The Great Machine II: future-proof

References

The Great Machine

– Analysis of how the arbitrary assignation of value works in our modern society

Historical Reasons

There’s an argument going on LibCon about markets and how they affect societies. There seems to me, and has for a while, to be a major blind-spot in the discourse over this topic. I believe that there is really only one country capable of producing people who see beyond this blind-spot, and that is Britain. The reason I think this is that as we were the first industrial nation, so we are the first post-industrial one.

The flaw I see in all of the analyses offered today is that they take no account of this completely inevitable phenomenon. Every economy that people point to as doing all the ‘right things’ (as defined from an industrial viewpoint) are the economies that are only just now rising out of agrarian pre-industrial status. Yes, that’s even true of China and India. It’s disguised by the fact that they have Information-Age first world economies to bootstrap them, which those of us who developed it the long way did not. It’s still what’s happening. People forget the timescales, partly because of the effect of Moore’s Law; China’s industrial revolution is equivalent to ours in 1830 and India’s to ours in about 1880.[1]

We know and have known for a long time that Western-model market capitalism only works in a state of constant expansion. To succeed one needs two things to be true: a constant source of new markets for your sophisticated goods and a constant supply of new client states with cheaper labour where you can manufacture those goods and import the profits back to your home economy. Thus far, this model has served the West very, very well but the warning bells are sounding. We started running out of economies to conquer and got a 20-year lease of life from an unexpected source; CERN and the rest of international geekdom. The PC and then Internet revolutions created multi-billion dollar industries (and thereby, markets) not by geographical expansion but by actually coming up with something really new. They created a new market. Seen any more of those, lately?

When you get out of medieval, muscle-powered agrarianism and into an industrial-capitalist model, particularly if you do so in a thoroughly post-Enlightenment world where someone else (mainly, us!) has already made all the mistakes so you can learn from them, then yes, you see a vast change in basic standard of living. I lived through this in Ghana; in 1981 we were a typical African failing state, by 1998 we were about the strongest economy in the region, as the failure to redistribute Nigeria’s oil wealth caused the implosion of an inadequately integrated socio-political system. [2]

Ghana saw a ‘communist military dictator’ establish a constitution, run two cycles of clean elections, refuse calls to modify the 2-term limit on Presidential ambition, and retire. We saw our GDP broadened from 80% relying on only three products, to the top 60% coming from 10 sectors and the remainder rapidly being developed. Via the Akosombo Dam engineering project we supply most of the Bight of Benin states with their electrical infrastructure; to the point that Rawlings effectively blackmailed West Africa into stopping the Liberian war with the threat of turning the lights off. Education is still way behind, but the University at Legon are working on that. The people in my village are still muscle-powered farmers, but the ones my age have radios and listen to the BBC: they travel to the industrialising southern cities to earn a cash stake and then come home and invest in joinery businesses and water engineering projects. All I’m describing is exactly what Britain was doing between 1750 and 1850, but contextualised by much of the world having done it first.

Future Problems

Britain is post-industrial. My analysis suggests that the last five years (culminating in the ridiculous behaviour of the Bush regime, inflating an empty boom to try and pay for his personal war) have seen the tilt point in the US which Britain saw after WWI: they are about to start the slide we’ve been on ever since, which saw off our primary industry and then saw our manufacturing industry fold under competition from cheaper, less-developed countries (and the European Union, but that’s just shortsightedness on the part of our political masters, not underlying economics).

That’s why the Yanks are suddenly protectionist again; free trade agreements massively benefit anyone who’s on the up-curve of industrialisation (labour surplus => cheap labour => cheap manufacturing with relatively low capital infrastructure investment compared to a fully-mechanised, fully-automated build) over anyone who is at the height of it (where they have to pay a decent wage, their workers have dreadful expectations like pensions and health-care and education, where they have anti-discrimmination laws, and all the other things that make manufacturing more expensive). The Yanks were free-traders for as long as they were behind the curve relative to Europe. The Cold War exerted an unusual influence; it kept them technically free-trade past the point where they went into the industrial plateau, for purely ideological reasons. Then their internal manufacturing started to lose in the market-place, and hey look; protectionists again.

The only answer if a late-industrial nation wants to compete in the ‘making things’ game is to up the tech level (see Japan on the subject). The only way a late-industrial nation can compete with a developing one is by automating; that removes what little is left of our traditional ‘labouring’ class, and means really everyone in your country needs a technical education A-level or above, which costs money and, again, raises the expectations of the commons. It’s not about whether markets work or don’t to help people; it’s about industrialisation and post-industrialism. You cannot answer post-industrial problems with industrial-era solutions. This is also why the traditional political discourse of ‘power to the working class’ just no longer works; in the UK the ‘working class’ under the traditional definition are less than 20% of the population, and every single currently industrialising economy will, at length, undergo the same change.

The elephant in the room is this: since market capitalism only works under the twin conditions of new markets for goods opening up, and new sources of cheap labour opening up, when we run out of planet and everyone, Africa too, has slid into post-industrialism, what happens next?

[1] This is a fairly loose analysis, but it’s broadly to do with the extent to which industry and communications infrastructure have been distributed into the hinterland. Obviously, the single largest problem those two units have always faced is that they’re just too big. And, in the case of China, too much of the country being above three thousand feet above sea level.
[2] “If I hadn’t seen such riches, I could live with being poor” and out there they express this sentiment with AKs.

Advertisements

31 Comments

Filed under Content, Signal

31 responses to “The Great Machine II: future-proof

  1. This is a very interesting response to the LibCon topic and offers a very useful perspective but I think it may contain its own implicit assumptions. The first thing is that you take a very national approach to the problem. Nothing wrong with that but it is essential not to elide the interests of a nation-state with those of its people. Britain has declined as a nation-state (in terms of its ability to project power) for the whole of the 20th century. But that hasn’t stopped its people from getting richer and living better lives over all those years. Post-industrialisation may create problems for existing power-structures (and that is indeed why protectionism has suddenly become an interest in the US again), but that doesn’t mean it is really in the interests of ordinary people on either side of a political border.

    Also industrialisation is not the be all and end all of economic growth and supremacy. Canada sells wood, Denmark sells butter. They have never been as industrialised, in terms of manufacturing, as Britain but they are still very prosperous because they have stuff people want to buy. There are enough paths to prosperity that it doesn’t necessarily pay to analyse development in terms of “eras” in anything more than very general terms.

    • johnqpublican

      I think it may contain its own implicit assumptions.

      Ideally explicit ones, but as you can see from the Axioms page, I’m not far into the process yet, and am only just starting to get peer review (comments! :) For which, thank you.

      The first thing is that you take a very national approach to the problem. Nothing wrong with that but it is essential not to elide the interests of a nation-state with those of its people.

      Two things here; one is that this is an historical analysis. Britain (note I didn’t say England) is unique geographically, and those oddities are extremely significant in why we had the first industrial revolution. Secondly, I never mentioned the interests of the people. This post is about what is going to happen whether people like it or not. Industrialisation implies post industrialisation for two reasons; one is automation (that’s what industry is step one of) and the other is finite natural resources.

      Regarding national view: areas of geography which cohere economically tend to be nations, so far at least. My analysis is as much geographic as national; arguably more so.

      Post-industrialisation may create problems for existing power-structures (and that is indeed why protectionism has suddenly become an interest in the US again), but that doesn’t mean it is really in the interests of ordinary people on either side of a political border.

      You will also notice that my comments are global. The problem I’m talking about is that we’ve hit the edge of the planet; everyone is going to be having this problem as a single species and no-one, at the moment, is thinking forward enough to start planning for dealing with it. Globalisation is necessary; corporate/statist globalisation is just the Great Machine. We don’t need to stop thinking globally (the internet pretty much put paid to the idea of parochial politics being viable) we need to stop thinking like industrialist Protestants and start thinking like a global species who’re having their information revolution, whether they like it or not.

      Also industrialisation is not the be all and end all of economic growth and supremacy. Canada sells wood, Denmark sells butter.

      And both are countries with spectacularly low populations relative to their size, educational and economic status. Canada would be India if it was tropical. That advantage has an intrinsically limited lifespan; the population of the human species doubled in a hundred years, which in Malthusian terms means we’re on the exponential part of the curve which leads to a minimum 60% die-off if we don’t fix it. First thing that will go is low-population nations, because they’ve got land and people are dying elsewhere because they don’t.

      Unuseable land remains a problem (viz. China): which is what technology will get used for. Unless we’re bright and move industry out of the biosphere, into orbit where there’s ample power available.

      There are enough paths to prosperity that it doesn’t necessarily pay to analyse development in terms of “eras” in anything more than very general terms.

      Actually, no, there aren’t. The planet is a Malthusian petrie dish. We’ve hit the walls. If we don’t expand the territory, we’re fucked as a species. National boundaries (as you yourself were arguing just before; but don’t seem to have followed the implications through) become progressively irrelevant when you’re talking about global-scale events which no-one can stop. Genies, bottles, clocks and winding back spring to mind.

  2. Whilst I substantially agree with your post, John Q, I do feel that you have over-played the amount of market freedom that existed historically.

    Ha-Joon Chang wrote a brief précis of the contents of his book “Kicking Away the Ladder” here: http://www.paecon.net/PAEtexts/Chang1.htm, and Kevin Carson provides a great deal of food for thought on the history of capitalism in the entire second section of his “Studies in Mutualist Political Economy”, available on-line here: http://mutualist.org/id47.html

    However we got to where we are now, though, your substantive observations stand. My own view is that there is little hope of finding a practical way forwards whilst we continue to ‘enjoy’ the monetary regime that we do; predicated upon constant growth, as it currently is, any other changes in approach that we might seek to adopt will likely fail unless this key system is also transformed.

    • johnqpublican

      Thanks for the links :)

      If I expressed anything suggesting I thought we’ve ever had free markets, really free markets, then I misspoke. Nothing I’ve seen suggests that we do; markets ceased to be free some time prior to meaningfully existing, since the first ‘market’ was “Give me some of your food and my lads won’t burn your farm”, otherwise known as ‘the early Hittite/Assyrian tax regime’.

  3. Mike Killingworth

    Great stuff, John.

    These “economists” remind me of magical practitioners of times gone by. If the magic doesn’t work, it’s because the magician made a mistake, not because the world-picture is wrong.

    In broad terms you (rightly) accuse them of a part-whole confusion – mistaking the practices that work at a particular developmental stage for universal laws. At a guess, I would say that since humans evolved, for every one that has been killed out of malice, tens of thousands have died due to soemone’s part-whole confusion. It is quite impossible to underestimate either the danger or the prevalence of this error.

    • johnqpublican

      Economics has become, quite some time ago, a system of complexity bordering on that of the weather. It’s not surprising to me that the experts in each field are about as successful as each other. Any good farmer can predict the local weather patterns well enough to use them; that’s what bankers do. Predicting the patterns of the whole system, which is what governments and analysts try to do, is … hard.

  4. The Malthusian claim was wrong before and I think it could be wrong again. We might simply be operating in a completely different paradigm with a different idea of what constitutes resources. I don’t see resources as inherently limited. Perhaps I am wrong and we’ve reached the limits of our ability to exploit the world more efficiently. But that would be a specific point in history which hasn’t been borne out by previous predictions of that sort.

    • johnqpublican

      I may go wrong here, as I did the thinking on this one quite a long time ago (when I was actually studying industrial history), but this is the reasoning chain I’ve been using.

      1. Malthus was wrong because he posited that his extrapolation from micro-culture to macro-culture could happen to a single national economy. The map and the territory didn’t match well; we proved very good, as a species, at conquering the communications and transport challenges necessary to stop anywhere being isolated for long enough that he could turn out right. Australia might have been an exception if the indigenous people hadn’t been pretty smart when it came to living in harmony with their environment; including not over-populating even the nice bits.

      2. We are no longer talking about national economies; we’re at the start of a truly global one. Pretty much everywhere you can be, there’s already someone there; even in some of the bits no-one in their right mind wants to be in. Some resources, like wood, can be treated as renewable but in large part are not, in fact, being renewed. Some, like coal, iron, bauxite, are not renewable at all.

      3. We’re talking about a long view here. I don’t think we’re going to see a functional depletion of resources in the next 150 years; I think we might in the next 1500.

      4. But: depletion != exhaustion, which is a function of demand pressure. The planet as a whole provides no new continental resources to open up, now. The planet as a whole is Malthusian in a way that no continent was going to be; there’s no-one outside who can ship in help and no-where outside, at the moment, to export excess population to or sell manufactured goods to. No successful industrial economy to date has been so without exporting manufactured goods outside its own population. Well; I may be wrong there but I’m fairly sure I’m not: if I am, I’m fairly sure someone will tell me :)

      5. We’ve now entered the exponential population growth phase of Malthus’ model, which we had not when he was writing. At that point we showed no particularly clear signs of doing so. This was partly because we really had no idea how many people there were in China, and partly because the Europeans of that era really didn’t care. Both of these things changed in the 20th century.

      6. Moore’s Law rocks, but it doesn’t apply to food or mining. All we need to cause a Malthusian crash is for population to grow fast enough that we are no longer able to exploit resources fast enough to keep up, since we’ve pretty much already exploited all the easy ones. [1]

      7. Therefore, in the medium to long term humanity’s future either lies in stopping having kids for at least 40 years, which is both unlikely and counter-productive; or climbing the walls of the petrie dish and finding ourselves some new places to live, build and mine.

      8. Bonus side-effect; moving industry to where the solar power is both cheap and plentiful, and thus moving industrial waste out of our primary biosphere altogether, has to be a good thing for all concerned.

      The most ambiguous thing, for me, in your paragraph is the implication that exploiting the world more efficiently is what we want to do. We’ll just run out of the static resources faster. What we want to do is get better at living in this world, while we spend our exploration budget building ourselves a new one someplace.

      We are the generation of humans who have spent least time, effort and money on exploration. Yes, we’ve been to most places on this planet, but 40 years ago we’d figured out that limiting our ambitions to this one planet was not worthy of us. Hopefully we will remember why before too long.

      [1] One reason I see Britain as exemplar is that this is exactly what happened here. We had a phenomenal resource map when we started, in terms of geographical distribution, abundance and ease of access. We’ve used everything easy to get at: we’ve been exporting mined goods, for example, for at least 7,000 years. Miners, too. We used to have huge timber resources; we’re living on most of the places they used to be, because we used them as fuel for our cottage-industrial revolution. And so on, and so forth.

  5. Pingback: But first… John Q Publican’s interesting point « Left Outside

  6. Mark

    Hmmmm... so we spend our time sitting around talking to each other and drawing pictures while people in Africa labour to make our chocolate and those in China labour to make our TVs.
    I think the battle to be the greatest producer of agricultural/industrial products is one we can well afford to lose...

    Capitalism =bad  Markets= good  non?

    But anyway, yes yes yes, lets go to space. 
    But lets do it as individuals working together rather than as chattal slaves working for towards our masters whims.

    • johnqpublican

      Not quite sure what you did to your comment but:

      No, I don’t think capitalism is bad. I think it’s good at what it’s good at. I disagree with the current dominant philosophy about capitalism, which seems to be that what it’s good at is a sufficient long-term goal for our species. I believe we can be more ambitious than that. More on that subject in a forth-coming article dedicated to the issue.

      Markets are good for things they are good for; like technological innovation and competition on grounds of service, or developing trade between differentiated tech trees. They’re very bad for other things, like food. No-one should be allowed to profit by letting people starve because they can’t pay. It’s not efficient, when seen on the scale of a self-aware species as a whole rather than from the internal point-of-view of a single competitor in a resource-scarce environment who wants to “win” a zero-sum game.

      Last paragraph; yes, let’s get into space as collaborative, private entities: like these guys: also the SS1 crowd who took the Ansari X-Prize. Watched that happening; good month to be a geek, that was. There was a good discussion of the current state of play in the US space industry in New Scientist recently.

      • Mark

        Cool, thanks for the links.

        One thing though – given that we aren`t planning on letting people starve, I`d say it`s better to simply provide them with the money to buy food within the market system rather than disrupting it and replacing it with… what… a command economy?
        I think our general experience shows that food tends to become cheaper and more available (due to increases in agricultural productivity) and that no matter how much farmers might wish to push up the price of food to increase profits, it`s not really feasible as long as competition exists.

        • johnqpublican

          I don’t believe there’s any short way out of the capitalist system. I do believe there are ways to redefine what we have so that it’s both more sustainable and healthier; more defined around what people need than around what rich people want. Once I’ve built a solid enough foundation of basic concepts, the idea is to get properly into those methods and concepts.

  7. Mark

    “free trade agreements massively benefit anyone who’s on the up-curve of industrialisation”

    Sorry, John, one more. Surely free trade agreements benefit everyone except certain capitalists and national leaders?

    • johnqpublican

      Depends on your definition of ‘certain’. My argument is that free-trade agreements are to the benefit of robber-baron capitalists; i.e. those who hold large capital accumulations in economies which are still on the up-curve of their industrial revolution. Examine the attitude towards free trade held by Britain relative to Europe, and then the USA relative to everyone, between 1880 and 1929.

      They are less good for established capital accumulators in nations which are in their industrial plateau or are falling into post-industry because those capitalists cannot restrict costs (labour, etc.) as low as developing economies can, and therefore the ones further ahead become less competitive.

      This is why the developed world is suddenly very hot on a) buying as much of the developing world’s industry as possible, because that way they can import the money back home, and b) trying to use state-capital lending blackmail backed up by the threat of military force to impose violently anti-innovative IP law on the developing nations who would benefit most from a free market of ideas. Like Brazil and India and Korea and Taiwan, all of which have embraced the underlying philosophy of the OSS and are winning because of it.

      The west is no longer competitive unless it regulates the global market intensely. Some have noticed. Most have not. I believe this recession will tilt that awareness level somewhat, because the Final Score report on this particular instance of short-sightedness is going to be something like “China & India All-Star XI: 1, Western World Veterans: 0 with several red cards awarded against western banking institutions for professional fouls”.

      • Mark

        I think you`re missing another important group for whom free trade is a decidedly good thing – consumers (ie all of us). Look at the experience of the corn laws – good for landlords, bad for just about everybody else.
        Also i`m not sure that the distinction between capitalists in one country or the other – as long as there is a relatively free flow of funds from one place to the other, anyone can be the owner of capital anywhere else. Free trade might not not be in the interests of nationalist political leaders who need production for some specific purpose (such as war), but the rest of us are free to profit from economic activity anywhere in the world.

        As for whether or not the west is competitive – I suspect all other things being equal we`re probably capable of producing clothing or cheapo products far more efficiently than China or India. It`s just that we (or at least the people we service *wink*) do other things *even more* effectively – which is why we`re far richer than people in China.

        If we must look at this from a national perspective, the ones making the mistake are the Chinese – keeping the Yuan artifically low allowing exporters to make profits, but preventing the Chinese consumer from fully enjoying the fruits of their labour.
        All so they can make more stuff for the rest of us?
        Weird.

        • johnqpublican

          I think you`re missing another important group for whom free trade is a decidedly good thing – consumers

          You’d be amazed how often people make that claim without actually substantiating it.

          In some cases; yes, it is. Such as; we get cheaper stuff because Chinese manufacturing is cheaper at any given quality level than ours, below very good quality levels. Craft products and extremely high-quality production still cost a lot to do precisely because they are less susceptible to automation without humans in the loop. Large-scale manufacturing of formulaic goods, like clothes, lumps of steel, etc. are a bit different.

          Yes, global free trade would be good for consumers. It isn’t, of course, what we’ve actually got. The global ‘free trade’ infrastructure which currently exists is part of the great machine; more of which later!

          as long as there is a relatively free flow of funds from one place to the other, anyone can be the owner of capital anywhere else.

          Realistically this is only true if they already have capital. The number of people who earn a capital stake of international significance in one lifetime without inherited wealth or quite spectacular good fortune is pretty small. The geeks who started the working bits of the internet did it, but as I said before: they created an entirely new global market out of now-where. Real, rather than fictitious, created wealth. The last time someone did that was the avionics industry: or possibly the advent of cinema, depending on how you count.

          I suspect all other things being equal we`re probably capable of producing clothing or cheapo products far more efficiently than China or India.

          But we don’t. Every time you look at the market doing what right-wingers claim it will, you see the more advanced nations losing in the competition. The only way they’ve found to win, so far, is to leverage pre-existing capital imbalances created by being first on the ladder to own the industry in the developing nations. And that is a short-term strategy.

          It`s just that we (or at least the people we service *wink*) do other things *even more* effectively – which is why we`re far richer than people in China.

          Not really. Firstly, we’re ‘richer’ because we got on the ladder first. Really. Britain’s industrial revolution started 250 years ago. China’s, maybe 80, maybe 60 depending on how you count. Give them another 150 years? You really think we’ll be richer?

          Also, I am not convinced by the claim. Yes; 60% of our population has a higher standard of living, greater access to manufactured goods and more disposable income (in absolute terms) than 60% of theirs. But I’ll bet if you look at the top 60 million Britons (all of them) and the top 60million Chinese, and compare average capital worth or average annual take-home revenue, the top 60million Chinese are richer. This is the same mistake people make when they compare the US further education establishment with that of the UK, or their army with ours.

          Regarding your last paragraph: seriously, learn more about China. Things your analysis seems to ignore are: a) Chinese society has a long history and a very strong tradition of taking the long view. Much stronger than ours. b) The world is only just gaining a sufficiently high-bandwidth tech level that the effective information breadth of China matches Europe in about 1750. Managing China is hard because China is big and has amazing numbers of poor people in it already. Also much of it is very high above sea-level. c) You don’t seem to realise quite how many people there really are in China, and the significances of that to long-term economic planning.

          These guys sent explorer/trade-ship convoys to pretty much everywhere, including South America, California and Oregon, Arabia, New Zealand Greenland in 1421. They did it to get a politically complex individual out of Beijing for ten years. When he got back they weren’t able to do much about what he’d found except sit on the physical loot because while they collect capital and distribute it very efficiently for their size, they’re just too damn big for a low-bandwidth civilisation. They are rapidly becoming a high-bandwidth civilisation.

          • Mark

            My apologies. When I said that we do things more effectively, I wasn’t making some claim about the inherent superiority of White Europeans over those Oriental devils – but it’s simply a fact that we produce more in an hour of work than they do in China. That’s true even of simple manufacturing – a British worker in a food packaging plant will produce more in an hour than their Chinese counterpart – but it is *even more* true of high tech industries which the average worker in Sichuan has no hope of participating in. Now, it is true that the average British worker doesn’t produce new kinds of medicine, jet engines or computers – but again he has a decisive advantage over our Sichuanian friend in that he lives close to those who do and can provide them with services – selling them coffee, giving them massages etc. In fact – even though they could produce more game boys in one hour than the Chinese, their advantage in terms of making drugs or providing services is infinitely greater than his, because it is something he simply can’t do.
            Comparative advantage, innit.

            Now there will be a variety of reasons for this – prime among them the fact that we started climbing the (modern capitalist) ladder first. But that doesn’t change the fact that we do have greater labour productivity and that in general, labour productivity determines the wealth of a country.

            So, I find it a little hard to swallow your characterization of the current international trade system as one in which the advanced countries are “losing the battle”, unless the goal is the work itself rather than the goods and services that result from it.

            And doesn’t your measure of wealth (only analyzing some arbitrary number of people from the top of society and ignoring the rest), grossly favor countries with large populations? By that measure, I’m sure you’ll find that Scotland is richer than Windsor and Mexico City is richer than Eastbourne – but I’m not sure this would actually tell us anything helpful about anything.

            And I’m sure that the Chinese are a marvelous bunch and no, I don’t know enough about them. But the fact that for all of their ingenuity and history they are currently languishing at a living standard far below the Western world *is* an indictment of their leaders and political system – who I fear are still rather more interested in international power politics than in the welfare of their citizens.

            And in 150 years, hopefully they’ll be as rich as we are. I can’t see the problem with that.

            • johnqpublican

              t it’s simply a fact that we produce more in an hour of work than they do in China

              yes, I said that already. The problem is we aren’t anything like efficient enough to overcome cheap labour in that kind of quantity in the market place. The idea that the market selects the best product is and has always been a myth. The market selects the cheapest product.

              he lives close to those who do and can provide them with services – selling them coffee, giving them massages etc.

              Hmmm. He lives close to the people who own the companies that do, and can service them (tertiary industry: see above). The people manufacturing the things those bosses own are very rarely in the UK. Processing, yes; sorting eggs and packaging them, making bread, that kind of thing. Making cars? Much less so.

              Now there will be a variety of reasons for this – prime among them the fact that we started climbing the (modern capitalist) ladder first. But that doesn’t change the fact that we do have greater labour productivity and that in general, labour productivity determines the wealth of a country.

              We don’t have enough jobs. We most certainly do not have efficient labour productivity.

              So, I find it a little hard to swallow your characterization of the current international trade system as one in which the advanced countries are “losing the battle”, unless the goal is the work itself rather than the goods and services that result from it.

              Talk to every geek whose job went to India, and ever textile worker in the US whose job went to China. Talk to the slums dwellers in Detroit, proud white men and women who’re in their 60s with no hope of work and a gang-ridden community; because Detroit can’t make cars as well or as cheap as Japan or China or India.

              We’re losing the industrial war. We’re only winning the financial one. Hey, look, what just happened to our financial empires?

              And doesn’t your measure of wealth (only analyzing some arbitrary number of people from the top of society and ignoring the rest), grossly favor countries with large populations?

              An arbitrary number would be one with no basis in fact. This number has a basis in fact: the total population of the whole of the UK. Measuring the wealth of the British (as opposed to the wealth of the British State) would not have included all the African and Indian subject peoples in the calculation.

              My point was this: total wealth divided by number of heads massively disadvantages the numbers for a country with a high, rural popluation. It gives a skewed view of how rich that country is getting. I’ve accounted for it: keep an eye out for Great Machine IV.

              But the fact that for all of their ingenuity and history they are currently languishing at a living standard far below the Western world *is* an indictment of their leaders and political system – who I fear are still rather more interested in international power politics than in the welfare of their citizens.

              To some extent? Yes. To another extent? It’s all our fault. Yes, really. The Chinese political system worked entirely by changes at the top; changes in Emperor. For the regular dude, the chop on the paper is the Emperor. Who put it there is irrelevant. That worked fine right up til the British turned up and knocked off the Emperess, who was trying to stop us from deliberately addicting her population to opium for reasons of profit. That’s fine; Genghiz Khan did the same, he became Emperor, and his descendents did all kinds of good for China. The problem is that the British did not take over; they walked away, leaving a power vacuum in a highly stratified, highly tradition-bound polity. The chain of emergent chaos and bad governance which followed led directly to Mao. Again, there’s much more on this process, though explained mostly through Anatolian, Sumerian and European examples, in later posts in this series.

              And in 150 years, hopefully they’ll be as rich as we are. I can’t see the problem with that.

              The only problem there is that it’s flat impossible. For it to happen in the current market-capitalist environment, China would have to industrialise just like us; keep expanding industrial reach, keep making more and more, keep opening up new markets and defending old ones against competition, until the industrial world has permeated the hinterland. And the planet as a whole can’t afford even another Europe doing that, let alone something the size and density of China, without the biosphere tilting.

              The West has queered the pitch for everyone else. Solutions will have to be global, and they will have to recognise that the late-comer industrial players, in the long run, will probably win for the same reason we got there first; scale.

              • Mark

                I`d like to comment on the other stuff later, but for now –
                If we`re losing out because the chinese charge less even though we do the job more effectively, why don`t we just charge the same as them?

                Are you saying that productivity doesn`t have anything to do with national wealth?

                • johnqpublican

                  I never said the Chinese charge less. I said that at any given quality level below very good, they make things for cheaper than we do. The efficiency (i.e. automation) advantage required to overcome that level of labour surplus and living-cost gap is much higher than the actual efficiency advantage we have. Good scarecrow, though. I liked the hat.

                  Your last question is risible; I never said anything even approaching that.

                  • Mark

                    The reason why the chinese produce things for less is that they charge less for their labour. 
                    If we had no other options, we‘d charge less and would be able to compete with them for price - it‘s just that we do have the better option of providing services and making high tech stuff.That is why we have a higher living standard - because we can produce things more efficiently - you agree with me here.
                    So given that our higher quality of life is due to an advantage in productivity,that the higher price which we charge for our labour is a result of our higher standard of living, how can the west be characterised as losing any battle, except the battle to labour hard for little reward?

                    Regarding geeks or factory workers losing their jobs, this is part of exactly the same process. Whether or not some indivduals have a hard time finding their way into different professions,the overall story is a good one. Individual bad luck or difficulty doesn‘t neccesarily mean that the system doesn‘t work.   

                    RE:your statistical methods
                    why should we simply ignore the rural poor? If you want to compare the wealth of people from different areas of China (hong kong say) with the west, that‘s one thing. But simply ignoring vast swathes of the Chinese population doesn‘t make much sense.
                    Using your system, if you compare China to Switzerland, it‘s probably far richer than if you compare it to America. But all we‘re doing to achieve this result is completly ignoring the inconvienient poor.

                    • johnqpublican

                      The reason why the chinese produce things for less is that they charge less for their labour.

                      or:

                      at any given quality level below very good, they make things for cheaper than we do.

                      because:

                      The efficiency (i.e. automation) advantage required to overcome that level of labour surplus and living-cost gap is much higher than the actual efficiency advantage we have.

                      My new emphasis. Labour surplus, living-cost gap. These are the two salient differences between an industrialising and an industrialised society. Thus, the advanced nation begins to lose in the production-of-things market, and can only win in the production-of-ideas market (but then, only if it will seriously, seriously, spend money on truly universal education) and the already-owning-all-the-money game, which was gong well for the West until the music stopped. Again.

                      That is why we have a higher living standard - because we can produce things more efficiently - you agree with me here.

                      Not exactly. I provided the thesis to which you are attempting to present a coherent antithesis. Thus in this instance you would be agreeing with me.

                      You’re also, in this instance, wrong about what I was saying; I can but assume, after this many goes round, that you’re wilfully missing or ignoring bits of what I say because you don’t have answers to them.

                      My thesis is that we have a higher living standard and greater level of citizen autonomy (which go hand in hand, and which raise the expectations of your populace along with their education level) because we are further removed in time from the subsistence economy. This is the cause: you have a persistent post hoc, ergo propter hoc issue I’ve pointed out before. The effects are, among others, that they have a massive population [1] providing a labour surplus, and a massively lower expectation of living standards among their population. Since they also have automation and assembly lines, the result is they can make basic physical stuff more cost-efficiently than us.

                      So given that our higher quality of life is due to an advantage in productivity,

                      This statement has not been demonstrated and can be safely ignored.

                      how can the west be characterised as losing any battle, except the battle to labour hard for little reward?

                      Look at the economic trends. Look at the terror among Western industrialists now the borrowing is drying up. Look at the numbers. Manufacturing industry is a game of large numbers and they got larger numbers than us.

                      Regarding geeks or factory workers losing their jobs, this is part of exactly the same process.

                      Yes, that’s my point. Increasingly, our successful industries are tertiary now. The process is post-industrialisation. The fact that you don’t like it is really not my problem.

                      RE:your statistical methods
                      why should we simply ignore the rural poor?

                      Because you’re attempting to compare the Chalk downs with a single cheddar cheese. [2]

                      Perhaps 20% of China’s population are living in the same century as us, technologically. For us it was the 1820s in London when most of the rest of the country was still living in 1750. Over the course of our industrial process, the modern era reached further out into the countryside, and this process also accelerated. London went electric in the 1890s but there were villages in Somerset which were still not fully electrified in the 1970s. When you compare standards of living and wealth per head, averaging the high-tech urban with the low-tech rural skews the wealth assessment massively against countries with large populations which are behind the industrialism curve. Broadly; we have one economy, they have two which are established hierarchically.

                      The point I was making was this: if you compare high-tech Western urbanised people with a country which has a tech- and social level in the hinterland equivalent to that of my village back home in West Africa, you’re not comparing like for like.

                      Using your system, if you compare China to Switzerland, it‘s probably far richer than if you compare it to America. But all we‘re doing to achieve this result is completly ignoring the inconvienient poor.

                      A right-winger accuses me of ignoring the inconvenient poor. Uh-huh. The inconvenient poor (and scale: stay tuned for more on The Great Machine) are the only reason China didn’t kick our arses in the industrial game. Too many peasants, not enough time: and hideous communications difficulties. When you have that many people to manage, you can’t move fast; but you do gain a lot of momentum. That means you arrive later but you arrive heavily armed and not stopping for anything.

                      [1] Which you will always get in subsistence-tech, muscle-powered societies with a high infant mortality rate which suddenly get industry and medical care. It takes three to five generations; that’s sixty to a hundred years, for a population to figure out that you don’t need 10 kids each because nowadays they’ll all live. I grew up in a place that had just started in generation three of that process.

                      If you have the right local dominant religion, they can still be trying to figure it out three hundred years later, as in South America. We followed the same pattern, though it’s more disparate because medical tech didn’t happen so suddenly for us: but look at the population explosion which accompanied the mass migration of 80% of all Britons between 1775 and 1875. America did it; look at what happened after the Civil War, as the railroads started to beat the scaling problem they had out there.

                      [2] Not my line, unfortunately; I saw it in a comment thread, almost certainly on LibCon.

              • johnqpublican

                [ Ed’s note: a duplicate comment was removed here. ]

                • Mark

                  Sorry, – I’m not willfully ignoring your points here. While I’m not often accused of being stupid, I’m prepared to admit that I might be. So please bear with me while I try my best.
                  The reasons why China produces more tat than the rest of the world are that they have a labour surplus and a lower standard of living.
                  Now, here is my point, which I don’t believe you’ve addressed – if one of the major `advantages` that China has is a lower standard of living, how can they be characterized as winning anything? If we really wanted to compete with them to produce tat, we could simply accept a lower standard of living and produce it more efficiently than them.
                  The fact is that we could do this but that no-one, certain lunatics excepted, *wants to* because we are not engaged in a competition to *produce* stuff. Please read the previous sentence again, it is rather important. If anything we’d like to consume though mostly we just want to get along. Again, the effect of this on a few industrialists who may or may not own tat producing factories in the West is utterly irrelevant – one mans misfortune does not indicate a failure of the system as a whole.
                  If China produced everything and we produced nothing and received tat for free, no-one would regard it as a victory for the Chinese, so how can you expect us to view it as a defeat for the West that the Chinese are in fact producing more stuff while we work elsewhere.
                  How will continued technological advance, trade and progress (I don’t think that’s too big of an assumption) negatively effect the West? If the Chinese manage to produce something more efficiently, it won’t be a defeat for the West (unless you’re a 17th century mercantilist – you’re not are you?) *it’s a victory for all of us* – because we get more stuff we want for less work. If the Chinese deside to produce everything – we get even more stuff.

                  And I may have an post hoc, ergo propter hoc issue, but you have a caput inter nubila problem of your own. Apparently, “we have a higher living standard… because we are further removed in time from the subsistence economy” (dismissing the significance of productivity) – but you must see that expectations cannot produce wealth and that time itself matters not one bit unless accompanied by technological progress. There is plenty of evidence that increased productivity = increased wealth, not alone that it’s a starkly obvious fact that if you can produce more in less time, you’ll be better off.
                  John, do you ever stop to consider that you might possibly, despite your natural gifts and talents, be wrong?

                • Mark

                  If only 20% of China population are living in the same century as us, wouldn`t it be rather more useful to use a comparison that reflects this fact, rather than one in which the Chinese population appears wealthier than ours?

                  Or was the original suggestion just another one of your *niger et albus* arguments?

  8. johnqpublican

    A comment has been deleted here. It appeared to be a polite comment, but carried a title to do with advertising weight loss products, and has therefore been qualified as spam.

  9. stuartjeffery

    Hi John, Interesting debate (and blog). A few thoughts from me…

    1. One way or another we will be consuming less in the future with various resources going into decline at various time over the coming centuries and you are right about the demand exceeding supply being the real pain. Just look at oil last year, followed by its price crash as demand sunk in the recession (that it probably helped trigger). I suspect that it will yo-yo for some time.

    2. We can either consume less voluntarily or be forced by depletion. Doing it voluntarily requires understanding by the vast majority of people and a level of understanding that doesn’t exist in the majority. It is almost a level of consciousness that has yet to reach people, not helped by greedy politicians and the media.

    3. Unless we keep the information age alive, even if we collectively agree on a path of reduced consumption we will soon fall off it as individual, corporate, societal and state greed kicks in.

    4. There are other models of society that have led ‘civilisation’ than Britain. Britain has just led us to the almighty mess that we are in now, that doesn’t mean we will lead us out of it!

    Stuart

    • johnqpublican

      Hi, Stuart: Thank you.

      Point 2: There’s another problem here. Developing nations want some of being rich. They see no particularly good reason why the West should end up telling them not to do what the West has already enjoyed the fruits from for several centuries. Having entrenched it this far, and having created the vast wealth gap with accompanying betrayed expectations that our system has, voluntarily cutting consumption won’t ever help enough. Particularly since one of the major problems is food. The fact it’s not a scarce resource in Europe doesn’t mean it’s not a resource we’re short on.

      And point 4: I don’t consider Britain to ‘lead’ the statist/hierarchical capitalist system. I just can demonstrate that they were the first industrial economy and can also explain why (in excruciatingly boring, steel- and football-related detail. Thank you, Professor Flatcap of Soton)

      For that reason and that reason alone we’re ahead of everyone else on a curve. We’re certainly not leading anything: we’re more like the miner’s canary.

      • stuartjeffery

        Re Point 2: Of course developing countries have a right to improve their standard of living. I would advocate the application of the contraction and convergence model for all aspect of economic change rather than just carbon emissions – lets move towards fair shares for the global community.

        The big danger is that developing countries try to follow exactly the same disastrous path as the west… The effect of a relatively small proportion of the planet trying to live way beyond the planet’s capabilities has been bad enough, if the rest of the world try to consume as much as we do we are all really stuffed.

        The west needs to reduce its consumption while allowing developing countries to increase theirs.

        • johnqpublican

          While morally one might agree, it’s economically impossible. It’s been a truism for decades that if every western woman woke up tomorrow happy with her body, the economy would collapse.

          Western society recognises precisely one measure of social worth: consumption capacity. How much cash you have is only relevant because of how much you can, on a monthly basis, buy. Not how much work you do, or any real-world value from that; not how much money you earn and save. How much money you spend is the only relevant calculation.

          Our society, from the point of view of the dispassionate observer, is built on circular consumption; that’s the reason they invented planned obsolescence rather than making things that lasted. We cannot afford to have the mass of people start saving. We certainly can’t afford to have them stop or even limit their consumption: not and keep the current socio-economic model. Two options remain; eat the planet or change the model.

          From the point of view of a polemicist (or conspiracy theorist, depending on whether you agree with them or not) this is not accidental. The invention of mass-media advertising and, following it, the invention of the concept of ‘market creation’ [1] were not accidents. The attitude of those at the centre of the Great Machine, what Eisenhower called the ‘military-industrial complex’ (but which should more rightly be called the plutocracy) have steadily engineered society down an economic cul-de-sac because, until they hit the wall, all the money keeps moving towards them.

          As I will be arguing across the next four posts in this series, industrial era answers no longer apply. To get out of this petrie dish alive we need to reframe the question and change pretty much all of the axioms, to generate a new paradigm that is future-proofed.

          There is only one way to be future-proof: flexibility over strength. It’s always been our species’ talent; look at how many predators out there are stronger than us. Not one is as adaptable.

          [1] Let’s examine that one. Market creation, done right, is the invention of the PC revolution (leading to the Games market, the peripherals market, etc.). The invention of the internet leading to Google. You have a new idea, make a cool thing, people like it, bingo! a market has been created.

          Market creation as an economic term does not mean this. It means: we have a thing we can make. No-one wants it. We have a skilled propaganda machine (marketing agency). We will create a desire for a product no-one wants.

          Surely there’s something auto-destructive about this concept being legal.