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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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Location: Northwest Arkansas, United States

Thursday, January 01, 2009

Industrial Policy: New Wine in Old Bottles

My first paper at C4SS.


Anonymous P.M.Lawrence said...

On page 3 you write "...the exponential growth of demand...". You should not have written exponential to mean something like massive, as that has a different precise technical meaning. There is something similar on page 8.

You should add a minor qualification to your remarks about modern power equipment allowing decentralised power equipment: this does not apply to power generation itself, and power transmission somewhat restricts the economic decentralisation of its end use. Even so, there are lower bounds on this centralising pressure, e.g. when gas engines running on gas from gasifiers burning local fuel start to outcompete centralised power generation (however, that's really a point for the future, as, when and if energy shortages themselves start to matter).

It is not in fact the case that "...the layout of the machinery in a Sloanist factory followed the same exact pattern as if it all had to be hooked to belts running off the drive shaft from a central steam engine or water-wheel". Electricity allowed a far more open plan, including conveyor belts and production lines needing near-horizontal operation, where mechanical power distribution had required compactness and rectilinearity in multi-storey buildings. I remember reading a book from the turn of the last century, The Romance of Electricity, in which it was recorded how a factory owner was finally persuaded to electrify when he realised, at the end of a long discussion, "Do you mean this electricity can turn corners?".

At the bottom of page 10, "custom" should be "customise".

At the bottom of page 13, you write of "...likely [sic - it's an adjective, not an adverb] maintain the existing standard of living with an average work week of one or two days". Unfortunately, without the right institutional changes as well, there is a bifurcation in the labour market. Current approaches deliver reductions in average work loads by reducing the number employed and if anything increasing the burden on the remainder. There is a risk that, rather than freeing up everybody, new approaches would be confined to a co-opted group that would serve to kick away the ladder and obstruct further escapes from dependency by the remainder (see cottier, cossack and maroon).

On page 16 and elsewhere, you probably over-estimate the resistance to business cycle variations that comes from smaller networks of mutually supporting activity. Although this would damp those variations down while the networks remained small, they would lose the insurance effect shielding them from variations caused by purely local circumstances outside the system, e.g. poor harvests, until they grew large enough to share that load on a larger scale - which would bring back the oscillations found within a larger system.

At the bottom of page 18, "...has allowed to function..." should be "...was...", and "bears" and "threatens" should be "bore" and "threatened".

On page 20, "...on the commons" should be "...on commons" (since you didn't write "the cottagers") or "...on the common" (you should also remember that "savings", like "commons", is plural).

Page 21 omits any discussion of just how the present order might react and adapt to what is being described - for instance, by permitting a privileged group to opt out and block that for others (see above, and also how just such a pool of small businesses feeds large Japenese firms). And there are other possibilities, allowing a mixed strategy of buying time with some tactics and using it with others (as against which, the same approach can be used to get those turkeys to vote for our Christmas - if it only applies to new and/or replacement turkeys, grandfathering, allowing current ones to see out their time with less competition and fewer defensive outgoings).

On the same page you do Edward Gibbon Wakefield an injustice. He did not envision artificial restrictions for those purposes on an enduring basis. Rather, he anticipated that allowing things to develop without them would only lead to a temporary pattern that would in turn be disrupted as immigration (which he was aiming at) later restored an equilibrium similar to that obtaining in the old world. He supposed - accurately - that it would be wasteful to set up one pattern only to knock it down later, and that it would miss out on the opportunity to tap into the gains from temporary artificial shortages to build up infrastructure for the final situation. Indeed, where his ideas came nearest to fruition, in South Australia, the gains really were ploughed into railways, roads and bridges, etc., leaving a much lower continuing tax burden afterwards (though it was not self-sustaining as he had hoped). That is, he envisioned the artificial part of the restrictions as temporary, to make a smoother transition to when they would be there naturally; the gains from that didn't go into private pockets but into developing the colony, and people working under the restrictons eventually got their independence under that later pattern.

Where you quote "opened started" on page 24, that's probably a typo.

On page 25, references to Mayberry are too US-centric; they need more background to make sense to the rest of us.

Now some asides:-

- Cases within the pattern of not too much/not too little household support for wage earners also show up in colonial systems as well as in developed countries. That is, we can find cases to illustrate the pattern not just vertically, looking at particular countries over time, but also horizontally, looking at other countries at different stages of development (and sometimes at different times as well - the first stage is now in the past everywhere, but it was recorded by contemporaries elsewhere and so is more accessible than the remoter past of current developed countries).

- I personally would have gone into some detail on alternative forms of providing capital: my personal preference is that firms could fleet lease generic equipment from larger natural groups like municipalities, endowed and self-supporting charities, or mutual associations that could finance buying or making the equipment with bond issues or sales of annuities, and then maintaining it using revenues received; that firms could organise as limited partnerships (i.e. with limited non-active partners and unlimited active ones) if they needed to provide business-specific fixed capital; and that firms could get working capital from loans from banks that confined themselves to the traditional core banking activity of financing trade and were themselves non-corporate like that.

In conclusion, the piece as a whole could benefit by being topped and tailed with "tell them what you're going to tell them... tell them what you just told them" stuff (G.K.Chesterton's approach to public speaking). Many of the excerpts could have used mentions of when they were written in the body of the text, to provide context, rather than in the footnotes. To help find alternatives and avoid throwing the baby out with the bath water, you should have gone into the original and now often ignored reasons and justification for licensing and regulating businesses, i.e. to ensure that customers got what they paid for from known reliable sellers who had incentives to self-police (sometimes against outright criminality; licensed London taxi drivers and bootblacks crowd out practitioners of an earlier era who mugged targets of opportunity among their clients - which is why the same licensing authority was set up to handle what at first sight appear to be unrelated activities).

January 02, 2009 10:27 PM  
Anonymous knapp said...


Regarding Vulgar Libertarianism: Bingo!!

You should think about presenting some of these ideas in a 'tapas' portion for a more general audience.

The timing couldn't be better.

January 03, 2009 9:37 AM  
Anonymous James said...

Hi Kevin,

A most excellent post. Nicely synthises all that I have learnt independantly myself and of course provides many new nuggets of insight to ponder.

I've stumbled across a couple of articles on the 'net that corraborates your assertions regarding chronic overproduction and capital overaccumulation.
Ironically one of which is Newsweek, prognocising on the potential future of China.



January 05, 2009 1:45 AM  
Blogger Kevin Carson said...

Thanks to all for the comments.

Tom, this paper is actually one example of a "tapas" strategy of distilling bits and pieces out of the org theory book. I eventually hope to market abridgements of selected categories of material: the household/informal economy (as in this paper); the labor struggle material from Ch. 9; an anti-Fish! pamphlet from the material in Ch. 8; etc.

James, re the material on China: Bello made a similar point in the article I cited, but I didn't include it. He argued that neoliberalism/outsourcing had outlived its usefulness as a surplus capital sponge because China was saturated with capital beyond the capacity of the Western economies to absorb its output.

PML: Thanks for the detailed critique. Re factory layout, I should have said "similar" instead of "exact same." As Waddell and Bodek describe it, factories tended to follow a linear layout that continued the pre-electrical patterns (if somewhat less rigidly), and failed to take advantage of the full potential of electricity (as the Japanese did with u-shaped cells, etc.).

Re resistance to business cycle variations, the pooling of risk in the event of bad harvests would likely involve a periodic spillover effect that only came into play when a bad harvest triggered it. The transportation system would be sufficient to ship staple foods long-distance for a premium price, under emergency conditions, but in normal harvest years the cost of such shipping would be prohibitive. So the availability of it under emergency conditions would not mean an increased prevailing market size and volatility all the time. The normal tendency would be toward producing locally whatever could be produced locally, with the pooling function being triggered only in exceptional circumstances and automatically retired by market price incentives when things returned to normal.

Re coopting a privileged class of cossacks, I suspect the resource constraints at the center would make this impracticable. Ditto for the problems of enforceability in preventing non-cossacks from taking advantage of the new technological potentials. It will be pretty hard to verify whether someone's running a microbakery out of their kitchen for trade with the neighbor's unpasteurized goat cheese, etc.

January 08, 2009 10:38 AM  
Anonymous P.M.Lawrence said...

KC, I agree with what you say about typical local production etc. (subject to transitional effects, e.g. much of western Europe, particularly Britain, would need high levels of emigration for generations to escape Malthusian constraints). However, the point I was trying to make, which I think you have conceded, was that there would be an occasional shortfall in local self sufficiency. As it happens, we know how that worked out in classical Greece. Local microclimates meant local variations, so that people had to bring in grain from other areas occasionally. Before money came in, they repaid debts the same way, in staples. Once money came along, they bought grain for cash at high prices, then had to repay the loans out of later earnings for which they had to sell far more grain as the prices had fallen by then; so the rich got richer and the poor got poorer. See, e.g., Kitto's The Greeks.

On the privileged class thing, I am afraid you have misunderstood just how that works. Precisely because there are "resource constraints at the center [that] would make this impracticable [and] problems of enforceability in preventing non-cossacks from taking advantage of the new technological potentials" for the centre, it doesn't do that but falls back on allowing a limited privileged class to come into being. It's like having "good bacteria" to crowd out other sorts, or the way journalists with parliamentary lobbying access crowd out others while being manageable themselves. It's also how licensing for taxi drivers or bootblacks originated (handled by the same authority, in London); they are few enough to manage but they do their own work policing their privileges against interlopers out of self interest. In return for setting up the licensing system the public got fewer opportunistic muggings by people in those businesses (that was the commonality that led one authority to be set up for both areas in London). Maroons developed from runaway slaves but reached a modus vivendi involving returning later runaways from the only hiding places, as the maroons lived there and could catch them - the authorities didn't do any catching, only having to take measures against maroons who stopped playing along. Similarly for Cossacks, who prevented peasants from realistically being able to escape oppression from a vantage point of occupying that niche themselves.

So, to take your example of "pretty hard to verify whether someone's running a microbakery out of their kitchen for trade with the neighbor's unpasteurized goat cheese", no, it wouldn't. That is, it would be hard for the central authority to do it - so it gives up and has a privileged class. So near every street there would be a cossack/maroon, and he would soon put a stop to all but a very few interlopers, either himself using his powers under the privilege or by reporting cases too big to handle directly to the central authority. For a case history relating to technological change (in Japan), see Perrin's very impressive and readable Giving Up the Gun (it's got good insights into clan and feudal structures too, with good comparisons and contrasts with Scotland).

January 08, 2009 4:04 PM  

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