Thoughts for Thursday: One Life to Live – Economics (Part 1)

No, I’m Not Writing about a Soap Opera.

This is the first on-time post of this week, and as I’ve detailed in all of the posts this month, I’ve been too damn busy.

I tried a job that wasn’t working out, and when I realized that it wasn’t working, I quit it. Here’s the thing, so many people don’t do that. Why do we stay? That’s kind of what I want to write about today.

When something isn’t working in my life, I like to problem solve by deconstruction. To fully understand what I mean, let’s look at a couple of examples.

Let’s say it’s a mechanical problem with a tool I’m using. Whether that tool is a car or a guitar pedalboard, the first thing I do is take it apart. I strip the system down to its most basic components and I analyze it from that vantage point. I consider the core purpose or function of the system, and I form a hypothesis as to the nature of the problem. Then I work on a plan to fix it.

Intro to Deconstruction

The same technique works for me with intellectual or existential problems, too. When I was doing my graduate work, I had a class in critical methodologies. For those of you who aren’t English majors, critical methodologies is the name they give to the class where you learn how to properly analyze and critique literature. There are several major schools of thought regarding literary criticism, from Freudian analysis, to Feminist analysis, to a school called Deconstructionism.

While I was going through that class, I couldn’t have really explained the deconstructionist approach very easily. I’m not sure I can now, either, but here’s how I look at it:

Deconstructionists take whatever they’re analyzing and strip it down to it’s barest essential functions – the same way a mechanic does when restoring a classic car. This approach is especially helpful when considering literature with a lot of abstract concepts, or where connections between events and characters are not immediately clear.

Original cover for Mark Twain's "The Adventures of Huckleberry Finn."
The Adventures of Huckleberry Finn

An example might be a Deconstructionist analysis of The Adventures of Huckleberry Finn in which the writer focuses only on the specifics of the raft trip itself in order to explore the other themes in the novel. After all, at its core, Huck Finn is an adventure story about a boy and his friend riding a raft down a river. So a Deconstructionist would start there, and form the connections to racism, slavery, religious criticism, and other themes by way of the raft journey and nothing else.

An Amateur and Completely Inappropriate Deconstruction of Economics

I have a problem with economics. Actually, I have a LOT of problems with economics. I’m not even close to being an economist, but I am a history teacher, so I probably know more about economics than the average American does. That said, I would like to re-assert that I’m not an economist or even an expert. This is just me rambling and trying to figure things out – trying to deconstruct economics so that I can understand it, if you will.

Proper deconstruction will have to go much deeper than Adam Smith and Karl Marx. Those guys are the new kids on the block. I want to go way back, to the earliest civilizations and think about what economics must have been like.

The Roots of Economy

Before the Greeks and before the Egyptians, there were small civilizations and there were records. Those records are the beginning of economy.

Note: Most of the claims I make in this section were informed by Jerad Diamond’s research as portrayed in the documentary Guns, Germs, and Steel.

Imagine tribal people, no matter which continent, and think of how they would have lived. Before civilization, they traveled the steppes, plains, and mountains looking for food. Often they would migrate with game, or walk miles in search of berries, nuts, and other edible plants. In other areas, though, such migration wasn’t necessary.

You can see examples of this on the North American continent prior to Columbus’ plundering of the West Indies. Tribes in the plains followed bison herds. Tribes in my homeland, the Pacific Northwest, however, formed settlements and relied on fish and other renewable food sources. They lived in permanent structures and learned to farm as well.

In many cases, though, contact with other tribes, families, or settlements brought about trade.

Thinking about Trade

In one sense, Economics is all about the division of resources. Those tribes who had to migrate with the herds – whether on the plains of America or Africa – they moved because the resources moved. On the other hand, the settlements in the Pacific Northwest – along with many other coastal civilizations throughout history – were able to put down roots because they found all of the resources they needed within their own territory.

In either case, however, the tribe or community is dependent on the resources their environment provides. If you live in a coastal region, you have access to fish and other seafood. You’d also have access to vegetation, and even game like rabbits, deer, and even bears. While the supply of these resources would be fairly consistent in those permanent settlements, there may have been natural disasters or other phenomena that decimated stores.

To stick with the Northwest example, in 1980, Mt. St. Helens, a stratovolcano not far from the Washington coast where the Quinault and Makaw tribes used to thrive, erupted and reduced the entire ecosystem for hundreds of miles to ash. It took decades for the region to recover.

Had that eruption or one like it occurred when civilization was in its infancy, those tribes would have been forced to move or die out. All of the resources they had would have been worthless. Their only hope for survival would have been trade.

Your Resources for Mine

When someone needs something they don’t have access to, they have to find a way to get access to it. This is where trade comes in handy. If my farm has two good milking cows, but no chickens, and your farm has plenty of chickens, but no milk, we might make an agreement by which I give you some milk every week if you bring me some eggs.

This still goes on today. In fact, there was a reality show on a few years back where they chronicled a couple of guys who made an entire business out of bartering goods with little to no actual money involved.

A pile of cash in Euros.
Bread, Scrilla, Cheddar, Denero, Okanne, Cashola, etc.

Then Came Money

At some point (probably during the height of Mesopotamian civilization) the term Shekel came into use. This was a unit of measurement of a good (usually 160 grains of barley) used to barter for other goods and services.

This was the bridge to the idea of “representative currency,” or money. But money now is a lot different than money has been throughout the centuries. For most of recorded history, money has been tied to some kind of precious metal such as gold or silver. In this system, a person would deposit gold into a bank, and then the bank would issue them a paper note that guaranteed that the amount on the note would be available in gold at that bank. Similar to a cashier’s check or certificate of deposit today.

The Chinese invented paper currency a few centuries after their first emperor, Qin Shi Huang, decreed that the unified states of his empire use a standardized currency system.

So money itself started out as a symbol. It’s a symbol that guarantees something of value to the one who accepts it for goods or services. In those earlier days, it was issued by banks, but when governments got involved, they would issue currency based on the value of gold owned by the government. This became convenient in large countries like China, America, and Russia, where the distances and differences in culture between one state or province to the next can cause confusion.

In America, the lack of a unified currency was one of the reasons we axed the Articles of Confederation in favor of a more iron-clad constitution.

Note: Most of my info for this section came from things I remember from my college history classes and from the Wikipedia article on money.

Why Money Matters

Money is a symbol of value. It is such, because we’ve agreed over the centuries that it is. After World War 2, many treaties were signed, and most of the world tied their own currency to the standard of the U.S. dollar, which was still tied to the amount of gold in Fort Knox.

Then in 1971, we left the gold standard behind. Now, money – no matter which country you’re in – isn’t backed by anything except the “full faith and credit” of the government that issues it. The justification for this loop of idiocy is that each government naturally has the ability to generate demand for its own currency by levying taxes. In other words, The United States is dollar is guaranteed to have some value no matter what because the United States government has the power to levy taxes from its 325,000,000 citizens. Because the government will require those taxes to be paid in U.S. dollars, its citizens will always need U.S. dollars – if for no other reason than to pay taxes.

A pile of gold coins.
Gold Standard

The Deconstructed View of Economics

I know. I still haven’t mentioned Adam Smith or Karl Marx. We’re not there yet. We have to look at these roots a while longer before we can get into the leading economic theories.

We have a society at the moment in which everybody has to have money in order to purchase necessary goods and services that they can’t provide for themselves in other ways. Chicken and dairy farmers, for example, don’t need money to buy eggs and milk, but they need it for a lot of other things.

As an aside, when I was growing up, we didn’t have a lot of money. My dad was a farmer, though, and we never went hungry or really wanted for anything. If there was something that we needed, and Dad didn’t have the money for it, he would find a way to barter for it. We didn’t raise beef cattle, but we always had fresh steak and roast, along with fresh milk. Our chickens gave us eggs, and every once in a while, their meat. We had a creek running through our property from which I caught us fish to eat all summer long.

My uncle worked at the Hostess bakery, and we used to trade with him for Twinkies, Ho-Hos and Ding-Dongs all the time.

When we had to leave the farm and move back to Spokane, my dad did whatever he had to do to make ends meet. He started his own business fixing heavy equipment, and would often barter work for one of a kind experiences we’d have never been able to afford otherwise. For example, we went on two amazing RV vacations when I was in high school because dad did some work for an RV dealership and they let us rent RVs for free in exchange.

The Economic Social Contract

So my view of economics looks like this. You have to earn everything you have. In order to earn things, you need to give something up – your time, your labor, your material resources, or your money. There is a social contract now that didn’t exist before, however, now that currency is only backed by credit. This contract is not immediately apparent to everyone, but it is nonetheless essential to the maintenance of a functional society.

Let’s Make a Deal

The social contract in America looks like this: If I am born in the United States or am naturalized, I am a United States citizen. As a United States citizen, I am entitled to all of the rights and protections afforded to me by the United States Constitution and all twenty seven amendments to it. In exchange for these protections and rights, I am required to pay taxes. In order to pay those taxes, I need to earn United States dollars. In order to earn United States dollars, I must sell either my resources or my labor.

This ensures that people will produce goods and services, and that the dollar will have value in perpetuity – unless the government collapses. Then everyone’s money will be worthless. Ask the Greeks or the Spanish how that’s going for them.

You Get What You Pay For?

In the United States we favor a system called Capitalism over other popular systems such as Communism or Democratic Socialism. In fact, if you speak out against capitalism, you’re likely to get labeled “un-American” in a hurry.

The basic principles behind capitalism – which were proposed by Adam Smith in the eighteenth century – are, as I see it, a way of trying to put a Band-Aid on the glaring problems with European aristocracy. Smith’s theory had the potential to create in society for the first time a mechanism for upward mobility. In other words, rather than being born into wealth, under capitalism, one could work their way into wealth. The idea goes like this:

The people with the capital, “the Capitalists,” hire people without capital to perform labor for them. The laborer sells his labor as a commodity in exchange for a monetary value agreed upon by himself and the capitalist. The labor performed by the employee is to serve the interest of producing more money for the capitalist than it cost him to hire the laborer. This seems rudimentary, I know, but again, we’re deconstructing, so we have to look at this piece by piece. Do you see the giant flaw in the mechanism? What incentive does the capitalist really have to pay higher wages to the laborer?

About Incentive

Here’s where the “One Life to Live” phrase starts to come into play. From my view, Economics is all about incentive. It’s a tug of war between the needs of the capitalist and the needs of the laborer. If the motive of the capitalist is to continually increase his capital, and his means of doing that involves hiring people with fewer resources than he has, he has no real incentive to treat those people with any dignity or respect, unless an outside force – such as the government or a labor union – steps in.

The only other incentive the capitalist has to take care of his employees is that in pure Capitalist philosophy, laborers are a resource just like steel, concrete, office machinery, or money. Why do you think it’s called “Human Resources” instead of “Personnel” in the private sector these days?

In this way, the smart capitalist may realize that maintaining his employees is just as important as maintaining his fleet of vehicles or network of computers. Even then, though, he is only motivated to do enough to keep the employees on the job and following orders.

I’ve had a meeting like this. It did not go so well.

Peter Gibbons makes a similar argument to the Bobs in Mike Judge’s classic satire, Office Space. He describes that without any type of stake in the company, he’s only motivated to work just hard enough to not get fired.

Neither of these scenarios are ideal. Do I really have to point that out?

Employers want to get the most productivity out of their employees for the least amount of money. Employees who aren’t vested in their companies want to do the least amount of work possible for the most amount of money possible.

Diametrically Opposed Forces

Die-hard capitalists and libertarians insist that competition is the gift of mana from God on high. They will shout from the rooftops that without competition and a profit motive you can’t have innovation. They’re full of shit. I posit that competition and the profit motive are as harmful to innovation as they are helpful. This is not to say that they aren’t helpful, but I want to point out that they’re often harmful, too. Let’s look at an example of each.

Competition for Good

Competition helped us get to the moon, and it’s currently helping to forge the path ahead to Mars. The competition between Boeing and SpaceX for NASA contracts have produced some amazing results that can’t be denied.

Competition in the form of the Cold War gave us innumerable new technologies – from freeze-dried food to carbon-fiber to GPS – and all it cost us was eternal lodging in the quagmire of the military industrial complex.

Competition created the American railroads and the telegraph system, and all that it cost us then was the near genocide of an entire race of people. I’m sorry for the sarcastic tone, but I want to drive home the point that when two sides compete, someone always loses – unless it’s a soccer match – a fact I’ll never be comfortable with.

When Competition Hurts

On the other hand, competition has also prevented an AIDS cure or a cure for any other major disease recently. I know this sounds like I’m making an allegation, but if I am it’s an allegation against an entire industry rather than any one company in particular.

Going back to incentive, let’s look at the progress in treatment of HIV and AIDS since the disease was discovered in the 1980s. We’ve made amazing strides with retro antiviral drugs. So much so that AIDS is not anywhere close to the death sentence it used to be. But we haven’t cured it.

Again, I’m not necessarily making an allegation here, I’m just looking at the situation and making an inference based on the information at hand. That said, I’d like to throw out this hypothetical. If my company spent billions of dollars over twenty years on research and development (much of that was probably grant money, but let’s open that can of worms here) of a treatment for AIDS, we have a big motivation in the form of an obligation to our investors to recoup as much of that money as possible.

Now, let’s say at one point in the research process, we have a choice of pursuing research option A or research option B. Both options will cost the same, but Option A will provide a vaccine that will eradicate AIDS by 2030, and Option B will make AIDS a chronic, but manageable disease with drugs that a patient will have to take for the rest of his or her now extended life. What incentive is there for the company to make the cure? In this case, the profit motive keeps the drug company from doing what’s best for society and instead they only do what’s best for themselves.

Or let’s look at malaria. Malaria kills over 3 million people every year. Most of those deaths, however, occur in countries where people are very poor. Countries all over Africa, South America, and Southeast Asia are most affected, and other than Brazil, India, and China, most of the countries in those regions are not economically viable markets for pharmaceutical countries.

Worldwide distribution of Malaria – See many wealthy countries?

You might be tempted to argue that competition could also save lives. That argument might go something like this: “Well, what if a company came along and just offered a cure for AIDS at a much lower price than all of the other pharmaceutical companies? Then the other companies would fold and the company that made the cure would be the last one standing.”

Well, the big problem there is that no company with any kind of “responsible” leadership is going to fall on its sword that way. Even if they beat the rest of the competition by offering a cure, the returns for the cure would be short-lived in comparison to the cost put into developing it, so there’s just no realistic scenario in which a corporation does that. Because if corporations are people, they’re the worst kind of people – at best Narcissists, at worst psychopaths. A public corporation’s only motivation is it’s own survival and growth – like a cancer.

Returning to the Social Contract

So what we end up with is what we have today. A system where people are basically born into debt because no matter what country you live in, you are obliged to pay taxes in the form of the monetary currency of the land. In order to pay for the privilege of living in that country, you’ll need to find a way to earn money. To earn money, you’ll usually have to spend a certain amount of time doing something that not many people want to do. If you’re lucky you can find a job doing something you like, but unfortunately, that’s not the way most people end up. After all, if its fun, why would anyone pay you to do it?

Okay, that last sentence was a land mine, and we’ll go into it next week, but for now I want to leave you with as much of a wrap up as I can manage of where we are so far, and lead a little into where we’re going in Part 2 next week.

We need resources. In order to get those resources, we need to work or sell goods. Time is a commodity laborers sell to capitalists. Each of us has the capacity to earn more money than we spend. None of us has the capacity to earn more time than we’re given. Therefore, time is inherently more valuable than money. When a person sells their labor, their selling time they could be spending on things they’d rather be doing.

There’s a proverb that goes, “Do what you love, and you’ll never work a day in your life.” Next week, I want to examine if that’s possible for everyone, and if so, how do we get there?

One thought on “Thoughts for Thursday: One Life to Live – Economics (Part 1)

  1. Pingback: Thoughts for Thursday: One Life to Live—Economics (Part 2) | Brandonia

Comments are closed.