Getting Your Head Out of Your Ideology

The fundamental problem with political and economic ideology is that it requires an enemy.  Unfortunately, as I will argue in detail, the resulting spirit of contempt embedded in our politics ultimately blinds its participants from finding real solutions to very real problems.   So while Christ told us to love our enemies, the Left directs its hatred toward the capitalists who clothe and feed them, and the government-adverse Right has all but forgotten that America rose to superpower status behind government laid tariffs.  In other words, neither ideology has it correct, because both will ultimately lead to the flight of the industrial base.  The Chinese thus are doubly fortunate as corporations flee the tsunami of regulation put upon them by capitalism’s haters, or flee foreign wage levels the free market worshipers have exposed them too.  What the Left and Right seems to have forgotten is that contempt or neglect of corporations is ultimately contempt or neglect of  the constituents who work at these corporations.

The consequences of this dynamic are the road to economic ruin, because the industrial base is the fundamental source of prosperity.  In addition, industry is the engine for economic growth (rising standards of living) derived from the productivity gains that are associated with industrial, chemical, and electronic advances.  To grasp the core idea here, simply imagine a nation of subsistence farmers.  One day a genius builds a farm tractor which amounts to a revolutionary productivity gain in farming.  The vast majority of farm labor is then freed up to pursue new production possibilities (e.g. automobile construction).   New production output with the same population means a rising standard of living.  As I have argued in “Just Measures” (see site tab), this dynamic can only properly take place in a closed economy.   A new theory of economics and money was constructed in that essay to support such a radical proposition. In the end, this growth process implies all sectors of an economy ultimately rely on the industrial base. Therefore if you allow the base to be removed with free trade, then all other sectors will collapse with it.

Thus left without a sound theoretical economic model, both ideologies are forced to rely on one dimensional catch phrases. The Right with its heroic notion of rugged individualism seems to have forgotten that the Articles of Confederation without its power to lay national tariffs was not sufficient to allow rugged individualist to flourish.   A statesmen following the revolution made this observation:

“In the comparative condition of the United States and Great Britain, not a hatter, a boot or shoemaker, a saddler, or a brass founder could carry on his business, except in the coarsest and most ordinary productions of their various trades, under the pressure of this foreign competition.   Thus was presented the extraordinary and calamitous spectacle of a successful revolution wholly failing of its ultimate object.   The people of America had gone to war, not for names, but for things.   It was not merely to change a government administered by kings, princes, and ministers for a government administered by presidents, and secretaries, and members of Congress.   It was to redress their own grievances, to improve their own condition, to throw off the burden which the colonial system laid on their industry.  To attain these objects, they endured incredible hardships, and bore and suffered almost beyond the measure of humanity. And when their independence was attained, they found it was a piece of parchment.   The arm which had struck for it in the field was palsied in the workshop ; the industry which had been burdened in the colonies was crushed in the free States ; and, at the close of the Revolution, the mechanics and manufacturers of the country found themselves, in the bitterness of their hearts, independent — and ruined.”   (Mason. 1884. 21-22)

The great German-America protectionist Friedrich List, writing in the 1800s, endorsed the idea freedom was not a sufficient condition for economic prosperity:

“… for history shows that nations have sunk into poverty and misery despite the labor and economy of their citizens.” (List. 1856. 211)

In fact, one only need consider the success of China to realize that freedom is not only not sufficient, it is not even a requirement at the political level. Or perhaps a more fundamental question is in order: Why hasn’t rugged individualism saved us from the mess we are presently in?

The Left on the other hand seeks solutions in the old worn out story of soaking the rich. In new speak, the 1%. This is simply Marxism in new clothes. Failing to understand that in a closed economy the industrialist grows rich by raising the standard of living of their workers through the cited industrial gains, the Left simply ends up slaying the goose that laid the golden egg. For example, if the cost of a first generation bag phone drops from $1000 to $100 for powerful smartphone, the industrialist has effectively put at a minimum of $900 in the pockets of every working American, along with sophisticated advances (unmeasurable wealth increases) to boot. This subtle aspect is far more relevant to national well being than any tax we can put on the industrialist’s estate.

To understand these historical failures of free trade, I make the case in “Just Measures” that a critical distinction needs to be made between free domestic markets (functional) versus free international markets (dysfunctional) due to the inherently domestic nature of money as the means to track labor content in an industrial good. It was this critical aspect of money as a purely domestic phenomenon that the early protectionists such as Hamilton, Lincoln, and List had overlooked, and thereby failed to construct a fully functional economic model to support their gut instincts, common sense, and historical analysis of the successes of protectionism.

In the end, ideology will not save us from the economic abyss we are speedily heading for, because an economy is a machine that operates according to laws defined by domestic money, not some economist’s outdated notion of barter disguised in modern simulations, or a politician’s misunderstanding of government’s role in protecting a nation’s industries. In contrast, Daniel Webster understood the nature of the economic problem when he suggested that the primary reason we created our Constitution was to stop free trade (Articles of Confederation did not have the authority to lay national tariffs). If the Chinese understand the economic logic of our founding fathers, maybe it is time we do too.

Footnote: For those interested in reading more in depth analysis, see Amazon Kindle Just Measures by Geldstone and the core tabs on this site. As always, critique is very welcome.

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2 Responses to Getting Your Head Out of Your Ideology

  1. I have really enjoyed your writing.
    I would like to hear your opinion on the new reality we are about to face. The economy where exponential technologies such as Robotics, Additive manufacturing (3D printing) and radically improved computing make productivity increases almost exponential too. The resulting massive unemployment cannot be soaked up easily by new positions. I believe that we have only seen the start of a disruption in the entire system and due to exponential nature, the changes in the next 20 years will require a new social system.

    My view is that a basic wage needs to be paid to everyone, funded not by the state and taxes, but by a more direct profit contribution from both exponential technology suppliers and the companies that benefit from these technologies.

    • wagemyths says:

      Craig My apologies in no getting back to you after 3 months. I only learned today that Firefox never displayed the comment. Thank you for the compliment. Regarding your thoughts. Your point about being able to soak up robot displaced jobs is a good one. I remain optimist (in a closed economy) because I think the steam engine it could be argued was a robot of revolutionary impact that did not lead to long term unemployment. Say robots cut the cost of cars in half tomorrow, I would expect the consumer who is now flush with cash to spend it buying a second car, a bigger car, or spend it on a new sector reemploying the recently unemployed. Obviously a subjective assumption, but I think the industrial, chemical, and electronic revolution were robots of sorts and did not lead to mass unemployment. Thoughts?

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