[R-G] [BillTottenWeblog] Harnessing Hippogriffs

Bill Totten shimogamo at ashisuto.co.jp
Sun Nov 8 16:24:26 MST 2009

by John Michael Greer

The Archdruid Report (November 04 2009)

Druid perspectives on nature, culture, and the future of industrial society

One of the more interesting aspects of writing these essays is that I can
never predict in advance what will get me a flurry of outraged responses
each week. It's a fair bet that something always does; the collective
conversation of the modern industrial world has become so overheated in
the last decade or so that it's difficult to say much of anything without
getting somebody in a swivet; still, what it is that sets off the
swiveteers routinely catches me by surprise.

Last week was no exception. Of all the things in that essay that might
plausibly have launched the usual cries of outrage, the one that did so
was an offhand reference to the free market fundamentalists of the
Austrian school, many of whom insist that the proper solution to every
economic problem is to let the market have its way. As it happens, in
making that comment I was thinking specifically of Michael Shedlock aka
Mish, whose blog {1} is one of the handful I read daily.

{1} http://globaleconomicanalysis.blogspot.com/

Mish is among the most thoughtful and articulate proponents of the
Austrian school in today's blogosphere, and he has an excellent eye for
the economic news that matters - which is by and large exactly the
economic news that the rest of the media avoids covering. Very nearly the
only thing on his blog that makes me roll my eyes is his repeated
insistence that the market is always right and government regulation is
always wrong; no matter how berserk the market gets, its vagaries are for
the best, and any problems should be corrected by privatizing even more
government functions. Now of course Mish is hardly an official
spokesperson for the Austrian school, as if there were such a thing, but
he's not exactly alone in his insistence, either.

Enough people in the peak oil scene share similar views that it's probably
necessary to say something about the free market and its potential for
solving or creating problems during the twilight years of industrialism
ahead of us. Any such comments need to be prefaced, though, by a reminder
that a spectrum consists of something other than its two endpoints. Just
as a great many people on the left have picked up the dubious habit of
using labels such as "fascism" for any political system to the right of
Hillary Clinton, a great many people on the right seem to have convinced
themselves that any form of economic regulation at all is tantamount to
some sort of neo-Marxist hobgoblin - a "socialist-communist-ecologist"
system, to use a phrase that actually appeared in one of the comments
fielded by last week's post.

Now it bears remembering that drowning is not the only alternative to
dying of dehydration; there's a middle ground that is noticeably more
pleasant than either. The same principle also applies in economics. The
experiment of having government own all the means of production in an
industrial society, along the lines proposed by Marx, received a thorough
test at the hands of the Communist bloc and failed abjectly. At the same
time, the experiment of having government keep its hands off the economy
altogether in an industrial society, along the lines proposed by a great
many free-market proponents these days, received an equally thorough test,
and failed just as dismally. The test took place a little earlier; in
America, it ran from the end of the Civil War into the first decade of the
twentieth century, and the result was a catastrophic sequence of booms and
busts, the transfer of most of the nation's wealth to a tiny minority of
wealthy people, the bitter impoverishment of nearly everyone else, and a
level of social unrest that included two presidential assassinations and
so many bomb attacks on the rich and their families that bomb-throwing
anarchists became a regular theme of music-hall songs.

Now it's always possible for theorists to contrast a Utopian portrait of a
free-market economy against the gritty and unwelcome realities of extreme
socialism, just as it's possible for people on the other side of the
spectrum to contrast a Utopian portrait of a socialist economy against the
equally gritty and unwelcome realities of unfettered capitalism. Both make
great rhetorical strategies, since the human mind is easily misled by
binary logic: if A is evil, it seems wholly reasonable to claim that the
opposite of A must be good. The real world does not work that way, but
this is hardly the only case in which rhetoric ignores reality.

The problem with the rhetoric, however, may be stated a bit more
precisely: however pleasant they look on paper, free markets do not exist.
Strictly speaking, they are as mythical as hippogriffs.

It occurs to me that some of my readers may not be as familiar with
hippogriffs as they ought to be. (Tut, tut - what do they teach children
these days?) For those who lack so basic an element in their education, a
hippogriff is the offspring of a gryphon and a mare; it has the head,
body, hind legs, and tail of a horse, and the forelimbs and wings of a
giant eagle. Hippogriffs are said to be the strongest and swiftest of all
flying creatures, which is why Astolpho rode one to the terrestrial
paradise to recover Orlando's lost wits in Orlando Furioso, and why Juss
rode one to the summit of Koshtra Pivrarcha to rescue Goldry Bluszco in
The Worm Ouroboros. They are splendid creatures, no question; their only
disadvantage, really, is the minor point that they don't happen to exist,
and drawing up plans to use them as a new, energy-efficient means of air
transport in the face of peak oil, for instance, will inevitably come to
grief on that annoying little detail.

Free markets are subject to essentially the same little problem. There
have been many examples of market economies in history that were not
controlled by governments, but there have been no examples of market
economies that were not controlled, and if one were to be set up, it would
remain a free market for maybe a week at most. Adam Smith explained why in
memorable language in The Wealth of Nations (1776): "People of the same
trade seldom meet together, even for merriment and diversion, but the
conversation ends in a conspiracy against the public, or some contrivance
to raise prices". When a market is not controlled by government edicts,
religious taboos, social customs, or some other outside force, it will
quickly be controlled by combinations of individuals whose wealth and
strategic position in the market enable them to maximize the economic
benefits accruing to them, by squeezing out rivals, manipulating prices,
buying up their suppliers, bribing government officials, and the like:
that is to say, behaving the way capitalists behave whenever they are left
to their own devices. This is what created the profoundly dysfunctional
economy of Gilded Age America, and it also played a very large role in
setting up the current debacle.

There's a rich irony here, in that the market economy portrayed in
textbooks - in which buyers and sellers are numerous and independent
enough that free competition regulates their interactions - is exactly the
sort of commons that so many free market proponents insist should be
eliminated wholesale in favor of private ownership. All commons systems,
as Garrett Hardin pointed out in a famous essay a while back, are
hideously vulnerable to abuse unless they are managed in ways that prevent
individuals from exploiting the commons for their own private benefit.
This year's Nobel laureate in economics, Elinor Ostrom, won her award for
demonstrating that it's entirely possible to manage a commons so that
Hardin's "tragedy of the commons" does not happen, and she's quite right -
there have been many examples of successfully managed commons in history.
Strip away the management that keeps it from being abused, however, and
the free market, like any other commons, rapidly destroys itself.

This does not mean that the best, or for that matter the only, alternative
to the unchecked rule of corporate robber barons is Marxist-style state
ownership of the economy; once again, dying from heatstroke is not the
only alternative to dying from hypothermia. It means, rather, that
something between these two extremes might be worth trying, especially if
it can be shown by historical evidence to work tolerably well in practice.
Of course this is what history shows; broadly speaking, economies that
leave the means of production in private hands, but use appropriate
regulation to harness their energies to the public good, consistently
produce more prosperity for more people than either unfettered capitalism
or extreme socialism.

This being said, the midpoint between these extremes may not lie where
today's conventional wisdom tends to place it. Consider an example from
the not too distant past: a large industrial nation with a capitalist
economy, but remarkably tough regulations restricting the growth of
private fortunes and the abuses to which capitalist economies are so often
prone. The wealthiest people in that nation paid more than two-thirds of
their annual income in tax, and monopolistic practices on the part of
corporations faced harsh and frequently applied judicial penalties. The
financial sector was particularly tightly leashed: interest rates on
savings were fixed by the government, usury laws put very low caps on the
upper end of interest rates for loans, and hard legal barriers prevented
banks from expanding out of local markets or crossing the firewall between
consumer banking and the riskier world of corporate investment. Consumer
credit was difficult enough to get, as a result, that most people did
without it most of the time, using layaway plans and Christmas Club
savings programs to afford large purchases.

According to the standard rhetoric of free market proponents these days,
so rigidly controlled an economy ought by definition to be hopelessly
stagnant and unproductive. This shows the separation of rhetoric from
reality, however, for the nation I have just described was the United
States during the presidency of Dwight D Eisenhower: that is, during one
of the most sustained periods of prosperity, innovation, economic
development and international influence this nation has ever seen. Now of
course there were other factors behind America's 1950s success, just as
there were other factors behind the decline since then; still, it's worth
noting that as the economic regulations of the 1950s have been dismantled
- in every case, under the pretext of boosting American prosperity - the
prosperity of most Americans has gone down, not up.

It makes a good measure of how far we have come as a nation - and not in a
useful direction - that the economic policies of one of the most
successful 20th century Republican administrations would be rejected by
most of today's Democrats as too far to the left. A case could be made, in
fact, that far and away the most sensible thing the US Congress could do
today, in the face of an economy that has very nearly choked to death on
its own bubbles, is to reenact the economic legislation in place in the
1950s, line for line. (When you're hiking in the woods, and discover that
you've taken a trail that leads someplace you don't want to go, your best
bet is normally to turn around and go back to the last place where you
were still going in the right direction.)

Yet there's an interesting point that also ought to be made about the
economic regulation of the 1950s. Outside of antitrust legislation, not
that much of it applied to the economy of goods and services on any level,
whether that of Mom and Pop grocery stores or big industrial
conglomerates. The bulk of it, and very nearly all the strictest elements
of it, focused on the financial industry. More broadly speaking, instead
of regulating the production and consumption of goods and services, the
economic policies of the Eisenhower era focused on regulating money: on
ensuring that too much of it did not end up concentrated unproductively in
too few hands, and on controlling its propensity to multiply as
enthusiastically as rabbits on Viagra. The relative success of these
measures points toward a distinction already made in these posts, and to
practical steps that will be explored in next week's post. 


John Michael Greer, The Grand Archdruid of the Ancient Order of Druids in
America (AODA), has been active in the alternative spirituality movement
for more than 25 years, and is the author of more than twenty books,
including The Druidry Handbook (Weiser, 2006) and The Long Descent: A
User's Guide to the End of the Industrial Age (New Society, 2008). He
lives in Cumberland, Maryland. 


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