Monday, January 4, 2010

Money - What is it good for?

I think it's time we did some serious thinking about how our world works, the motivations behind it, and why we find ourselves facing so many problems in a world that has plenty, but provides for so few.

Money has existed for at least over 5,000 years, but why? Have you ever stopped to think about why people used money? First, money as paper was created to stand in place of precious metals (gold and silver) as trading items. No more need to carry around heavy gold and silver coins. Just deposit those into a bank and get paper of equal value.

So then why did people need money? It boils down to one simple truth: people needed money to buy things that they could not make or build themselves. Scarcity of resources required a system to be developed to trade those scarce resources. If you had something I needed, but could not get, and I had something you needed, but could not get, the legal way to transact between us would be physically trading items (bartering) or using money. The more "rare" the commodity, the more "value" it had, and eventually money won out over bartering, allowing you to get something you wanted or needed even if you didn't have something viable to trade for.

That makes complete sense in a world where traveling 100 miles was a serious challenge on foot or by horseback. The ability to go get something for yourself, or have it transported with ease, was simply not possible 5,000 years ago. Hell, it wasn't very easy just 200 years ago.

But now we find ourselves living in a world that has been completely transformed due to technological innovation, a lot of which is a direct result of space exploration and development over the past 50 years. Global communication is literally in the palm of your hands, goods are transported routinely every day around the globe with ease, and advances in science and technology give us the ability to create sustainable systems that can provide an abundance of everyday living necessities for the entire world. All this thanks to technology.

Moreover, money today isn't even backed by any tangible object. This is called fiat money. Fiat money is money whose value is not derived from any intrinsic value or guarantee that it can be converted into a valuable commodity (such as gold). In other words, it's just made up out of thin air by governments, and the governments "say" it has value. What kind of system is that?

So then we move to the next most logical step, what is money good for in today's world? Think about it. We have the technology to mass produce food in any location around the world, even the driest deserts (it's called hydroponics). We have the technology to mass produce homes, better ones not made of wood, but made of composite materials that would be so energy efficient it would make your head spin. We have the ability to mass produce clothing and we have the technological ability to transport any and all of this throughout the world in under 24 hours. There is NO MORE scarcity, at all, in the world we live in today. And anyone who says that we have a food shortage, a water shortage, or any shortage of anything is absolutely ignorant and/or lying! Period. So what stops us from doing the logical, humane thing? MONEY!

What used to be a necessary item during a time of scarcity and technological deficiency is now they very reason why people starve around the world, don't have clothes and don't have shelter. Money is now the end-all, be-all of existence. "He" who has the most toys wins. "He" who has the nicest car, biggest house and fattest bank account wins. And if you can't make a profit on it, don't do it. It is simply not profitable to be humane. It requires donations!

So what is more important, money or humanity? I bet most of you instantly thought humanity, because in your heart you know this to be true, but we sure don't act that way, do we? With all the technology we have in the world, and all the abundance we can create, sustain and provide, why do we cling to a system that causes us such stress, anxiety, depression and destruction? How many of you have struggled under the thumb of money? In today's economy, it's probably even more apparent that money is a fickle beast.

Why do we live in a world of such capability, but also such poverty, disease and turmoil? The monetary economic system is an outdated, old world method that needs to be put to rest. There are alternatives to a monetary based system, and there are many more people living in this world without money than there are of those who want to hold onto theirs. Are we going to let the greed of such an insignificant few drive the direction of the entire planet, a direction which is obviously flawed and broken?

Throughout history mankind has developed new and better systems to live under, and now is no different than then. We are fortunate to live in such an age where anything is possible, such as traveling into space, which would have made us Gods just 2,000 years ago. People are fearful of such drastic change, but in light of the obvious truth, how can anyone sit by and continue to let the mess continue?

Consider this: There are children in this world, maybe even in your own city or town, that will grow up to be criminals, not because they are evil, but because they are poor, hungry and distraught. They are products of a system that cares less about them, because it's not profitable to do so. There are children in this world who will die from disease or starvation, and they don't have too, but it is not profitable to help them. There are children in this world that have the minds of geniuses, who would have the ability to solve mankind's greatest problems, but they will never become great, never become visionaries and never harness that potential, because it's not profitable to educate them.

So what's more important, money...or them?


Anonymous said...

if you ain't bustin you own ass to take care of your own family then you must have the luxury of being finanically independent.

You may be right - maybe there is not a 'food shortage' but their is definetly a 'freedom shortage'
Most countries that have abject poverty and starving citizens generally are so because they have a government that does not allow the free trade of money/goods to operate... Dictators, warlords, elite class of communism, marxism does not allow the free distribution of foods to the masses... They TAKE what they want to fund their own lavish lifestyes, their hangers on, and their thug armies to enforce their 'legal looting' - just take a look at Hugo Chavez or Castro, or lots of African nations...

I don't buy that it's because we are to greedy to give, or be chartible, or humane... I don't know what country you're from but America gives more than any other country in the world when it comes to humantarian need. I for one am not guilty because I work and provide for my family... I pay plenty of confiscatory taxes that get wasted on all sorts of stupid gov't bureaucratic boondoggles and I tithe to my church that does a great deal of work and single-handedly saved a local charity from going out of business but now can brag of an 80% success rate of helping entire homeless families stay at their safehouse and help them get back into their own home...

You go on this rant about how making money is the problem... so what is the answer? you never told us...

It's always easy to project your own guilt on others and not provide the solution... what good is your bitchin if you don't offer a viable solution?

You brag about how great and how far we've come - what do you think got us there? The ability for a free man to own and sell his own production and surplus... using money... money is not a piece of paper - it only represents YOUR OWN LABOR and intellectual property - a God Given Right to utilize the property as you see fit...

What is this 'better alternative' to 'a montetary based system' - i'd like to hear about this better system - if it were better you can believe people will want to know about it...


Douglas Mallette said...

Anonymous - My reply to you is too long for a comment, so I shall make a separate post just for you.

Norman Copeland said...

Yes... Do... This is what space politics and advocacy is about...

Clark said...

Hi Douglas,
I usually avoid these sort of econ/politico/philosophical essays but I find I can't resist questioning a number of your assumptions.

I believe your focus on money is misplaced. As you indicate, that is just a convenient means of exchange. The wealth of a country is determined by its productivity. My wife comes from an African country with per capita income about 200 times less than than the US. That is not because we found 200 times more gold nuggets laying on the ground than they did, it's because in an average hour of labor we produce 200 times more goods and services. We can do that because of an elaborate infrastructure of roads, bridges, etc, mass production, educated workers, a vast and efficient communications system, etc.

It's easy to say that "we have the technology to mass produce" this or that in any place we choose but in reality it takes a stupendous amount of time and investment to get an economy of the ground. All of that infrastructure has to be put into place. It can't be done just by dumping cash on a country. Trillions of dollars of aid have been put into developing countries in the post-War period and most of it did very little good. Poor governance is the primary cause of poverty, not a lack of charity by developed countries.

I can remember as a kid when there were pleas on TV for money to send Care Packages to impoverish places like Hong Kong and South Korea. At the time they were among the poorest places on earth. They became the developed countries as we we know them today by developing that infrastructure slowly and deliberately along with the help of a vast market in the West, especially the US. Buying a country's goods and services is the way to build up its economy and eliminate the poverty there, not by charity that will quickly disappear in a dark hole of corruption and inefficiency. (We have a number of entrepreneurial friends and acquaintances who have tried to start companies in my wife's country and they have to deal with terrific battles a corrupt bureaucracy that tries to stymie them at every turn.)

Your pessimism about world poverty I think is also overstated. East Asia is well on its way to eliminating the lowest levels of poverty and has moved something like a billion people into the middle class. The World Bank last year reported that the lowest level of destitution in China (~$1/day) had dropped from 80% to 15% since the economic reforms started in the 1980s. I also saw a report that in 2007 about 51% of the worlds population was now in something one could call middle class.

It's not just East Asia that is making progress. It was recently announced that Chile will soon become the first Latin America country to transition from developing status to developed country. In Africa, Botswanna has had one of the highest growth rates in the developing world for many years and now has a per capita income approaching that of Mexico. In both of these cases, it is good governance, along with market economies, that have made the difference.

You are right that there is no physical reason to prevent everyone in the world from having a decent life. However, rather than messing with the monetary system, the key to eliminating world poverty is to get the remaining developing countries to implement the policies that have worked extremely well all over the world and in all sorts of cultures.

- Clark

Douglas Mallette said...

Clark - Money seems to be a convenient means of exchange, but it is really? Where does money come from today? I will admit that back when it started, money had a legitimate backing. It had true intrinsic value, but now it's literally manufactured paper and nothing
more. It may represent some level of worth, but who dictates that? And with ludicrous amounts of money being thrown into circulation,
inflation is exponentially destroying the real value of everything.

And value is nothing more than a representation of the supply/demand cycle. We all know how that works. But if we develop a system where
supply of everything is adequate for everyone, then the whole system breaks down. The Monetary System is based on the fact that people
need things, so what's to stop companies or people from manufacturing scarcity to suit their own bottom line?

Let's say, for example, that we did manage to feed the world, such that every nation had the ability to produce plentiful amounts of food
for its people. Please note that this is completely possible today, but we're just not doing it. Every single food company in the world would go out of business, because demand would be zero for their products. There is absolutely NO way they would want that to happen. They want their money. Money drives the passion to be bastards and screw the system such that they continue to thrive while others barely survive. Manufactured scarcity.

You made my point with this comment: It's easy to say that "we have the technology to mass produce" this or that in any place we choose
but in reality it takes a stupendous amount of time and investment to get an economy of the ground.

You're exactly right, and the investment is money. Not necessarily cash, but money in the form of materials, labor, etc. It all has
cost. Money is the only reason why these nations have not developed. They are simply victims of a system that requires scarcity to exist.

You mention poor governance, but if we go deep enough, what is the root cause for bad government? It's corruption in the form of money. Paying off this guy or that guy for the purposes of financially benefiting another group.

When thousands of people die every day from starvation, I am NOT overstating poverty. In such a technologically advanced world, no one
should ever die due to a lack of basic living necessities, period. The World I trust those schmucks. They are the ones who
manufacture most of the mess we're in right now anyway, but that's a whole different conversation.

I know some countries are playing the Monetary System game and trying to come out ahead, but it would be much faster and easier if we moved
away from money and went to the Resource Base Economy. You'd see a drastic shift in the human condition around the globe, and it would be for the better. Please watch the video I linked in the article to see even more details.

Norman Copeland said...

Douglas says:

I know some countries are playing the Monetary System game and trying to come out ahead, but it would be much faster and easier if we moved
away from money and went to the Resource Base Economy.

Norman Copeland says:

Hellooowwwooo!!! Manned spaceflight exploration...

ENTRE' Bartacus]...

{For newer viewers and audience Norman Copeland endorses the opinion of zero cash monetary systems based on space exploration regimes for the enevitability of a scientific based space capable and civilian space travelling race...

[Bejeepers sumwun tikle me pinkies]...



Douglas Mallette said...

Norman, lay off the COFFEE!!! lmao. I think getting off money will be the one major thing that will ensure humanity becomes a space faring species. Every damn reasonable space project ever conceived will be done, no matter what, because we ALWAYS acquire significant gain from space exploration. Money always cancels amazing projects...well NO MORE! Get rid of money and you get rid of ALL road blocks to progress.

Clark said...

Hi Douglas,

"Where does money come from today?"

The central bank of a country has the primary responsibility for determining the money supply. The supply must be kept proportional to the productive output of the economy. If there is too much money, you get inflation, too little you get deflation.

The tools for monitoring and controlling the money supply are extremely complicated. Guys like Milton Friedman got Nobel Prizes for figuring them out. One of the great triumphs of modern economics has been the successful control of inflation regardless of country, culture, history, etc.

I lived through the 60s-70s when inflation got higher and higher and there was constant handwringing over what to do about it. The problem was that they kept interest rates too low to boost the economy and reduce unemployment. At the end of the 70s, the Fed's mandate was changed to make the money supply its number one priority. Inflation reached double digits when Volcher raised interest rates to nearly 20%. This caused a severe recession (e.g. unemployment reached over 11%) but he successfully killed inflation and set off 30 years of solid growth in the US that saw low inflation and the creation of about 50 million jobs (Europe created about 5 jobs in that time.) Countries like Brazil and Turkey that had extremely high inflation used the same tools to finally get their inflation under control

My point is that the monetary system is not some arbitrary fiction but a very complex system that has very real effects and needs extreme care to avoid setting of enormous pain that will last for a long time.

- Clark

Clark said...


" what's to stop companies or people from manufacturing scarcity..."

The lack of a monopoly stops them. There is always someone else who will see a killing to be made by underpricing them.

"Let's say..."

Sorry but none of that makes any economic sense at all. Production of food does not magically happen just by saying "we have the ability to produce..." When you actually work out the details for a system for producing food effectively, you will end up with a system extremely close to what we have.

"Money is the only reason why these nations have not developed"

That is not even remotely true. You should spend time in an underdeveloped country and see the staggering roadblocks to development that involve all sorts of cultural, ideological, religious, and governance factors. As I mentioned, we know of many people have gone back to my wife's country after making lots of money in the US thinking that it will be easy to start a company there and help boost the economy. Usually they lose their investment and give up.

We consumers in developed countries are like penguins waddling around on a bit of ice floating on the water, oblivious to the iceberg beneath it. We think the goods on the shelves got there easily but are oblivious to the enormous invisible infrastructure of industries, trains, ports, etc. all run by highly trained people who are highly motivated (by money) to get those goods there.

Reproducing that elsewhere takes a lot more than just money. You need a legal system that enforces contracts, private property rights, an education system, security from crime, etc., etc.

There have been all sorts of economic systems tried out, especially in the post WWII period. If there were easy ways to develop a country, we would have seen them by now. Most of those experiments not only did not help, they often, as happened in my wife's country, resulted in horrific catastrophes that made things far, far worse.

I just don't understand why economics should be different that any other area of our lives: Look at what doesn't work and don't do that. Look at what does work, and do that.

China's growth was stymied by communism for 4 decades. It switches to a market economy and suddenly it's growth skyrockets and poverty plummets. It wasn't because someone handed them a bowl of cash. India was badly handicapped by the influence of Fabian Socialism and hyper-nationalism. It implements a number of market reforms and suddenly its growth rockets ahead as well. Brazil has also gotten its economy roaring and reducing poverty with a similar approach to development.

If those countries had started in, say, 1950 with those policies, just think of the mountains of suffering that would have been avoided!

Well, enough econo-pontificating for me today. Back to advocating economies in space!

- Clark

p.s. I'm no fan of World Bank policies either but there is nothing wrong with their collection of global economic statistics. The reduction in poverty in China is well documented by many other sources as well.

Douglas Mallette said...

Clark - When's the last time any central bank took money out of the system in order to properly balance the economy? They don't. I know how complex the monetary system is, and it's completely broken and flawed.

I care less about inflation, since the invisible money created disappears just as easily once it's repaid. My anger comes from the notion that interest repayment comes from what source? The money supply reflects the principle, not the interest, so by default there
is an insurmountable debt created by the system that cannot be eradicated. There's no money in the money supply to cover the interest on anything, but it is mandated to be paid.

There is a great video that breaks down this "complex" system quite nicely and shows it to be the fraud that it is. I hope you'll take a moment to watch this.

Douglas Mallette said...

Clark - Continued...

What lack of monopoly? Capitalism invites monopolies by its very nature. Example: Walmart destroys smaller businesses by undercutting their prices through underpaying their employees and strong arming suppliers. News documentaries have shown this to be the case. I call that a monopoly since other businesses can't possibly compete. Also, banks buy each other up, and if not allowed, they then work together in an effort to get what they want. Insurance companies partner with banks in an effort to cross protect each other no matter what they do...and then the damn government bails them out when crap hits the fan.

"...roadblocks to development that involve all sorts of cultural, ideological, religious, and governance factors."

I could type a rebuttal to everything you've said, but there are video's that can do that and save me the time. The question is, will
you watch them fully?

If you go to my article "Time Must Be Spared For Self Education" which was posted Dec. 21st, there are links to several videos that cover
everything you've mentioned, including how a resource based economy would work, why it's better, etc.

And Zeitgeist Addendum definitely covers how and why some nations have been restricted in growth, and money is the primary factor. Culture, ideology and governments are tools used and manipulated to support the monetary structure as the "powers that be" want it.

I advocate this change in the economic system for the sole purpose of enabling us to freely explore space and advance humanity. My eyes are
still, and always will be, fixed on the stars. But what we do on Earth greatly determines our ability to venture off of it.

Money holds us back. Money is a noose around our necks. How many times have great scientific missions been canceled because of
funding?! It's ridiculous and should not happen, ever. The removal of the monetary system ensures the proper growth of our civilization, on Earth and among the stars.

Norman Copeland said...

I agree Clark...

But, how much counterfeit money is in modern western world communities?

I agree with Douglas, It is a theology that is the perimeter of theology...

Space advocate...

That's my man...

Clark said...

Hi Douglas,

Well, I'll try one more time to get my main two points across and then give up. I thought we would have more common ground but you are floating away into econo never-never-land. I'll try to bring you down to earth to see if there are at least some issues on which we can see eye-to-eye on.

Firstly, Productivity determines wealth, not money. That is not an ideological or philosophical statement. It is just rudimentary economic arithmetic.

(I really prefer to avoid arguments over grand macroeconomic theories about capitalism, socialism, etc. and focus on the microeconomic level where things are concrete, testable and empirical. Arguments about macro issues never go anywhere because they quickly devolve into hand-waving and unprovable and un-disprovable assertions. I come from a experimental science background and I like to look at the basics and see what actually works and doesn't work in the real world.)

If a farmer replaces his pointed stick with a plow, he produces more for the same amount of labor input. If he uses his increased earnings to create an irrigation system, to buy a tractor, etc. he will get produce even more for the same input. If he starts to buy up surrounding land of less productive farmers, he gets even richer via economies of scale.
That sort of thing must be replicated throughout an economy to make it richer for everyone.

I could go through in detail all of the barriers there are for a farmer in, say, Ethiopia to follow that course of development, but will just say that virtually all of those barriers are due to issues within the country. They are not because of evil international food companies or "powers that be" outside of the country.

Secondly, you refuse to see that East Asia completely contradicts all of your assertions about global poverty not being reduced by
standard market economics. The rise of the Asian economies and the vast reduction of poverty there is not just one of the greatest wonders of our time but one of the greatest in all of human history. (That so many people in the West are so unaware of the East's staggering progress is probably the second greatest wonder!)

Similar progress in places like India, Brazil, Chile, Botswana, etc. show that it is not because of Asian culture but that it can happen anywhere if the proper set of conditions and policies are in place.

When overwhelming data contradicts your theory, throw out the theory, not the data. Do this regardless of whether your theory is elegant and emotionally satisfying.


Clark said...

With regard to some of your particular points:

"When's the last time any central bank took money out of the system in order to properly balance the economy?"

Money is taken out of the system every time a central bank raises interest rates. Low interest rates held for too long create commodity/real estate bubbles and high interest rates pop such bubbles.

You seem to believe that cash is the only component of a monetary system when it is actually a relatively minor part. Here's an example. If I'm able to borrow, say $300k from the bank to build a house. Then both the bank and I each have $300k on our ledgers. Ta-daaa, a new $300k has been added to the economy. If I hand over $100k to a contractor to start
building the house, he now has $100k on his ledger and that much more has been added to the economy. The original $300k that the bank got (indirectly) from the Fed, can expand far beyond the base amount. Conversely, if interest rates are raised high, I might not be able to borrow that $300k. That leads to a reduction of money in the economy. This is the sort of "complexity" that I was referring to. The money supply is not just cash but all of the money that everyone and every organization has on its ledgers. How to deal with this, as in controlling inflation, is nontrivial.

WRT "balance the economy", the central bank, of course, does not determine the government's budget. It cannot stop deficit financing, for example. However, if the central bank keeps interest rates low to help the govt borrow, this will inflate the currency and all those who bought govt bonds will take big losses since the interest rate will not cover the inflation rate. If the Fed keeps rates high, then the economy will tank, tax collections will drop and the deficits will get even bigger. So the Fed alone cannot solve govt financing problems. Ultimately the govt. must get that under control.

"Capitalism invites monopolies by its very nature."

Not exactly. Companies continually try both to expand the size of the market and to expand their share of that market. They do that by offering better products and/or cheaper products than their competitors. Either way it is good for customers. If one company eventually gains so much share that it becomes tempted to raise prices and/or stop offering better products, then it is lighting up a giant billboard inviting new competitors to come in and take away its business. This happened, for example, to the oligopoly of the Big 3 automakers.

Capitalism invites growth, competition, creative destruction, while decreasing poverty and increasing wealth.

"Walmart destroys smaller businesses by undercutting their prices ..."

The Walmart stores I know of certainly have plenty of competition all around them. Target, for example, is not the least bit afraid of Walmart. In a given small town, a Walmart will put some stores out of business because customers prefer getting more for their money. Eventually, though, new specialized stores that fill niches not covered by Walmart start to open up.

Walmart uses the same economies of scale that have been fundamental to the raising of our standard of living. Companies don't become larger just because they are evil and greedy. It's because of another basic economic arithmetic fact: fixed costs grow slower as an enterprise expands so each additional unit of good or service becomes cheaper and cheaper to produce. It's called mass production when a manufacturer does it but the same arithmetic holds for a service like Walmart.

I expect that space settlements will experiment with different economic systems. The Pilgrims, for example, started with a communist style common ownership type of organization in their New World settlements. However, I expect that like the Pilgrims the space settlers will find that these alternatives work very poorly and they will return to a standard private property, free enterprise, market system.

Ad Astra,
- Clark

Douglas Mallette said...

What happens then when you get to the point when your farmer (to use your example) is completely removed from the process, because technology can do it without the use of people, at all. Now that farmer is making nothing and earning nothing, but the productivity is immense. Technological unemployment is real, and as we develop systems that outperform and outwork humans, what then does the monetary system do to compensate for the eradication of entire labor markets due to technological innovation? Do we seriously reduce our technological capability simply because we want to maintain obsolete jobs...cuz we feel bad for those people? Really?

Fine, Asia is making progress, but how much more could be made, faster, without the restraint of money holding back significant advances? How many times do we wish that money was no object when it comes to space exploration, or that costs didn't screw up our medical systems? How many science projects or space missions are canceled because of budget issues? How many of those could revolutionize our lives, but never make it off paper, because we don't have enough green paper to cover it.

You seem to be ignoring the most obvious truth, that money has an adverse affect on many more things than it has a positive on. Wealth really only helps the wealthy, and the poor have a hard as hell time getting any reasonable amount of wealth.

Capitalism invites planned obsolescence, not making the best possible product you can, but only making a product that's good enough to last until your next "amazing" product comes out, which you probably already had developed anyway. We have the technology to make cars fully electric and last 50 years without fail, but we don't, because that's not profitable. What kind of psychosis is that, where we purposefully make substandard products solely for the purpose of profit gain? Oh yeah, that's Capitalism.

Lastly, the Pilgrims didn't have the kind of technology we do today, so any and all comparisons to the past are null and void, because the situations and capabilities of resource management and scientific design were all but absent then..even just 100 years ago.

And I venture to guess that you have not yet taken the time to watch the video I suggested.

Clark said...

"What happens then when you get to the point when your farmer ...."

Farm employment has dropped from about 80% in the US to about 3% since the 1800s. Farming now offers a high standard of living as opposed to a subsistence existence. The lower cost of food has led to the percentage of income going towards food to drop from the 50% range to about 5%. That has freed up income to buy other goods and services and so raised our std of living significantly.

"Technological unemployment is real,...'

No, it's no more real today than it was when the Luddites were yelling about it. As shown by the farming example, whenever productivity improvements lead to less employment in one area, the lower costs free up income for other goods and services, which in turn need new workers. Pick up the Yellow Pages and you'll see that it is filled with goods and services that either didn't exist a few decades ago (e.g. home PC repair, satellite TV installation, cell phones, etc.) or were too expensive for most people to afford (e.g. air travel, Caribbean cruises, eating out frequently, etc.)

There are essentially an infinite number of possible goods and services. If all manufactured goods eventually fall to near zero cost, then great; there will be more than enough service employment to make up for lost manufacturing jobs. (Services already account for about 80% of jobs in US). If cyborgs eventually takeover services, then great; everything will be free and we can all live lives of leisure and pursue whatever our interests are.

"Fine, Asia is making progress, but how much more could be made, faster, without the restraint of money holding back significant advances?'

The monetary system had a minimal role when China had a purely Communist economic system. That did not free them for significant advances but instead it grossly handicapped them and kept them poor for near 40 years. China, Soviet Union, etc. all tried to run economies by "commanding" it to do what they wanted it to. They proved that economics just doesn't work that way.

For example, I can remember as a kid in the early 60s that there started to be a sneaking suspicion that maybe Communism wasn't quite the economic failure it had been made out to be. The Soviets were setting records in areas like the number of tons of steel produced annually, number of tractors made, etc. In retrospect, however, that was an illusion. While initial industrialization had boosted their std of living, their economy was already plateauing. Each extra ton of steel was being produced by the same number of workers while in the West fewer and fewer workers were needed to produce a ton of steel. That meant everything made of steel (e.g. cars, refrigerators, etc.) were getting cheaper and at the same time similar productivity improvements were being made throughout the economy. The Soviets had no market signals, i.e. the near-infinite number of daily individual decisions made by customers based on price and performance, to tell producers in the Communist system to improve productivity or go out of business. There was no monetary system to direct investment where it should go to raise productivity. Instead, investment was grossly wasted on making unneeded and/or flawed goods. The Soviets ended up with piles of unused steel and fields of rusting tractors no one wanted.


Clark said...

"You seem to be ignoring the most obvious truth..."

No, I'm simply giving you overwhelming empirical evidence that your primary assertions are untrue.

"Wealth really only helps the wealthy..."

This, for example, is just preposterous. We have seen a continuous growth in the standard of living over the past centuries that is just stupendous. In my own lifetime, I've seen middle class std of living reach a level that would have been considered wealthy when I was a kid. The avg. middle class home in the 50s could fit in the garage of the avg. middle class home today. We take for granted things today such as mass air travel, cell phones, home entertainment centers with giant flat TV screens, etc. that were wild fantasies in the 50s.

Around 1970, the govt. began releasing its annual poverty estimate and the first number was around 12% and today it still is around that level. However, that is relative poverty. Something like half of those in the poverty category in 1970 did not even have indoor plumbing. They lived in real destitution. Today, those in the poverty category not only have indoor plumbing, most have a color TV, a car, a microwave, decent clothes, etc. Absolute wealth continues to grow but I expect will always be taken for granted.

"Capitalism invites planned obsolescence..."

No, because if a company tries to plan the obsolescence of its products, other companies will see a competitive advantage in offering longer lived products. A low cost sedan today is vastly superior in most every way except cachet to a Mercedes of 1960.

"We have the technology to make cars fully electric..."

But we don't yet have the technology to make batteries to build an EV that is comparable in price to a gasoline car. That price reflects the supply of lithium, the amount of labor that goes into building them, etc. As the Soviets showed, you cannot just magically command these limitations to go away. Putting labor and resources into electric cars will take labor and resources from other areas. That is not ideology, it is just rudimentary microeconomic arithmetic.

" any and all comparisons to the past are null and void, ..."

No, the gross economic failures of the past century in the many attempts at socialist govts show that basic economics are still quite valid.

"And I venture to guess that you have not yet taken the time to watch the video I suggested."

I could assign you some basic economic treatises but I dare guess you wouldn't run out to read them. :-)

Before I take the time to learn about someone's theory on, say, anti-gravity, I want to see a hovering car. Before I take the time to learn about an economic theory without money, I want to see an economy somewhere, sometime that worked along those lines without leading its people into misery.

I really don't understand why you are so pessimistic wrt space development that you think some wild new economic system is required. The same process is underway that has worked in every other area. Technology costs have fallen to a level that small companies and individual investors are doing real hardware development. There are markets, such as space tourism and research users, to fuel this process. It will gradually snowball. Just give it some time.

- Clark

Douglas Mallette said...

Clark Part 1 -

Not sure why you're arguing, because the points your making are exactly what I'm talking about. In fact, farming should be 0% employment, because we don't need people to do that anymore, but moreover, no one should ever have to pay for food when our technology gives us plenty.

Why are we paying for basic living essentials anyway? Food, water, clothing and shelter are basic living standards, and technology has given us the ability to give these in abundance. It's money, and the pursuit of it, that has falsely limited the basics such that we're forced to pay for something we all should simply have.

You said, "If cyborgs eventually takeover services, then great; everything will be free and we can all live lives of leisure and pursue whatever our interests are."

That's exactly my point! lol. That's the whole argument. My concern is that we're already there, we have the capability to do that, but the people with wealth and power absolutely do NOT want that to happen. They control and twist the system as much as possible to prevent that very occurrence from happening. Of course, that's all in vain. They can't stop innovation (unless they outlaw it under some false pretense), so their time will come.

Douglas Mallette said...

Clark Part 2 -

"In my own lifetime, I've seen middle class std of living reach a level that would have been considered wealthy when I was a kid. The avg. middle class home in the 50s could fit in the garage of the avg. middle class home today. We take for granted things today such as mass air travel, cell phones, home entertainment centers with giant flat TV screens, etc. that were wild fantasies in the 50s."

How much of that is paid for, and how much of that is financed through debt? People have a false sense of higher living, for much of what they have is not even owned by them. Just look at the foreclosure rates. It's all invisible money and ballooning nonsense.

"I could assign you some basic economic treatises but I dare guess you wouldn't run out to read them. :-)"

Go right ahead. I hope it doesn't make me fall asleep. lol. But I did offer up something to watch that doesn't take much time, is easy to go through, and requires no money to buy. It just requires 1.5 hours of your time. Are your suggestions as user friendly? :)

"Before I take the time to learn about an economic theory without money, I want to see an economy somewhere, sometime that worked along those lines without leading its people into misery."

This I agree completely with. This is why I'd like to see a test city built for what The Venus Project is advocating for. I'm interested in this from the science perspective more than anything else. The social part will come when the light bulb goes off in peoples heads. It can be labeled a "research facility" for all I care, but every aspect of the RBE should be tested in some scientific and valid form, so that we can ascertain its validity. I totally agree.

I'm not pessimistic. And it's only "wild and new" because anything that's a severe buck to the system is generally considered bad, right away. I'm sure the carriage people hated cars too. A new system is a new system, no matter the medium.

Now, do I think a commercially driven approach to privatize space is a valid method? Sure. Do I think eliminating money completely as an obstacle to growth is valid? Sure. I think the later of those two would give us better results faster on a whole host of issues, but I still think making space private is the right way to go. Much better than government space running everything.

BTW, thanks for the discussion. I appreciate the arguments back and forth. That's one of the things I like best about this blog...the conversation.

Norman Copeland said...

Lol... Clark...

Douglas, I think clark really wants to talk about SME's [small/medium enterprizes], considering his quite descript circumspect of modern economics at broad democrat level, this example clarifies our conversation, I have another example that I could show ''when I offered to manage the largerest european and indian diamond and gold broker service company...'', but shall tell the story at another opportunity...

Who dares wins].

Gordon said...

Clark / Douglas

Brilliantly argued gentlemen. I enjoyed watching the tennis. I would give the game to Clark. Douglas has charm and passion but just falls the wrong side of the line between enlightened and nutter. Please keep refining your argument Douglass, I want to share your belief that humans can colonise the galaxy and live on as a species indefinitely.

Gordon (pompous observer)

Douglas Mallette said...


Nutter implies a lack of reason and logic in ones thought process. I am employing nothing BUT reason and logic in my thought process, using the scientific method, science, engineering and technology as the prime solution to our issues. I'm not the one holding onto an archaic system that's becoming less logical and reasonable with every technological advancement we make, so who's the nutter?

I advocate for a change in the system, a system that has significant flaws. It's not my fault people are so entrenched in the current system that they cannot fathom doing anything different, or that they cannot bring themselves to see the obvious difference between what's being proposed and all the nonsense of the past. That's not necessarily their fault either. That's how they've been conditioned. Hell, that's how the whole WORLD has been conditioned.

It's not easy to critique and then abandon a system that's been around for 2000+ years. What's funny is that so many people say things like, "If money was no object," and "Let's do the right thing," and "What would Jesus do," but then when someone comes up with a system that proposes just that, he/she is ridiculed. Funny how that works. Breaking ones programming is difficult.

Here's the great thing, this will happen whether you like it or not. Technology and innovation will create systems that wash out the need for money. The only way to stop it is to literally crush anyone who invents the next best thing, and completely stop all technological advancement on the planet. I'm pretty sure that will be overtly obvious and far too many people would be pissed and whoever tries that. Only then would the status quo remain.

The better our technology gets, the less we need to cling to old world systems. Time to evolve. As my dad would say, "Shit or get off the pot."