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Magic Wand Politics
September 11, 2022
by William P. Meyers

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Capital, Industrialism, and Magic Thinking

In the modern era it is fair to say that Adam Smith, in The Wealth of Nations, started the trend towards asserting that given a few simple preconditions, everything will work out wonderfully for society. Smith's book was published in 1776 in England, when many people believed that modernized, non-theological thinking combined with their version of good government, would lead to a future vastly improving upon the past. In Smith's case the central idea was the mechanism of free market capitalism. To some extent Smith was right. The freedom of people to start and conduct businesses without government interference (including exclusivity granted by monarchs or Parliament) tended, over time, to product an equilibrium where suppliers and consumers balanced each other. Free markets were not supposed to be a form of magic, but a mechanism that was self-regulating. I will return to Smith and his version of a Magic Wand after introducing some others.

Of the challengers to Smith the best known is Carl Marx, who was born in Deutschland but who wrote his important works in England. Capital (Das Kapital) analyzed the actual workings of the British and other industrial economies. Volume I was published in 1867. It showed that as a free market economy accumulated capital, particularly in the form of factories, the capital itself did not spread itself out over time. Instead, the capital tended to accumulate in the hands of a relatively small group of people, capitalists or bourgeoisie. People with some capital, but not control of vast amounts, were labeled petite-bourgeoisie. Beneath them was the working class, particularly factory workers, the proletariat. At the time there were still significant numbers of holders of large plots of agricultural land, plus peasants and ag workers. There were the often unemployed, the lumpen-proletariat. The analysis was pretty spot on, at least for that era. The magic wand came in the form of Marxist political ideology. Marx taught that the proletariat, numerically the largest class in an industrial society, would either vote themselves into power in a democracy, or overthrow any class or government that stood in their way. Then utopia would follow automatically, as people controlled capital, rather than capital controlling people.

Society is complicated, as is the natural world. Many groups that have suffered some sort of oppression (or continue to suffer) tend to propose solutions that are partly realistic but partly assume the nature of magic wands. No one was surprised when racism (in particular, anti-black racism) did not come to a screeching halt when Lyndon Johnson signed the 1964 Civil Rights Act. Almost 60 years later, some 3 generations later, despite there being substantial groups of middle-class, upper-middle class, and even capitalist African-Americans, many people are still waiting for a magic wand to upgrade their social status. Marxists blame the situation on the failure of working-class (proletarian and lumpenproletarian) people of color to embrace Marxism. Capitalist Free-Market ideologues blame individuals for not getting themselves into the workforce and saving money to at least buy a condominium, and preferably to invest in the stock market instead of lottery tickets.

In some ways environmentalists may seem to be more in touch with reality than other folk. There are many subgroups of environmentalists, and they have their solutions they want adopted. In some cases, to some extent, those solutions make sense, but they also tend to have magic wands as part of their belief system. Typically, scaling up a good idea is seen as solving an environmental problem. Most typical is the belief that global warming can be stopped by building enough solar panels and wind turbines. Or by people eating less meat. When it is pointed out that global energy demand is going up faster than renewable energy supply, these environmentalists say to wave the wand faster. The world does not work that way. People want more, and politicians want to please most of the people most of the time. So energy demand goes up. Meanwhile CO2 levels rise, as do temperatures and CO2 from positive feedback systems. Also this happy talk fails to appreciate the baseline. A reasonable baseline is 1800, when the industrial revolution became unstoppable. Since then the human population has increased by a factor of 8, the use of energy per person has grown exponentially, and the land mass not carved up by industrial agriculture or other human uses has shrunk precipitously. Solar panels good. Wind cells good. But insufficient to address the present problem, going to hell in an overpopulated, industrial handbasket.

Adam Smith made some good points. He observed the economic reality of his time and made some astute generalizations. If he had been alive 50 or 100 years later he probably would have refined his observations. Often things that work on a small scale do not scale up perfectly. When there is a larger pond, with more room for complexity, more complexity usually emerges. Smith did not take into account the realities of human power relationships, or of capital power relationships. The larger an enterprise, the more it can create efficiencies that are not available to smaller competitors. It may or may not be able to better exploit workers and consumers, depending on the labor and end markets. But over time businesses with smaller capitalizations get bought out or bankrupted by larger businesses. Capital is concentrated, and capitalists can buy the political system they are in. Usually.

Over time governments, even those normally labeled capitalist (by socialists), sometimes decided that when free markets were not working for a nation, some regulation was necessary. In the U.S., after decades of consolidation in the oil industry, Standard Oil was broken up using anti-trust laws. Minimum wages and working conditions were established. That did not prevent capital from continuing to accumulate and concentrate. It also did not prevent some economists, capitalists, and politicians to believe that Adam Smith's original formulation was right, that everything works best when markets are left to themselves. Markets are their magic wand. When things go badly (say, the Great Depression) they spin some scenario to make it the fault of government regulations and taxes, rather than a natural outcome of unregulated markets.

Cue the Socialist bullhorn. Note there are a variety of socialist doctrines, sometimes with few points in common. In the typical Marxist-Leninist program the only solution to the defects of free market capitalism is ownership of all capital by the government. [The anarchist-socialist idea that the workers themselves should own the capital was defeated in bloody battles, notably the Russian Revolution]. In Democratic Socialism the method of decision making, democracy, is prioritized, and the state may own some or all capital, or may redistribute income or even wealth to achieve its goals. As might be expected socialist governments have had mixed records on economics and other issues. Trotsky and Stalin's mass murders cannot be justified in any way, even if the Soviet economy did grow quickly for several decades, including while the rest of the world suffered through the Great Depression. The defects of the Soviet economy became more apparent in the 1980s. Democratic Socialists like to pick and choose their own examples. They often point to socialist success in nations like Norway, which had prospered under capitalism and put a rather light harness on their free markets. As even Marx predicted, socialism works best when the nation has already used free market capitalism to accumulate a lot of capital. When used in former colonies with little prior capital accumulation, it has not had a good track record. In Venezuela it destroyed the economy, but most socialists still blame outside interference.

Competence matters. Many well-capitalized businesses have been destroyed by the incompetent children of the creator of the business. Socialism in general may not be as bad of a strategy as the reign of Nicolas Maduro, an incompetent of the highest order, might indicate. But whether socialism is working in a particular situation or not, its proponents tend to see it as a magic wand. When corruption, incompetence, and crime do not disappear by socialist magic, socialists all too often play the blame game. On occasion, as in Cuba, they may even give free markets a bit of a try again.

The Democratic Party and Republican Party both tend to treat themselves as magic wands. If only we could capture the Presidency, the Supreme Court, Congress, and the various state governments at the same time, then we could fix things! But electing a party to power does not change human nature, certainly not overnight. It does not change the natural environment, and it must work with the specific types of capital that have already been accumulated. Plus the remains of the defeated political party.

Compromise is also not a magic wand. It sometimes works, and sometimes does not.

Some things may seem to work like magic, but they do not. If they work in the real world, they work by real world principles. If you want to solve real world problems, from overpopulation and global warming to drug addiction, unfair prejudices and crime, there are no magic wands. There are some things that work some of the time. Toss aside your magic wand and pick up a shovel or pick or best practices for raising children, if you want the best possible results.

[Disclosure: written by an old man. I tried any number of magic wands during my younger days.]

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