economics


Gotta love Adam Smith, writing as he does from a ruling class perspective.

So he writes of the working class man:

The torpor of his mind renders him, not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. (Wealth of Nations V.i.f.50)

By contrast, the cultured refinement of the ruling class intellectual (like Smith himself) is a terrible burden:

The contemplation of so great a variety of objects necessarily exercises their minds in endless comparisons and combinations,and renders their understandings, in an extraordinary degree, both acute and comprehensive. Unless those few, however, happen to be placed in some very particular situations, their great abilities, though honourable to themselves, may contribute very little to the good government or happiness of their society. Notwithstanding the great abilities of those few, all the nobler parts of the human character may be, in a great measure, obliterated and extinguished in the great body of the people. (V.i.f.51)

This one is certainly not celebrated or even mentioned when the disciples of Adam Smith wax forth: he was deeply suspicious of paper money, speaking of being ‘suspended upon the Daedalian wings of paper money’ (Wealth of Nations, II.2.86).

And he has little time for creative and unproductive activities, such as churchmen and buffoons:

In the same class must be ranked, some both of the gravest and most important, and some of the most frivolous professions: churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera dancers, &c. s The labour of the meanest of these has a certain value, regulated by the very same principles which regulate that of every other sort of labour; and that of the noblest and most useful, produces nothing which could afterwards purchase or procure an equal quantity of labour. Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production (II.3.2).

One of many parables by that great story-teller, Adam Smith. It’s point is that difficulty, filth, and dishonour result in higher pay. So we read of the journeyman tailor, smith, and collier, only to come across the closing lines of the parable:

Honour makes a great part of the reward of all honourable professions. In point of pecuniary gain, all things considered, they are generally under-recompensed, as I shall endeavour to show by and by. Disgrace has the contrary effect. The trade of a butcher is a brutal and an odious business; but it is in most places more profitable than the greater part of common trades. The most detestable of all employments, that of public executioner, is in proportion to the quantity of work done, better paid than any common trade whatever.

Picture for a moment kids talking about what they want to be when they grow up: doctor, airline pilot, teacher, vet … no, I want to be an executioner.

These are from his Principles of Political Economy (1821). Needless to say, he’s not in favour of republics or democracy, and rather likes the aristocracy:

And when we consider how very difficult it is, under any circumstances, to establish a well-constituted republic, and how dreadfully the chances are against its continuance, as the experience of all history shews; it is not too much to say, that no well-grounded hope could be entertained of the permanent prevalence of such a form of government (p. 336).

The immediate spur here is the French Revolution, but who is to protect us from such evils?

It is an historical truth which cannot for a moment be disputed, that the first formation, and subsequent preservation and improvement, of our present constitution, and of the liberties and privileges which have so long distinguished Englishmen, are mainly due to a landed aristocracy. And we are certainly not yet warranted by any experience to conclude that without an aristocracy, which cannot certainly be supported in an effective state but by the law of primogeniture, the constitution and liberties so established can in future be maintained (p. 338).

Without such noble gentlemen, the dangers of despotism and democracy are all too real:

Although it be true that a better distribution of landed property might exist than that which actually prevails in this country at present, and although it be also true, that to make it better, the distribution should be more equal; yet it may by no means be wise to abolish the law of primogeniture, which would likely lead to a subdivision of land greater than would probably be favourable even to the wealth of the country; and greater certainly than would be consistent with those higher interests, which relate to the protection of a people equally from the tyranny of despotic rulers, and the fury of a despotic mob (p. 339).

There’s nothing particularly new in the liberal economic arsenal, since they’ve been trotting out the same stuff for more than 200 years. Take the incredibly naive Thomas Malthus, for instance, on age pensions, support for single mothers and for the unemployed:

By the application of calculations to the probabilities of life and the interest of money, he [Condorcet] proposes that a fund should be established which should assure to the old an assistance, produced, in part, by their own former savings, and, in part, by the savings of individuals who in making the same sacrifice die before they reap the benefit of it. The same, or a similar fund, should give assistance to women and children who lose their husbands, or fathers, and afford a capital to those who were of an age to found a new family, sufficient for the proper development of their industry. These establishments, he observes, might be made in the name and under the protection of the society.

Such establishments and calculations may appear very promising upon paper, but when applied to real life they will be found to be absolutely nugatory … If by establishments of this kind of spur to industry be removed, if the idle and the negligent are placed upon the same footing with regard to their credit, and the future support of their wives and families, as the active and industrious, can we expect to see men exert that animated activity in bettering their condition which now forms the master spring of public prosperity? (An Essay on the Principle of Population, pp. 46-47)

Ah yes, the idle poor have always been with us. Shouldn’t reward them for their laziness, now, should we?

As part of my reading for Idols of Nations, I have to work my way through some mind-numbingly dull material. Hugo Grotius is bearable to a point, but John Locke and Adam Smith and the others are dead bores. ‘Utter tedium’ barely captures it, so much so that I wonder at the attention lavished to these writers, supposedly the doyens of English economic thought. John Locke, my focus at the moment, was a man quick to anger and without any sense of humour. Then again, he does manage the odd pearl despite himself, especially when it comes to sex:

God in his infinite wisdom has put strong desires of copulation into the constitution of men, thereby to continue the race of mankind, which he doth most commonly without the intention, and often against the consent and will of the begetter (First Treatise on Government).

Not so long ago, most of the necessities of life were pretty cheap in these parts. A trip overseas meant haemorrhaging money and then returning with a debt to make your grandchildren’s embryos blanch. Now all that’s reversed, for visitors here, returnees from long voyages on the seven seas, and home dwellers all know that we pay among the highest prices on the planet – even surpassing Norway for many things.

Why? Many theories have been put forth:

1. Transport costs. This is crap, since transport covers about 7% of costs, as I am told by a recently retired head honcho in the world’s largest shipping firm.

2. Taxes. Nope. The goods and services tax is a measly 10%. This hardly explains the 100% markup (and more) on many goods from overseas. For instance, I can buy my favourite (and only) pair of shoes at less than half the price on the internet than in the local shoe shop.

3. High wages. True enough to some extent, since Australia has one of the highest average wages in the world, and a decent minimum wage. Hence the high cost of coffee, restaurant meals and so forth. But it still doesn’t explain everything, like those shoes.

4. High dollar. We’ve slaughtered the US dollar, the Euro, the pound. Great when you are on the road, but now it supposedly pushes up prices here. Not sure I can see how that obtuse argument works, for does it not push down the price of anything you buy overseas?

5. What transnational company executives think Australians will pay. There seems to be a bit more in this one. Music, software, computers, mobile phones … the list is long indeed. They all cost more here relative to prices overseas. Why? Because people keep paying for the damn things at the prices listed. Infamously, there is some software that costs more here than the airfare overseas and its purchase price somewhere else combined. Since some idiot will pay for it, the companies charge it.

That said, being a somewhat stingy bastard, I can say it is possible to live very cheaply indeed in the land of Oz. Less than $50 per week is no problem at all.

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