September

We've arrived at that time, Labor Day, ending summer and beginning Fall.  We remember fondly our summer loves,  while enjoying cooler, fragrant autumn days.  It's not quite time for leaves to turn color,  then fall,  but it's past time for new branches, flowers and fruits.

Here in California,  we get to cheat a little on the temperate seasons.  It's time for the second crop.  Not all the grapes have been picked.  Citrus, pomegranates and other fruit are still developing.  The dead of winter is many months away; Fall is still 2 months off.  Californians can entertain the illusions of summer much longer than other people.

Since I have some time,  I felt an urge to talk about some political illusions.

"Special Interest" Power

Tony Horwitz' noted in his book, "Blue Latitudes",  that Captain Cook found relatively democratic and equalitarian societies on remote, under-populated South Seas islands.  Those islands with large populations tended to have stratified and authoritarian societies, usually monarchies.  Equalitarian societies generally prevailed wherever it was hard to make a living.  Easy living seems to have promoted vertical and horizontal social divisions.

I've read similar things in other books concerned with human history and evolution.  I don't know why this happens,  but it does.  My simplest explanation is that the crooks take over,  or that the Devil finds work for idle hands.  A surplus of basic necessities makes possible non-productive occupations.  The strong and cunning soon take advantage of any opportunity,  however temporary.  As soon as one person gains a greater share of the surplus,  the opportunity arises to use that surplus to increase one's share.  It's the virtue of compound interest:  those who start saving sooner,  get ahead sooner and faster.  Thus,  warriors, kings and shamans take over.

From that perspective,  the development of democracy in modern societies is either an accident or a miracle.  The United States is a central player in that story.  The first Europeans in America were unprepared for its rigors,  regardless of their religious fervor or desire for conquest.  It took a century after Columbus for Europeans to found permanent settlements, like St Augustine.  Native Americans were often able to resist the White Man until they were decimated by measles, syphilis and other European diseases.  Arriving in a sparsely populated, hostile lands, European- Americans huddled together in small settlements.  They learned to rely on themselves rather than Big Brother 3,000 or more miles away.  This self-reliance became a way of life which contradicts servitude or slavery.

Later,  an America filled with rebellious settlers threw off its British, French and Spanish masters.  Each colonial rebellion became an example for, and instigation of, others in North and South America.  In the 20th century, the New World became the arbiter of disputes in an exhausted Old World.

The United States' rise to power was so swift - just a few generations - that its democratic heritage was not lost or forgotten.  Thus,  we had the spread of democratic ideas throughout the world.  But,  that is not the same thing as the triumph of democracy,  which means different things to different people everywhere.  Even in the United States,  the meaning of "democracy" is much changed from Revolutionary days and especially since World War II.

As in Cook's South Pacific,  the United States has become a far more stratified and authoritarian society during the last century as its population and wealth grew.  Even though I was raised in a small town, and have always favored participatory democracy,  I find it difficult to see how our society could have developed otherwise.  In a society of 280 million, or even 28 million, people it is probably impossible to consider each person's unique circumstances.  There are just too many people.

So,  the institutions and laws must configured for some sort of median or average,  which means almost everyone will be dissatisfied in some way.  Of necessity, interpreting the law will be delegated to "experts" (judges),  who will almost always favor some and scorn others. John Stuart Mills invented Utilitarianism - really an economic theory - just in time to justify the unavoidable:  the greatest good for the greatest number.  This, compared to the Pledge of Allegiance promise of "justice for all."

The result is this:  only "special interests" can hope to be treated in our society.  Enough people's needs and desires have to be put into one package to gain attention.  In most cases,  it's not enough to be needy;  the need must be demonstrated by qualified agents.  Thus transit fees:  the cost of finding a sponsor and going to Washington.

An important part of this process is that poverty and deprivation will not find relief,  until a huge portion of the population is desperate.  The truly needy haven't any money to give the K Street packaging agents.  The rich are either powerful or  have access to the powerful.  The middle classes support the efforts of the rich, whenever they see themselves as rising in wealth and influence.  Thus,  as much as the bottom half of society will have little or no say in its policies or direction.

I think the rule is this:  In the absence of a prolonged depression or serious recession,  control rests in the hands of those who have the weighted average of the votes.  "Weighted average" means each person's vote is multiplied by the sum of that one's wealth, income and influence (and possibly other factors).  For example, in the First World,  corporations and other special interests are given seats at the policy table, so we must multiply the voting power (influence) of those who control those entities.

We can use the recent statistics concerning Bush's tax cuts as an estimate of who has effective control in the United States.  Just 1% of the American population earns 80% of all the taxable income.  More than 90% of all income accrues to households receiving $50,000 or more annually.  The amazing fact is that the bottom half of the population lives on just 10% of the national income.  Wealth is also just as disproportionately distributed.  Corporate control is even more concentrated in the hands of the few,  as about 90% of all stock (bonds, etc) are owned by just 5% of the population - the same few who have the greatest wealth and income.  Taking these statistics as guidelines,  at least 80% of the "voting stock" in the United States is held by 1% of the population.

Note: Control remains in the hands of those few in the absence of prolonged national  stress.  The system of electing representatives and officials prevents a quick, systemic response to crisis.  For example,  economic conditions had been deteriorating for most people by 1928,  when Hoover was elected President.  Despite the 1929 crash,  the voters were unwilling to change course in the 1930 Congressional elections and the government did not change its ineffective policies.  Even FDR ran on an economic policy of balancing the budget and reducing expenses in 1932.  After FDR's election,  it was clear that things were so bad that immediate action was required.  FDR's New Deal policies resulted from upper class fear of Communist revolution,  and the perception of well-educated upper class scions that there was a way out of the crisis.

For control to pass to the masses - the lower classes - crisis must coincide with the election cycle,  or even persist through several election cycles.  Had the first President Bush acted promptly and effectively to end the 1990-91 recession,  it is very likely he would have been re-elected in 1992.

Again, peaceful (electoral) change of control occurs when the the upper classes lose confidence in the old regime.  The only times that change of control occurs against the will of entrenched controlling interests are during  revolutions.  The difference between voting out the autocrats and guillotining the aristocrats is a matter of degree,  not principle,  depending on how bad things have gotten for the lower classes.

Thus, in our kind of society,  special interests almost always prevail.  What is a special interest?  It is any entity sufficiently funded and organized to determine the policies affecting it (most of the time).  It takes a coincidence of bad times, bad management and bad tempers to overthrow them.

The New Mercantilism

The British Empire thrived for centuries on a simple idea:  buy cheap, sell dear.  This price mechanism has been known to work in almost every situation.

In its practical application, the idea was to import cheap raw materials from the colonies,  and export expensive manufactured goods to the colonies and other countries.  This retained nearly all highly paid value-added work at the center,  while pushing lowly jobs to the periphery.  Highly paid work also included finance, insurance, shipping and regulation;  that is, whatever made the colonials subordinate to their Imperial masters.

The system depended on having low cost resources.  Thus, the colonies were stripped of metal ores, plant fiber and basic foods,  without thought of repatriation or reinvestment.  Inevitably,  the colonies became wastelands or very reduced in their abilities to support the native populations (of humans, animals and plants).  In many areas, and especially on plantations,  the only affordable way to employ people was as slaves.

My view of the mercantile system is simply that it was the practice of extracting what the Empire wanted, at a very low price,  from others. Of course, it wasn't just the Brits who savored the advantages of  mercantilism;  so did the Dutch, French, Germans, Japanese, Spanish and Americans.  Americans got into the game after throwing off their British masters,  thus inadvertently teaching the lesson that Imperialists should look out for determined colonials who refuse obedience.

Why preach this historical catechism?

I have noticed the protests against GLOBALIZATION,  and now the growing concern about the loss of manufacturing jobs in the United States.  The same job losses are happening in Europe and Japan.  In parallel,  an economic boom continues in China,  and is beginning in India.  Europeans and Americans can see the results in their neighborhoods stores,  where it seems almost everything is made in China or elsewhere in Asia.  China is rapidly replacing America as factory for the world,  which is what America did to the Europeans 100 years ago.

Multinational corporations benefit from this rearrangement by retaining highly valued jobs at the center,  and exporting menial work to the periphery.  The "center," however, is not necessarily any particular country or place;  thanks to modern technology,  it is wherever the  beneficiaries congregate.  Modern multinational corporations are easily headquartered in the Bahamas, Tonga or any other place willing to protect them against taxes and regulations for a small price.  Those who control, and benefit from, these corporations can live almost anywhere or nowhere:  the corporate rich have joined the "jet set."  In short, multinationals and their wealthy beneficiaries have detached mercantilism from national power,  and used money to become powers unto themselves.

In the Victorian age,  it was necessary for each Empire to project force onto its colonies to assure the continuance of the desired (and necessary) arrangements.  While Europe had relative peace in the 19th century,  especially after the Franco-Prussian war,  the European colonies were chambers of horrors.  Almost all of Asia, India and Africa were sites of constant warfare, rebellions, cruelty and oppression until the end of World War II.  The United States, in its "idealism,"  and with the enthusiastic support of corporate elites and large corporations,  ended the colonial era by demanding and getting independence for the colonies.

The result was, in the post-war non-Communist world,  the actual force of foreign administration was replaced by the imminent threat of American troops.  This allowed the introduction of the "money police;"  after all, like the Romans,  Coolidge said the "business of America is business."  America establishes rule by bringing people into wage slavery,  which is not just a colonization of the land and body,  but also of the mind.  America then hands over administration  to the multinationals,  who don't need more than a friendly local government and a civilian police force to keep things in order.

People enslave themselves.  It's fairly easy to get rid of this new colonialism,  provided you are willing to forego almost everything modern and return to the jungle.  That is the alternative,  because once the multinational economy is established you have to give up your food, clothes, house, medical care, entertainment and much more to get out from under.  Credit cards and the old-fashioned company store have much in common.

It's a very rare person who undertakes following Thoreau.  It's remarkable that here in Northern California and parts of Oregon,  in the belly of the beast, thousands of people we call "hippies" (and other names) did just that.  They're a tough bunch, and we know little of them because they prefer their seclusion.  The ones who totally detached themselves are hiding in the back country,  leading shorter, less healthy lives.  But,  they've done it: they've escaped servitude, they are free.

The rest of us are ruled by a vastly expanded mercantile empire.  It follows the same, simple idea as the British India Company: buy low, sell high.  As long as we are in the grip of this philosophy,  no one is safe;  everyone is expendable.  Thus,  today we find jobs moving to China at an ever-increasing pace,  while people in the Europe, Japan and North America are displaced - eventually onto the streets.  Those who manage and engineer these massive shifts to low cost labor are paid handsomely.  Many of these nouveaux riches can and do start a dynasty,  thus assuring the eventual appearance of an inherited aristocracy.

For those caught in the "race to the bottom,"  there is at best temporary salvation.  One might get re-trained, or hired at another company just a little behind the times.  In almost all cases,  the next job is paid less than the previous.  Inevitably,  the race to the bottom is a flushing down the drain - everyone is sucked lower and lower by it.

But, in our finite Universe, every drain has to come out somewhere;  there is a lowest level.  For those in the drain pond,  the levels continue to rise.  In other words,  your job lost in Nogales reappears somewhere in Sichuan.  This improves the life of some Chinese,  so maybe it appears things are getting better in Chengdhu. And, things are getting better,  for those who can use their newly earned, higher wages to buy products at the old prices from their impoverished neighbors.  Thus,  we have the millions of Chinese middle and upper classes in Beijing, Shanghai, Hong Kong and elsewhere who are as wealthy as their foreign counterparts.  Altogether, some 250 million Chinese participate in a modern economy which will soon become one of the world's largest.  This sounds impressive until one realizes that the lives of 1,000 million Chinese - 80% of the population - have not changed in at least half a century.

Oddly enough,  it is only the policies of the Communist government in Beijing which prevent the relative wealth of the 20% from being sucked into the drain of the other 80%.  For this,  the Chinese government earns the suspicion and even hatred of some Western powers and political entities; e.g., the United States and Republicans.  I suppose what this means is that Western ultra-capitalists won't be satisfied until everyone (except themselves) is demeaned to the lowest possible level.

Even if we cannot stop the progression of this new mercantilism - economic colonialism, eventually there will be a lowest possible level.  It's just like the chain of entropy that keeps life on this planet going.  The highest useful energy levels are found in Sol's radiation,  which heats the Earth and drives global oceanic and atmospheric circulations.  Heat and sunlight are trapped by organisms at the bottom of the food chain,  which become the food of other organisms higher in the food chain.  Eventually one finds the top predators:  us.  At each step of the food chain,  there is an inefficiency and degradation of potential energy.  Thus,  only a very small fraction of solar energy ends up as food and all the products we humans use;  most of it is just degraded into low-level heat.

Looked at the other way around, our lives require a huge energy base to support their existence. Because of entropy,  there can never be more lives than the initial input of energy.  Thus,  if some lives take more energy than others,  there is necessarily less energy for all the others.  If this fact is not yet apparent,  it is only because we haven't yet depleted the energy pool to its minimum sustainable level.  Consider fossil fuels (oil):  we are using a huge reservoir created millions of years ago.  There is some evidence that oil creation is a current, on-going geological process.  While the oil reservoir has supported a growing oil-based economy for nearly a century,  at some point there will be no more oil unless the draw-down is less than the creation rate.  Since it is most likely that we are pumping faster than nature refills it,  someday there just won't be enough oil for everyone.  For example, it seems unlikely there is enough oil-based energy to support a Western lifestyle - house, car and all - for all Indians or Chinese;  much less, Chinese and Indians, in addition to the present First World.

Does anyone know what happens when we get to that lowest sustainable level?  The lowest possible level?  The MERCANTILE idea just doesn't consider this case.  For mercantilists,  there is always a lower price,  someone else to exploit.

So, what is the NEW MERCANTILISM?  It is simply a new, more efficient way of applying the old maxims.  Economic Imperialism replaces military conquest.  Advertising - economic propaganda, mind control - replaces guns and bullets.  People become willing serfs or slaves to get modern products,  and are integrated into a system they cannot escape.  The modern economic system,  the new mercantilism, completely destroys escape routes:  the knowledge and practice of older methods of self-support.

The cleverest argument - Adam Smith's invention - for what is going on is, "Greed is Good."  Smith thought capital investment and the division of labor would inevitably improve the lives of all participants,  because products would be made at the lowest possible cost;  that is, with the least effort.  Smith explicitly made his argument in support of untaxed and unrestricted international trade; i.e. free trade.  Smith assumed there would always be a market for the products,  perhaps because, in the early stages of the Industrial Revolution, the market was effectively unlimited.

Those who later formalized Smith's economics (e.g., David Ricardo) explicitly stated as premises what Smith assumed.  While the formalization - Classical Economics - is now taught almost everywhere as Economics 101,  the premises are often ignored.  Some of these premises are:

In other words,  it is assumed there are always more and cheaper products.  Maybe it seems that way to you,  but certainly not to me. Malthus was correct:  sooner or later,  the process must end in the poverty of most people.  It is the Malthusian conclusion which labels economics as the "the dismal science."

Of course,  such a dismal result can be avoided, IF we balance our population and our resources.  We don't have to judge everything by its monetary value to ourselves,  which is just a disguise for exploiting others.

But, Aren't We Capitalists?

Capitalism doesn't exclude mercantilism.  The Mercantile Philosophy - buy low, sell high - expresses the values of its practitioners.  Capitalism is one mechanism by which economic and social goals may be achieved.  There is both a why people do something,  and how they do it.

Modern capitalism has provided the tools for expanding and deepening the mercantile culture.  Mercantilism never went away; it's just less obvious.

Why am I making this case?  Because I do not believe we have to organize our society this way.  Sooner or later,  we won't, because the premises of capitalism and mercantilism,  as well as (neo-) classical economics, are false.  There are much better, more humane, ways to conduct our lives.

Last update: 11/02/2007

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