Statutory disclaimer: The author of this article has never been inside an economics classroom, and has no background in economic theory. He is also of the opinion that academic economics ranks alongside astrology as one of the most fundamentally useless facets of human study. Therefore, the contents of this article are not unbiased, and may be wrong.
One of the recurrent themes I’ve come across in right-wing economic discourse is the idea that the cycle of production and consumption is a never-ending route to permanent prosperity. On the surface of it it’s a rather plausible idea, of course; someone makes something, sells it, gets money and buys something else. He’s happy, his customer is happy, and the guy from whom he’s buying is happy.
Only, what happens after the customer has bought whatever it is the man has made? Once he’s bought something with which he’s happy, what then?
This is a rather fundamentally interesting question, because, as I’ll illustrate, the entire foundation of modern society is based on a flawed understanding of it.
Suppose our craftsman is a potter. He sells a nice set of pots to a housewife, gets money for this, and uses part of that money to buy himself a shirt from the tailor, and with the money left over buys food for his family. Right, so he’s clothed and fed, and presumably content. But what happens next?
If the housewife is satisfied with his pots, and they serve her needs well she’s not going to be back in the morning with an order for a further set. So, what does our potter do tomorrow to put food on the table?
Let’s suppose yesterday’s customer has friends, and these friends see the pots and come over to buy more. Business does well for a few days, but sooner or later everyone has pots.
So what’s our potter to do then? He might hire a crier to sing the praises of his pots far and wide, and that might bring an uptick of business, but ultimately he’ll have sold so many pots that people don’t want any more.
Some of the pots, of course, will break over time, and if the potter is a tad unscrupulous he might ensure the pots are brittle and would break easily. But that would be stupid, because the people might decide that it makes more sense to buy their pots from the other potter two villages over. In fact, making better pots ensures staying ahead of the competition.
So far, so good. But the potter’s customers have stopped coming, and he requires a source of income so as to be able to continue affording shirts and food. What is he to do?
If this is a village-level economy, the potter can probably work as a farmhand for a few months until enough of the pots he’s sold have broken in the course of daily use that he has a customer base again to sell to. In fact, this is something a lot of people do even now, in the villages of this country; during the farming season they work in the fields, and when the crops have been gathered in, they manufacture pots or cloth or wicker baskets enough to supply the customers until the next manufacturing season. And while they’re off working in the fields, the bamboo or cotton they use for their raw material has a chance to grow and replenish itself.
It’s a relatively sustainable and low-wastage solution to the problem. But it works well only at the level of a simple (I will not say “primitive”) economy.
The problem with these simple economies, of course, is that they operate on a small scale and do not allow a few people to become extremely rich. For that, you need economies which operate on a much, much larger scale, with organised factories working without an off season to supply a large scale market. That can only be done on an industrial scale, of course, and that’s what the Industrial Revolution was all about – the factories which ran round the clock to produce an endless supply of goods.
Of course, the setting up of factories and mass production also requires several other things.
First of all, there has to be a regular supply of raw materials and power, as well as cheap labour. All these cost money, add to the finished cost of the product, and therefore directly affect the margin of profit. And since the cost of raw materials and power isn’t – generally speaking – something that can be skimped on, the cost of labour is the one part of this which can be lowered. The ultimate in this lowering is the assembly line, especially the ultra-modern robotised assembly line.
This is the point at which right-wing economists generally sit back complacently and declare that this is the acme of modern capitalism, where the producer and consumer both benefit, and the money earned is passed down to the workers in the form of wages and upstream to the suppliers of raw material and power as payments for goods. Actually, compared to the village potter, an assembly line can look like a marvel of modernity, but actually it’s far less sustainable in the long run. There are several reasons for this, but ultimately it all comes down to the necessity of finding a market for the stuff you produce.
Unlike the village potter, the assembly line can’t afford to switch to alternative work when the demand dies down. If it’s going to keep in business, it has to stay in production – and it has to keep moving the finished product. Unless it can keep producing, and selling what it produces, in the long run it has no future.
This simple fact means that the modern industrial system has to have absolutely assured and constant sources of raw material and power; at all times, and can’t wait to have them regenerate themselves (for the former, generally speaking, regeneration isn’t even an option). And it also has to have a constantly expanding consumer base, so that it can sell its products despite competition and the changing tastes of various people.
At first, the producer can try to reduce the selling price of its products to a minimum to attract purchasers and undercut competitors, but that’s not a policy which can be sustainable. The selling price, after all, can’t be less than the cost of production, quite apart from such recurrent expenses as wages, maintaining and replacing equipment, transport and so on. Again, while right-wing economists love to extol the alleged benefits of reduced prices to the consumer, this is not something that ever happens in the long run. Instead, the producers end up forming cartels and rigging prices to around the same level, but even so they end up in a situation where they have to find new customers for their products if they are to survive.
Of course the reader will see where this is heading. Since the very existence of the industry, and by extension the economy dependent on the existence of this industry, depends on these three factors, they have to be secured by any means possible. And, equally obviously, if these means require that government policy be “influenced” in favour of that industry, by lobbying, bribes, or other means, that’s quite all right. Forests can be made to vanish and the ground strip-mined of coal and minerals, and poison dumped into rivers because it’s cheaper than treating effluents. But that doesn’t remove the requirement for consumers to buy the products.
This situation is worse for the producers of consumer durables like cars or refrigerators, aeroplanes or office furniture. After all, how many cars can a man own? What happens after each member of the family has one? (I once asked this question to an economics professor. His reply: “Then they want better cars.” Really? What happens to the old cars? And what happens when there’s no more road space to drive those cars on?)
In the nineteenth century, the solution was relatively simple; the industrialised nations would routinely invade and occupy Asian and African countries, destroy their local small-scale production, strip them of their raw materials, and force them to buy the finished products of the Western factories. It was easy to do, because owing to the industrial revolution and constant warfare the European nations were militarily much stronger than most rival countries. It was also easy to justify, in the name of spreading Western civilisation among the “lesser breeds without the law” (who, in general, were far more civilised than the Europeans doing the civilising). The heights of this policy of securing captive markets was reached by the British (who else?) in the nineteenth century, when they went to war against China to compel the Middle Kingdom to buy opium, the use of which was then rampant and which the Chinese government of the time was trying to suppress.
Imperialism, in its foundations, was always primarily an economic phenomenon.
After the Second World War, there was a brief period when imperialism seemed to have ebbed, and it appeared that the time of the old imperialist powers was past. In reality, the temporary ebbing of that imperialism can be ascribed to the rebuilding of the shattered European and Japanese infrastructures and economies after the war, and the economic boom which followed as people back home bought cars and TV sets, dishwashers and vacuum cleaners, things which they hadn’t had before.
But then, soon enough, the same problem raised its head; the domestic market was glutted, and there were industries all dressed up with nowhere to go.
Coincidentally, around this time, for the first time in history the world suddenly found itself under the hegemony of a single power; a power, moreover, which had no scruples about changing the rules to suit itself, including imposing its own currency on the planet as a reserve so that it had no need to earn foreign exchange in order to purchase foreign goods. The equivalent is to print your own money, so that you can buy whatever you want instead of working for it.
As a somewhat famous bearded German Jew once said, history repeats itself. This hegemonistic power, and its European vassals, found themselves again in virtually unchallenged military superiority over the rest of the world at just the time when their own (economically accessible) raw materials were running short, and they desperately needed new secure markets for their products. Is it a coincidence that it was just then that they set about another series of wars meant to “spread Western values” among non-white peoples? Of course not.
As the war criminal and mass murderer William Jefferson Clinton openly stated, his country was
entitled to resort to "unilateral use of military power" to ensure "uninhibited access to key markets, energy supplies and strategic resources"
... a rare bit of honesty which soon gave way to the camouflage of a “Global War On Terror”, as promoted by his successor, the war criminal and mass murderer George W Bush, and continued under his successor, the war criminal, mass murderer, and Nobel Peace Prize recipient Barack Hussein Obama. Remember what the very first objective the Empire’s forces secured after the capture of Baghdad was, before all others? The Oil Ministry. Recall what happens to every single nation taken over by the Empire or its vassals? Privatisation of the economy, with assets sold off to the Western multinationals which also finance the election campaigns of those in power and their primary opponents. What is the first condition for a loan imposed by the World Bank or the International Monetary Fund on a desperate and poor nation? “Economic restructuring”. Basically, it’s the Opium Wars all over again, but on a global scale. Greed is still the motivating factor.
The reader will understand that what the people of the occupied nations want or need does not matter in this situation. What the people of the industrialised nations want, too, no longer matters. What matters is only profit, and the continuing ability to generate profit. Everything else is secondary to that goal.
Not that this will continue indefinitely, of course. Even on a global scale, the neo-imperialists can’t compel people to buy their products forever any more than the village potter can compel the housewives to buy his pots. And, sooner rather than later, the raw materials will run out, leaving the industries with no way to produce and no way to sell (this will actually be exacerbated by the impoverishment of the majority of people of nations whose economies have been forcibly privatised, as a direct result of said privatisation; in all newly privatised economies, a small minority becomes very wealthy and the rest become poor). That will be a complete collapse, compared to which a mere depression, or even Depression, will look like a party.
At that point, it’s impossible to predict just what will happen, but massive wars over dwindling resources are a distinct possibility. If anything is left over at the end of it all to start over again, it will probably be on a subsistence level. Something like...
...a village potter, for instance.