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Mutualist Blog: Free Market Anti-Capitalism

To dissolve, submerge, and cause to disappear the political or governmental system in the economic system by reducing, simplifying, decentralizing and suppressing, one after another, all the wheels of this great machine, which is called the Government or the State. --Proudhon, General Idea of the Revolution

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Tuesday, July 26, 2005

Fair and Balanced

Lest anybody think I'm getting soft on the Globalization Institute, I just couldn't let this twaddle slide. Paul Staines writes:

It should, two centuries after Adam Smith wrote The Wealth of Nations, be axiomatic that to alleviate poverty, developing economies need to grow faster, and the poor need to benefit from this growth. Trade can play the key role in reducing poverty, because it boosts economic growth and the poor tend to benefit from that faster growth. Yet this is sometimes disputed by anti-capitalism/anti-globalization fanatics who put their ideological values before the needs of the developing world, caring more about opposing capitalist corporate symbols then raising living standards.

No, it should not be axiomatic.

First of all, neoliberals don't even have a clear idea of what "growth" is measuring. I've said it before, but here it is again: A great deal of nominal "growth" probably reflects activity that was formerly unmonetized (in the subsistence, barter or gift economy). As an example, I repeat--once more--the case of British colonial policy in East Africa. The colonial administration evicted the native peasantry from some 20% of the best land in Kenya, and gave it to settlers. At the same time, they imposed a poll tax on the native population to force subsistence farmers into the wage market. I'd guess that the nominal GDP, measured in official currency, probably exploded upwards as a result of that.

Right now Third World cities are similarly being flooded by landless peasants, evicted by landlords acting in collusion with authoritarian governments and Western agribusiness corporations. And they're bidding each other down to almost nothing, competing for sweatshop jobs. Meanwhile, the incomes of the landlords profiting from cash crop agriculture, and of the comprador bourgeoisie getting rich from the sweatshops, are exploding upward. See any parallel?

Conversely, imagine if those same peasants returned to the land that was rightfully theirs, made use of biointensive farming techniques and the kind of intermediate technology that's adapted to decentralized village economies, and met most of their consumption needs bartering in local LETS systems. I'm guessing that official GDP would fall to almost nothing--but the real quality of life would be almost incomparably better.

Second, "trade" as such is neither good nor bad. If there's more of it going on because externalizing the cost side of the ledger on the state makes it artificially profitable, it's bad: it's a form of inefficient, subsidized activity, crowding out more efficient small-scale producers for local markets. If it's genuinely more efficient, even when all costs are fully internalized (as, you know, Adam Smith favored), it's a good thing. My own guess is that there'd be a lot less "trade" if all that trade genuinely took place on the free market, instead of on the government teat.

Whereas anti-globalization zealots are today very much marginalised from the mainstream, a more respectable body of opinion argues that free trade can be economically disruptive and damage livelihoods in the short-term.

This last sentence, if it makes any sense, must assume an unstated minor premise: that "globalization" is equivalent to "free trade." Staines is quite sensible not to make such an assertion explicit, because--as I've already shown--it's utter nonsense.

11 Comments:

Anonymous P.M.Lawrence said...

Even if Staines' other assumptions were correct, fast growth can actually be more harmful, since the disruption/dislocation can then easily outpace the trickle down that generates new roles for the casualties of change. One minor quibble: if I recollect Bertrand Russell, Kenya actually used hut taxes not poll taxes. It's also quite possible that the authorities were aiming at maintaining the fiat currency and considered mobilising the work force a side effect; but this only goes to their state of mind, not the economics. Oh, compare and contrast the Byzantine Kapnikon and the English Hearth Tax some time, and maybe the French version too.

July 26, 2005 9:24 PM  
Blogger Kevin Carson said...

"It's also quite possible that the authorities were aiming at maintaining the fiat currency and considered mobilising the work force a side effect."

I would have accepted this possibility until a couple of days ago. But I just saw a bunch of quotes from colonial authorities at the time, quoted by Georgist Harry Pollard from an old paper of his on Kenya, that give the lie to any such "good intentions." As far as I can tell, they were conscious disciples of Wakefield.

July 26, 2005 9:59 PM  
Anonymous P.M.Lawrence said...

You misunderstand me. I wasn't suggesting that they didn't understand what they were doing, but that the official London policy, at any rate, may well have been swayed more by financial issues (colonies were always cost centres). That in no sense contradicts the idea that local civilians - and possibly even some bureaucrats - may have approved of its obverse, mobilising the work force. After all, Meinertzhagen was often at odds with London. By the way, the Georgist LVT idea shares a nasty feature with the Kapnikon: it modifies behaviour to make it easier to enforce over time (and has no built in limits on yield save collapse of the tax base).

July 26, 2005 11:42 PM  
Anonymous Wild Pegasus said...

In all fairness, there's no one at the GI suggesting that peasants ought to be thrown off ancestral land.

- Josh

July 27, 2005 2:38 AM  
Blogger Kevin Carson said...

Peter,

Thanks for clarifying.

Josh,

I didn't mean to imply that they did--only that standard measures of "economic growth" are meaningless because they include such bads as well as goods.

July 27, 2005 8:40 AM  
Anonymous BillG said...

Peter wrote:

"By the way, the Georgist LVT idea shares a nasty feature with the Kapnikon: it modifies behaviour to make it easier to enforce over time (and has no built in limits on yield save collapse of the tax base)."

would yo like to expand on this please?

July 27, 2005 9:06 AM  
Anonymous P.M.Lawrence said...

The Kapnikon levied a standard charge per household. This encouraged occupiers to stop individuals leaving, and also encouraged households to consolidate (you can see the results in Kosovo). This actually helped the state which merely raised the standard charge but had fewer households to catch. Similarly, LVT is disconnected from economic activity and the level can be set independently of it - the long term result will include "efficient" consolidation, i.e. reduction of the state's costs of policing the revenue base. It's a little more complex, but that's the summary.

July 28, 2005 3:51 AM  
Blogger Kevin Carson said...

Some Georgists argue that the LVT would lead to a collapse of the revenue base--at least if it were taxed at 100% of rental value. A full capture of rent would destroy the market value of land, and cause rents to fall to zero. One such Georgist, Harry Pollard, says that the important thing is to get rid of the rent, not how the revenue is spent: we'd be better off collecting all land rent even if the proceeds were thrown in the ocean, simply for the sake of removing all the market-distorting effects of rent.

July 28, 2005 6:47 AM  
Anonymous thebhc said...

"...anti-capitalism/anti-globalization fanatics who put their ideological values before the needs of the developing world,..."

This is the standard argument for pro-globalisation wonks; rising tide floating all boats. It is also the standard argument of supply-siders and trickledown theorists who maintain allegiance to this idealogy despite no evidence for it.

We have seen an increase in poverty world-wide over the last 30 years during the precise period when globalisation was accelerating. I would like, just once, for globalisers to present once piece of evidence that this theory actually does what they claim. This is not to say that globalisation won't, but that its real world application has worsened many, many places. And that is because it is not done fairly, does not create "free markets" and, if anything, actual globalisation has been about one way exchange: "they" open their markets to US goods but cannot impose tariffs to help nascent local industry and are usually restricted in their exports to the US. The current CAFTA bill is demonstration of that. cnTodd had a good post on this latest shafting of Latin America by a so-called free-trade agreement.

If anything, it is the pro-globalisation crowd who clings to an ideology that has never been demonstrated to actually do anything remotely similar to its claims.

July 28, 2005 2:26 PM  
Anonymous P.M.Lawrence said...

I did say it was more complex. Here are a couple more things. If 100% rent is levied by LVT and thrown away, it makes a differenece whether we are talking real or nominal rent. The former is wasteful, but the latter "only" needs adjustments to prevent the consequences of deflation. The other huge point is, the economic disconnect from production means we depend on accurate estimating techniques to find out whether we have indeed got 100%. That's the big deal, that you only find out if you push any taxpayer over the edge when the collapse is too late to reverse. Don't think that's all there is to be said on the subject, either.

July 29, 2005 1:52 AM  
Anonymous Anonymous said...

Kevin wrote:

"One such Georgist, Harry Pollard, says that the important thing is to get rid of the rent, not how the revenue is spent: we'd be better off collecting all land rent even if the proceeds were thrown in the ocean, simply for the sake of removing all the market-distorting effects of rent."

not how the revenue is spent...the economic rent has to be paid by either the excluded or the excluder.

if the excluded pay then liberty suffers because it violates their right to property in the fruits of their labor.

if the excluders pay then it matters not if it is collected by the excluded.

BillG (not Gates)

July 30, 2005 5:56 AM  

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