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Friday, September 07, 2007

Judging conditions

In light of the revisiting economic history post and the ensuing comments about standards and judgements, this post by Mark Perry at his Carpe Diem blog is quite apropos:
“Workers are paid poorly, only 15-25 cents per hour, and are expected to work 60 hours per week, often in unsafe and dangerous conditions. Sweat shops can be found in every major city across the country. There are no worker fringe benefits, no paid holidays, etc., and unions are nonexistent. Child labor is common, especially providing long hours of grueling manual labor on farms, and farms are so dependent on child labor that schools are not even in session during the peak growing and harvest months of the year. There are no environmental, safety or labor standards to speak of, and dirty black clouds of smoke are a common sight. City streets and sidewalks are often covered with rotting animal waste. People burn garbage everywhere without restriction, and the foul smells and thick smoke from burning garbage are a daily nuisance.”

Sounds like China today? Actually the description above is of the United States in 1900, when it could accurately be described as a “developing economy” by today’s standards.
Now, you should probably read the whole post to follow everything he is saying. He does us the great favor of summing up the key takeaway at the end:
Bottom Line: Advanced labor, health, safety, and environmental standards are luxuries that only advanced economies can afford. The U.S. couldn't afford these luxuries in 1900 and China can't afford some of them today. But just like the U.S. eventually created enough wealth to afford a clean environment, end child labor, regulate safety, and improve working conditions, so will China. Just give it time.
Then this comment makes another key point:
They seriously believe America is wealthy with comfortable working conditions because of labor laws, minimum wage laws, and other regulations.
As economies develop and workers get more productive, they will prefer to take some of their compensation in non monetary form: cleaner safer working conditions, limited work hours, a cleaner natural environment, etc. Employers will usually go along with this both for competitive reasons and because as workers get more productive it is worth doing things that enhance the health and happiness of employees. First comes enough of an increase in productivity, then comes the improvement in conditions. That's what it means for a society to become wealthier.

How workers become more productive and raise their standard of living further and further above a subsistence level is the subject of a future post. That's how workers compete with low wage workers : be much more productive or find a new area of comparative advantage.

ps Say I was in the car business and adopted this innovative way of organizing the work in my factory so my workers became much more productive. I could make more cars at a lower unit labor cost allowing me to undersell the competition and pay my workers more. The really fun part is that I could tell everyone how wonderful I was for paying such a generous wage. Really all I would be doing was following good business practices. Ford had a better idea.

80 comments:

Bret said...

"The really fun part is that I could tell everyone how wonderful I was for paying such a generous wage."

Better yet, you could insist on minimum wage laws which would put your competition outta business.

Harry Eagar said...

'Employers will generally go along with this'

You're kidding, right?

Bret said...

Why would he be kidding?

I'm an employer. Seems right to me.

Harry Eagar said...

Rewriting history is bush league. The real pros rewrite current events.

Lemme see. Strong profit picture. Stock market through the roof. Competition for employees strong. Pensions and health insurance being canceled (unless you're lucky enough to be in a union and sometimes even then) left and right.

Oroborous said...

Defined-benefit pensions are going away because employees don't consider them to be much of a perk if they're written realistically.

So we're going to defined-contribution, which lets workers fantasize that they'll be able to kick in a few meager percentage points of their wages, retire at 65, and support themselves until death - as long as they don't run the numbers.

Defined-benefits plans and SS have run the numbers, which is why they're going away.

erp said...

Harry, I haven't read this blog long enough to understand where your comments are coming from. Would you be kind enough to elaborate on your economic theories please?

You sound like an old time leftie c. 1930 and I can't believe there are any still extant given the immense body of evidence that has proven those theories not only false, but dangerously so.

Susan's Husband said...

As another employer, I agree with Howard as well.

Susan's Husband said...

Oh, and as an employee I liked my defined contribution plan much better than a standard / old fashioned pension.

Harry Eagar said...

Not ALL employees like the switch. My wife, for example, works for the government not because there are not more interesting private sector jobs out there, but because she has serious chronic health problems.

She is going to retire soon, and she has calculated that -- unlike a private sector retirement plan -- she will not have her government health coverage canceled during her golden years.

Sheesh.

erp, I guess I am some lefty c. 1930. I am also an amateur of economic history, so, since I actually know something about economic conditions in various times and places (unlike, say, Chicago School economists), I fail to be as charmed about how capitalism works as some people are.

My economic ideas derive primarily from Rexford Guy Tugwell.

Rex and I were/are not socialists, but we were/are unenthusiastic about laissez faire capitalism.

Finally, by profession I am a business reporter. My newspaper readers are people who have to think twice about spending 50 cents to get my stuff. I have no interest in whether, say, Craig McCaw manages a 36% gain flipping a cable franchise after running it into the ground, or only a 24% gain; but I am interested in the fate of the cable guy who goes on calls in a truck without reliable brakes because McCaw has calculated that his percentage return will be better if he guesses right that his employee will not die in a crash before the feeding frenzy allows him to flip to the next sucker.

YMMV

Susan's Husband said...

I don't think we claimed that all employees liked the switch. It was your implicit claim that the switch was anti-worker that was in play, and we provided counter-evidence to that claim.

And of course, the fact that your health insurance is related to your job is the kind of monumentally stupid idea that can only occur because the government intervened in the free market. I think it's a bit off to blame capitalism for the failures of a planned economy.

erp said...

Harry your comment sounds like the script of a B movie. Are there no lawyers in your neck of the woods? Sending an employee out in a truck with faulty brakes! Invitation to penury if I ever heard one.

So you are neither a socialist nor a capitalist. Do you support receiving manna from heaven then?

I'm truly sorry that your wife is suffering from chronic health problems, but lucky for her she's living in the U.S. where people are treated with the latest medical breakthroughs no matter how old they get ... unlike the UK for instance where certain treatments aren't available to geezers or Canada where certain treatments aren't available at all (I don't have the link to a woman having multiple births who had to travel from a large Canadian city to a small one in the U.S. for her delivery), but the good news is in both cases, their non-treatment is freeeeeeee.

I hope she lives to retire in health and happiness, but she should vote Republican and hope everyone else does too because those generous public sector pensions may not be around too long if the dems are permitted to have their way and run us into the ground.

Harry Eagar said...

Stupid or not -- and I agree it was stupid, but in a different sense -- that's what McCaw did.

He's a star of capitalism. I get calls from people who speak of him in the tones that leftists reserve for Dennis Kucinich.

You can have him.

I also have historical examples. We could start with Homestead 1892. Most profitable capitalist enterprise ever. Run by a man who declared grasping for money the root of evil.

We all know how generous the employer was then.

Sigh.

Like Jimmy Durante, I got a million of 'em.

erp said...

Durante had a millions of jokes.

Bret said...

harry eagar wrote: "I got a million of 'em"

There have been thieves and robbers and crooks and murderers since homo sapiens arrived on the scene and there will continue to be nasty and evil people while there are still people.

Capitalism cannot cure that part of the human condition. That people have done nasty and evil things under capitalistic systems is not surprising. Coming up with examples, even numerous examples, of people doing nasty and evil things under capitalistic systems is neither remarkable or even meaningful, since as long as there are people, bad things will happen under any system.

The only question that matters is whether or not people are better off (in terms of things like wealth and freedom) under capitalism or some other system. Depending on how one subjectively weights the various measures of goodness, one might come up with difference answers. For example, if an egalitarian ecomomic distribution is most important to someone to the exclusion of all else, capitalism is probably a bad choice for that person. If nannyism is also very important, then capitalism is also probably a bad choice. Short of giving those two things a lot of weight, capitalism is probably the best choice, in my opinion.

Harry Eagar said...

Depends whether you like to eat reg'lar or not, I'd say.

I have already quoted the most profound economic remark ever made: 'People don't eat in the long run. They eat every day.'

-- Harry Hopkins

Capitalism has a pretty spotty record by that standard. It might be a complete coincidence that soup lines have disappeared since the New Deal, but I suspect not.

erp said...

Harry, Sorry again, I must point out that you're wrong. Soup lines aka the homeless are still very much with us, but they're only in the "news" when there's a Republican in the White House.

Susan's Husband said...

1930s American soup lines vs. 1930s in the Ukraine. Does Mr. Eager really find it hard to chose between those?

Harry Eagar said...

erp, the standees in 1932 wanted to work, had worked. Most of the standees these days are not, even in aspiration, participants in any kind of economy.

However, those who are, are not advertisements for capitalism, are they?

SH, the Ukrainian soup lines (actually, there weren't any, but I take your analogy) were not the result of an economic system. The New York soup lines were.

Don't results count?

Peter Burnet said...

The proof that Harry is an economic lefty is that he sees capitalism as a system that is the opposite or mirror image of socialism. Harry, if you were elected President and wanted to implement socialism you would presumably begin passing one law after another and probably never stop. Assuming you are starting from the same blank slate, how would you "implement" capitalism?

And you are right that there were no Ukrainian soup lines, but that was because there was no soup.

erp said...

Why then do they disappear during democratic administrations. Ukrainian soup lines didn't exist, but if they did exist, it wouldn't be as a result of the economic system.

Bueno!

Harry Eagar said...

I like our current mixed system. It has worked much better over the past 74 years than free market capitalism ever did.

Also better than socialism ever did.

I'd have been more impressed if, instead of a political famine, you had instanced the failure of Soviet Communism ever to solve the broader agricultural economic problems it inherited -- from capitalism as it happens.

If I were president, I wouldn't change much. If it ain't broke, don't fix it.

I'd probably want to ease up on Reagan's soft money policy. That's about all.

erp said...

Czarist Russia was a capitalist system?

Bret said...

harry eagar wrote: "If I were president, I wouldn't change much."

We're in complete agreement then actually. Where we might disagree is in direction if policy was to be changed. My direction would be incrementally towards laissez-faire capitalism. My guess is yours would be towards more socialism.

Susan's Husband said...

Mr. Eager;

The Ukrainian famines were the result of an economic system, Communism / Socialism, where in the State decides what to produce and who gets it. It was all done under the rubric of collectivization, which is certainly an economic system.

I think results count. You're the one who says that even though capitalism results in improved living conditions compared to its alternatives (something you stated yourself), that doesn't make capitalism a good thing — i.e., the results of capitalism don't count.

Howard said...

erp:

Czarist Russia for about 150 years prior to the revolution was capitalist - well sort of... It was a limited access order like much of Latin America only worse. Most of the population was literally in serfdom until after the 1860s. The respect for property rights did not run very deep and the embrace of envy may be unrivaled anywhere else on earth. God awful! You might want to read the chapter titled Patrimonal Russia in Property and Freedom by Richard Pipes.

Howard said...

Harry:

I'd probably want to ease up on Reagan's soft money policy.

please elaborate

Harry Eagar said...

erp, slavery is capitalism on steroids.

Toward the end, Russia was a mix of state capitalism and more or less untrammeled free market capitalism. That created one of the most noxious stews ever seen, economically speaking -- the local population starved while capitalists exported ever greater volumes of grain through Odessa up to 1913.

For some reason, freemarketeers always take the grain exports as a positive and compare them favorably with the inability of the USSR to export grain. Go figure.

SH, the economic motive of collectivization was, in my opinion, a long way secondary to the political. I accept Bukharin's analysis that the problem of early Soviet economic policy was that it could not induce the peasants to give up grain to the cities because the cities, in ruins from capitalist war, had nothing to exchange with the countryside.

Lenin solved the problem by machinegunning the peasants and stealing the grain.

That was a policy for one season only.

'War Communism' (free trade in farm produce) worked rather better but was politically inexpedient. The function of the Ukrainian program was not to reorganize farms but to subdue a rebellious peasantry.

Since the peasants reacted by killing their livestock, as an economic system it was insane. Russian agriculture never recovered.

Howard, you've noticed we have a program of soft money? Free silver and free men!

That was, of course, a Populist and later a Democratic plank, but as long as the Republicans were hard money men, induced inflation was restrained. Reagan took the wraps off and although Clinton reverted, briefly, to a Republican policy, Bush II has gone in totally for soft money.

Or are you under the impression that the economic expansion of the past 25 years was driven by a move to free trade?

Economists I deal with, free traders all, have been warning for years that this cannot go on. I agree with them.

Even Johnson tried to finance part of his war with a 10% income surtax. You're probably too young to remember that.

Bret said...

harry eagar wrote: "slavery is capitalism on steroids."

Okay, I seem to be lost. I'm not sure how capitalism, which is a free market system of millions upon millions of individual decision-makers, engaged in peaceable, voluntary exchange pursuing what they see in their best interests, can lead to slavery. It somehow seems like the exact opposite to me. A serfdom is not a free market since taxes are far beyond the bounds of where voluntary exchange can take place.

harry eagar also wrote: "Economists I deal with, free traders all, have been warning for years that this cannot go on."

Yes, and they've predicted the last 11 of 0 recessions as well. Many economists have been continually stating that catastrophe is around the corner since the 1980s. We're still waiting.

Plausible arguments can be made that money policy has been too easy. These arguments are based on broad money measures (M2 & especially the infamous M3) growing faster than nominal GDP. However, because these broad measures are very slow velocity money, they have little impact on current inflation measures. The expectation is that someday the broad money stores will be converted to higher velocity money, at which point it might cause inflationary pressure.

However, the FED has no direct control over M2+. It could restrict M0/M1 but that would cramp the economy now for no apparently good reason other than to address some possible problem that might occur sometime in the future. I personally think that would be an awful idea - for sure inducing pain now to possibly, just maybe (but maybe not) save some pain in the future.

harry eagar also wrote: "[a]re you under the impression that the economic expansion of the past 25 years was driven by a move to free trade?"

Adequate money was a necessary condition for sure. However, the expansion is primarily due, by my analysis, to growth in technology and multifactor productivity, increased entrepreneurial activity, innovations in the financial markets, and increased trade.

Harry Eagar said...

If a slave isn't capital, what is? And for a long, long time, a slave was almost the only sort of mobile capital.

It isn't so easy to uproot a peasant. Slaves can be shuffled around and are fungible. Better than money, almost.

Of course, you can define 'capitalism' as millions of free actors, but that leaves open the question: what have you got when you have millions of unfree actors? Not socialism, anyway.

As for the expansion of the last quarter century, you can cite credit facilities, technology etc.; but I look around and see the opening of the 25,000th Subway Sandwich shop and I see easy money.

erp said...

Harry, by millions of unfree actors, do you mean slaves? If so, we must be some strange kind of greedy capitalists to have fought a bloody civil war to divest ourselves of that capital by setting the slaves free.

Bret said...

harry eagar wrote: "...that leaves open the question: what have you got when you have millions of unfree actors?"

You have Communism (which is socialism on steroids). "From each according to his ability, to each according to his needs" is exactly what the slave owner would decree. Give each just enough to keep them alive and productive and take from each all that they're able to produce. Communism (and Socialism to a lesser extent) is, almost by definition, an economic system of mass slavery. And in the USSR, China under Mao, Cuba, etc., it worked out that way too.

You're right that slavery is not necessarily incompatible with capitalism. However, slavery is not the result of capitalism.

Communism is slavery, both in theory and in practice.

harry eagar also wrote: "I look around and see the opening of the 25,000th Subway Sandwich shop and I see easy money."

If "easy" money means adequate money for businesses to grow, then we're in agreement.

Is there something wrong with having 25,000 subways? What would be the advantage of not having 25,000 subways? What would be the advantage of having a more restrictive money policy? Who would be better off? Why would they be better off and when?

Harry Eagar said...

erp, my great granddad fought to keep his slaves.

I don't want to veer off into slavery v. freedom. At the same time Stalin was rounding up his slaves, Hitler an the Japanese were rounding up their millions.

Nobody (I would have thought) would label either Nazi Germany or Hirohito Japan 'communist' but a couple weeks ago at Volokh Conspiracy I discovered I was wrong.

Hard to have a discussion about economic systems if we cannot decide which is which.

If capitalism is not slavery, slavery is certainly capitalism.

Bret said...

harry,

I'm not sure how you can write the same two phrases in a single comment:

"At the same time Stalin was rounding up his slaves..."

and

"...slavery is certainly capitalism."

This would seem to imply that the economic system under Stalin was capitalism?

Nazi Germany was a collectivist system like communism. Nazi is short for National Socialist after all.

harry eagle wrote: "Hard to have a discussion about economic systems if we cannot decide which is which."

Indeed, a lot of this discussion seems more definitional than anything else. If I didn't know better, I'd guess that you're definition of capitalism is something like "everything that can be evil within an economic system" and socialism is "everything that can be good within an economic system". In which case, capitalism would be, by definition, evil.

Harry Eagar said...

I would describe Stalinist economics, at least in the 1930s, as state capitalism. very much like Russian economics in later tsarism.

The more we look at Stalin, the more Russian he looks and the less socialist. Anyhow, Hitlerian and Stalinist dirigisme were pretty far from anything that could be called socialism.

The German nationalists, capitalists all, certainly never backed Hitler because they imagined he was a real socialist.

By your standard, North Korea is democratic because its formal name is 'Democratic People's Republic'

Harry Eagar said...

To get back to Subway, I'm not sure why it is a triumph of free markets to produce a glut of mediocre sandwiches.

I bet, if you went back to 1980 and asked, which would you rather have, a glut of sandwiches or a glut (or even a bare sufficiency) of comfortable houses within the aspirations of ordinary folks, most folks would have said, houses.

The market has a very hard time delivering a glut of anything that had a large labor component. No doubt, if 900-square-foot 3-bedroom houses could be stamped out by injection-molding machines, we'd have them.

As it is, since about the same effort goes into building a mansion as a modest home, and the profit margins are (usually) bigger the bigger the house, the market preferentially delivers big houses.

To argue that the market responds to demand is obviously absurd.

Yet this is the fundamental argument in favor of unfettered markets.

It's like standing on one foot and scratching year ear with the other -- forever.

I am aware that the US housing market is not entirely free, though it is in some ways the freest of the economy's large segments. I'd argue that the interferences in the market, although really dumb, have been ineffective responses to the failure of the market, not prior restraints.

Anyhow, a system that extracts labor without providing decent housing in return must obviously appeal to rentiers. Why, though, should it appeal to me?

erp said...

In a free market when there is a glut of mediocre sandwiches or anything else, those supplying them either move with the times or go out of business. The guvmint doesn't make those decisions, investors make them.

No different than 900 sq ft houses. If there were a demand, investors wishing to turn a profit would be supplying them. However, since we are subsidizing rentals, we'll be getting a lot more of them. The best thing we can about housing is get the government out of it and let the market seek its own level.

Oroborous said...

"From each according to his ability, to each according to his needs" is exactly what the slave owner would decree. Give each just enough to keep them alive and productive and take from each all that they're able to produce.

That's what happened in practice, but that's not classic communism, any more than coercive, publicly-funded pensions, alms, and unemployment and disability insurance are classic capitalism.

Part of the problem in putatively Communist nations was that so far, no developed country has gone communist, and so in those nations that have, (or were forced to), a subsistence living for most was the best that the collective ability could do.

But "to each according to his needs" merely means that no one goes hungry or without shelter, which is in fact EXACTLY the aim of modern, putatively capitalist nations as well.

America has food subsidies, housing subsidies, medical subsidies, education subsidies...

Bret said...

harry eagar wrote: "I would describe Stalinist economics, at least in the 1930s, as state capitalism"

"State capitalism" is an oxymoron. If the state's involved in owning or directly controlling the means of production, it ain't capitalism by any definition I've ever seen or heard. Perhaps you could give a concise definition for capitalism?

If the state is significantly involved in the ownership and/or control of the means of production, it's "Collectivism."

Just for reference, here are some American Heritage Dictionary definitions (via dictionary.com):

Capitalism:
An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.

Socialism:
Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.

In Stalinist Russia, the government owned much of the means of production, no? If so, it would be called Socialism, wouldn't it?

erp said...

Harry, not that old canard again. What you're saying is that in order for communism to work, capitalism would have had to make the country already prosperous.

A lot of what's wrong here is all the subsidized stuff that is throwing off the market. One thing that I can agree with you about is that the worst of the profiteers are those making tons of money from these government subsidy programs and most of these are affiliated with the unions or the democratic party.

Bret said...

harry eagar wrote: "I'm not sure why it is a triumph of free markets to produce a glut of mediocre sandwiches."

How is it a glut? Are the sandwiches rotting? Is Subway no longer making profits?

I personally think Subway's sandwiches are pretty good but the triumph of the free market is that I get a huge variety of choices in what and where to eat, Subway just being one of many dozens of excellent eateries that I personally frequent.

Harry Eagar wrote: "The market has a very hard time delivering a glut of anything that had a large labor component."

The market rarely supports a glut of anything for any extended period of time. That's one of the things the free-market system is very good at. Gluts, even the shorter lived ones, are usually associated with government regulation or subsidy.

Harry Eagar wrote: "To argue that the market responds to demand is obviously absurd."

Apparently, it's far from obvious that it's absurd, because I completely disagree. Your statement amounts to a claim that there are no products that have ever existed in the world which someone created and brought to market because they knew somebody wanted that product.

How do you think products come into existence? You seem to admit that a desire for profitability is involved. Wouldn't it make sense to develop products for which there would be high demand if one is trying to maximise profit?

Harry Eagar asks: "Why, though, should it [a system that doesn't provide decent housing] appeal to me?"

What alternative are you proposing that would be better?

Bret said...

oroborous wrote: "...that's not classic communism..."

I think that Hayek's Road to Serfdom did a pretty decent job explaining why classic communism isn't really possible in the real world.

oroborous also wrote: "But "to each according to his needs" merely means that no one goes hungry or without shelter, which is in fact EXACTLY the aim of modern, putatively capitalist nations as well."

It's AN aim of modern political/economic free-market systems, not THE aim. In slavery and communism, it's THE aim.

Oroborous said...

...classic communism isn't really possible in the real world.

And as it turns out, classic capitalism isn't much desired in the real world either, as evidenced by the fact that NONE of the G-7 practice it; some are barely capitalistic.

Harry Eagar said...

I define capitalism thus:

One of three broad concepts of economic organization, in which capital is superior to labor. In cases of deep conflict, capitalists do away with labor.

Socialism:

One of three concept of economic organization. Labor is superior to capital, which is either owned or controlled by the operatives. In cases of deep conflict, labor does away with the capitalist.

Agriculture:

The third great sector of economic organization. Ownership of land is superior to capital or labor, and in cases of deep conflict landowners (usually hereditary or priests) destroy capital and/or labor.

Agriculture is divided into two parts:

Peasant agriculture, in which the landowners are small and unorganized.

Latifundia, in which landowners are few and who therefore organize production on industrial lines, with labor more or less servile.

As you can see from this definition(and if you know the history of jacqueries), capitalism has not claim to be less violent or coercive than Leninism.

Over most of history, either capitalism or agriculture has been dominant, because it is much easier to organize capital and servile labor than free labor.

A peasantry is the closest thing to a combination of free labor and free capital, but, being always unorganized, whenever it comes into conflict with capitalism or large landowners, the peasants get slaughtered.

The mixed system that has evolved in western Europe combines some of the least bad features of all three.

Now for my trick question: What was the poorest country in Europe in 1840? What was its position in 1970?

erp said...

Russia.

Howard said...

If it's Sweden, you might want to cool your jets and look at this and this.

Harry Eagar said...

It is Sweden. Worst to first isn't a bad record.

If Europe is making the same mistake that capitalist Uruguay made in 1950, that's not blamable on socialism or welfare-statism or whatever we want to call it.

It might be interesting to find out the unfunded pension liability of the U. of Chicago. I've no idea what it is, but I'll bet a CD of Phil Ochs' 'Tape from California' it's bigger than the endowment.

Peter Burnet said...

We're getting old, Harry. Time to stop seeing the world through the glories of 1970, especially when talking about resource rich countries with plodding, deferential cultures and automaton-like work ethics that took a pass on WW11. But here is my trick question: Which country was a bit of a poor, insecure, unstable, unsettled backwater in 1800 but led the world economically and militarily in 2007?

Capitalism is nothing more than the right to use and alienate your property as you wish. What is this "capital is superior to labour" stuff? Do you think the 19th century mining and forestry barons were socialists?

Harry Eagar said...

I'm not following your last remark, but as to America in 1800, that was about the date it became the country with the largest aggregate installed steam horsepower. It wasn't so backward.

It also had the largest whaling industry, an extremely high birth rate and virtually no internal taxes, since government was paid for primarily by selling off land stolen from the Indians.

And you don't me to go back to 1970? Sheesh.

The point about not getting involved in neighborly wars is good, too, although Sweden had gone peaceful around 1720.

Howard said...

Like a dog with a bone!

Peter Burnet said...

OK, then my Switzerland trumps your Sweden.

Even Pj O'Rourke admitted that, if you absolutely have to choose socialism, head for Sweden. But it was all built on natural resources, an extremely pious and gloomy Lutheran/Calvinist ethos and a homogenous, authoritarian political culture. Plus, like America, they stole all that Sami land. Israel, too, was socialist but got by fairly well for a time on a strong nation-building ethic and a siege mentality. Plus, like America, they stole all that Arab land. The question you should be asking is, given those rare advantages, why did they both run out of steam?

Harry Eagar said...

Oh, I see where you were going. I am not making myself very clear.

When I say 'superior,' I don't mean replacing labor factors of productionm with capitalist factors. I mean policial power.

Yes, the mining and timber barons were large employers of labor, but that does not make them socialist. They also used superior organization to employ legislatures to pass antisyndicalist legislation.

We are talking about control, are we not?

Running either an individual business or an entire economy is like juggling with nine balls in the air. It isn't technique so much as timing.

I wonder how much you know about economic organization in Switzerland. As it happens, I just posted a review of Fontaine's 'History of Pedlars in Europe' at amazon this week. It's all about the rise and collapse and rise and collapse of the finance capitalists in the high valleys.

My point, in a nutshell, is that shibboleths about economic organization (of any persuasion) are usually contradicted by the history of real economies.

Sweden was very poor when capitalist, expanded rapidly under mixed conditions that most people would call socialist but might not meet my definition (but then again, might in some cases--no for Saab and Electrolux, yes for shippoing).

It was not merely a question of resources. The resources were there when Sweden was poor. Not of technic. Sweden was familiar with industrial organization and had a larger iron prodution than England in the 17th c.; it also had banking and advanced credit facilities.

Also, it was plenty gloomy in the 18th c.

Why then did it remain poor? And why then did it later take off?

Very mysterious. Free markets cannot be the whole answer.

Think of economics the way we think of climate. When it comes to climate, most of us understand that it is a complex result of a multitude of antagonistic factors, not just of the level of atmospheric carbon dioxide.

Peter Burnet said...

I agree with you that there is a lot more than simply economic organization, which is a bit of a problem for the libertarian perspective. Culture is extremely important--Swedish socialism is better than Russian free enterprise. But then, Russian free enterprise is better than Russian socialism. And how about that caring Argentinian socialism vs. cold, heartless Singapore, both better than Russian anything?

Also, the kind of state intervention makes a difference, at least as to how long you can string out the experiment. My understanding is that the Swedes were traditionally big on very high taxes, absurdly generous welfare and non-stop gov. regulation, but not state ownership and management, so they avoided a lot of headaches the Brits had to pass through. Aristocratic privelege and class friction are other issues, as is the honesty and efficiency of the courts. Same with social cohesion and public safety. I've been to Sweden a few times and while it is certainly a formal democracy, debate and dissent are quite tightly controlled socially and culturally by Anglosphere standards. Ever tracked the Swedish press?

But whether radical or moderate, honest or corrupt, all leftist regimes rely on a ethos of public sacrifice and building something collectively to maintain support. You might get one or even two generations out of that, but when the younger generation starts joking about booking off sick two or three months a year and only nerds attend May Day ceremonies while the rest are enjoying a good piss-up, it's time to cut them loose to sink or swim. I think we all know by now that is inevitable.

Oroborous said...

Israel, too, was socialist but got by fairly well for a time...
...given those rare advantages, why did they both run out of steam?


Israel has run out of steam ?

Over the past few years, their economic growth rate has been higher than that of the U.S., they've had very low inflation, and their unemployment figures are comperable to those of North American nations, once we adjust for differing methodologies.

So...

erp said...

It's the kibbutz that has run out of socialist steam.

Peter Burnet said...

Yes, they largely abandoned the initial socialist dream that took them to the 80's. They were in quite the mess at the end.

Harry Eagar said...

Well, it's not as if they didn't have to deal with externalities.

At Israel's worst 'mess,' it was orders of magnitude better than any other nation within 1,000 miles.

I will make one last attempt to explain why unfettered free markets are a bad idea, calling on the immortal wisdom of the mortal Dan Stanford, whoever he was: Experience is what you get when you don't get what you want.

All economic methods of organization have highs and lows. Free marketeers, libertarians and Chicago Schoolboys measure the success of any method solely upon whether it generates ever highr maxima.

Realling Harry Hopkins ("People don't eat in the long run"), I contend that best sort of organization is one whose minima never drop below a threshhold. This could be measured in calories, around 1,400/day, for instance.

Free markets have a bad record in this respect. New Deal liberalism has had a 70-year run so far. Who knows how much longer it can go?

But it's already gone further than any other method.

erp said...

Harry, you can't seem to get off the idea that the government, whatever that is, owes people something. Today it's 1,400 calories a day. Yesterday it was a 900 sq ft house. In a free society, it's up to the able bodied individual to make his own way.

The rest of us, I think with great charity, pick up the tab for the infirm and the incapacitated, not the lazy and shiftless ... and yes, we get to decide which is which.

Oroborous said...

But coercive, publicly-funded charity for the infirm and the incapacitated isn't capitalism, it's socialism, or as Harry puts it, "New Deal liberalism".

And the vast majority of citizens in both America, and the advanced nations as a whole, are very happy with "New Deal liberalism", although most people have ideas about how they'd like to tinker with it at the margins.

Oroborous said...

Also, I don't think that Harry's point is that the government "owes" people 1,400 calories a day.

It's that any system that cannot provide such, at all times, is not the ideal system for most people.

erp said...

I don't mean publicly funded charity.

Here's an interesting list
of U.S. style poverty courtesy of BrothersJudd blog.

Harry Eagar said...

What did I say about government? I was talking about large-scale economic organization.

The fact is, under all forms of economic organization, except one, people enjoy hunger, chronic or periodic.

Americans didn't embrace New Deal liberalism because private charity already was taking care of people who had worked all their lives and been thrown out on the street because of a crisis of liquidity that they had nothing to do with. They embraced it because it wasn't.

Besides, I grew up in the South, and I've seen how it works when racists or religious bigots with money get to decide who deserves to eat.

Howard said...

If an economy has not yet evolved to a high enough level of productivity (in this case primarily agricultural productivity) then the government cannot wave a magic wand and will these calories into being.

If the calories exist but something is gumming up the voluntary exchange that would allow people to obtain the food, fix that. Don't man handle "the economy". (Gee, this guy fell down. I've got my foot on his throat but I still don't know why he can't get up.)

Also, if the new deal was about helping people in desperate need then why was so much food destroyed??? It was about power and control over others as much as anything.

I too like a mixed economy, but one that is largely free.

Bret said...

harry,

The "crisis of liquidity" was caused by the government. The government created the crisis and then inserted itself into peoples lives because of the crisis it created.

Only one economic system has no hunger? It's probably zero actually, because I'm sure you can find someone malnourished in every country. However, for very low rates of hunger, how about Hong Kong? Singapore? Sure, there was a nasty war that means they haven't had as long a run as the U.S., but given they have very limited resources, it's particularly amazing how wealthy (and un-hungry) they are. And both of those are fairly close to laissez-faire.

Peter Burnet said...

Harry, your problem is not with your facts and history, but rather with your insistence in seeing this as a choice between two systems. You would do well in Left Bank cafes. I'm getting the impression if you were elected President, you would see your first task as choosing what "system" to impose. That's not it at all. The question would be, "How far do I go in restricing people from doing what they want to do and confiscating their income?

If you are a leftist, you will say: "Quite far, because what they usually want to do is selfish, crass, destructive or exploitative and I must protect everybody from "them" and also "them" from themselves.

If you are a conservative, you will say, "as little as I can while still maintaining public order, health and hygiene, safety, patriotism, compassion, virtue and in some cases beauty. Private economic activity is a good in itself, but it isn't by definition always connected to or consistent with other equally important facets of a free, resilient society and there can be conflicts".

If you are a libertarian, you will say: "As little as possible. All sorts of good non-economic things flow wondrously and naturally from unfettered, private economic activity and growth. It's like magic!"

And if you are a liberal, you will say: "Haven't a clue. It's all very confusing, but if George W. Bush is for it, I'm against it!"

Howard said...

Peter,

perfect!!!!

Harry Eagar said...

'If the calories exist but something is gumming up the voluntary exchange that would allow people to obtain the food, fix that. Don't man handle "the economy".'

I recommend a stiff dose of Wedgwood's 'The Great Hunger.'

There could never have been a freer economy than Great Britain's in 1848-9, but it's hard to imagine how people whose entire income was potatoes were supposed to exchange nothing for something.

Especially since the something that was there -- beef, butter, wheat -- was being exported to England. The fine Victorian ladies and gentlemen acted like rentiers always do: They insisted on their rents.

But have it your way: Destitute people are rescued by kindly capitalists, who with good grace forgo a year's excessive accumulation (see today's post) because they have values in addition to, in some cases superior to, greed.

I'm sure these fantasies help you sleep better, but they're still fantasies.

Peter Burnet said...

Harry, please stop with the "capitalists". Socialists are people with a theoretical worldview of varying degrees of coherence on political-economic organization. Capitalists are people who invest their money somewhere. They can be, and often are, thick as a brick about politics, economics, etc. Just say "the rich", because surely that is what you mean. Then we can all relax and have a nice little 18th century class war.

Oroborous said...

...have a nice little 18th century class war.

You say that like it's a bad thing.

In modern times in advanced nations, "class war" has come to mean "quibbling over which segment of society should be most heavily taxed", but there was a time when the stakes were higher. Rich people who don't cut the peons some slack when times get tough DESERVE to end up swinging from a lamppost or tree, and that idea is supported in the main post.

The main post stated that "Ford had a better idea", and while Henry Ford was a bigot and an inept manager, he did get that one right, forgoing profits to support his employees in their time of need.

Howard said...

The better idea was arranging the work in a manner which allowed the workers to be much more productive thus allowing him to pay higher wages and to sell his product at a price that was affordable to the masses.

Bret said...

harry eagar sarcastically writes: "Destitute people are rescued by kindly capitalists, who with good grace forgo a year's excessive accumulation (see today's post) because they have values in addition to, in some cases superior to, greed."

I don't think that anybody said/wrote that.

"Capitalists" are individuals, some of which may or may not have "good grace". I couldn't find in any of the posts or comments anything about the "grace" of "capitalists". Maybe I just missed it.

But what was said is that a free-market/voluntary exchange economic system makes people better off than centrally planned/coerced exchange systems.

Free-markets (the system), not "capitalists" (even though they are part of the system), are what raise people out of destitution (at the fastest rate).

Also, the idea that the potato famines would've turned out better if Britain was socialistic at the time seems extraordinarily unlikely to me. There are "rentiers" in any economic system.

Howard said...

Harry,

There could never have been a freer economy than Great Britain's in 1848-9...

You're confusing the England of the mid 1800s with the England of the late 1800s, the one that lead the first globalization boom. Subsidies, controls and protections that existed in abundance such as the Corn Laws are not part of a free market system.

There were groups and individuals desperate to help who were screaming for repeal of the Corn Laws so they could obtain an abundance of cheap food. Repeal finally came, but too late to matter.

In order to get more of the good and less of the bad, capitalists must be left to compete, not be subsidized or protected by the government.

Imagining that fixating on deprivation while ignoring how wealth is created and created broadly, will lead to policies that make things better rather than worse seems like the greater fantasy.

Harry Eagar said...

'a free-market/voluntary exchange economic system makes people better off than centrally planned/coerced exchange systems.'

Not if you're Irish.

Let's see.

Corn Laws repealed: 1846

1.5 million Irish starve to death: 1848-9

The sarcasm arises from the immediate resort by free-marketeers, whenever 'socialism' is mentioned, to the Ukrainian famine.

Well, it wasn't the first, and, compared to the capitalist famine in Ireland not even the worst, although it was close.

Funny, I've seen references to the Ukrainian famine of the 1930s pretty regularly over the years. But nobody ever mentions the Ukrainian famine of 1892 and says, 'See, capitalism is bad.'

Why is that?

Bret said...

By the way, Harry, if you're ever interested in posting here (as opposed to just commenting), you're more than welcome to be a guest blogger here. I've been hoping to find someone who can balance Howard's and my viewpoint on this blog and the advantage for you is that sometimes it's easier to arrange thoughts proactively in a post as opposed to reactively in comments. Let me know if that's interesting to you.

(Any other regular commenters are also welcome to be guest bloggers here, but everybody else already has their own blog, so I'm assuming nobody would be interested).

Bret said...

harry eagar wrote: "Not if you're Irish."

Yes, if you're Irish. The Irish are doing very well, actually, now that they've gone to freer markets and lower taxes:

"Ireland also saw its government's share of the economy rise to more than 50 percent by the mid 1980s, but then began the process of reducing taxes and shrinking government. By 1989, the Irish government's share was under 40 percent, and it continued to fall during the 1990s until it reached about 30 percent late in the decade.

"As a consequence of this dramatic reversal, Ireland is now the second most prosperous country in Europe after oil-rich Norway. From a 1975 per capita GDP that was only 42 percent of America's, Ireland's economy has since experienced rapid growth, and its per capita GDP is now 94 percent of America's and 25 percent higher than that of France or Germany.
"

So modern Ireland isn't a very good example of the evils of capitalism. Lowering taxes and freer markets correlated with more prosperity for the Irish.

Ireland in 1846 (when the famine started)? It didn't go so well. However, while the Irish could voluntarily exchange the potatoes they had at that point, it was decades of colonialism and feudalism that caused them to be on plots of land so small that it wasn't sustainable. You call it capitalism, whereas I think the component of capitalism involved in the socio-political system at the time was insignificant.

Also, the government's socialistic response made things even worse:

"Lord John's ministry focused on providing support through "public works" projects. Such projects mainly consisted of the government employing Irish peasantry on wasteful projects, such as filling in valleys and flattening hills, so the government could justify the cash payments. Such projects proved counterproductive, as starving labourers expended the energy gained from low rations on the heavy labour. Furthermore, prospects of paid labour influenced Irish peasants to remain at work, far from their farmlands. So they did not farm, which fact worsened the famine."

Susan's Husband said...

"But nobody ever mentions the Ukrainian famine of 1892 and says, 'See, capitalism is bad.'

Why is that?"

Most likely because you're the only person who thinks 1892 Russia was capitalist / free market.

P.S. As for the Corn Laws, you're being a bit disingenuous. The legislation was passed in 1846, but the tariffs themselves persisted until 1849.

Harry Eagar said...

That shortens the glorious period of English free market success, which according to Ashton was done by 1871.

I'm not sure how Ireland in the '90s contradicts Ireland on the Hungry Forties.

You might as well say that Ireland in the 1790s (8 million population, double what it was when capitalism got through with it, whether in the '40s or in our '90s) proved the economic superiority of sharecropping.

++++

Thank you for the invitation, bret. I've mulled over blogging from time to time. Just now, our office is down to 3 from a strength of 6, so I don't have a lot of time for serious thinking.

Peter Burnet said...

Harry, you are simply going to have to make up your mind whether all the horrible things that happened in the past were the fault of the capitalists or the Christians.

Bret said...

peter burnet wrote: "...the fault of the capitalists or the Christians."

Well, in Ireland, I guess it would've been the fault of the Christian capitalists, so harry doesn't have to decide between them.

erp said...

Why not use the jargon of the day, i.e., Haves and Have-nots.

Harry Eagar said...

I am a meliorist. It is less important (but more fun) to assign blame than to understand what went wrong so we can stop doing that.

I have, after all, endorsed the idea that tamed Christianity or some similar benign spirituality is necessary for the social health of most people.

That doesn't require me to approve of burqas and faith healing.

Substitute 'capitalism' or 'socialism' for 'Christianity' in that formula.