Saturday, May 06, 2006

The lie of "capital".

First off, i know i haven't posted in a while. I sort of ran out of things to talk about, actually.

Well, i still have things to talk about, but i didn't have the time or concentration to work them up into posts. We'll see how well this goes.

I've been thinking about this sort of thing a bit lately, and just recently i had a very interesting talk with someone who has thought about it more than i have--he was one of those guys who really were hippies back in the '60s and '70s. We didn't explicitly talk about this, but he mentioned something that reminded me of this.

He suggested that our modern society has two fundamental problems (among many other fundamental problems) that go like this: we use many resources than are created in the same period of time and we create more garbage than we know what to do with. These problems are connected in that the first causes the second, but other than that they are basically not discussed--and when they are discussed they are discussed independent of one another. However, this person with whom i talked realized--and he realized back in the '70s--that the only way to solve either of these problems was to connect them at the other end: to use the garbage as the resources. We must either build things so that they will last for a long time or so that they can be broken down into easily reusable parts.

We also discussed how corporations "game" the economic markets in a number of ways. The extract money form the environment in the form of "natural resources" and sell it for a profit--the cost of this transaction gets shared among all people, but the benefit (in the form of cash-money) goes to a very small sub-set. For example, when mercury restrictions were lessoned a while ago companies could dump more mercury into rivers than they could previously, so they dump more mercury (rather than some other, less profitable action) and make more money. The cost (more mercury in rivers) hurts everyone, but the benefit goes to those companies which dump mercury.

In fact, most economists (particularly those of the "Conservative" variety) argue today that this is how we can tell the corporation is working. We might, borrowing John Taylor Gatto's description of schools, say that the modern corporation is psychotic because it has no conscience--but these people would say that the modern corporation is healthy because it has no conscience. If it followed conscience, they argue, it would not be following the profit motive and its sole duty to provide profit to its shareholders.

We can see this in the Wal-Mart strategy: by playing separate socio-economic regions and other groups against each other Wal-Mart makes money. We've seen this in comedy a lot: it's the same sort of thing as the person who takes money and trades it for something else, then for something else, then that for something else, and so on, until finally this person trades back into the original currency and ends with more than was started with. Now, an economist would say that this person probably deserves the extra cash because the goods have been redistributed along more efficient lines.

But we have a problem here. The corporation does not actually create the wealth that it acquires, just as in the above example of a corporation dumping mercury. It only looks like wealth has been created because of the redistribution away from the many to those who orchestrated this situation.

Now, the economist might object that the original explanation for this behavior and my objection here are compatible. In other words, that was is being "created" is efficiency rather than any actual product. But the plastic junk that these corporations peddle has little to no real worth outside the system in which it was created. It was invented from whole cloth by the corporation for the purpose of moving it around the and soaking up money in the process. The demand for the product was created mostly by the corporation itself--in the form of advertising.

I suspect we can see the ultimate example of this sort of behavior in a profiteering corporation which stokes the fires of war to create demand and then provide goods and services to both sides. Halliburton and friends are probably a step or two (but probably not more) below this, as they have not (as far as we know) directly designed the Iraq War for their own profit.

There exists another fundamental problem with how we view economies. Despite claims that prices of goods in a "free market" accurately reflect the "value" of a thing exactly the opposite is true: the price is not at all related to the cost.

Aside from the examples i have already used, let us consider another on natural resources: oil versus water. Now, let's assume we're dealing with two sub-sets of those: gasoline versus bottled water. Both of these have prices attached to them. Although there are mitigating factors that tamper with their prices (for instance, gas taxes and subsidies and widely available public waterworks) let us assume they do not come into play for this example. (I do not believe they have relevance here anyway, but i may be wrong.)

Although the relationship of prices between the two (let's say a gallon of water compared to a gallon of gasoline) might be one thing now it will be another later. In fact, over the long run, gasoline will necessarily become more expensive as compared to water.

How can i say that? Let's go back to the first point i made: bottled water can be easily recycled. The byproducts ("garbage", as i put it) of almost all of its uses (actually literally all, so far as i'm aware) can be fairly easily converted back into water or some other useful thing. The byproducts of use of gasoline, on the other hand, requires a great deal of effort to convert back into gasoline. In fact, so far as i'm aware, there is no way to do this directly. This means that our use of water does not affect the total amount of water in the world, but the more we use gasoline the less of it we have--or rather i should say: the less we will have available in the future. And once we run out of oil it doesn't matter how much water you trade in for money, you still won't be able to buy even a single drop of oil.

Some poeple suggest that this is not a problem, because the markets will solve it. Or that, if this ever starts becoming a problem, markets will naturally move into conservationist tendancies so that the corporations (etc) do not self-destruct. I would argue that, under our present systems, precisely the opposite will occur. A corporation should use more of a limited resource like gasoline, if it can, because not using more of it means someone else will get to use more of it and will gain the subsequent economic benefits. In fact, the "correct" action makes the problem worse and worse as the problem gets worse and worse.

Now, many object to my objections by saying that we ought not tamper with markets. The underlying argument being "Markets are natural, therefore tampering with them leads to unnaturalness (or ineffeciency)." Of course, this is self-evidently untrue: markets are only "natural" in a sort of synthetic manner. Just take a look at the rules of the Securities and Exchange Commission if you don't believe me. Of course, those who buy into this sort of "do not tamper with markets" argument will point to examples of market-like behavior arising spontaneously in people--for example, "primitive" markets arising to barter for goods and services when existing structures collapse. Of course, that does not prove markets are natural. Another thing that arises when existing structures collapse is chaos. For instance, New Orleans post-Katrina. But the people who buy into the "markets = natural = intrinsically best form" argument do not suggest we should allow the "natural" chaos of a situation like Katrina to exist because its naturalness is intrinsically good!

So: what is the lie of capital? That "capital" is interchangable. That all things can be reduced to dollars and cents and those dollars and cents interchanged for other things. We even have a word for it: "fungible"--our dear Head Warmonger Donald Rumsfeld even believes people are basically fungible. The lie is that the price of water and price of gasoline says not only one thing about the relationship between water and gasoline but that it says the only relevant thing and that what it says it says accurately.

But corporations want to believe in the lie. They want to believe in the lie because, curiously, it allows them to justify their own self-interested behavior--they claim it's the right thing. It justifies their psychotic behavior.

In fact, many do not even recognize the problems i outlined above because they are not problems that can be described in purely economic terms. They simply do not have criteria to examine problems other than "it will cost you $X." So things like global warming, peak energy, etc are not only irrelevant but also: focusing on them would be wrong for a corporation!

Unfortunately for us, they are the ones who are wrong. Oil and water are not fundamentally interchangable. To put it another way: they do not mix.

Next time: Why Republicans can't govern.
Time after that: The Crito, wherein Socrates rebukes a guy named Crito for his (Crito's) principles and provides an important lesson for modern Democrats. I'll try to keep the stiff philosophy out of it.


Anonymous Eslington said...

We did discuss something like the mercury pollution problem in economics.

Essentially, you decide who owns the right to pollute the area and then have the other party sell or buy the resource as they are willing.

The example we all learned was the proposed construction of an airport near a residential neighbourhood.
If it was decided residents owned the rights to the level of noise in the area, the Airport could try and buy it off them. If the reverse was true, the residents would try to buy off the airport.

Of course, such a system would need some pretty clever implementation and it's probably intended as more of a pure model, given the likely wealth divide between the airport owners and residents.

1:57 PM  
Anonymous Pat_Em said...

Glad I stumbled onto this blog. After reading the most recent posts I'm looking forward to reading through it.

I was just thinking, however, in your corporation's use of oil argument. If my understanding of supply/demand is correct, I believe that the iuncreasing scarcity of oil would lead large consumers to reduce their consumption. After all, as you said yourself, all the water in the world would not buy you one drop of oil. This means that the corporation's use of oil to make "plastic junk" would push their production cost so high, there would no longer be a consumer for their product as the increase in production cost would naturally be passed along to consumers.

Perhaps you have considered this and have a differing theory? There are certainly some products with a fairly inelastic demand curve that require oil (pesticides / fertalizer is one that springs to mind.) Again the increase of price would be passed along to consumers in the form of higher food prices, but aside from stockpiling pesticide / fertalizer I still have a disconnect about how large corporations would actually ramp up their production in a world of ever-increasing gas prices.

Anyways, I hope that the rest of your posts are as much fun to read as this one and I look forward to reading your opinions.

1:46 PM  
Blogger Winter said...

It's been a while since i wrote this, so i can't remember everything precisely right off the top of my head, but let me take a quick stab without re-reading:

The depletion and subsequent collapse of the market is indeed an inevitable result of growing scarcity of oil. However, not all of the uses of oil will respond to growing costs in the same way. Junk can be made out of other things--metal, for instance, is actually quite cheap. On the other hand, not every use of oil has an elastic supply. For those things that don't the incentive to simply sell as much as you can, while you can, is still there. Meaning that--i think--for a strictly limited resource the market will eventually, and in the end very rapidly, completely deplete that resource as everyone tries to compete with everyone else to get as much as they can before they can't get any more.

The main point being that there isn't much of a payoff to sitting around and watching everyone else sell the last of the oil, as when it's gone so is your business. So the rational thing to do is to try getting your hands on as much as you can--ideally all the remaining supplies--and then selling it yourself.

1:53 AM  

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