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Global Economy Flattens in Structural Change, Not Recession, Absent a Frontier


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There is a massive buildup of wealth in the world. Something like 72 superyacht builders can't keep up with demand. The business jet business is off the charts, and, for the first time, most purchases are by individuals, not corporations. What recession?

Do you mean the “little people"? The peasants? Well, Capitalism works just fine, as Karl Marx observes in his book Capital, to concentrate wealth. Concentrate, as in make rich people richer. When there is a windfall to be had, Capitalism is most efficient at harvesting the gains. When the pickings are slim, however, it is most brilliant at extracting gains from other economic sources, with results that simultaneously increase prices and reduce the cost of labor. We love it when that happens. And, when it happens, both because of its results and because it is inherently predictable, we love the status quo. At the first hint of a frontier, though, prices go down, labor costs go up, and your reserve workforce departs for parts unknown. This, we do not like.

Frontiers work their black magic about prices by exposing wealth to those who would go to remote places and find it. The years 1600 to 1900 must have been hard for European Capitalists to bear. A ready workforce vanished over the sea and into the forests of the so-called New Word, finding timber, furs, ambergris, and potatoes, not to mention all manner of prized metals. Timber enabled the building of everything from houses to ships with cheaper, better-quality materials than could be had in England. Furs did the same for clothing. The New World viscously undercut the price of ambergris with the discovery of huge quantities of the sea drift in the Bermudas. Potatoes destroyed the price of bread, which had been so profitable previously, especially when combined with the weight of a little sand.

It is often said that there are three ways to produce wealth. You can mine it. You can grow it. You can manufacture it. The New World added one other way. The men of the great frontier found it, not only furs and timber for the taking, nor just ambergris floating in on the tide, but fist-sized nuggets of gold lying naked on the land.

In pursuit of wealth, a quarter of all English workers left the jolly old Jolly Old. Away to America they went, taking low wages with them. Reaching those fertile shores by means of shipbuilding, cartographic, and timekeeping technologies invented by Capital, they virtually pilfered the land, many of them vanishing over the Alleghenies and into the west, stealing away with them valuable skills developed in the employ of honest gentlemen.

And what did they do with these skills? They manufactured things for themselves, making and using looms to weave cotton and wool, forging iron into tools, and glass into instruments, stealing business from us. Then they turned on their benefactors, inventing and building, with huge oaken cross-braces, monster frigates the equal of any two English ships of the line. “Huzzah! Her sides are made of iron!" Indeed.

How totally different from those better days when enclosure was the law. In those halcyon times, the owners of land were few. We were able to eject the unprofitable and morally bankrupt tenants from the land using certain well-conceived “Enclosure Laws", employ peasants more cheaply and effectively in labor gangs, and direct them into the northern Manufactures, the better to discipline them and use them up. There was nowhere to run in those days, and so we maintained a reserve army of unemployed labor which we were able to deploy quickly at any propitious moment, even to haul barges. Bottom line, the cost of maintaining a draft animal is a well-known quantity, while the value of a woman of the lower classes is beneath all estimation.

The key to success for Capital is always a form of “globalization", if by that we mean inability to escape the reach of Capital. In the 15th and 16th centuries, the reach of English Capital and the laws supporting it covered all of the Englishman's world. Escape was not an option. Briefly, for about 400 years, the remoteness of America and Australia changed that. Today, once again, our dominance is global, this time literally. We find cheap labor and high prices in a worldwide market, employing Chinese or Indian workers preferentially, because they are cheaper than, say, Europeans or Japanese. And we charge what we will where we can get it. Monopolies rule. The force of law, and the guns of armies, support our rights, and there is nowhere that our enforcers cannot reach.

In contrast to population, we do not produce much increase in real wealth these days, nor do we mean to. More groceries, more fuel, more water, more manufactures, these things do not concentrate wealth. They tend to diffuse it instead. So we are not in favor or more. We find that fear fills our coffers, fear of death (hence medicine), fear of misfortune (hence insurance), fear of poverty (hence credit).

Note to self: Make darn sure there will be no more frontiers.

Laurence B. Winn is an engineer, pilot, adventurer, and author. His web site provides insight into the greatest escape adventure of all time.


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