exchange, similar to engagement rings (which were initially dowries – break the engagement and the gold ring is the compensation for going back on your word). Coins grew out of attempts to establish a reliable standard of purity, authenticity and weight by rulers who thereby benefited through segniorage (profits made from issuing money). As we saw, in most early states mining was a “nationalized” industry, meaning coins could only be minted by the authorities. Coins were easier to measure for collecting taxes than paying in commodities. They then began to circulate as money, not before.

In ancient times, precious metals seem to have been used primarily to facilitate long-distance trading, not internal market exchanges. Polanyi argues that long-distance trade, which existed for thousands of years, is what drove markets (not local bartering), and that these markets were kept fundamentally separate from the inner workings of the societies in which they operated. Furthermore, such markets were noncompetitive. Precious metals were not typically used within societies for transactions – reciprocity and credit were. Even when they were, the “value” of what they could purchase was dictated by governments – even gold and silver were fiat currencies whose value came from the need to pay taxes to the central state from the very beginning. As Randall Wray describes:

What we call “money” (coins, tally sticks, paper notes, electronic entries on bank balance sheets) is simply the record of debt, “accounted for” in the money of account. The line between what we want to count as “money” debts or merely as “money denominated” debts is and always has been arbitrary. Most will include a checkable bank deposit in their definition of “money”; most will not include a non-checkable certificate of deposit in that definition.

Typically, people want to apply the term money to those money-denominated liabilities that can be used immediately as a medium of exchange—that is, to buy something, passing hand-to-hand. I am sympathetic. If we look at the modern economy, and focus only on transactions of households, it works pretty well. But going back through time and including transactions of private and public institutions, it gets quite messy.

The argument is not that barter never occurred in ancient times; it certainly did. However, money as we know it did not emerge out of barter, and neither did competitive internal markets as we know them. Capitalism is not just an exchange of goods growing out of barter, but something fundamentally different.

Second, it’s not that there was never any trading or markets in antiquity. There surely were, and they date back to human prehistory. But markets were not the primary focus of social relations, rather they were exclusively mechanisms to procure goods from afar, or to exchange certain goods within societies. “Unplug” markets from society, and they go on much as before, if a bit poorer. Competitive, internal, self-regulating markets did not derive from these types of markets. Inside cultures, the idea of using impersonal market transactions based around money to regulate every aspect of social life would have struck ancient people as offensive and absurd, not to mention inhuman.

So how do we get from that to the market society of today? That’s what we’ll be  taking a look at next time.