economic theory

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For Example (Wendell Berry on our economy’s effect in human communities)

Last time I remarked that Wendell Berry’s agrarian philosophy is congruent with the Trump administration’s re-focus of economy here in America. For example –

“…The attitudes of the industrial economy…” writes Wendell Berry, “have taken their toll…. the news from everywhere in rural America… bankruptcy, foreclosure, depression, suicide, the departure of the young, the loneliness of the old, soil loss, soil degradation, chemical pollution, the loss of genetic and specific diversity, the extinction or threatened extinction of species, the depletion of aquifers, stream degradation, the loss of wilderness, strip mining, clear-cutting, population loss, the loss of supporting economies, the death of towns. Rural American communities, economies, and ways of life that in 1945 were thriving and, though imperfect, full of promise for an authentic human settlement of our land are now as effectively destroyed as the Jewish communities of Poland….

The news of rural decline and devastation has been accompanied, to be sure, by a chorus of professional, institutional, and governmental optimists, who continue to insist that all is well, that we are making things worse only as a way of making things better, that farmers who failed are merely ‘inefficient producers’ for whose failure the country is better off, that money and technology will fill the gaps, that government will fill the gaps, that science will soon free us from our regrettable dependence on the soil.  ….We have heard that the rural economy can be repaired by moving the urban economy out into the country and by replacing rural work with work in factories and offices. And all the while the real conditions of the rural land and rural people have been getting worse.

Port Royal, Kentucky… (was once) held together by a complex local economy…. sixteen businesses and professional enterprises… all serving the town and the surrounding farms. …Now, counting the post office, the town has five enterprises, one of which does not serve the local economy. There is now no market for farm produce in the town or within forty miles. We no longer have a garage or repair shop of any kind.  We have had no doctor for forty years and no school for thirty.

What does the death of a community, a local community, cost its members? And what does it cost the country? So far as I know, we have no economists interested in such matters. ….as the urban-industrial economy more and more usurps the local economy…. my part of rural America is, in short, a colony…. in the power of an absentee economy, once national and now increasingly international, that is without limit in its greed and without mercy in its exploitation of land and people.” (‘Conservation and Local Economy’ (1992) in The Art of the Common Place: The Agrarian Essays of Wendell Berry.)

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Donald Trump, Wendel Berry, and International Development theory all in agreement

One of the ironies of the present moment (and there are many) is that while the media pundits declare that President Trump’s ‘isolationism’ (in prioritizing the American economy and withdrawing from international trading not to America’s advantage), is economic suicide, bad global citizenship, and regressive… he actually advocates what both current international development theory recommends to developing nations, and what agrarian philosopher/farmer/poet/economic thinker Wendell Berry advocates for rural American towns.

International development theory currently contends, due to decades of observation, that the promise of benefits from hooking up to the global economy are not panning out for developing nations. Relatively few people are benefiting, and most of them are banks and corporations in the developed world. Instead, development theorists contend, developing nations should look inward, develop a diversified economy that meets the needs of their own populations. In other words, don’t base your economy on Americans buying bananas or T-shirts (while you have to import everything else) – the price of bananas in the U.S. may drop five cents per pound and wipe out your economy, or Vietnam may start making T-shirts cheaper than you, equally wiping out all the eggs you placed in one basket. Make things in your own country that people in your own country need, thus creating jobs and economic linkages both vertically and horizontally along the economic spectrum. This has been a radical re-think in the development industry, a painful moment of repentance. What Trump is advocating for the U.S. is exactly what development theorists advise developing nations to do. Don’t expect many people in our megalopolis or Ivy League schools to admit this though.

Wendell Berry, as well, advocates the same thing for small rural American towns. Throughout his writings he bemoans the loss of local economies and economic linkages to transnational, absentee corporations who rape local economies in all the ways we learned during the era of colonialism against the indigenous peoples of the world. Berry points out that small towns used to be loci of production, horizontal linkages (blacksmiths, tack shops farmers needed, etc) and now there are neither jobs nor those horizontal-linkage businesses. These absentee corporations care neither for the people nor the place where their goods are made or bought, and local conditions testify to the fact – including the contrast to what these places used to be like. The Art of the Common Place: The Agrarian Essays of Wendell Berry is rife with this thought. Though the Trump administration’s policies on international trade are demonized as throw-back, ignorant hyper-nationalism, he is actually doing what both the international development industry is telling developing economies to do, as well as being congruent with the avant garde thought of our most famous agrarian philosopher alive.

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Why Enlightened Self-Interest Doesn’t Rescue the Environment

You would think that enlightened self-interest would cause corporations, like individuals, to avoid doing things that would be unsustainable in the future, since that would nix their ability to continue in that line of business. So, for example, you would think a corporation would avoid over-cutting a particular forest, and manage it for the long-term, so that they could continue to cut it and make profits from it in the future. However, avoiding environmental damage (as any enlightened farmer would do for his fields) is not a guiding star for corporations, who often don’t own the environments they wreck, but even when they do! Socio-political thinker and novelist Kim Stanley Robinson explains it succinctly in his novel Antarctica (1998):

“Say a company owned a forest that it had harvested selectively for generations, delivering its shareholders a consistent ten percent return. Meanwhile the world financial markets were offering bonds with a fifteen percent return. Lumber prices dropped, and the company’s returns dropped, so the traders dropped it and its shares plummeted, so the shareholders were angry. The management, on the edge of collapse, decided to clear-cut the forest and invest the profits from that lumber sale immediately into bonds that yielded a higher return than the forest had. In effect the money that the forest represented was more valuable than the forest itself, because long-term value had collapsed to net present value; and so the forest was liquidated, and more money entered the great money balloon. And so the inexorable logic of Gotterdammerung capitalism demolished the world to increase the net present values of companies in trouble… simply the logic of the system.”

Add to this scenario the fact that it’s not a self-owned lumber company. That company is among thousands of companies some transnational mega-corporation owns, and they are into everything: lumber, cement, films, cars, oil, wind energy, toys, music, insurance, housing, aerospace technology and munitions. If some of their companies aren’t returning good quarterly profits, they take a tax write-off and liquidate the company at a loss. Thus, cutting the forest to the ground and not re-planting, and then walking away from lumber altogether is simply a decision made at a desk in a cubicle at a Manhattan (or Toronto or Tokyo or Berlin) skyscraper, and the man whose office looks out across the city with the windows never even knows the decision was made, besides some numbers on a spreadsheet.

So, thinking that the common sense of wanting-to-have-a-planet-to-live-on-in-the-future-that-isn’t-a-wasteland would naturally cause companies and corporations to make sensible, long-term, sustainable, healthful decisions… is simply not how our world system is set up to work. Those mega-corporations are not looking out for your interests. So how do you fix that? U.S. President Theodore Roosevelt, (president from 1901-1909), whom the United States can thank for the vast majority of the National Forests and wildlife sanctuaries that exist, did not believe the timber barons and mining barons of his day could be trusted with American’s forests and lands. He believed vociferously in the free market and personal freedom and property, but he also believed capitalism had to be reined in by the government on behalf of the people, or the logic-of-the-system (and those who became powerful within it) would wreck the world around us. He did not allow the giant corporations to do whatever they wanted nor to take over the world. Maybe we should go look at and think about his insights again in our day. Because current events have demonstrated for quite some time now that just hoping common sense will cause smart decisions ISN’T protecting the Earth’s environments for the future.

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Poverty and Capitalism in SE Asia

I’ve been in our new location in SE Asia for the last week, driving around the city and nearby countryside. What I’ve been seeing has sparked thoughts about poverty, capitalism, free markets and international trade.

It’s clear that free market capitalism has benefitted industrious people here in absolutely huge numbers. There are beautiful – and not small by U.S. standards – homes everywhere; very very nice homes, inhabited by people whose parents lived in shacks a generation ago. The ability to start a business from the ground up (selling vegetables or plastic household goods, for instance, along the roadside to the burgeoning population), and then develop that business into a successful wealth-generating income, stands as a classic example of why people argue for free market capitalism. The evidence is all around me. As I stand on my balcony looking across the neighborhood in the morning, the homes are beautiful, incredible. And I do not live in a wealthy area… this is considered middle class. In a local setting, “the invisible hand” can provide a context for a lot of good.

At the same time, if you know about the Toronto debacle regarding the hire-local, produce-local solar panel scheme, it’s clear that in terms of international trade, “the free market” is a laughable myth, an insult to thinking people. The WTO successfully sued Toronto, declaring that a city cannot prefer local goods over foreign goods. Essentially this simply makes sure the Donald Trumps and other transnational corporate empires are free to dominate every single market, and a local community cannot make choices about its own labor and industry at all. There isn’t anything free or invisible about what happened in Toronto, it’s clear the market is stacked, channeled, constrained and controlled by mega-size forces who get laws written to protect their ability to accumulate more fortunes. I don’t begrudge Trump his wealth; I detest the idea that we act so ridiculous as to say that “free markets” and “an invisible hand” are enshrined values in international business. Nothing could be further from the truth.

The tax code and other tools have always channeled markets when governments got involved, and let’s not act like we are protecting freedom for the little guy, when we are actually protecting transnational giants who dominate the world in breathtaking ways rarely seen in human history.

So, two thoughts: 1) a free market can be a very valuable help to a local population. 2) What’s going on in international trade law is the furthest thing from a free market.

Next time I’d like to share some thoughts about what is poor and what is not.

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“Is it Time for Atheists to Hunt Bigger Game?” by Chase Madar

I like this article, not because I agree with every single word, but because it reminds us that there are many “gods” people believe in, including enshrined political or economic theories, that should be questioned. And that, as usually occurs when people go fundamentalist in their beliefs, when you do question some of these assumptions, people begin to freak out. That true-believer mentality is not limited to theological questions; our world at this very moment is being DRIVEN by beliefs like the ones critiqued in this article.

http://america.aljazeera.com/opinions/2015/5/is-it-time-for-atheists-to-hunt-bigger-game.html

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Alternative to Modern Capitalism? Buddhist Economics

So, 12 days since my last post. Preparing for a move to SE Asia has been like bodysurfing a wave that was a tad bit bigger than you – lots of momentum and movement – and it’s pushing you all over the place while you try to keep your head above the foam! But here goes: Buddhist Economics.

One of the essays in Fritz Schumacher’s 1973 Small Is Beautiful: Economics As If People Mattered is entitled ‘Buddhist Economics’. In it, Schumacher argues that labor, for the classic Western capitalist, is a necessary evil that you want to get the most out of. The less labor you need, the better, aka mechanization. Likewise, labor also sees work as a dis-utility; they would rather have more compensation with less work. So, from the get-go, labor and management/ownership find themselves in contrary positions. This is neither harmonious, nor engendering an organizational atmosphere where everyone feels they are working for a common goal.

However, a Buddhist take on economics, Schumacher argues, is quite different.

“The Buddhist point of view takes the function of work to be at least threefold: to give man a chance to utilize and develop his faculties; to enable him to overcome his ego-centeredness by joining with other people in a common task; and to bring forth the goods and services needed for a becoming existence. …To organize work in such a manner that it becomes meaningless, boring, stultifying, or nerve-wracking for the worker would be little short of criminal; it would indicate a greater concern with goods than with people….

The Indian philosopher and economist J.C. Kumarappa sums the matter up as follows:

If the nature of the work is properly appreciated and applied, it will stand in the same relation to the higher faculties as food is to the physical body. It nourishes and enlivens the higher man and urges him to produce the best he is capable of. It directs his free will along the proper course and disciplines the animal in him into progressive channels. It furnishes an excellent background for man to display his scale of values and develop his personality.

If a man has no chance of obtaining work he is in a desperate position, not simply because he lacks an income but because he lacks this nourishing and enlivening factor of disciplined work which nothing can replace.”

And yet, Schumacher goes on, modern capitalism desires a certain percentage of the labor force to be unemployed, for various economic reasons.

Now, I ask you, fellow Christians: which sounds more like the view of work in the Scriptures we call the Old Testament: modern capitalism or Schumacher’s Buddhist economics?

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Schumacher: the limitations of economics to reflect reality

“I’ll post it in a few days.” A few days! I am having trouble getting back to my blog as I am being subsumed under a wave of a zillion things to do as I wrap up my job pastoring a fantastic church in rural Pennsylvania, at the same time that I have another zillion things to do preparing for a move to SE Asia.

In any event, here is E.F. Schumacher’s quote, written in 1973, regarding the short-sightedness of modern economic activity: (Well, I think this is the one I had in mind 10 days ago!)

“Economics, moreover, deals with goods in accordance with their market value and not in accordance with what they really are. The same rules and criteria are applied to primary goods, which man has to win from nature, and secondary goods, which presuppose the existence of primary goods and are manufactured from them. All goods are treated the same, because the point of view is fundamentally that of profit-making, and this means that it is inherent in the methodology of economics to ignore man’s dependence on the natural world. (Note from Todd: you can monetize wood, but when there’s no forest left, money does not equal trees anymore).

Another way of stating this is to say that economics deals with goods and services from the point of view of the market, where willing buyer meets willing seller. The buyer is essentially a bargain hunter; he is not concerned with the origin of the goods or the conditions under which they have been produced. His sole concern is to obtain the best value for his money.

The market therefore represents only the surface of society and its significance relates to the momentary situation as it exists there and then. There is no probing into the depths of things, into the natural or social facts that lie behind them. In a sense, the market is the institutionalization of individualism and non-responsibility. Neither buyer nor seller is responsible for anything but himself.

….economists have felt entitled… to treat the entire framework within which economic activity takes place as a given, that is that is to say, as permanent and indestructible. It was no part of their job and, indeed, of their professional competence, to study the effects of economic activity upon the framework. Since there is now increasing evidence of environmental deterioration, particularly in living nature, the entire outlook and methodology of economics is being called into question. The study of economics is too narrow and too fragmentary to lead to valid insights…”

E.F. Schumacher, Small is Beautiful: Economics as if People Mattered (Harper & Row, 1973, pp. 46, 54).

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The irony of modern economics

One of the most amazing ironies of modern Western civilization is, to me, that a few hundred years ago, some economists convinced all Christendom that self-centeredness and greed were actually virtues rather than vices, and would benefit society! The idea, of course, was that if I pursue making my business succeed with all speed, (in order to make more money for myself), my competitors will be doing the same to keep up, and everyone will benefit by better products, more efficient processes, and an increased economic activity in society all around.

One of the things that could be observed was that the traditional Christian virtues were a bit better entrenched in society back then (John Wesley said work as hard as you can for your business to succeed, as long as it doesn’t hurt your neighbor’s business!), but more importantly, this self-centeredness as economic driving force is neither biblical nor good, in the long run, for the world. The theory is that enlightened self-interest will serve as a brake from anyone carrying their selfishness too far… as chopping down too many trees would cut into the sustainability of their bottom-line. However, history has shown that in a world of transnational corporations, this doesn’t actually work.

The modern economy runs almost exclusively on short-term profits, and short term profits erase all notions of long-term environmental sustainability. Humanity’s footprint in the natural world was a lot smaller 300 years ago. If a farmer farmed his land the way transnational corporations “manage” our environment, he’d be looking at a desert within five years. Good farmers know there is much about nurture rather than production that needs to be taken into account, if you want that land to make food for your grandchildren’s generation. In our world today, it is, most often, the people at the bottom of the economic ladder, the poorest of the poor, who bear the brunt of the environmental damage, because they have the least power and voice in the society to make a big deal out of it and apply pressure.

Schumacher makes this point about the dysfunction of classic Western economics in ‘Small is Beautiful:  Economics as if People Mattered.’ I will post his quote in a few days.

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I’m moving to SE Asia

So, I’m a bit late in posting, as some rapid developments in our lives here have resulted in something exciting and new: my family and I are moving at the end of the summer to SE Asia where we have accepted a position in our denomination. More on that in the future. In the meantime, I promised some more from E.F. Schumacher’s Small Is Beautiful: Economics As If People Mattered, from 1973. And here it is… Schumacher starts the book with the following two quotes:

“Few can contemplate without a sense of exhilaration the splendid achievements of practical energy and technical skill, which, from the latter part of the seventeenth century, were transforming the face of material civilization….

If, however, economic ambitions are good servants, they are bad masters.

The most obvious facts are the most easily forgotten. Both the existing economic order and too many of the projects advanced for reconstructing it break down through their neglect of the truism that, since even quite common men have souls, no increase in material wealth will compensate them for arrangements which insult their self-respect and impair their freedom. A reasonable estimate of economic organization must allow for the fact that, unless industry is to be paralyzed by recurrent revolts on the part of outraged human nature, it must satisfy criteria which are not purely economic. “

  • H. Tawney, Religion and the Rise of Capitalism

“By and large, our present problem is one of attitudes and implements. We are remodeling the Alhambra with a steam-shovel, and are proud of our yardage. We shall hardly relinquish the shovel, which after all has many good points, but we are in need of a gentler and more objective criteria for its successful use.”

  • Aldo Leopold, A Sand County Almanac
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Fritz Schumacher’s 1973 ‘Small is Beautiful’

I’ve been reading an interesting book lately: E.F. “Fritz” Schumacher’s 1973 Small is Beautiful: Economics As If People Mattered. Schumacher was a British economist for England’s coal industry. His book argues that economics, and institutions in general, should be built upon a “human scale.” Schumacher observed that our modern human institutions tend to grow to such a scale that they are like frankenstein monsters which grow so large that they come back upon their masters and devour them (my image, not his). Another way you could put it is that our economies/institutions/etc cease being our servants and instead become our masters. Sudddenly the humans don’t matter in the decision-making, it’s the self-perpetuation of the larger structures we’ve created. Our creations come to lord it over us and be too big for us to control or direct in a way to promote human thriving.

It’s a very interesting book, and one that drew quite a bit of interest in the world of economists and international development policy makers back when it was written.

Schumacher argues for things like:

De-centralized, local decision making that takes the long-term good of the community as its goal, not short-term profits for a select few in some faraway metropolis.

A critique of systems that grow too gigantic or destructive of human and ecological well-being.

The need for some limiting principle, to enable a society at some point to legitimately say “enough!”

The recognition that economic profit is not the grounding, priniciple manner to gauge human well-being and the failure of modern economic thought to calculate non-economic factors into policy-makers’ decisions

The concept of intermediate technology – simple, nonviolent and controllable – (or, simple, cheap, small, safe): useful in the local situation and not forcing us to develop giant schemes

A changed view of labor and production where work is elevated to a vocation and labor and ownership aren’t mutually contradictory antagonists

The contention that Third World poverty is a question of “two million villages,” as Gandhi argued, and thus that concentrated endeavors in urban settings merely concentrated the benefits into the hands of a very select few, and the villages stayed in abject poverty

The contention that humanity should adapt within Earth’s ecosystems instead of trying to dominate (and typically destroy) them

The need to return to the Four Cardinal virtues:  prudential, justitia, fortitudo, and temperantia

As I said, it’s a very interesting read, and I’ll include some excerpts in the next few blogs.