Wednesday, February 25, 2009

Naked communism

There's a story in this week's Economist about the Chinese government trying to stimulate demand by getting its rural peasants to buy consumer electronics. It's not working very well, partly because it's the Chinese government doing it (who couldn't organise a piss-up in a sake distillery), and partly because this is The Economist, where a socialist initiative can't, ever, really work. But what can't be denied is that tens of thousands of households are getting their first TVs ever.

Amid the "sky is falling", apocalyptic analyses of the coming Fairly Great Depression, one thought keeps occurring to me: all - yes, all - of this doom-mongering is coming from a very narrow sector of humanity. Specifically, rich people.

Look at it this way. If we're to be thrown out of our homes and begging on the streets, then who exactly is going to be living in our houses? If we're all to be starving, then who specifically is going to be eating that food that the farmers are still producing, because let's face it, what else are they going to do with their land? If we're all to be poor, then who's going to be using this computer that I'm typing on now, or the iPod in my pocket? Are all these things going to lie about unused, simply because everyone has 50% less money?

Are they hell.

No, what's going on is a redistribution of wealth - away from (some) rich people, towards (some) poorer people. (And towards other rich people, of course, who have - as always - deftly cut themselves in on the deal.) And the complaints, loud as they are, are coming from people who are the losers in this transaction.

To be sure there'll be less production for a time, particularly of luxury goods like the aforementioned iPod. But there will still be a lot of goods in the world. Houses aren't going anywhere. Food production isn't drying up. I don't know what's in your wardrobe, but I'm reasonably confident that the clothes in mine today will keep me from nakedness for the next couple of years at least, even if they're not quite the cutting edge of fashion.

It is, of course, a messy system. Many really poor people are suffering even more than they normally do; and many of those losing out think themselves poor, being guilty of nothing worse than judging themselves by the standards of their peers and neighbours. It's happening that way because we, the modestly rich, have spent the last 50 years fighting tooth and claw against the shift happening gradually - thus making it inevitable that it should happen suddenly. (And now we're fighting to slow it down - that's what the huge government deficits in Western countries amount to. They don't make the countries any richer, but they do space the pain out over several years, rather than applying it all at once.)

But on the whole, on average, we are witnessing a net shift in wealth away from the rich and towards the poor. That's what happens when prices drop.

As in any uneven transaction, the losers complain much louder than the winners. And the rich have a louder voice anyway. Which is why the media is screaming economic armageddon, and why I'm not going to be invited onto any chat shows to talk about my theory.

Yes, there will be a lot of unemployed people. That's bad because unemployed people are less productive, their skills deteriorate, and they tend to be more isolated, with all the physical and mental health consequences of that lifestyle. But there's still about as much food, just as many houses, in the world as there was last year. So if more people are starving and begging in the streets, it's because we've chosen to put them there.

Why would we choose to do that?

Well, historically, it's because we love wealth. Specifically, we love what Galbraith called the chimera of "wealth without work" - the idea that someday we'll be rich ourselves. And while most of us keep our aspirations modest - we hope to retire sometime in our 60s, and live the remainder of our lives in reasonable quiet - a large minority want better. They want to retire earlier, be richer, live higher and faster and longer.

Most of us fall for this illusion at some point in our lives. My sister-in-law, Sarah, is a fine example. She has no ideas that amount to creating much wealth, but she aims to buy houses and live off the rents - an all-too-common dream here in New Zealand. And of course, that's a dream that can only work if a majority of people are willing to pay their rents. That is to say, they're too poor to buy their own homes (because house prices are astronomical), and too cowed to not pay, or to complain too loudly about the condition of their housing (because living in a slum is better than living nowhere).

And it's that mass hallucination, that dream of wealth without work, that has brought us to our present pass - as it did in 1929, and will do so time and again until we admit that we have already beaten scarcity - in the Western world at least, there is plenty to go around - if only we can bring ourselves to share it fairly.

There are three ways we could emerge from this - let's call it a "downturn".

One, the usual answer through recent recessions, is business as usual. Let the misery fall where it may, most of us will be okay, and eventually the economy will be back to what we've been trained to think of as "normal", and we can get back to our private dreams of wealth.

Two, we could - as we did in the 1930s - redefine the bottom of our economic scale to make poverty less terrible. The Great Depression gave us the idea of the "welfare state" - the notion that the state should guarantee a minimum level of welfare for its people. In the long term that configuration proved to be unstable - as generations went by people grew greedier, and increasingly resented "paying for others" to enjoy things, such as health care, that they wanted for themselves. But even so, it gave us an impressive 79 years between critical economic collapses.

Three, we could stop pussyfooting about socialism and embrace it properly. We could accept that there's no shortcut to retirement. We could accept that we're not going to inherit or save much wealth from anywhere. We could agree that "rich" is a four-letter word, that ambition is a bad master, that enough is enough.

But I don't think we're ready for that yet. Maybe next time.


Nodressrehearsal said...

the chimera of "wealth without work" - ah, music to the lottery makers' ears.

Your sister-in-law sounds like my 23 yr. old son - "We should buy a bunch of houses and make money renting them out or selling them."

I try to explain that if it were that easy, everyone would be doing it. And that we are further hindered by the fact that we don't know how to do much around the house beyond the normal little repairs. Unless you can do wiring, plumbing, drywalling, etc. yourself, you're at the mercy of hiring contractors, which all adds up to $$ca-ching$$ - more money out than in.

In the meantime, I'm trying not to run around like a chicken with my head cut off screaming about the sky falling and other such tragic events.

There are a few things within my control that I can do to perhaps spend a little less and save a little more. Other than that, it's been business as usual around our house. My husband's employer recently put a freeze on wage increases, profit sharing, 401k matches, and let a handful of people go.

Our 401k plan that we've been diligent about contributing to every paycheck is back to the balance it had nearly ten years ago. Hopefully, the next ten years will gain that back.

Our health care costs have sky-rocketed, but still - we have health care while many don't.

I'm willing to make sacrifices to benefit those less fortunate than I am - but should I be trusting government to see that the playing field is better leveled? I just don't know...

A great read, as always vet.

vet said...

Thank you, NDR. I hope you can weather your present storm. At the very least it should shut your son up, no? Tell him he's just gonna have to work for a living like every other schmuck, so get used to it.

Here in NZ it sometimes seems that everyone (who can afford it) is trying to take that route to what they think is Easy Street. I'm a lone voice, complaining that even if we can't stop these people consigning themselves to unproductiveness, at least we shouldn't encourage them. At the very least, let's tax the bastards.

As far as I can see, everything in the US system is designed to encourage people to fantasise that one day they'll be among the parasitic elite. That's why there's so much emphasis on personal choice - especially in sectors like health care, retirement funds, education, where there exist a "confusopoly" of providers. They're all trying to create the impression - without doing anything as liability-creating as actually claiming - that they'll make you somehow "richer" than their rivals.

Nodressrehearsal said...

You betcha he's working, vet. Working and finishing up his college degree. He did move back home though - it was too expensive out there, even sharing an apartment with friends. At least he learned a few things about how the real world functions and that life at home is a pretty cool gig.

Everybody's fighting for a piece of my pie here, it's true.

All I want out of life (financially) is to be able to afford the bumps in the road without going into credit card debt. We have a nice home, drive safe cars, wear decent clothes, have insurance... but I'm not fond of the "WHAT DO YOU MEAN WE NEED A NEW REFRIDGERATOR?!" moments.

vet said...

Ah yes, the independent-living experiment... I'm so glad to hear he has at least tried it.

I don't think Sarah's ever done it. The one time she tried living alone, in less than three months she'd talked herself into reconciling with her estranged husband and moved back in with him. But I don't want to trash-talk her on here. Not now, anyway...

Artemis Archer said...

I wrote a long, thoughtful comment for this about how the economic crisis has me feeling strangely optimistic— with the burden of unreasonable expectations lifted and all. Alas, it was lost in cyberspace. Anyway... thanks for the add!

Ruby Apolline said...

I'm sorry I'm so late with this one. I had to think about it. Also, when I first saw the title, I thought it said "Naked Communion."

I wonder, though, who you're calling rich. I'm sympathetic to the squeezed middle class, at least here in the U.S., teetering on mountains of household debt with houses that can be repossessed, ditto cars and probably other household goods.

Anyway, I'm all for embracing socialism in some limited form. I think a mixed system would work--socialism for health care, education, certain industries and then tota capitalism for others, because it does seem to drive innovation. War does too, which I'm trying to forget.

An iPod is a luxury item?

Annamaria said...

Vets, I am commenting because I love your train of thought and because I want to know how to add you to my list that I follow! Just added NDR but I really am a dope, as things come up differently in each blog. Still, it must be the tablets, I am losing my words all the time. Example, was searching for the word "demonize" in my head and all I could come up with was "deify" WHAT! Your friend, anniex

vet said...

Ruby, I think "naked communion" would be a way more interesting post, and now I'm wishing I'd written that instead...

You have fingered what I knew was the weak point of my argument. There is, indeed, a degree of sleight-of-keyboard going on above in regard to the word "rich", which elides from meaning "rich rich" to merely "living at a modest middle-class level in a first-world country."

Ironically, it's that very confusion that I think is at the root of our current crisis. The way middle-class people have been hoaxed into thinking that they either are, or could be, really rich. What I think we're seeing is a long-term adjustment that means our living standards being shifted sharply downwards. There's no getting away from the fact that it's going to be painful. All we're arguing about is how that pain should be shared out.

The problem, as I see it, is differentials. People higher up the income scale are incredibly jealous of their differentials, and will do anything to protect them, even at their own expense.

(There was a famous survey back in the 1970s. I forget the name or the exact details, but the gist of it was: "If you had a choice, which would you rather see: the US economy growing by 4% and the Japanese economy by 6%, year on year; or both countries' economies growing by 2% each?" A significant majority of Americans preferred option 2.)

And we - meaning the first world generally - have demonstrated those priorities in our industrial, trade and (particularly) agricultural policies for generations now. Sure we want to enrich ourselves, but that's really only our second priority: number one is to keep ahead of the others, and if that means keeping them poor, we'll do it without a qualm.

The "limited socialism" you describe is what we tried to do in Europe, and it worked pretty well for a long time. But there are always tensions between the two sectors - public and private - and what we've seen, particularly since the 1970s, is that those tensions get worse over time. I have some other theories about how to address that, but they're another several posts' worth...

Personally I agree that the answer has to be some variant of that system, to alleviate the horror of poverty. But it's not poverty that leads to instability - it's wealth.

Anonymous said...

"confusopoly" - great word, and very applicable in this modern world of multiple undifferentiated choices.

re. 'US growth 2%: Japan growth 2% preferred by Americans over US 4%: J 6%' - "prosocial preferences were reduced by inequity, when the partner received a superior reward" (PNAS, 2008. DOI: 10.1073/pnas.0807060105 ) [a more entertaining interpretation of the study is in Ars Techinca by Todd Morton
Study: Monkeys like to play Secret Santa too
(Aug 2008)]


Eric Lester said...

I've been reading you backwards and so posted a comment like this on a more recent post. But I can never resist an opportunity to quote our old buddies Karl and Friedrich:

You are horrified at our intending to do away with private
property. But in your existing society, private property is
already done away with for nine-tenths of the population; its
existence for the few is solely due to its non-existence in the
hands of those nine-tenths. You reproach us, therefore, with
intending to do away with a form of property, the necessary
condition for whose existence is the non-existence of any
property for the immense majority of society.