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The Brute Economics of Slavery

Preramble: I posted this on my blog exactly a year ago today, in slightly different form.  Dan linked to it once, from here, just a few weeks before I started writing for Angry Bear.  Recent comments got me thinking about it again. 

 In thinking about the economics of slavery, I’m considering slavery and serfdom to be economic near-equivalents. Of course, I recognize that there are qualitative differences between chattel-slavery and serfdom:

–  In slavery, the master owns the person of the slave; in serfdom the master owns the labor output of the serf, either as a stated labor quantity, a stated output quantity, or some combination.

–  Serfs enjoy some measure of freedom, and can accumulate personal wealth, after the rents are paid; slaves do not and cannot.  (The point, though is to keep rents so high that accumulation is prohibitively unlikely.)

–  It might be easier to gradually and incrementally impose serfdom on an existing population. First generation slaves need to be captured, conquered, or in some other way removed from – and deprived of – their native state. Thus, serfdom is imposed on the indigenous population, slaves are more typically imported.

–  The individual slave is a depreciating asset.  But, as a population, slaves are self-renewing, since, unlike Shakers, they reproduce.   Serfs are factor inputs rather than assets.  (On the other hand, the master also owes the serf protection, and sustenance in times of famine.  In that sense, the serf resembles an asset that requires maintenance.)

These are significant differences, to be sure, but mostly from a sociological or political perspective.  In terms of the brute economics, they are somewhere between second order and trivial.

The necessary conditions for reducing a population to serfdom are as follows.

– A large wealth and power disparity between the haves and the have-nots.

– Perhaps more significantly, the ownership of virtually all assets by an elite class, with severely limited opportunities for the general population to own or accumulate assets.

– A poorly educated population with limited skill sets.

– Severely impaired individual mobility, due to an impossible debt and/or tax burden and legal restrictions.

– Government of the masters, by the masters, for the masters, with little or no sense of worth or justice for the serfs.  This enforces and reinforces the previous point.

– A social and/or religious system that recognizes the inherent meritocracy of the master class.

– A population that is scared or coerced into ceding their freedom to the masters in exchange for security.

– The political will to deprive people of their fundamental human dignity.

Via Krugman, we find Delong’s repost of a short treatise on slavery and serfdom by Evrey Domar.

Domar points out additional requirements, and a mechanism for serfdom to develop.

– Low population density: Labor scarcity favors slavery/serfdom, since the cost of freeman labor will be high.  I’ll admit I didn’t get this until is was stated the other way around.  Population growth favors freeman labor since the competition for jobs drives wages down.  (Note the implicit denial of the “Lump of labor fallacy” canard.)

– A large class of what Domar calls “servitors” who owe allegiance, taxes, and military support to a higher authority.  They are the equivalent of medieval vassals of a liege lord, who extract from the local peasant population not only their own means of existence, but that of their liege, as well.   This is the beginning of, and most literal sense of “rent-seeking.”  The process is that, starting with a free population, by taxation or other forms of indebtedness, the freedom of the common people is eroded.  Those whom Domar calls “servitors” I call leaches.

– Explicit Government complicity in restricting mobility, via legal structures. Besides limiting the population’s mobility in a gross sense, it also eliminates the possibility of competition among different servitors.

In this way, serfdom developed in depopulated* Western Europe during or after the late Roman Empire, and in Eastern Europe many centuries later – in fact, long after serfdom has disappeared in the West.  In each case, the critical enabling factor was low population density, resulting in a critical shortage of labor.

Basically, it comes down to an economic evaluation of costs and returns.   But these are not easy to determine with any precision in the abstract, and probably not in the actual event, either, unless the increment is quite large.  The slave, and even the serf, needs maintenance in a way that the free laborer does not.  The serf can be compelled to work past his willingness in way that the free man cannot.  On the other hand, the free man might have higher willingness and unit productivity.  The wild card here is what the free man can demand as wages, and that depends on the competition for available jobs.  The bottom line is that serfdom will dominate whenever the profit (revenues less costs) of keeping a serf is greater than that of hiring a free laborer.

Of course, all of this was long ago – pre-industrial revolution in fact, and centered on a low-technology agrarian system.  What message does it have for us today?   Here, Krugman wonders** why, after the the plagues of the mid-14th century, serfdom wasn’t reestablished in Western Europe, since the population was greatly depleted.  Domar has no clear answer, and Delong won’t hazard a guess. I will — but it’s only a guess.  Perhaps society had moved on, and the culture was no longer accepting of serfdom as a social institution.  Serfdom had faded away from lack of interest and due to population growth many decades before the plague epidemics occurred around 1350.  There were sufficient numbers of artisans, craftsmen, guilds, merchants, and bankers, such that tying people back to the soil might not have been easy, or even desirable.   The growth of towns might have played a part.  Another social factor is that in late Eastern European serfdom, the servitor’s status was determined by the number of serfs he controlled.  I don’t think that was ever the case in the West.  Sometimes social factors trump economics.

Also, as Barbara Tuchman points out in A Distant Mirror (Ch 11, frex.), though the population decreased due to the plague, total wealth in coins and material possessions did not, and they were largely in the hands of the elite.  It could be that with this wealth maintained, the brute economic drive for serfdom was absent, or severely attenuated, despite the labor shortage.

Krugman also wonders: “And an even bigger question: why hasn’t indentured servitude made a comeback in the modern era? Yes, I know, human rights and all that – but if it was profitable to have indentured servants in the modern world, I’m sure that Richard Scaife’s think tanks would have no trouble finding justifications, and assorted Christian groups would explain why it’s God’s will.”  

Well, that was in 2003, when Scaife was well known and the Koch brothers weren’t. This statement also gets a lot of ridicule in comments at Delong’s Domar post. But, there were certainly many Christian apologists for slavery, and you can see today that tea-baggers and the Christian Right do not exactly align themselves on the side of human rights vs the brute force of the elite.

So Krugman’s question remains, hanging over us like the sword of Damocles.  Here is the way I see it. First off, you need to be skeptical about translating a socio-economic phenomenon from a different place and time to the here-and-now.  Our population is not sparse nor badly educated (yet), and we do not have a pre-industrial agrarian economy.  But these differences effect the possibilities and modes of implementation.  They don’t effect the ongoing defects of human nature that Krugman obliquely alludes to.  These are greed, ego, and the lust for power, and you can see them manifesting themselves right here in the U.S. today in the struggle between labor and the minions of the wealthy elite.

When I think about serfdom, I also think about more modern analogs – sharecroppers, coal miners who owed their soul to the company sto’e, child laborers in early industrialized England, indentured servants, the exploitation of illegal immigrants, and the union busting practices that have been highly successful here since 1980.

In evaluating the conditions that favor and disfavor serfdom as such, something is missing from the analysis.  That is that somewhere along whatever spectrum of conditions makes serfdom more or less economically favorable to the elite, there is a point (or region) of indifference.  If working people are reduced to the point where the economics are no less favorable to the elite than serfdom, then actually going through the formality of making them serfs simply isn’t worth the effort, and doesn’t make any economic difference.

What do we have today?

– The largest wealth disparity since before the great depression – at every stratum of society, growing larger every day.

– An all out assault by the moneyed elite on the wealth and status of working people.   Union busting is one of the tools.

– Deliberate undermining of public education.

– Segments of the population tied to the land by under-water mortgages or the inability to unload a property.

– Popular social movements with religious backing that favor the interests of the elite over the interests of the people.

– Constant fear-mongering as a pretext for inducing people to give up their basic rights.

– A moneyed elite that effectively owns government.

Krugman’s apparent underlying assumption, which I share, is that – for the servitors at least, and possibly for the serfs as well – serfdom is a strategy of least resistance, and therefore the default social order, whenever the conditions for it are right.

One of the things that can make conditions not right for serfdom is regulated entrepreneurial capitalism – inventiveness, innovation, industry, and real competition.  Capitalism generates wealth, increases wages, opportunities and the standard of living, and reinforces concepts of freedom, liberty, and fair practices.  Effective regulation assures that fair practices are maintained, keeps the playing field even, and increases the likelihood that reward is in some way proportional to a combination of skill and effort.  Capitalism is expansionist by nature, serfdom is static.

Unfortunately, over time, capitalism transmogrified into Corporatism.

Corporatism, for all its acquisitiveness, is a very different phenomenon.  Ownership is remote.  Assets are used in large part for executive bonuses, dividends, and mergers and acquisitions.  Though the track record of M&A in meeting stated goals is dismal, the real net effect is monopolization – corporatists hate competition.  Corporatism seeks always and everywhere to decrease wages, and is utterly indifferent to the living standards, freedom, and opportunities of anyone outside the elite.  Ethics and fairness are non-existent.  Rewards are in proportion to rapacity.  In other words, Corporatism is the new feudalism.

This is why I say that the goal of the Republican party, as servitors to Scaife, the Koch’s and their ilk, is to take us back to the 12th century – or whatever it’s 21st Century near-equivalent might be.  I’ve stated that trans-national corporations with no loyalty to anyone or anything constitute the real road to serfdom, in contradistinction to what Hayek said.   That is a bit inaccurate, though. Once wage scales are reduced to the par value of slave maintenance, it doesn’t matter what the correct technical description of our condition is, and the elite won’t care.

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* Antonine Plague of 165-180, Cyprian Plague of 250-270, Justinian Plague of 541-2
** The link to the Surowiecki article that Krugman mentions is broken.  It can be found here.

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The Road to Serfdom!!

Brad DeLong points us to a post from The Nation on early Koch brothers and Hayek The Road to Serfdom!!

Yasha Levine and Mark Ames:

Charles Koch to Friedrich Hayek: Use Social Security!: [I]n early June 1973, weeks after [Charles] Koch was appointed president of the Institute for Humane Studies. Along with his brothers, Koch inherited his father’s privately held oil company in 1967…. Koch invited Hayek to serve as the institute’s “distinguished senior scholar” in preparation for its first conference on Austrian economics, to be held in June 1974.

Hayek initially declined Koch’s offer. In a letter to IHS secretary Kenneth Templeton Jr., dated June 16, 1973, Hayek explains that he underwent gall bladder surgery in Austria earlier that year, which only heightened his fear of “the problems (and costs) of falling ill away from home.” (Thanks to waves of progressive reforms, postwar Austria had near universal healthcare and robust social insurance plans that Hayek would have been eligible for.)

IHS vice president George Pearson (who later became a top Koch Industries executive) responded three weeks later, conceding that it was all but impossible to arrange affordable private medical insurance for Hayek in the United States. However, thanks to research by Yale Brozen, a libertarian economist at the University of Chicago, Pearson happily reported that “social security was passed at the University of Chicago while you [Hayek] were there in 1951. You had an option of being in the program. If you so elected at that time, you may be entitled to coverage now.”

A few weeks later, the institute reported the good news: Professor Hayek had indeed opted into Social Security while he was teaching at Chicago…. He was eligible…. On August 10, 1973, Koch wrote a letter appealing to Hayek to accept a shorter stay at the IHS, hard-selling Hayek on Social Security’s retirement benefits, which Koch encouraged Hayek to draw on even outside America. He also assured Hayek that Medicare, which had been created in 1965 by the Social Security amendments as part of Lyndon Johnson’s Great Society programs, would cover his medical needs…. [T]aking on the unlikely role of Social Security Administration customer service rep, Koch adds, “In order to be eligible for medical coverage you must apply during the registration period which is anytime from January 1 to March 31. For your further information, I am enclosing a pamphlet on Social Security.”

(h/t Mike Kimel)

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Nominations are due by Friday, March 11, 2011.

2011 Hayek Book Prize Nomination Form

The Manhattan Institute is currently gathering nominations for our Hayek Prize, which will honor the book published within the past two years that best reflects F.A. Hayek’s vision of economic and individual liberty. The winner of the Hayek Prize will be given a $50,000 cash award and asked to deliver our annual Hayek Lecture in New York City later this year.

We encourage the nomination of books that advance the ideals of classical liberalism along a range of economic, political, and moral dimensions. Hayek’s The Road to Serfdom is very much the inspiration and the model for the Prize.

Nominations are due by Friday, March 11, 2011.

Presimetrics can be nominated by Angry Bear readers. I know….just found it, so thanks.

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The Capitalist & The Entrepreneur

One of the nice things about going to the Kauffman Foundation this year was meeting up again with Peter Klein of Organizations and Markets, who was my first economics professor.* (I liked him as soon as I found out one of his first publications dealt with “moral hazard” and the Designated Hitter.)

Peter has a book out from the Mises Institute, The Capitalist & The Entrepreneur. Subtitled Essays on Organizations and Markets and carrying blurs from Business and Law people as well as the obligatory G-Mu professor (Adam Smith Award winner Peter Boettke), the book, as with Klein himself, is likely well-conceived, sharply written, and worth arguing with and about.

Not to mention that, at $12 from Mises, it’s very reasonably priced.

I’m certain I’ll have more later, after I get a chance to read it. But it seems exactly the type of book that should be getting more discussion here.

*On hearing this, Andrew Samwick said, “But you two are at opposite ends of the spectrum.” What I Should Have Said then I say now: “I said he was a good teacher. I never said I was a good student.”

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How to be a Communist and a Fascist at the Same Time

by Bruce Webb

Those of us with a passing knowledge of the development of Communism and Fascism within the larger context of the Popular Revolution vs Reaction tend to scratch our heads when people accuse Obama and his whole program of being both. After all in Europe, the historical cradle of each, the movements have seen to be the Left and Right anchors of a political spectrum that has various democratic flavors in between: Social Democrats, Liberal Democrats, Christian Democrats and the like. But that is the result of looking at his through a narrow lens focussing on who is in or out of political power and/or which party is holding the balance. There are alternative analytical schema that break this down in very different ways. To illustrate the mind-set that animates some, but by no means all, of the fervent opposition to Obama I would like to give you this from a review of Friedrich Hayek’s The Road to Serfdom

This spell-binding book is a classic in the history of liberal ideas. It was singularly responsible for launching an important debate on the relationship between political and economic freedom. It made the author a world-famous intellectual. It set a new standard for what it means to be a dissident intellectual. It warned of a new form of despotism enacted in the name of liberation. And though it appeared in 1944, it continues to have a remarkable impact. No one can consider himself well-schooled in modern political ideas without having absorbed its lessons.

What F.A. Hayek saw, and what most all his contemporaries missed, was that every step away from the free market and toward government planning represented a compromise of human freedom generally and a step toward a form of dictatorship–and this is true in all times and places. He demonstrated this against every claim that government control was really only a means of increasing social well-being. Hayek said that government planning would make society less liveable, more brutal, more despotic. Socialism in all its forms is contrary to freedom.

Nazism, he wrote, is not different in kind from Communism. Further, he showed that the very forms of government that England and America were supposedly fighting abroad were being enacted at home, if under a different guise. Further steps down this road, he said, can only end in the abolition of effective liberty for everyone.

Capitalism, he wrote, is the only system of economics compatible with human dignity, prosperity, and liberty. To the extent we move away from that system, we empower the worst people in society to manage what they do not understand.

For followers of Hayek’s tradition the enemy is statism and their bulwark, their strength is capitalism. To argue as many leftists do that opponents of health care reform or of increases in minimum wage or any other intevention by the State to improve social or economic justice are just arguing against their own material interests, and that in doing so they are just siding with the bosses fall on deaf ears. Once you have internalized the twin equations Capitalism=Freedom & Statism=Tyranny you can well understand why Movement Conservatives first rejected the Eisenhower and Rockefeller Republicans who espoused Goo-Goo approaches (‘Goo-Goo’ being an old, somewhat derisive term for the Good Government movement). For people who followed Hayek the Interstate Highway System was not an instrument for good, the fact that it was government initiated, funded and maintained made it more like a Superhighway to Serfdom.

Not all the fury being exhibited has its total roots in this Hayek-Friedman-Libertarian soil, there are clearly cultural and racial roots to much of it as well. But if you think that somewhere behind that shouting face is the committment to one of the original rallying cries of Movement Conservatism, that of Barry Goldwater in his acceptance speech in 1964: ‘I would remind you that extremism in the defense of liberty is no vice! And let me remind you also that moderation in the pursuit of justice is no virtue!

Not my own cup of tea, I kind of believe in steady pursuit of justice. I just want to point out that this is not just mindless anger, there is at least some coherentness behind it. An insurance claims rep is an agent of capitalism and so an ally of Freedom. A government health care bureaucrat is an agent of statism and so an enemy of Freedom. Making an operational argument that either one is getting between you and your doctor doesn’t cut any ice. Either you are for Freedom or against Freedom, if that comes with some personal sacrifice sobeit.

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