Saturday, March 05, 2005

Money! --Episode 2

[Peg and Al are teachers--what would they know about economics?]

[Lunch hour Friday. Peg bursts into Al's classroom, paper sack in hand.]

Peg: Alright, smart guy, I've got you now!

Al: Oh?

Peg: Oh, nothing! Remember how we finished on Monday--you had me almost agreeing that the goal of capitalism is friendship.

Al: I do recall that. Why don't you sit for a minute and have your sandwich--

Peg: That's what I intend--while I instruct you in economic philosophy.

Al: Instruct me? I thought we were peers on Monday afternoon. But I'm always willing to learn. At any rate, it sounds like you've reevaluated the idea.

Peg: I certainly have. I think you tried to sell me a fraudulent product, and I fell for it.

Al: I'm the one who fell for that timesharing scam a couple of years ago. I don't think I'd deliberately sell you what you didn't want to buy, Peg. But it's possible we both let some arguments slip by without much examination.

Peg: Part of the problem is that I really did want to buy what was on the market at that point. See, while I'm often critical of free enterprise, I want it to be a valid system for societies and for the world, because freedom is better than the lack of freedom. If you can avoid bureaucracy, rules and regulations and still have people accomplish, earn wealth and build their futures, then that's good. It frees them for the leisure you were so avid about on Monday. I guess being sold on the idea prematurely goes along with being the Civics teacher.

Al: So, what's the problem, exactly?

Peg: The problem isn't that capitalism doesn't work. It may work too well--for a few. Look at the effects. This system doesn't seem to care what the "collateral damage" is. There are too many who are poor. People around the world think the system is wicked and excludes them. We in the U.S.A. consume resources disproportionately and at an alarming rate. And you claim that capitalism has the goal of "friendship"?

Al: Well, I believe it does. But I also know there are parties in the world who are mad about how "the West" has so much while they have so little. They also perceive that the prosperity is the result of exploitation of humans and resources, especially from the rudimentary, resource-based economies of Africa, Asia, and South America.

Peg: Aren't they right?

Al: Yes, but only half-right.

Peg: What do you mean, "half-right"? The whole colonial era and its legacy have created an impossible economic situation in the world. Throw in the environmental damage, too, for that matter. How will the poorest nations ever catch up?

Al: Are you sure you don't want to include male-domination as well?

Peg: That, too.

Al: The poor have a case on all those grounds. I'll admit that.

Peg: So, why are you taking the steam out of my arguments?

Al: Well, I think this deserves some more looking into, issue by issue. Let's take one of the parts of the case and examine it a little more closely, then move on to another when we're satisfied with the conclusion. Do you have a little time to get started, at least? We really do need to look at what the specific grievances are.

Peg: Sure, I have time. But, here we go again .... You're going to take every objection that I've raised and take it apart minutely. In military terms, I think that sound like what a sniper does. There seems something sneaky about that approach, like you're afraid to face the whole force of the army so you use guerrilla tactics.

Al: Not at all. I'm trying to avoid the confusion of mixing too many too many issues together like an omelet. What I hope is that in these issues considered carefully, some common theme will surface, even if it's that the situation is too complicated. We're both taking for granted that the issues--colonialism, capitalism, wild contrasts of wealth, cultural hegemony--are all related, aren't we?

Peg: Sure, but a common theme--like what?

Al: I'm not sure. Let's try a couple of broad issues and see where they lead us. You mentioned colonialism.

Peg: O.K., don't you agree that most of the poorer part of the world is still suffering from the effects of centuries of colonial rule? Didn't this mean that the European economic system, capitalism, was forced upon these nations in such a way that value in resources and labor was basically stolen from them? How is the capitalist system NOT at fault in this case?

Al: I'm certainly not going to defend colonialism. The European powers certainly extracted great wealth from today's Third World. Their governments became wealthy, or wealthier, almost at an exponential rate during this period. But it happened by a one-way flow of value. On a world scale of that time, you wouldn't call this an exercise in economic or political freedom. The colonizers didn't do the colonies any favors, and they did a lot of lasting harm..

Peg: That's true. What are you getting at? I'm always suspicious when you're too agreeable.

Al: Have no fear--I just believe in an honest approach. The economic system served an ulterior purpose--political sovereignty.

Peg: Did the economics serve the politics, or vice-versa?

Al: Now history's not my strong point, but it seems that the goal of the European states at the time was the political domination of European affairs and hegemony over the sea routes. The accumulation of massive wealth, collectively was an integral and necessary part of this striving for power. But I don't think you can say it was any sort of modern "democratic" capitalism. The goal was not to insure that wealth was shared broadly in even the European populations.

Peg: And so the wealth deliberately flowed to the politically powerful, through the banking and trading classes--eventually to the early industrial barons as well.

Al: I'll bet they all had each other's phone numbers. And I'll admit that significant consequences and leftovers of this early-modern system continue to shape the world. But, today governments in the West, including the "Pacific rim," do seem to be acting to deepen and broaden the distribution of wealth.

Peg: Within limits, yes. I'm not ready to let them off the hook, however.

Al: I'm not either. But the fact that we can think in these terms--that the nations can work with various agencies that are influential in the world to agree on issues of international debt, use of resources and the technicalities of economic start-up in poor nations--indicates that some very significant changes have taken place in the idea of what capitalism is supposed to look like and accomplish.

Peg: Hmm.... I'll agree with that much. I don't know what's going to happen to those poorest-of-the-poor nations, though, like the countries in central Africa.

Al: I don't either. Those are very special cases. There are some things that have to change in major ways.

Peg: Sure, the rich nations have to start paying attention.

Al: That's absolutely right. I got my new Almanac in the mail last week, and as I flipped through it I noticed a table with a ranking of countries where it was either easier or harder to do business depending on the amount of corruption you encountered and the amount of accountability and transparency required under the legal system there. All the very poorest nations were at the bottom of the list.

Peg: Ouch. That does say something. But it confirms that these countries are not only colonial victims, but violent and lawless in their own inner dynamics.

Al: A relatively free and healthy economic system isn't very likely to exist except in a context of laws and civilized behavior, at least if you're talking about American-style capitalism. Whatever that system is that the Chinese are trying to gin up seems to be something different. But I'll bet the basic rule is similar: a stable framework of humane law and a benign social atmosphere have to exist, or its the Wild West, robber barons, hereditary fortunes, and not much else except gross disparity of income between the wealthy and the poor. That's probably still the great danger even in this country.

Peg: I'm glad you have that much concern, at least. Do we really know well enough how this works on such a large scale to be able to put even those poor countries on a footing of basic participation in the world's economic system?

Al: I think we're learning. There's an economist by the interesting name of Hernando de Soto whose books are exactly about this point. I read a review of one not long ago. He has a team of researchers that have gotten down to the nuts and bolts of dealing with the after-effects of the formerly colonial-style economies of the third world. The first two steps of the process he proposes are the establishment of a mechanism to translate labor and other very basic forms of value into the kind of real property stake that has existed in the industrial-technological world for a long time, and then working with the legal and banking structures to protect these stores of usable value on a national basis.

Peg: That sounds like he wants to get to the real root of the problem, since the economics of colonialism was all about NOT having or endorsing any indigenous basis for property rights.

Al: I think de Soto's group has done some actual trial work in Peru and a couple of other places where he has found a sympathetic and willing ear in the government. It's pretty audacious because these reforms require fundamental constitutional changes. The review said there had been promising results on the small scale, and bigger trials were at hand, since his reputation is spreading.

Peg: Why didn't I know about this?

Al: That's a question I'm not touching....

Peg: ... and had better not think about touching, either, smart guy.

Al: At any rate, look at the time. They'll be storming the gates pretty soon.

Peg: I'd better get down the hall. We need to talk about those other topics we mentioned, too--but I think I at least get the gist of where you were going with the case you tried to make on Monday. This capitalism business is not the root of all evil. Certainly it's more complicated than I thought.

Al: You're right--it is complex. I'm glad we agree on that much. Have a good afternoon!

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