Why there are no Right Libertarian Societies

Why there are no Right Libertarian Societies 

Despite the attractiveness, to some, of libertarian prescriptions for creating a ‘better’ and ‘freer’ society, there is a notable absence of any examples of states run according to libertarian principles in the record of history.  The reason is that libertarian societies, as a matter of definition, lack an institution, ( a government, basically) capable of redistributing demand.  They thus are incapable of dealing with the producer-consumer problem, (which I describe below,) and so fail.

One of the problems in dealing with libertarian economics is the protean nature of the libertarian state, which, in the hands of libertarians, changes according to the criticism leveled against it.  That is, what ever the libertarian state one criticizes, it is not the state advocated by any libertarians.  

Anyway, from Karl Widerquist (who, granted, seems to be no apologist for libertarians,) “A Dilemma for Libertarians,” we have:

            “Libertarianism can be thought of in at least three ways: It is the ideology

supporting (1) maximal equal liberty understood as self-ownership or noninterference, (2)

strong, inviolable property rights without regard to the pattern of distribution of those

rights, or (3) a so-called libertarian state, which is either a government limited to

protecting property rights and self-ownership or no government at all.

 Natural rights libertarians think of their philosophy as embodying all three of these claims, believing that a commitment to maximal equal freedom entails a commitment to strong property rights, which in turn entails a commitment to a libertarian state.”

http://works.bepress.com/cgi/viewcontent.cgi?article=1005&context=widerquist

Widerquist, whose paper is well worth the read, argues that any libertarian state operating under these assumptions necessarily evolves into what is effectively an absolute monarchy.  (An aside:  A close analysis of the 11 incidents of property,  as described by Tony Honore an conveyed by Widerquist in his paper, at least strongly suggests that it is impossible to eliminate any of the functions of government.  These functions can only be redistributed.  Libertarians, then, seem to believe in appropriating all, or for the minimalist state libertarians almost all, of the functions of government to the individual.)

So we will address libertarianism as described above.  But we will show something different.  (Since here the notion of property is paramount, we will consider this an instance of right libertarianism. Here we will not address the concerns which might be raised by any of the many varieties of left libertarianism.) We show that in the libertarian ‘minimal state’ of government protecting only property rights and ‘self-ownership,’ the economy cannot maintain demand for its production, and so will collapse. (Actually, we will show something quite different from this!)

But consider then a closed model economy, consisting of two sectors: a producing sector, and a consuming sector.  We allocate to the consuming sector a quantity of money. Here we are just talking tokens of demand, as I discussed in “The Standard Definition of Money is in Error.“  With these tokens, this money, the consuming sector buys the products of the producing sector. The consuming sector must spend its money to support itself, since it produces nothing on its own, and therefore can earn no money selling what it produces. So eventually it runs out of money.  (With this model there is no provision for borrowing, or assets.  Adding these features do not change the direction of the dynamics.)  As a result, the consuming sector demand then collapses.  With the collapse of the demand of consuming sector, there is no one to buy surplus production.    Prices crash, and with that crash production, and so the economy.  Adding the possibility of borrowing, or the selling of assets by the consuming sector, does not change the direction of the process, but merely adds to its duration.

Reality is of course, more complicated. First, any economy is more properly divided into net consumers and net producers. Consumers do produce, and producers do consume, but the distinction may still be made.  Now, whenever the consuming sector of the remaining economy is driven from the economy, the remaining economy may still be so divided. That is, the remaining economy cannot produce a net surplus to its own consumption, because there is no one to buy it. No one else has any money.  Therefore, the remaining economy must reduce production to match the reduced demand. Because production is reduced, so is that part of the economy which produces.  Thus, the producing sector is less than the whole of the remaining economy, and so the other part of the remaining economy is necessarily a net consuming sector. But this new net consuming sector has only a finite amount of money, with which to buy the surplus production of what is now the producing sector.  And so the process iterates.  The actual process of collapse, then, can better be described as a continual increase in the concentration of money and wealth, as ever an ever larger portion of the economy is stripped of its demand on the ever shrinking net producing portion of the economy. 

Although we have argued from a closed economy, we can actually start from an open one.  The entire economy then is the net producer, which exports its entire surplus into the exterior. The exterior, however, necessarily starts with a finite amount of money.  And this money necessarily is eventually depleted.  And so we return to the start of the previous process, which we have already shown eventually leads to collapse.

In a more realistic monetary economy, relative profits determines who is a net consumer, and who is a net producer.  The net consumer is the one who profits from his production, and the net producer is the one who loses money from his production.

This is not intuitive.  But suppose a fixed money supply.  The producer who profits, can buy more than he produces.  That is, he can consume more than he produces.  He is a net consumer.  The producer who loses money, can only buy less than he produces.  That is, he can only consume less than he produces.  He is a net producer.  ( I would like to point out here that, under capitalism, labor, certainly at least in private industry, is a net producer. This is because, for the capitalist to make a profit, labor, in the net, must produce more than it consumes.  (Consider first a one product economy.)  Even if we include government labor, if in the net businesses make a profit after taxes, labor as a whole is still a net producer.)

 This fact inverts the conclusion:  It is the net consumer who ends up with all the money and wealth, whereas the net producer is stripped of all his money and eventually all his assets. So as promised, what we have instead shown is that it is production which is decapitalized, and which the economy fails to maintain, and that is the cause of the economy failing. 

Labor, of course, is not the only net producer.

In the libertarian economy, there is no mechanism to redistribute demand, as is required to maintain production. Voluntary redistribution of demand from the net consumers to the net producers cannot work.  The set of all producers represents a commons, and any consumer who restrained his consumption would be exploited by other consumers.  And any compulsive mechanism of redistribution is contrary to minimal government libertarian principles.

The best solution seems consist of the continual issuance of money by the producers, (as defined in the more realistic monetary economy,) and, in order to prevent inflation, be attendant by the extinction of money among the consumers.  This is another way of saying money is taken from the consumers and returned to the producers.  This requires an instrument of compulsion, a government.  Such government must remain an instrument of the (real) producers, or it will fail to adequately return demand to the producing sector, and the economy will increasingly, de facto, approximate the character and trajectory of a libertarian society, and collapse.    

Two final notes:

1) Principle never stood in the way of profit. For instance, there is profit to be made from slavery, that is, the violent appropriation of the ‘ownership of self’ by others.  It took a war to establish the principle, and overcome the profit.  And there is profit to be made from the violent appropriation of property. In the absence of a mechanism to enforce principle, principle is empty. While libertarians enunciates the doctrines of “(1) maximal equal liberty understood as self-ownership or noninterference,” and “(2) strong, inviolable property rights without regard to the pattern of distribution of those rights,” the ‘libertarian state’ libertarians promote provides no effective mechanism to guarantee these rights.  Indeed, the very existence of such a mechanism is anathema to Libertarianism. 

So the preservation of individual rights, civil, political, and economic, requires a mechanism to guarantee those rights:  A government. This government requires a sufficient input of real resources to both to maintain itself, and to be able to act to effect such guarantee. It must also answer to those whose rights it guarantees.  Where the input of resources to this government erodes, or where that government less and less answers to the people, so must the rights of the people that government guarantees, erode. 

2)We will divide the functions of government into two:  internal and external.  We will suppose the external functions of government to be a net consuming sector of the economy. That is, any society with external functions of government has less wealth to distribute among its members.  That every society, or more certainly, almost every reasonably complicated society that we have ever known of, has had these external functions of government, despite the net cost, suggests that at least the leading members of those societies considered those functions necessary.  

Suppose now that all the internal functions of government were necessarily a net consuming sector.  That is, any society with a government would necessarily have less wealth to distribute among its members than a society without the internal functions of that government.  There are two possibilities.  The internal functions of government are used and maintained as an instrument for the oppression of the majority of the people by some ruling elite, to that elite’s profit.  That is, the benefits of those internal functions to that elite would be greater than the cost, to that elite, of maintaining and operating those functions.   Or, it would be preferable to the members of that society to have no internal functions of government, since then they wouldn’t have to pay for any functions.  That is, the people would be better off, and presumably choose, the internal functions of the libertarian state.  (Except, perhaps, for internal functions to enforce taxation to support the external functions.)  However, we have not seen this, or at least have not seen it perpetuated often enough for it to make the record, so we must assume that such an internal libertarian state must be unstable, and evolve as described above. (One possible example, though, might be the Old West.  Which raises other issues.)

Education is Insufficient to Maintain US Wages with Unrestricted Trade

A recent post over at Bloomberg Business:' Global Labor Glut Sinking Wages Means U.S. Needs to Get Schooled'  http://www.bloomberg.com/news/articles/2015-05-04/global-labor-glut-sinking-wages-means-u-s-needs-to-get-schooled is nonsense.

Education will not maintain US wages in the face of international competition. Once foreign countries are able to supply sufficient basic education, both in quantity and quality, there is nothing to stop them investing in the necessary specialized education needed for their own workers. Information (education) is more transferable than labor. The US cannot embargo the export of information.  The development of skills in foreign countries cannot be prevented. Any advantage in education is transitory, requiring a continuing race of investment in human capital. Further, the cost of education in US is greater than the cost of the same education in foreign countries, the US is at an absolute disadvantage in such a race.  Because education in the US is more expensive, it makes greater sense for international corporations to invest in the education of the foreign workers, rather than American workers.  Finally, the high cost of maintaining and developing capital in the US discourages the investment in education in the US, aggravating the competitive disadvantage in which American labor finds itself. 

In particular, the equalization of factor prices affects those factors more directly exposed to international competition faster than those factors more insulated from direct competition.  (All factors of production are connected, and therefore affected. The price of all factors of production eventually equalize, across borders. However, during the transition stage to the new equilibrium, the relationship of factor prices within the economy is altered.)   In the American case,  because of its substantial trade deficit with low wage so called ‘developing nations,’ the prices of labor and other exposed factors declines faster, while factors such as education and government, (in particular infrastructure, and military,) become relatively more expensive, and more difficult for the rest of the economy to sustain.  On the other hand, in the case of the developing countries themselves, and where they run a substantial surplus, these insulated factors become relatively less expensive, as the prices of the exposed factors rise faster.  Education, (and infrastructure, and the military,) in the developing countries thus becomes relatively inexpensive to capitalize.  Thus, the US is also at a comparative disadvantage in providing education to labor. 

One further aspect is that because the price of American education is increased relative to the rewards, and a greater share of that cost is borne by the individual, the individual is less encouraged to capitalize in himself.  This is aggravated by the fact that, with continued economic destruction because of the deficit, and inequality and resultant decrease in career opportunities, vs mere job opportunities, the chances of advancement through education are reduced anyway, especially for disadvantaged youth.  Indeed, many of these might see the costs, in time and attention, of even a minimal education as not worth the bare rewards this society seems to them to be prepared to offer them.

 The result of these factors is that, over time, US labor's disadvantage will increase, and their wages continue to decline.  This decline in wages will not result in greater competitiveness, because the capitalization of the American labor force will be reduced over the period of factor equalization, and be less than the capitalization of their foreign competitors.

Efforts to educate the American work force will not save American jobs or maintain American wages in the face of international competition.  These efforts are not being made, anyway.

Corrected and slightly expanded version of an earlier post

Greece and Germany have Essentially only Four Things to Talk About.

Greece and Germany have essentially only four things to talk about.  And these are not the things they have been talking about.

1:  How big a piece of Greece do the Germans want?

2:  What percentage of the Greek GDP do the Germans want?

3:  How long do they want it for?

And since because the trade deficit, mostly with Germany, and austerity have damaged the Greek economy, perhaps beyond its ability to repair itself: 

4:  How much will Germany capitalize Greece to restore its industry so that it can pay Germany back?.

What the Greeks have to talk about among themselves is by how much, and for how long, they want to remain burdened by a corrupt aristocracy that essentially sold out the rest of the country to the Germans.

If these issues are not addressed, the Greeks will have to escape outside of the box they have apparently been thinking in, if they are to come to terms with the reality of their situation.

EDIT (4/4/2015) Apparently, many Greeks consider themselves part of their aristocracy.  A disproportionate number think themselves above paying taxes, and another disproportionate number think themselves deserving of government employment or support.  Do the Greeks think the benefits of civilization are not worth paying for? Consider this post:  https://medium.com/nav-blog/the-story-of-the-greek-debt-crisis-in-20-charts-7e39ef9d6c2e

 However, all this bad behavior seems to be enabled by the country running a trade deficit.  Only by running a trade deficit can the people of a country consume more than they produce.  With a country maintains balanced trade, one person’s profligacy can only be maintained at the expense of other citizens.  This provides a people with an important motive to discourage indolence in their fellows.  

Of course, as we have discussed elsewhere on this blog, running a trade deficit does more than encourage profligate behavior among the citizenry.  http://anamecon.blogspot.com/2015/01/destruction-of-production-from.html

It progressively destroys productive capacity, making it ever more difficult to maintain living standards by domestic industry alone.  Further, the benefits of running a trade deficit are illusory.  Purchasing power declines more than the decline of prices of those imports which replace domestic production.     

The Germans are not innocents in this travesty.  They pursued policies destructive of their trading partner’s economies, so they themselves could profit and grow.  See Dr. Heiner Flassbeck discuss Germany’s beggar thy neighbor policies of the past 15 years or so. http://www.youtube.com/watch?v=TFKzAAd_1W8&feature=player_embedded

Greece, being small, is just the first domino to fall.

 

The Standard Definition of Money is in Error

The standard definition of money is in error. 

The standard definition of money is given in terms of its three functions:

                  1:  Money is a medium of exchange.

                  2:  Money is a measure of value.

                  3:  Money is a store of value.

Number 1 is at best misleading.  Numbers 2 and 3 are simply wrong, and these things are easy to show.  It is also easy to show that this is important.

First, the actual definition of money:

                  1:  Money is a token, or instrument, of demand, which is exchanged for goods or services.  Or simply: Money is demand. 

                  2:  Money is a measure of demand.

                  3:  Money is a store of demand.

In the standard definition, Number 3 cannot possibly be true.  Were Number 3 true, money would have value of itself.  The value of money would be independent of what ever else an economy produced. But consider, the best monies are those instruments which have no intrinsic value whatever.  How can any amount of something which has no value, be a store of value?  Even where commodities have been used for money, (and this may be the origin of the error,) they have tended to be those commodities, precious metals, for instance, which, because of their properties, were of only limited economic use. The reason for this is known and simple:  These commodities had to be more valuable as money than they were valuable as commodities.  If they were more valuable as commodities, they would be consumed, and so their use as money would disappear.  But this implies that the value of these commodities, as money, over their value as a commodity, is not intrinsic, but as with plain fiat money, purely a matter of other factors.  That is, the value of the commodity as money is not based on any intrinsic value of the commodity to the economy. 

So fiat money has no intrinsic value, and therefore cannot be a store of value. If the economy produced only money, that money would have no value.  It does not have value as, say, a refrigerator full of food has value, or a tank filled with gasoline.  But, what the third function of money actually is is as a store of demand.  If you have $100 in the bank, or in your pocket, you have a store of demand, which you can keep as long as you want, and when you choose to, you can spend it.   You can demand something which is offered for sale, to the amount of $100.

Then you can take your $100 of tokens of demand and you can go to the grocery store and with it buy $100 worth of food.  This shows that money is also a measure of demand:  You have as much demand for food, or anything else, as $100 will purchase.  If you have more money, you have more demand.  If you have less money, you have less demand.  If you have no money, you have no demand.

Money is not a store of value.  Can it reliably be a measure of value?  Economically worthless things may be in much demand, and therefore command a price beyond their value.  Yachts, for instance.  Economically valuable things may be in little demand, or supplied at prices below their value.  Water, for instance.  With money, you have demand for these things, at the prices they are offered.  But their prices do not reflect their economic value, only the amount of demand, the amount of money, which must be exchanged for them.

This counters the claim that the only value a thing has is that set and measured by the market:  The toys of the wealthy are much in demand, but of little value.  The goods needed by the poor are to them of great value, but it may be that those poor are only able to demand a meager portion of them.  Markets only measure demand.  They need not measure value.  This is the primary inadequacy of markets. 

So because money is demand, or more exactly a token or instrument of demand, it serves as a 'medium' of exchange:  Because money is not demand for any particular good or service, but is demand for any offered good or service, it may be exchanged for any offered good or service. Money is a medium not in the sense of being an environment for exchange, but in the sense of being a generalized instrument.  It is an abstract good, which is offered in exchange for other goods and services. The individual who exchanges his good or service for money then himself has equal demand on others for different goods or services.  Money thus flows opposite to the flow of goods and services, not to the degree of the value of these goods and services, but according to the demand for these goods and services that are offered.

Goods or services are thus exchanged for an equal demand on other goods or services.  Money, then, is an instrument for comparing the demand for dissimilar objects.  However, we have shown it is not reliable for comparing the value of dissimilar objects. 

By mistaking demand for value, the standard definition of money thus implicitly fails to distinguish between the value of an object, and the demand for that object.  In an informal sense, this results in the failure to distinguish between the needs of an economy, and its wants.To provide another example, the economy 'needs' streetlights in Highland Park, Mi.  It 'wants' yachts in Newport, RI.

If we regard the economy as like a tree, money cannot distinguish between the fruits of a tree, and its roots.

There is a larger issue. The standard definition of money goes back, essentially unchanged, to 1875. See eg. Wikipedia.  It is, implicitly, a key part of the foundations of the entire field of economics.  That it is in error calls into question the soundness of the entire economics project.

Education is Insufficient to Maintain US Wages

EDIT:  Improved version at: http://anamecon.blogspot.com/2015/07/education-is-insufficient-to-maintain.html


A recent post over at Bloomberg Business:' Global Labor Glut Sinking Wages Means U.S. Needs to Get Schooled'  http://www.bloomberg.com/news/articles/2015-05-04/global-labor-glut-sinking-wages-means-u-s-needs-to-get-schooled is nonsense.

From the post: "The most effective way of combating this oversupply [of workers] is to promote increased training and education of U.S. workers so they can provide skills unavailable elsewhere to employers, according to experts who have studied the problem."

Education will not maintain US wages in the face of international competition. Once foreign countries are able to supply sufficient basic education, both in quantity and quality,  there is nothing to stop them investing in the necessary specialized education needed for their own workers... Information (education) is more transferable than labor. .The development of skills in foreign countries cannot be prevented. The US cannot embargo the export of information..Any advantage in education is transitory, requiring a continuing race of investment in human capital.. Further, since the cost of education in US is greater than the cost of the same education in foreign countries, the US is at a disadvantage in such a race. For example, it is economically efficient for foreign countries to import US educators to train their own work force. For the same pay as in US, foreign nations can often supply a much. higher standard of living. And because education in the US is more expensive, it makes greater sense for international corporations to invest in the education of the foreign workers, rather than  American workers.... Finally, the high cost of maintaining and developing capital discourages the investment in education in the US, aggravating the competitive disadvantage in which American labor finds itself. The result of this is that, over time, US labor's disadvantage will increase, and their wages continue to decline.  This decline in wages will not result in greater competitiveness, because of the decrease in the capitalization.of American labor force.

The Evolution of Power and Society in Late Capitalism

Power is the ability to impose consequences, on the world, and on people. It is the ability to impose positive consequences, or negative consequences. Usually, these consist of rewards, for behavior pleasing to the powerful, or punishments, for behavior displeasing to the powerful. Of course, consequences may also be applied arbitrarily, but this wastes power. Power may also be applied inefficiently, which is also wasteful of power.  

In today’s world, the wealthy and many political leaders have the most power, and thus the ability to impose the most consequence.  The power of other institutions to influence the evolution of society and the economy has been significantly reduced.  While there are also other indicators of this, the reduced influence of these institutions can be seen in the combination of diminished material income, and increased dependency upon capital for such income as they retain. 

In a democracy, political leaders are expected to represent the will of people, and the interest of the people and the wealthy do not coincide. While both the wealthy and the people desire order and security, the wealthy and the people are always in competition for wealth and power. Since the people are dispersed, and the difference between what they have and what they need is less, unless they unite in will and action, they are at a decisive disadvantage to wealth.  The most important and unified instrument of the will and action of the people is their government.  Where the government is the strongest and most coherent agent of the wealth and power of the people, the wealthy will always seek to overcome, corrupt and capture it, that they may use it to help gather the wealth and power of the people to themselves.  On the other hand, seldom does an established government seek to take the wealth and power of the wealthy from them, since these tend to be regarded by the government and the people as legitimately acquired, and generally supposed to be applied to the benefit of the people.   

The wealthy are not monolithic.  However, they all share the same desire to enhance their own personal wealth.  While some are less principled in seeking and achieving this goal than others, none is so principled as to willingly give any substantial portion of his wealth and income to the people.  And so, few can afford to allow the unprincipled behavior of other wealthy to go without answer. Where some of wealthy still act as a check of the unprincipled behavior of other wealthy, the efforts of the wealthy to seize control of the government may be mitigated.  However, where the rewards for unprincipled behavior become substantially greater than the rewards for more responsible behavior, the ability and inclination of those wealthy who might be regarded as responsible, must be expected to decrease.   The pressure on the government to first pass laws and adopt policies allowing for its corruption, and then laws which further its corruption, thus increases, along with the degree of control of the government by the wealthy.  Efforts to oppose this process by interest groups from among the people are also increasingly repressed.     It should be noted that the effective transfer of control of government is an enormous transfer of wealth and power from the people to the wealthy, a transfer which usually goes unremarked. 

 As wealth becomes concentrated, and its influence on politics increases, the political leaders lose effective power, however, and become mere agents of the wealthy in the application of their power.  As this happens, political leaders, through the government, increasingly impose the will of the wealthy upon the people, whose interests they, and the government no longer represent.  Interestingly, even those interests the people once had in common with the wealthy, order and security, no longer completely serve the people, since they now also serve to enable the oppression of the people by the wealthy.  Once their government is captive of the wealthy, so long as the people are orderly and seek security, the wealthy and their captive government, through commerce and law, will strip the people of their property and rights. In this respect, an important instrument of positive power becomes degraded, as the people increasingly perceive their desires for order and security to be in, the net, harmful to themselves. 

In theory, of course, in a democracy, political leaders never ‘had power,’ as they were expected to be agents of the people, in transmitting and executing their will. However, the ability of the people to control these agents, that is the power of the people over them, was always limited.  The people were always limited in how and how much they could reward their representatives.  While they could offer rewards besides the material, those material rewards they could offer were in principle limited. Further, the perceived value of these non-material rewards were always under attack by the wealthy. And in general the people could only punish their representatives by not re-electing them to their office. The people were also limited in their ability to acquire information about many of the actions of their representatives.   For these reasons, and also because there were often a variety of ways to accomplish goals, political leaders always possessed a certain amount of discretion.  That is, a certain amount of their power actually originated from their own office.  Where, however, they are ‘elected’ by the wealthy, the wealthy have much more control over them, being able to both reward and punish them more, and also being more informed as to their actions, so most of this discretion is absent. (Because the wealthy are able supply greater reward, the expectation of that reward is higher.  Thus the punishment associated with the withdrawal of that reward would be greater.) Because of this, an ‘elected’ government can be expected to become a more effective agent of the wealthy than it ever was of the people.  Since the rewards to politicians change, we would expect the people who choose to become politicians to change, also.  We would expect them to become more self interested, and less public spirited.  We would also expect them to become more authoritarian and dogmatic, and less authoritative and pragmatic.  We would also expect them to be more sectarian and divisive, and less inclusive and unifying. 

We would expect them to identify with and seek to emulate their wealthy patrons, and devalue the rest of the population, especially the poor and other groups whose interests diverge from those of their patrons. Indeed, we would expect many to become wealthy themselves. However, so far as they must maintain the appearance of serving the interests of the people, they may be expected to engage in tactics which enable this.  Since their actions no longer serve the people, but favor the wealthy, those actions must be hidden from the people and obscured.  The people must be misled, and distracted by other activities which are irrelevant to the projects of the wealthy.  In particular the wealthy are indifferent to the divisions of the people, Yet, because these divisions are a powerful distraction to the people, the wealthy are prepared to exploit and aggravate them.

In this they are aided so far as the wealthy control the media. The media serves its owners. As society is segmented, so too is the media. Through the media the attention of the people is channeled, directed, and to a large extent, molded. The real actions of the wealthy and their servants in government, and the consequences of those actions, are downplayed or even ignored.  The importance of events which distract the people is exaggerated and those events dwelt upon. The information provided by the media increasingly diverges from reality, and action based on that divergence becomes counterproductive.  However, the information provided by the media is also what the wealthy wants the people to hear.   The wealthy are aware of this process.  It is circular,  and insofar as it progresses, it is perceived by the wealthy, and at some level at to some extent perceived by the people themselves, to render the people unfit for self-government, and requiring outside control of their activities.  It is this self-perception which renders the police state increasingly palatable to the people.  It is, however, not because they see themselves as requiring greater external restraint, but because they see their neighbors as requiring greater external restraint.  This heightened level of fear also increases the motivation in the individual to arm himself.      

Different segments of society become aware of the unresponsiveness and even the oppressive nature of their government at different times. Those people long at the bottom of the economic ladder do not notice, since they are most disadvantaged in any society. However, as society is plundered, each level of society plunders the levels below it.  Awareness thus tends to progress up the economic scale, but may be uneven, depending on the institutional  and economic relationships between the levels.  This awareness erodes the belief in the legitimacy of the government by the people.

So wealth, or capital, has power so far as it is able to impose both positive and negative consequences on labor and consumers. It gives rewards to labor through increases in wages and grants of authority, and punishes labor by discharging it, or laying it off.  (Of course, capital does not always interpret its own actions this way.)     However, as society becomes increasingly unequal, the ability of the wealthy to impose positive consequences decreases,  This because the rewards to labor that the wealthy bestow come from the income consumers spend on goods and services, and this income is decreasing as the wealthy increase their share of both that income and the wealth that comes from accumulating it. Indeed, this quantity can only decrease, unless compensated for by a greater rate of growth, or transfer of income from the wealthy to the worker.  This transfer, however, is contrary to the goal of the wealthy, which is an ever increasing stream of income to themselves. 

The reward the wealthy offer to labor of accumulated wealth is decreasing, and the income from that wealth also.  And, in its reduction of everything to material worth, the intrinsic value of labor, of work for works sake, is also devalued.  The wealthy see actual work as degrading, and this is eventually understood by labor; that laborers are regarded as fools, a vision that is reinforced by the abstract forms that work takes among the wealthy, and the disproportionate rewards the give to themselves and each other for such work as they do perform.

This means the wealthy must increasingly rely on negative consequences to exert their power. In particular, they must increasingly use force to contain and restrain the activities of labor.  Further, these negative consequences must continually escalate, to compensate for the negative consequences of the diminishing reward schedule given labor. 

It is intrinsic to capital and the wealthy that they devalue the other rewards that a society has to offer its members, since this relatively enhances the value of the rewards they offer society, and so enhances their power. They do this through their control of the media, through their control of government, and directly by how they invest their capital. (And of course, they also spend resources exaggerating the value of the rewards, and diminishing the apparent costs of those rewards, that they offer.)  It is necessarily part of their strategy to corrupt and co-opt the social, intellectual, and spiritual institutions that otherwise would provide these rewards, and which otherwise might provide a countervailing authority to their exercise of power.  Doing so, they necessarily corrupt and devalue the rewards that these institutions themselves provide.  But this process is part and parcel of capital’s decapitalization and plundering of society.  All institutions require both wealth and income to sustain themselves.  Where the wealth and income of these institutions can remain independent of capital, they can remain an independent and countervailing force.  Therefore, capital seeks to both erode and co-opt the sources of wealth and income that support these institutions.  Once the sources of wealth and income of these opposing institutions are co-opted, they may be withdrawn, and the institutions destroyed. Institutions that are dependent on income from the government, thus become vulnerable when the wealthy gain effective control of that government.  Indeed, it is evidence of capital’s control of government that they are able to do this.  And even where these institutions are not destroyed, they will be rendered compliant to the interests of capital, since the only other source of income is increasingly capital itself. 

 Further evidence of the control of the government by capital is that the government is set to tasks which, while beneficial to the wealthy, are either of no benefit to the people, or damaging to the wealth and income of the people.  Further, tasks which might be beneficial to the people are attacked and diminished, especially if they cost the wealthy income.    Most importantly, while war may be beneficial to the people, despite its costs to the people, and on occasion also be necessary, war need not be either of these.  However, whether or not war is either beneficial to the people or necessary, it is always a great source of profit to the wealthy.  When war is fought for profit, however, its goal is not victory, but perpetuation, and the maximization of that profit.  Since without victory, there can be no profit from the capture of foreign resources, all profit must be taken from the people.  What also must be taken from the people is the stream of resources from which that profit is derived.  These resources could otherwise be spent to the benefit of the people, and instead are effectively destroyed.  

So, the question arises, why hasn’t capital captured the government before now?

The first reason is the fact that the activities of government are, of themselves, not particularly profitable.  This is because, ordinarily, the discount rate for government investment is much lower than that of private capital.  One could say that, ideally, and in the limit, government is in the business of the preservation of resources, and the discount rate goes to zero.  Thus, a government responsive to the needs of its society will maintain its infrastructure.  When government is captured by capital, however, the discount rate goes up, public assets are sold at a discount, and infrastructure is allowed to decay. (The discount rate goes up because capital is effectively taking its profits from government in reduced taxation.) The second reason is that it is often much more difficult for a private entity to capture the return on these kinds of investments, than it is for the larger society.  (For these reasons together, education tends to be relegated to the public sphere.)

So taken together, these reasons imply that ordinarily capital will seek greater profits elsewhere.  And as long as it can do so, that is where its efforts will lie.  And as long as it has access to an expanding base of resources, capital will remain dispersed. That is, as long as access to resources expanded faster than the profit rate, capital would remain dispersed. But in recent times, this has ceased to happen, and return to real capital has declined.

However, the acquisition of resources and their modification and distribution throughout society, the provisioning of society, is merely an instrument to capital’s actual goal of acquiring a society’s wealth through ever greater monetary profits. Where greater profit can be obtained through manipulation of an economy, rather than providing for it, this is where capital will next turn.  Since this is process is essentially the wealthy transferring assets from the people to themselves without any substantial compensation, it can be expected to be resisted by the government. Thus, the government must be captured by the wealthy before it can be done efficiently.

  And the final reason that we haven't previously observed capital to capture the government is that one of the most important activities of government is to counterbalance the accumulation and concentration of profit in society. The government must distribute final demand throughout the economy, in order to sustain the people and their institutions.  When government ceases to do this, the ability of the people and their institutions to sustain themselves collapses. So the final reason is that no society long survives the capture of its government by the wealthy. 

Space for tomorrow

Space tor tomorrow