Tuesday, 28 August 2012

The Potter's Wheel: Thoughts on the Economic Foundations of Imperialism

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. 


  1. If we wind up with a world capable of sustaining the village potter, his family and his village I think we shall be extremely lucky. The capitalism that you describe (and I have no disagreement with you overall) is about unfettered and almost unregulated exploitation of our world's resources, spilling chemicals and carbons over our lands, waterways and in the very air we breathe and ensuring global climate change. I have children and grandchildren and while I love them to bits, I sometimes regret that I so unthinkingly brought them into this world. Kia ora.

  2. Statutory disclaimer:I spent a year in an economics class and still understand less than nothing. Actually that's not true, the one thing I took from that time is that; the primary aim of all business/ companies is to maximize profit and minimize costs. Businesses are not welfare departments, they neither consider nor care about the social impact of their activities on any individual or group of people. They do not exist to care, they exist to maximize profit and once the primary objective fails, the business ceases to exist. Its not that they are immoral, more like amoral, its simply not in their remit to look beyond profit.
    Given that I agree with just about every thing you say. I constantly wonder why people are surprised at the negative impact our economic system has on people and the environment. A return to smaller and more simple ways of supplying and distributing goods and services would be great, and in my opinion not impossible, except that those who reap most benefit from the present system are all powerful and have no incentive to change. At least not yet, I keep hoping that these people who can't see the bigger picture will eventually wake up to the damage they are doing and realize that this system isn't working

  3. was just saying today to friend, wish we could hit reset and get rid of all this modern technology/society, go back to nature. this is not progressing as humanity, this is high tech barbarism ... had visions of hiding out with cows from FEMA vans looking for rogue "freedom fighters" lol

  4. @ Forgetmenot525

    " Businesses [...] neither consider nor care about the social impact of their activities on any individual or group of people. They do not exist to care, they exist to maximize profit"

    That only happens in an unregulated economic environment. There's nothing to stop governments from imposing a "cap" on profits. Neither is there anything which realistically shouldn't make these businesses accountable for the impact they have on society.

    After all... business doesn't operate in a vacuum. If it weren't for society, they wouldn't have a market to start with.

    Unfortunately, since the deregulation orgy of the 70's... thanks to the likes of Reagan and Thatcher... we've allowed them to pretty much do as they please.

    1. Hi,

      'That only happens in an unregulated economic environment.'
      I'm sorry but I don't agree with that. I believe the system we operate under is fundamentally corrupt and unsustainable. The system isn’t people centered its profit centered. So called 'regulations' only tinker around the edges of a system that doesn't work. I understand what you are saying about the ‘deregulation’ that’s been going on over the last 30 – 40 years. Successive governments have eaten away employment rights and employment law has swung in flavour of the employer. However………if you look at the bigger picture you see that no amount of ‘regulation’ is going to address the basic problems. We are living in a world of finite resources. The ethos of our entire system, regulated or not, it to make a profit, and to do this companies need to increase sales, and to do this they need to manufacture more and more and more goods, which in turn uses more and more and more of the worlds finite resources. Add this to the increase in energy used in the production of these goods and you get an even bigger demand on diminishing resources. The public are swamped with advertising, which uses more resources and energy and actually produces nothing, except an increased demand for more goods. Many of the raw materials used in sustaining our lifestyle originate in poorer countries, countries where incidentally they don’t use their share of the worlds resources, and these poor countries do not have the bargaining power to demand better prices for their raw materials. In order for every one on the planet to ‘enjoy’ the same life style as the average western man we would need almost two planets. The ‘thing’ called ‘ecological foot print’ measures the total resources we use in ‘global hectors’. If all available ‘global hectors’ were divided up equally between earths population we would each get roughly 1.8 global hectors’. If you are an average American you use 8 global hectors and if you are an average UK citizen you use 4.89 global hectors. I know a lot of this seems totally unrelated to the average man in the street who is just trying to keep his job, pay his bills and feed his family. But in reality, it’s these very people, the ordinary people who are too busy trying to survive to look at the bigger picture who will suffer first. And this………is why I say no amount of tinkering around the edges of a corrupt system is going to make any thing any better. In order to survive we need a new system that looks at the real problems of supply and distribution of the worlds resources to all of the worlds population.

      So sorry Bill I didn’t mean to hijack your blog.



  5. @ Forgetmenot525

    We are, indeed, living in a world of finite resources. It's a reality. So is our global population growth which is going to increasingly tax those limited resources no matter how sustainable we try to be or what "system" our governments adopt.

    As for regulations not working, well you're entitled to your opinion.

    I live in a country which has a mixed economy and where industry is far more regulated than in the USA. It's worked very well for us so far. After all, Australia managed to avoid the Global Economic shitstorm which devastated most other countries.

    Be mindful of not falling into the trap of judging capitalism using extreme examples as your litmus test. The USA is no more indicative of how well capitalism can work than the USSR was for communism.

    1. Malace in wondrland.............lol, I should have know by your name, I made the misatake of assuming you were a man, out of curiosity (and I hope you don't mind) I checked your site and realise my mistake, just shows how easy it is to make assumptions.

  6. I didn't say regulations don't work, I acknowledged that they do make a small difference and we now live in a time when employment/ industrial law has swung in favour of the employer and not the employee. When our economy is regulated it does make a small difference to those living in that particular country. Internationally regulations don’t make a great deal of difference because those countries most adversely affected by our system are not in a position to demand a fairer deal for themselves and their people. So yes, if you are the average western man living in a regulated economy you are probably better off than you would be in an unregulated economy, but as the average western man, you are in a minority of the worlds population, and those regulations do nothing to better the lives of the majority of the worlds people. What I said was that the system itself doesn't work and the fact that, as you so rightly pointed out, population growth is greater than at any time in our past, makes it even more important to find a better way of governing ourselves. Like you I don't think 'judging' and being judgmental is particularly useful, and I don't think using labels is useful either ( capitalism/ communism) or any thing else, it leads to conflict and the world has seen enough of that in the past. I believe what we need, as a race, is the ability to 'think outside the box', acknowledge that as a race we are using up the worlds resources much, much faster that the earth replenishes them and as a race we have spectacularly failed to find a system that treats every one fairly. And if you look at those two points, which in essence is what I said, there is no way any one can argue that our system works.

  7. To be clear... and if you've checked out my site as you claim, you'll be aware... I'm not pro-capitalism per sei.

    However, I also tend to be a realist. And one of my pet hates is hypocrisy!

    It's well and good for those of us in the First World to self-righteously claim we should start "thinking outside the box", but the reality is we've exploited the rest of the planet for centuries. In fact, our economic growth has depended on it. Sustainability is, ironically, a luxury only we can afford.

    Do we now have the right to point fingers and start to dictate to developing countries that they should curb their economic growth to satisfy our own, selfish, need to suddenly be more "sustainable" after we have effective raped and plundered the planet for all it's worth?

    I agree sustainability needs to be addressed. Personally, I drive a hybrid and have installed solar panels on my roof... but I'm also not so smug as to assume these things are affordable to most people. They're not. That's the "small picture". The "big picture" is even more complex and abstract arguments about the morality of sustainability won't put food on the table of most people and I cannot sit back and let people starve in order to satisfy my "progressive liberal", wankey, new-agey need to feel self-righteous about the planet. It's just not that simple.

  8. I'm also a realist, I believe the reality is that if we don't address the problems, as Bill said in his final paragraph, global war and conflict over dwindling resources are a distinct possibility. I don't think I was pointing the finger at any one, or blaming any one, or demanding unreasonable action from poor countries. I was simply saying that out present profit driven system (in a regulated or unregulated economy) isn't working. Sooner or later, this system that isn't working, will collapse in on itself and we will all pay the price. It matters not a jot if we recycle every thing we lay hands on, if we use fuel economically etc etc; IF, at the same time we continue trying to adapt a system that is 'not fit for purpose', rather than look for a system that actually works. Obviously I know we have ruthlessly exploited poorer countries in the past, to our shame. What is more worrying is that we are still exploiting them in the name of 'progress' and 'development' and 'industry'. In fact in any name so long as it turns a profit. Profit for us that is, because very few companies in poorer countries are actually owned by those countries or people in those countries. We've stolen much of their natural resources and now we are using them as a source cheap, sweat shop labor, and cheap coffee, (on land that could be used to grow food for themselves). Unless of course they are lucky enough to be a graduate and speak fluent English, then we set up call centers and employ them because they work twice as long and twice as hard for a fraction of the cost the same workforce in our own country would cost. And of course that's because the overriding priority isn't their welfare (or ours) its profit. And this is what you call 'development' in poorer countries?? What this situation does do, is allow us to sustain our unsustainable lifestyle for a little longer. The reason for our reluctance to accept this is that we will have to change our lifestyle. And no one really wants to hear that. Sustainability is not a luxury only we can afford, as I said, if you are American you use 8 times more than your share of the worlds resources, if you are British you use almost 5 times more than your share but..... if you come from a poorer country, you are using substantially less than you are entitled to. Therefore, these poorer nations are not the ones who need to make the drastic changes, they are entitled to more, lots more, than they have. Its us who has to make these changes.

  9. I think we're agreed in principle. But the reality is that exploitation and war are a part of the human condition.

    Humankind has always been at war. We've also exploited each other's labour and resources since time immemorial. We've raped and pillaged for land, water, manual labour, opium, oil and even, more recently, human body parts. No race or nationality is immune to the sickness.

    We're incapable of NOT being greedy.

    The problem isn't with ideology... it's our ability to implement it given our human condition. You want a better planet? The only chance of that is if humankind destroys itself completely.

    As you can see, I have no faith in our collective ability to do anything but destroy and I envy your positivism. Sadly, I've seen too much of man's inhumanity to man to share it anymore.


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