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Yasha Levine: Recovered Economic History – “Everyone But an Idiot Knows That The Lower Classes Must Be Kept Poor, or They Will Never Be Industrious”

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Yves here. This post by Yasha Levine ran last week, but it is sufficiently important  that I thought it was worth featuring on NC. The conventional thinking on the so-called “lower orders” usually depicts them as deserving their fate (either due to lack of self-discipline and motivation, or in other ages, as genetically inferior), or as victims of circumstance. But Levine, citing a recent book by economic historian Michael Perelmen, points to another strain of thought: that self-sufficient peasants were indolent, and it would be better for them to reduce their income so as to force them to work harder. God forbid that anyone other that the aristocrats have the luxury of a lot of leisure time!

I do have one quibble with Levine’s piece: just as Keynes has been done a disservice by Keynesians, so has Adam Smith been badly used by some of his purported followers. His “invisible hand” likely came from Macbeth (it was the most famous usage at the time and Smith, a serious Shakespearean actor, would have known its origin). The “invisible hand” is a conjurer’s trick, so Smith appears to have been signaling some reservations about the seeming efficiency of market activity. Similarly, Smith wanted to be remembered for his Theory of Moral Sentiments, not the Wealth of Nations, and he criticized some of the abuses of early capitalism.

By Yasha Levine, an editor of The eXiled. You can reach him at levine [at] exiledonline.com.. Cross posted from The eXiled

…everyone but an idiot knows that the lower classes must be kept poor, or they will never be industrious.

—Arthur Young; 1771

Our popular economic wisdom says that capitalism equals freedom and free societies, right? Well, if you ever suspected that the logic is full of shit, then I’d recommend checking a book called The Invention of Capitalism, written by an economic historian named Michael Perelmen, who’s been exiled to Chico State, a redneck college in rural California, for his lack of freemarket friendliness. And Perelman has been putting his time in exile to damn good use, digging deep into the works and correspondence of Adam Smith and his contemporaries to write a history of the creation of capitalism that goes beyond superficial The Wealth of Nations fairy tale and straight to the source, allowing you to read the early capitalists, economists, philosophers, clergymen and statesmen in their own words. And it ain’t pretty.

One thing that the historical record makes obviously clear is that Adam Smith and his laissez-faire buddies were a bunch of closet-case statists, who needed brutal government policies to whip the English peasantry into a good capitalistic workforce willing to accept wage slavery.

Francis Hutcheson, from whom Adam Smith learned all about the virtue of natural liberty, wrote: ”it is the one great design of civil laws to strengthen by political sanctions the several laws of nature. … The populace needs to be taught, and engaged by laws, into the best methods of managing their own affairs and exercising mechanic art.”

Yep, despite what you might have learned, the transition to a capitalistic society did not happen naturally or smoothly. See, English peasants didn’t want to give up their rural communal lifestyle, leave their land and go work for below-subsistence wages in shitty, dangerous factories being set up by a new, rich class of landowning capitalists. And for good reason, too. Using Adam Smith’s own estimates of factory wages being paid at the time in Scotland, a factory-peasant would have to toil for more than three days to buy a pair of commercially produced shoes. Or they could make their own traditional brogues using their own leather in a matter of hours, and spend the rest of the time getting wasted on ale. It’s really not much of a choice, is it?

But in order for capitalism to work, capitalists needed a pool of cheap, surplus labor. So what to do? Call in the National Guard!

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

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

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

This pamphlet from the time captures the general attitude towards successful, self-sufficient peasant farmers:

The possession of a cow or two, with a hog, and a few geese, naturally exalts the peasant. . . . In sauntering after his cattle, he acquires a habit of indolence. Quarter, half, and occasionally whole days, are imperceptibly lost. Day labour becomes disgusting; the aversion in- creases by indulgence. And at length the sale of a half-fed calf, or hog, furnishes the means of adding intemperance to idleness.

While another pamphleteer wrote:

Nor can I conceive a greater curse upon a body of people, than to be thrown upon a spot of land, where the productions for subsistence and food were, in great measure, spontaneous, and the climate required or admitted little care for raiment or covering.

John Bellers, a Quaker “philanthropist” and economic thinker saw independent peasants as a hindrance to his plan of forcing poor people into prison-factories, where they would live, work and produce a profit of 45% for aristocratic owners:

Our Forests and great Commons (make the Poor that are upon them too much like the Indians) being a hindrance to Industry, and are Nurseries of Idleness and Insolence.

Daniel Defoe, the novelist and trader, noted that in the Scottish Highlands “people were extremely well furnished with provisions. … venison exceedingly plentiful, and at all seasons, young or old, which they kill with their guns whenever they find it.’’

To Thomas Pennant, a botanist, this self-sufficiency was ruining a perfectly good peasant population:

The manners of the native Highlanders may be expressed in these words: indolent to a high degree, unless roused to war, or any animating amusement.

If having a full belly and productive land was the problem, then the solution to whipping these lazy bums into shape was obvious: kick ‘em off the land and let em starve.

Arthor Young, a popular writer and economic thinker respected by John Stuart Mill, wrote in 1771: “everyone but an idiot knows that the lower classes must be kept poor, or they will never be industrious.” Sir William Temple, a politician and Jonathan Swift’s boss, agreed, and suggested that food be taxed as much as possible to prevent the working class from a life of “sloth and debauchery.”

Temple also advocated putting four-year-old kids to work in the factories, writing ‘‘for by these means, we hope that the rising generation will be so habituated to constant employment that it would at length prove agreeable and entertaining to them.’’ Some thought that four was already too old. According to Perelmen, “John Locke, often seen as a philosopher of liberty, called for the commencement of work at the ripe age of three.” Child labor also excited Defoe, who was joyed at the prospect that “children after four or five years of age…could every one earn their own bread.’’ But that’s getting off topic…

Even David Hume, that great humanist, hailed poverty and hunger as positive experiences for the lower classes, and even blamed the “poverty” of France on its good weather and fertile soil:

‘Tis always observed, in years of scarcity, if it be not extreme, that the poor labour more, and really live better.

Reverend Joseph Townsend believed that restricting food was the way to go:

[Direct] legal constraint [to labor] . . . is attended with too much trouble, violence, and noise, . . . whereas hunger is not only a peaceable, silent, unremitted pressure, but as the most natural motive to industry, it calls forth the most powerful exertions. . . . Hunger will tame the fiercest animals, it will teach decency and civility, obedience and subjugation to the most brutish, the most obstinate, and the most perverse.

Patrick Colquhoun, a merchant who set up England’s first private “preventative police“ force to prevent dock workers from supplementing their meager wages with stolen goods, provided what may be the most lucid explanation of how hunger and poverty correlate to productivity and wealth creation:

Poverty is that state and condition in society where the individual has no surplus labour in store, or, in other words, no property or means of subsistence but what is derived from the constant exercise of industry in the various occupations of life. Poverty is therefore a most necessary and indispensable ingredient in society, without which nations and communities could not exist in a state of civilization. It is the lot of man. It is the source of wealth, since without poverty, there could be no labour; there could be no riches, no refinement, no comfort, and no benefit to those who may be possessed of wealth.

Colquhoun’s summary is so on the money, it has to be repeated. Because what was true for English peasants is still just as true for us:

Poverty is therefore a most necessary and indispensable ingredient in society…It is the source of wealth, since without poverty, there could be no labour; there could be no riches, no refinement, no comfort, and no benefit to those who may be possessed of wealth.

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77 comments

  1. Nathanael

    But if you make them too poor they get angry.

    It was always a fine balance, keeping your poor busy but quiet. The elites at Versailles disrupted that balance.

    The Roman Emperors made sure to provide “bread and circuses”. When the elites don’t do that….

    1. bmeisen

      Just discovered Young via Doyle’s “Oxford History of the French Revolution”, which is a proper distraction from the outrage provoked by American corruption. French peasants were passive if not compliant in their exploitation, and not because there were surpluses. They only really revolted when the cost of bread consumed almost their entire income and when it became apparent that the king would not react forcefully, arguably his most devastating mistake. Assad has probably read his history.

      1. Rcoutme

        Saddam Hussein also read his history. His policy is that he would rather kill 100 innocent men than let one guilty (possible assassin) go free.

      2. Rcoutme

        For those who don’t realize it, both men are/were leaders of their countries and part of the Nazi (oops!) I mean National Arab Socialist Party, aka Ba’ath.

    2. Maju

      The elites are nobody: they have no right to be the elites, nobody voted them, they are not accountable, they are nothing but thieves and parasites.

      1. gepay

        A Haitian proverb comes to mind: If work were so great, the rich would have stole it all a long time ago.

  2. Rotter

    “I do have one quibble with Levine’s piece:”

    I know your an Atheist from the post of a couple days ago, regardless of that, there is at least one quote from the Bible im sure you can appreciate. It was the catch-all response to a question asked about detecting false prophets from true prophets of God…it was: “you shall know them by their works”..there has never been a wiser, or a truer statment made on the subject, in all the history of statements and subjects.

  3. F. Beard

    “It [poverty] is the source of wealth, since without poverty, there could be no labour; there could be no riches, no refinement, no comfort, and no benefit to those who may be possessed of wealth.” Patrick Colquhoun

    Wow! Could there be a more wicked statement? People are to be kept or made poor so the rich can enjoy themselves? What about the benefits of labor for the rich? Ah, yes – the rich get to choose their own “labor” including what, when, where, how and how much. But not anyone else. No, they must be very diligent so the rich don’t have to be.

    The LORD enters into judgment with the elders and princes of His people,
    “It is you who have devoured the vineyard;
    The plunder of the poor is in your houses.
    “What do you mean by crushing My people
    And grinding the face of the poor?”
    Declares the Lord GOD of hosts.
    Isaiah 3:14-15 New American Standard Bible (NASB)

    Btw, the Biblical ideal seems to be family farms.

    1. Mansoor H. Khan

      Please note that there is difference between poverty and scarcity. Too much scarcity is poverty.

      While I am not advocating poverty a case can be easily be made for enforced scarcity.

      It seems to me that God has setup our earthly existence with enforced scarcity (and sometimes poverty). God could have easily given us heaven at the onset of our birth on earth but he did not.

      I believe there is good reason for this. God wants us to not only give us heaven but also appreciate it and enjoy it more by having us experience scarcity first.

      In the last century humanity in many places in the world has achieved great material progress but has gone backwards with respect to spiritual progress in these places. Rampant faithlessness and world wars are a testament to spiritual regress.

      Once the proper level of spirituality returns to humanity (I pray for this everyday) a significant portion of the 1% in power will see the light and fight the other non-enlightened 1% to bring more balance to our lives. Of course, the masses will have to help the enlightened 1% fight the non-enlightened 1%.

      mansoor h. khan

      1. F. Beard

        It seems to me that God has setup our earthly existence with enforced scarcity (and sometimes poverty) Mansoor H. Khan

        Maybe so but that is His business, not ours. It is EXTREMELY presumptuous for mere humans to enforce scarcity or poverty on other humans.

        1. Mansoor H. Khan

          F. Beard,

          I agree with you. We should not play god but still we can try to understand scarcity we cannot undo (even though we are asked by god to do our best including increase our material well being).

          Thanks for the clarification.

          Mansoor

        2. David Petraitis

          HI Mansoor, F.,

          It seems to me that when you want to “make a case for enforced scarcity” using as a premise of your argument “God has set up the world” such that the case is proved is taking a (too) short circuit. This is a logical fallacy and a rhetorical device to stop real cogent analysis and real argumentation.

          Scarcity, particularly enforced, is a human invention. Which is of course the premise of this book review. Scarcity, as apologists of capitalism and many economists argue, can be deemed “natural.” When one sees this in an argument one should also be interested in why (and how)the rhetorical device of “nature” is being used in the argument (often in the place of God as deus ex machina) to support a predefined conclusion, e.g. suppression of liberty to enforced wage labor is justified.

          A lesson in logic for the 99%. Look at the conclusion, look at the deeds, and acts it supports, then look at the argument with suspicion or at least skepticism if the acts are injustice on a grand scale.

          F. makes the point that we should be careful not to excuse human injustice as if God’s intention or invention. The price for hubris has often been severe punishment. I agree.

          1. Mansoor H. Khan

            Dave Petriatis:

            “we should be careful not to excuse human injustice as if God’s intention or invention”.

            Yes I should have made that clear in the original comment.

            But the fact remains that we humans cannot rectify every injustice even with the best of intentions and the life on earth will never achieve what our minds can conceive as far as perfect justice, perfect peace, infinite life and infinite happiness.

            mansoor

          2. They didn't leave me a choice

            >But the fact remains that we humans cannot rectify every injustice even with the best of intentions and the life on earth will never achieve what our minds can conceive as far as perfect justice, perfect peace, infinite life and infinite happiness.

            Actually we can. We just need to exterminate the 1% and live in perfect harmony with the ecosphere and forever be on the lookout of another elite trying to arise. Trying to claim otherwise is to make the oh so typical “moderate”, aka traitor claim that we are somehow making “perfect the enemy of the good”. If “good” is defined as wage slavery, forcing people off their land and driving everybody to poverty and desperation just to have an exploitable workforce, then quite frankly sir, I don’t want to have anything to do with your perverse world.

          3. Mansoor H. Khan

            David Said:

            “Actually we can. We just need to exterminate the 1% and live in perfect harmony with the ecosphere and forever be on the lookout of another elite trying to arise.”

            By using the word elite in above statement you really mean “bad” leaders (I think).

            Ok. We can do better. That is what you are saying.

            But we will still have natural disasters and accidents and things like birth defects or currently un-curable diseases.

            This means perfection on earth is not going to happen anytime soon (if ever).

            mansoor

      2. Rcoutme

        I’m sorry, but I have to disagree. The history of Europe is one of conflict. Wars were being fought all the time. The same is (mostly) going on in sub-Saharan Africa.

        The reason we had two world wars in the 20th Century is not because of man’s depravity (in comparison to earlier times). It is because transportation had become much, much more stable, predictable and rapid.

        The Crimean War is not called a World War. It did, however, involve people from quite a few powerful nations.

        WWI and WWII did not involve (or not much) South America. Why not? Because those people had very few economic interests in the areas being fought over. Meanwhile, the Japanese went all the way from Japan to Hawaii in a week in order to strike the US Pacific fleet. It took HOW LONG for the Russian fleet to arrive during their war in the early 20th Century?

      3. Dave of Maryland

        God has nothing whatever to do with poverty, nor scarcity. That is a filthy lie. Poverty, scarcity, disease and hunger are imposed by those who seek their own private profit thereby.

        If scarcity were the spiritual ideal, then we would reasonably expect the wealthy, upon awakening to their true state, to divest themselves of their useless goods and inflict the “poor” with gold and rubies and diamonds and silver.

        Nowhere in nature does “God” impose scarcity. Except in the human kingdom, to which he erroneously gave “free will”, that humans could impose mindless cruelties upon each other. And then rationalize their evil in precisely those words.

        The French Revolution smashed the Churches far more than it executed the aristocracy.

        1. Mansoor H. Khan

          Dave of Maryland:

          “God has nothing whatever to do with poverty, nor scarcity.”

          At least in the islamic conception of god he is in absolute control of all events and things. He already knows how we will use our free will and he has made that knowledge part of this plan.

          The quibble you might have is: Why does he allow so much injustice to persist on earth?

          I don’t have a real good answer to this question other than:

          “He works in mysterious ways”.

          Mansoor

          1. F. Beard

            He already knows how we will use our free will … Mansoor H. Khan

            Not according to the Bible:

            “The heart is more deceitful than all else
            And is desperately sick;
            Who can understand it?”

            “I, the LORD, search the heart,
            I test the mind,
            Even to give to each man according to his ways,
            According to the results of his deeds.”
            Jeremiah 17:9-10

            Why the need to “search the heart” and “test the mind” if God already knows how we will act?

            And the above is not an isolated example. The Lord several times expresses regret for a choice He has made in the Torah.

            We do God an injustice when we assume He is infinite. Greater than any is He, for sure, but not infinite.

          2. Mansoor H. Khan

            “Not according to the Bible:”

            According to the Quran. Allah has absolute, total and complete knowledge of everything past, present and future and he also knows the fourth:

            fourth = events that can happen but will not happen because he has NOT willed them.

            Quran leaves no doubt that allah is in total control of all events and things and knows exactly how we will choose in a given situation and has used this knowledge to construct all happenings.

            This world is nothing more that a three dimisional movie for him of which he knows exactly how it will unfold.

            mansoor h. khan

          3. Mansoor H. Khan

            “We do God an injustice when we assume He is infinite. Greater than any is He, for sure, but not infinite.”

            Quran says that he is infinite. You can only know him enough to get into heaven but never completely. Therein lies the incentive to live forever in heaven. When all is said and done there is only on rule in heaven: “We can never be him”.

            Time in my opinion is measured (in heaven) according to how well you know him and there is always more to know. Hence, the goal of infinite life for humans and jinns.

            mansoor h. khan

          4. Mansoor H. Khan

            F. Beard:

            “How did Allah get that way? Or was he always such?”

            He was always such. He infact created time and space and everything else material and non-material (laws of physics, etc.)

            mansoor

      4. VoxVeritas

        Mansoor – I certainly would be interested in how you define “God”. I’ll give you mine.. a concept, a construct of human minds.. and I daresay ‘minds’ cannot agree upon the myriad of endgame plans or goals of this construct. You would do better perhaps to base your perceptions on the real rather than imaginary.

        1. Mansoor H. Khan

          VoxVeritas said:

          “You would do better perhaps to base your perceptions on the real rather than imaginary.”

          If god does not exist then any concept of justice and/or fairness is also imaginary. The 1% in power can simply reason that they are gods and they decide what is just.

          mansoor h. khan

          1. Christophe

            “If god does not exist then any concept of justice and/or fairness is also imaginary.” – Mansoor H. Khan

            Dude, what have you been smokin’? Whatever it is, I want some too.

            When you make up axioms like the one above, do they reflexively become true? That’s cool. Who are you — God?

          2. Mansoor H. Khan

            VoxVeritas,

            so please tell me what makes an act just or unjust? what is your yardstick? what is your standard? what is your reference to measure moral value of acts with?

            mansoor h. khan

        2. Mansoor H. Khan

          VoxVeritas said:

          “Mansoor – I certainly would be interested in how you define “God”.”

          Below is the translation of the very short chapter number 112 of the quran:

          He is Allah, the One and Only! Allah, the Eternal, Absolute; He begetteth not nor is He begotten. And there is none like unto Him.

          mansoor

  4. jiminy

    What is “rotter” going on about?
    Anyways…the point he makes is that even proto-capitalists knew what Marx and Lincoln knew: labor is the source of capital, notwithstanding randian burbling about billionaire’s “creating’ wealth and “sharing” it with lowly peons. Barf.
    But today we witness a huge pool of excess labor, not the shortage in smith’s time that prompted the illuminating passages above.
    Having succeeded in depriving almost everyone of independent means of support, the project is to drive wages down in a quest for obscene profit.
    An added benefit will be the total political and economic subjugation of the formerly privileged euro- American proletariat.
    Happy Easter!

    1. F. Beard

      Having succeeded in depriving almost everyone of independent means of support, … jiminy

      It was the banks that drove families off their farms, wasn’t it?

      1. Rcoutme

        In a word, yes. However, they had been suffering greatly due to the drought that had hit the nation. Thus: they would likely not have survived much longer without some sort of relief. Thus farmers who began the period with absolutely no debt would not have survived on subsistence farming (at least not in the Great Plains).

    2. ScottS

      Yes! Let’s recognize the real problem — post-scarcity of labor. The goal of 0% unemployment can be achieved two ways: everyone working who wants to, and no one working unless they want to.

      We need to free ourselves of the Protestant work ethic that says you have to earn a living just to survive. We have the resources to feed everyone, so let’s fix the distribution problem by dropping the pretentious moralizing.

  5. Middle Seaman

    Thanks for the historical record of what we see daily in action. The US has a rather brief history of democracy compared to its life long of unmitigated capitalism. Until the Civil War we openly enslaved people for capitalist upper classes gain. After the War we reformed some but still abused the African American population for gain and oppression.

    The war on unions lasted the whole 20th century and has intensified lately. The Battle of Blair Mountain in 1921 was a union uprising involving tens of thousands of coal miners in WV. It is all directed towards enpoverishing workers and keeping them docile. The rich, through their storm troppers the GOP, are now in the thick of that fight. The authorities were almost always against the unions.

    All this can hardly be called democracy. If the right to organize is limited to the Chamber of Commerce, capitalism contradicts democracy.

  6. F. Beard

    Here’s a more likable quote from Arthur Young:

    “Give a man the secure possession of a bleak rock, and he will turn it into a garden; give him a nine years’ lease of a garden, and he will convert it into a desert.”

    I agree!

  7. F. Beard

    Well, because or more likely in spite of exploitation of the poor, the wealth has been created. Mission Accomplished!

    Now there is the matter of just distribution of that wealth (land reform? common stock distribution?) and the destruction of the means of exploitation – the usury for counterfeit money cartel, the banking system.

  8. Jo

    I seem to be having to school a lot of commentators recently that Adam Smith was scottish – in the context above we’ll read ‘english’ to read ‘british’.

    mmmmmmmmmkay?

  9. Max424

    “Child labor also excited Defoe, who was joyed at the prospect that “children after four or five years of age…could every one earn their own bread.’’ But that’s getting off topic…”

    Not really.

    1. F. Beard

      I have no problem with a GENTLE introduction to work (minor chores, etc) for children WITHIN the home so that having to work for a living doesn’t come as a sudden rude shock when they leave home.

      Plus, not that I necessarily recommend it, but those brought up on a farm, with plenty of chores to do, when they finally leave home seem to find ordinary labor in the city a lark.

      1. Max424

        Agree.

        My Dad made me and my brothers do chores when I was a kid. I was the dishwasher (before there were dishwashers). I don’t remember if I asked for the job, or I got stuck with it, but I know I became a master of the trade by the age of 11.

        To this day, if you’re looking for someone to do the pots and pans (and the dishes, too) after a large Thanksgiving dinner, I’m your man. Just don’t get in the way, and mess up my system –or I’ll quit ya.

        Note: The major point for me though, is that child labor really seems to get the Republican’s rocks off. And I think that’s why, since prepubescent slavery and forced child labor are currently, illegal, the Republican mind has turned to dominating the sidelines of Little League football games.

        Since they can’t work em to death, the next best thing for a Republican is to watch kids smash into each other at high velocities, all the while screaming things like:

        “You creampuff shitbird! Drive that motherfucker’s teeth through the back of his skull!”

        And, while grabbing some little tot’s face mask and violently shaking it … “You worthless fucking pussy! Backtalk me, you prick-less bastard, and you’ll wish you were never illegitimately born!”

        1. Rcoutme

          Well…Newt wants to eliminate child labor laws (and has said so to cheering audiences). I would contend that they are not content to simply force children into sports competition.

          1. F. Beard

            “Newt is a ninny,
            thrice traitor is he:
            to his wives, to the South
            and to liberty.

            If I had the money
            and it weren’t no sin,
            I’d buy a Contract FOR America
            and Newt’s name append.”
            the unknown poet

        2. F. Beard

          Just don’t get in the way, and mess up my system –or I’ll quit ya. Max424

          Exactly! The rich work where, how, when and as they please and maybe very long hours too and maybe very productively because they can do it THEIR way. Well, so would the poor if they had their own land, farms, shops, etc.

          The above, btw, is why I oppose a guaranteed jobs program in favor of a guaranteed income program. The poor can find their own work to do with adequate resources such as land and income.

        3. F. Beard

          The major point for me though, is that child labor really seems to get the Republican’s rocks off. Max424

          Yes, the Republicans want a nice, neat, orderly, EFFICIENT society AT ALL COSTS.

          If they pursued justice instead, we would have a much more genuinely nice, neat, orderly and even efficient society, I would bet.

  10. Goin' South

    Yves is right about Adam Smith being a somewhat ambiguous character.

    Peter Kropotkin, the Russian scientist and anarchist, admired Smith’s Theory of Moral Sentiments:

    “He was young when he wrote this book which is far superior to the work of his old age upon political econ- omy. Free from religious prejudice, he sought the explanation of morality in a physical fact of human nature, and this is why official and non-official theological prejudice has put the treatise on the Black List for a century.

    Adam Smith’s only mistake was not to have understood that this same feeling of sympathy in its habitual stage exists among animals as well as among men.”

    1. Sandi

      And speaking of animals………..heard a report today that experiments have shown that dominant female monkeys have more t-cells and a higher immune system than subservient monkeys.
      http://www.biologynews.net/archives/2012/04/09/changes_in_monkeys_social_status_affect_their_genes.html
      It appears the “lower caste” monkeys can change their genes by improving their social status. The researcher said it stands to reason that the lower castes have greater levels of stress which in turn show up as a weaker immune system.
      So, all these uptight moralists who insist the poor are merely shiftless “no-’counts” as they say around here, are full of it. But we knew that.

  11. gatopeich

    Thanks, Yves, this was really interesting and educational.

    Looks like the plan worked, and only smallish wrinkles wait to be neatly ironed. Perfection is on its way!

    I’d say we have a good substitute of child labour in the education system where we are taught to obey authority, not reason. Very efficiently, looking at the results.

  12. PhilJoMar

    I’ve read most of Perelman’s book, learned some interesting stuff, however it needs a bit more editing. What I mean is if you read it, don’t let that put you off.
    The quote from Hutcheson above is fine but he does advocate giving out land to the poor in another part of his System of Moral Philosophy. Excepting Hume and Smith, most eighteenth-century Scottish philosophers were influenced by James Harrington’s Oceana, which advocated land re-distribution (not to the poorest however) and after the famines in the 1690s in Scotland many C18 intellectuals were very sympathetic to the poorer sort.
    I’m not sure Perelman’s work really engages with any of this background but it is important in understanding who Smith might have been agreeing or disagreeing with.
    Of course, Perelman is a Marxist economist and this is the tradition he is seeking to illuminate.
    Now,as someone who lives on a smallholding, let me tell you that nature is abundant, it never stops. Most scarcity is produced by an imbalance in entitlement. The poor need never starve and indeed an older sympathetic tradition allowed the poor to steal if their lives were threatened.
    Shoplifters of the world unite!!!

    1. F. Beard

      The poor need never starve and indeed an older sympathetic tradition allowed the poor to steal if their lives were threatened. PhilJoMar

      Good point! In the Torah, the poor are allowed to glean the fields of the landowners and the landowners were commanded not to throughly harvest their crops so as to leave behind food for the gleaners.

      Progressives and liberals would do well to know the Old Testament if for no other reason than to confuse the so-called “Religious” Right with a Book they claim to heed but often ignore.

      1. amanasleep

        This principle could be very politically powerful. Using the bible to destroy the tenets of right wing economic theory could wedge fundamentalist christians away from the right. I have spent a fair amount of time with fundamentalists, and many are fair minded and decent.

        Walking into bible study with ethical, scripture-based economic principles could be explosive. I feel a sea change is in the air when Pat Robertson starts denouncing the War on Drugs…

        1. Susan of Texas

          I disagree, speaking generally; although some individuals might change their opinions most will not because not all devout people are motivated by the desire to follow Christ’s (or some other deity’s) commands to help other people.

          The purpose of organized religion seems to be to teach obedience, not goodness. Because deities do not interact with our physical world, all clergy must persuade others that they are and/or were in communication with their god(s). Without authority it is difficult to persuade others that you are right and they are wrong, that they have the right to command and you must obey. Therefore one of the essential features of organized religion is teaching the followers to give up their own autonomy and give the power over their minds and lives to their leaders, who know and obey God’s laws. Religions define the godly as those who obey God’s laws and the wicked as those who disobey God.

          Therefore the godly are motivated to please and obey God, not necessarily do good, which in this case means helping the poor and hungry. Of course many religions (and Jesus specifically) command their followers to help the poor but those who do not want to help others for personal and/or political reasons can easily convince themselves that they are disobeying God or his words by helping others, thereby excusing themselves from their own laws.

          Rick Warren, a multi-millionaire megachurch pastor, said:

          Well certainly the Bible says we are to care about the poor. There’s over 2,000 verses in the Bible about the poor. And God says that those who care about the poor, God will care about them and God will bless them. But there’s a fundamental question on the meaning of “fairness.” Does fairness mean everybody makes the same amount of money? Or does fairness mean everybody gets the opportunity to make the same amount of money? I do not believe in wealth redistribution, I believe in wealth creation.

          The only way to get people out of poverty is J-O-B-S. Create jobs. To create wealth, not to subsidize wealth. When you subsidize people, you create the dependency. You rob them of dignity. The primary purpose of government is to keep the peace, protect the citizens, provide opportunity. And when we start getting into all kinds of other things, I think we invite greater control. And I’m fundamentally about freedom. You know the first freedom in America is actually the freedom of religion. It’s not the second, third, fourth or fifth.

          The Bible does not support freedom of religion; there is one way and one way only to God, and that is belief and obedience to the laws it lays down. The pope also does not support freedom of religion for the same reason. And most people who depend on religion for a purpose and guidebook to follow in life and on a religious organization for emotional, financial, and social support will not change their minds and reject the teachings of their tribe when confronted by irrefutable evidence.

          Refuting their religious/political dogma is considered a personal threat, an attack on everything they believe in, most especially to the concept of obedience to authority. It’s not necessarily that the Republicans would love to see small children working at looms again; Republicans want everyone to obey their authority and and their authority tells them to remove any regulation on authority. The reality of exploitation, disease and hunger are easily dismissed because obedience, not goodness, is the goal.

          And if children are exploited, well, humans are sinners, and there’s nothing anyone can do about it except insist on obedience to authority even more stridently.

  13. Owen Finn

    Reminds me of Bertrand Russell`s 1932 essay, “In Praise of Idleness” in which he wrote – “(Keeping the poor contented) has led the rich, for thousands of years, to preach the dignity of labour, while taking care themselves to remain undignified in this respect.”

    Desperation is the next bubble.

  14. Tim

    The Arthur Young quote is shameful. I am seriously reconsidering whether I want to keep doing business with Ernst & Young.

  15. snowedin

    Interesting history lesson. But statements like “But in order for capitalism to work, capitalists needed a pool of cheap, surplus labor” is demonstratively false and so is, therefore the main premise of Levin’s arguments.
    The Nordic model is a living example, Capitalism thrives in these countries who happen to have the highest labor costs in the world, by far. The effect has become societies with a very narrow income distribution, not very (any) poor, and not very many rich, either. How can capitalism work in such an environment?

    On one hand there are generous incentives for people to start and build companies. On the other hand, there are costs (social, employment, taxes etc) required over time, quid pro quo wealth distribution. Think IKEA, Maersk, Nokia etc. Long term the impact is ineffective because once the companies become big enough (actually profitable enough), the “capitalists” break the social agreement and move abroad since the incentives work against the business life cycle after start-up. If there are enough “new business” to replenish the “old”, the model works. If not, the model starts breaking down as there are not enough revenues to cover the “old”, which is the case in most of these countries (except for Norway who has the oil&gas as a buffer).

    To state that capitalism as an economic system is dependent on a constant source of cheap and surplus labor is old-think. Its all about incentives.

      1. snowedin

        They really aren’t.
        Oil&Gas, by far the biggest raw material input. Who are the biggest exporters and what effect does the person’s wage working in that upstream industry have on Levin’s argument?

        Cotton? The U.S. is the biggest exporter. Wage effect on price? Same goes for intermediary production (via the highly automated mills).

        Iron other ores? Where is this mined, how many do you need to mine, their wages compared to “surplus low wage” environments, and final price?

        Electronics is a good example of where low wage and surplus does still factor in, although that is rapidly changing. The assemblers hardly make a profit (e.g., Foxconn) while the marketers (Sony, Apple etc) convert the low cost into high margins. But labor content of electronic manufacturing is drastically being reduced as automation kicks in (eg Foxconn is building a fully automated factory in Brazil). The capitalist logic is that the flip side of mass, low wage labor is long term expensive (only certain number of hours they can work, they tend to have health problems, not dedicated enough, kill themselves etc etc) Sounds crass of course, but the answer to cheap labor, is no labor.

        Where cheap surplus labor plays the role in capitalism is normally in the domestic industries of the developing countries (think India) who are still – in terms of industry stages of development – in the western 1800′s labor structure.

      2. UnlearningEcon

        You’ve basically just admitted that they do import a lot from less well off countries. The last time capitalism found itself without a cheap labour force it got the state to destroy the labour movement. Not sure what it will do if/when something similar happens on an international scale but it won’t be pretty.

        1. snowedin

          No, you are wrong.
          Canada is a poor country? (hint: the largest exporter of petroleum to the U.S.?)
          Saudi? last I looked the guys at Aramco weren’t paid peanuts. Australia is a pretty well off country too, and we buy much of their ores and rare earths. Or, guess who exports the most wheat in the world that feeds people? The U.S., France, Canada, and Australia in that order. I can go on but it would embarrass your statements.

          And as for raw materials that originate from basket case countries, just because their wages are low doesn’t mean the raw materials have equally low labor costs associated with them, or the labor related input costs are material to the prices people pay for their products. And in any case, so what? Raw materials happen to exist in many developed countries, because they do. They are called developed countries for a reason. What is your issue and how does it relate to Levin’s premise? Feel free to debate with facts.

          1. UnlearningEcon

            Just because some developed countries also have raw materials it doesn’t undermine my point.

            ‘just because their wages are low doesn’t mean the raw materials have equally low labor costs associated with them, or the labor related input costs are material to the prices people pay for their products. And in any case, so what?’

            Low wage countries export cheap raw materials but this has nothing to do with low paid labour and so what anyway?

            Jees, I thought it was so well established that the West imports a lot of raw materials from the second and third worlds that I wouldn’t have to state the obvious.

            For example: Congo relies heavily on mining diamonds, gold, copper and others. Many African nations rely on coffee exports. Poverty in Africa as a continent has stagnated since the 80s.

            The US and UK have a history of military interventions in countries that are looking to escape global capitalism or simply ones where there are a lot of raw materials. Read Killing Hope.

            Right now we are seeing the wages in the ‘BRIC’ countries rise and wages are stagnating or falling across developed countries.

            Sure, the Scandinavian countries are doing well at the moment, but they are their own countries with their own historical circumstances. And this doesn’t guarantee they will stay that way.

            Has it never occurred to you that global capitalism requires a large amount of people stay poor to function?

  16. JefeMT

    The best wag comment on Smith (or Shakespeare’s) invisible hand… “It’s busy stacking the deck!” from the mondakotucky oil patch

  17. MrColdWaterOfRealityMan

    This strategy will last just until the oil runs out in 50 years (or less), after which time the elites of our time and place will join the Mayan elites in extinction while the indolent masses roll on.

  18. Karl Fitzgerald

    Interesting that the enclosures of the commons were used to kick people off the land. Now we have Real Estate 4 Ransom -> boom-bust-bailouts to do the same.

    Adam Smith spent most of his book discussing public finance and how to raise it with the least side effects. But yet we hear of the invisible hand.

    The above quotes look at the reduction in independence when dis-possession occurs, but yet most see the capital vis labour playoff (passing over the land issue).

    Free the land to free the people.

  19. Siggy

    If one is to fully understand the concept of the invisble hand as referenced in the Wealth of Nations one should first digest Smith’s Theory of Moral Sentiments. As an observation on the political economy, Moral Sentiments is probably a clearer assessment of the nature of commerce.

    The problem that Smith is grappling with is the self evident capacity of people to lie, cheat, connive, steal and perpetrate frauds that is the connundrum that is ever present in the transaction. The issue is who holds superior information and insight, the buyer or seller which is coupled with the circumstance of who is at the effect of the stronger motivation.

    It has been underreported that the motivation that energized our several asset bubbles has been some form of fraud and theft. Absent prosecutions, the government has created a Gresham’s Dynamic that engenders the corruption of the government and its regulating agencies.

    This all did not arise as in the manner of mushrooms, it has arisen, been abetted, by a process of subversion fed by campaign contributions and politcal favors.

    1. F. Beard

      The issue is who holds superior information and insight, the buyer or seller which is coupled with the circumstance of who is at the effect of the stronger motivation. Siggy

      Common stock as money avoids so many ethical concerns. The seller, if he cheats the buyer (using common stock as money to buy), has cheated himself since he becomes a co-owner when he accepts the stock! And the buyer, if he cheats the seller, has also harmed his own interests.

      Conventional money has perverse incentives to harm others; common stock as money does not since it “shares” wealth and power.

  20. steelhead23

    A heartfelt thank you, Yves. While perhaps not intended as a book review, this piece has me dying to read Perelmen. This is the food I hunger for. There is an interesting dichotomy in the Enlightenment I wish to explore – there is this abject commitment to the rightfulness of aristocracy, that is, a duty to lead and control the masses lest they succumb to sloth, as contrasted with the Rights of Man, that ostensibly applied to all – except those who happened to be black. This dichotomy continues and is a source of much human suffering. A stellar post.

  21. b.

    What this brings to mind is the encounter of the to-be-mutineers on the Bounty with the polynesian islands. The similarity between repression of their own “lower classes” and the colonially acquired “subhumans” is also striking – the racism pervading the interaction of “The British proper” with their slave populations in Ireland or Scotland and its continuation in the colonies – Natives, Irish, and enslaved Africans – is a mirror image of the loathing of the unproductive “masses”.

    I believe we can expect some drive-by-scholar dismissals from the DeLongs of the world if this book should gain any popularity.

  22. EmilianoZ

    Great piece! Cross-postings from The Exiled have been a welcome addition to NC.

    By now most NC readers know that the “free market” has never been that free. More precisely, it has been free only for the populace. The 1% has always enjoyed full state backing.

    This post confirms that capitalism as we know it could never have appeared without the collusion of the state. This could be a factor explaining why this form of large scale capitalism was born in Europe and nowhere else. Reading Graeber’s “5000 years of debt”, I learned that in China, the merchant class was barely tolerated. Their existence was justified only insofar as they provided the service of moving goods from one place to another. The mandarins at the court never trusted them. In the Arab world the merchants enjoyed a higher status and prestige. But, according the Graeber, the Arabs practiced what comes closest to a truly free market. The state did not intervene to help the merchants. Only in Europe was there a large scale collusion between state and merchants.

    It’s a few months since I read Graeber’s book. My memory is not very good. Apologies if I have misquoted him.

    1. digi_owl

      Interestingly, Muhammad was a merchant before he found(ed) religion. As such, he knew very personally what charging interest could do.

      And the European change came with the protestant reformation, as until then the (catholic) church had held a strong opinion against charging interest (usury).

      Note however that this opinion did not have an effect on Jews. This is one part that fed the antisemitism that plague Europe to this day.

  23. Hugh

    I think it is not really until the 19th century that you get a real economic theory of class. In the 18th century, it is more amorphous, more a moral perspective, so deeply embedded among the elites that it was considered as much a part of the natural world as rocks and trees. The British variety was a weird hybrid of the old aristocracy and proto-capitalists who had more than a tinge of Calvinism about them.

    What I find interesting though is how class, which was seen as so natural in the 18th century and was so salient in the 19th and early 20th centuries, has been has been purged from our vocabulary. To even mention it brings on accusations of class war, which is funny in a way because our society very much has a class structure. That is what the 1% and the 99%, our elites and ordinary Americans, are, and we are in a class war which those 1% and elites are waging against the rest of us.

    We have been indoctrinated and propagandized by our elites to reject class, but what we have been experiencing for the last 35 years is kleptocracy and kleptocracy is all about class. Class is, of course, not the only taboo our elites have created to protect themselves and their looting. The transfer of wealth to the rich is always depicted as virtuous and in the natural order of things, but transfer of wealth back to the 99% is quite simply theft.

    Consider also revolution. Go back through American history. The country was born in revolution. It has experienced pre-revolutionary periods every 30 to 40 years from the Founding to Jackson and the banks, to Lincoln and the Civil War, to the Gilded Age and trustbusting, to the Great Depression and FDR, to civil rights and the anti-war movement, to the housing crisis and the meltdown. We live in a country given to revolution but our elites drill the very opposite lesson into us. We impart an air of treason into it. But the truth is that revolution is not treason against the country. It is treason against our elites. We should keep this in mind because this time around our elites have closed off all avenues of reform, leaving the 99% nothing but revolution left as a remedy.

    1. digi_owl

      I think class as a term has been eradicated because it was the main argument used by communists. By removing the term from the conversation, one defanged the communist argument to some degree.

  24. calabi

    I think the plan may be failing now because there is too many capitalists.

    Their all fighting over one another over a diminishing resource. Hopefully the wont see sense and stop fighting and team up and really get serious with the slavery. Then we really are screwed.

    But then are we?, because they have to control the slaves with another group of slaves.

    1. A Real Black Person

      “I think the plan may be failing now because there is too many capitalists.” That was the situation that confronted the world at the beginning of industrial society, at the beginning of the twentieth century. There was too many fish in the pond. Every country industrialized in Europe wanted to have an empire like the British and the Americans did. The industrialized countries in the twentieth centuries had two world wars to determine which country would be the most dominant. Today, the likelihood of war remains unclear. The global economy produces a lot of interdependence and the arsenal of war includes weapons that could literally sterilize entire countries.

      “TheY’RE all fighting over one another over a diminishing resource. ” From the perspective of the layman, and the layman includes many people with college degrees, the rich are getting more and more of the resources and leaving less for those below. What may be occurring in reality is that capitalists are only insisting on maintaining their net worth even as the resource that most of their wealth is based off and sustains a global population of seven billion people diminishes.

      “Hopefully the wont see sense and stop fighting and team up and really get serious with the slavery. ”

      With diminished global trade, they won’t “team up” to do anything. The complex finance and communications systems the built over the last seventy years will come apart because the resource needed to maintain them will become to expensive. The elite will most likely regionalize their power if they can defend their private property with soldiers and use violence or the promise of security to secure power.
      Slavery will come about out of desperation, since scarcity of life’s basics including water will become acute.

      The resource I hope you’re referring to is petroleum. Without it being as widely available as it is now, most of us would be dead within months.

  25. A Real Black Person

    “I think the plan may be failing now because there is too many capitalists.” That was the situation that confronted the world at the beginning of industrial society, at the beginning of the twentieth century. There was too many fish in the pond. Every country industrialized in Europe wanted to have an empire like the British and the Americans did. The industrialized countries in the twentieth century had two World Wars to determine which country would be the most dominant. Today, the likelihood of war remains unclear. The global economy produces a lot of interdependence and the arsenal of war includes weapons that could literally sterilize entire countries, and put a lot of land off-limits.

    “TheY’RE all fighting over one another over a diminishing resource. ” From the perspective of the layman, and the layman includes many people with college degrees, the rich are getting more and more of all the resources and leaving less for those below. What may be occurring in reality is that capitalists are only insisting on maintaining their net worth even as the resource that most of their wealth is based off and sustains a global population of seven billion people diminishes.

    “Hopefully the wont see sense and stop fighting and team up and really get serious with the slavery. ”

    With diminished global trade, they won’t be able to “team up” to do anything. The complex finance and communications systems they built over the last seventy years will come apart because the resource needed to maintain them will become too expensive. The elite will most likely regionalize their power if they can defend their private property with soldiers and use violence or the promise of security to secure power.
    Slavery will come about out of desperation, since scarcity of life’s basics including water will become acute.

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