To think that the new economy is over is like somebody in London in 1830 saying the entire industrial revolution is over because some textile manufacturers in Manchester went broke.
– Alvin Toffler
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Samizdata quote of the daySamizdata Illuminatus (Arkham, Massachusetts) · Economics, Business & Globalization · Slogans & Quotations July 13th, 2010 |
 10 comments to Samizdata quote of the day |
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The government is an odd thing.
It crushes the profits of functioning businesses while at the same time absolving corrupt and incompetent ones of the consequences of their actions.
Rather than competition and prudence resulting in the success of good businesses and the failure of badly run competitors, government intervention results in the very opposite.
The criticism often levelled against pure free market economics is that it inevitably results in mega-monopolies. I’m not convinced, and even if that is true surely companies would only get to the top by being the best? And if they stopped being the best, competitors would spring up again, surely?
depends on you definition of the “new economy” I was always under the impression that we were still basking in more or less the same old economy, but with new additions that we’d been enjoying since the dawn of the Industrial Revolution.
True.
For example, manufacturing did not replace farming in Britain in the 18th and early 19th centuries (as we are told that the “new economy” would replace manufacturing).
On the contrary, it was the profits from domestic farming (not “the slave trade” or the other lies that are taught in schools and universities) that mostly financed the British industrial revolution.
Where farming was not profitable (such as the areas of Ireland and Scotland where farming was dominated by small peasant plots) THERE WAS NO INDUSTRIAL REVOLUTION – and this peasant plot system of farming was an accident-waiting-to-happen (the people who attack the “Highland Clearances” should think about what would have happened in these areas of Scotland later on, in the 1840’s, had the peasant plot system of farming had been left in place there by landowners – as it was in most of IRELAND).
As for 1830 the big problem for English (and South Welsh) farming was the high cost of the Poor Law – but that was not caused by the “economic forces” it was caused by the spread of the “Speenhamland” system (from 1795 – village of Speenhamland) by which magistrates (under powers granted to them by the Act of 1782) started to hand out Poor Law money to people who were IN WORK.
Originally this was supposed to be temporary (a war time measure) – but this wage subsidy system just grow and grow, till by 1830 many farmers were being driven to the wall by the taxes to pay for it.
However, the system was abolished in 1834 – and farming recovered.
Indeed there were more people working on the land in 1851 (census) than THERE HAD EVER BEEN in England and Wales.
“But farming was in depression in the 1870s and 1880s” – to some extent yes, but it recovered.
There was nothing much wrong with British farming before the First World War – it only fell apart after the war, and manufacturing also went into decline.
So the idea that a “new economy” replaces an “old economy” is false.
A country with good manurfacturing is likely to have good farming also (and if it does not – something is wrong).
And an economy that has good “new” manufacturing (computers and other such) is likely to have good “old” manufacturing (steel mills and so on) and – if it does not (again) something is wrong.
And an economy that has a profitable banking system is likely to have strong industries – expanding and expanding, for (if not) where are the banking profits comming from?
If there are strong banking profits yet industry is not expanding and profitable – then something is very wrong indeed.
The idea that the rise of a new “sector” (such as internet companies) means that it is “natural” for other “sectors” (such as steel mills) to decline is false thinking – if there is such a decline SOMETHING IS WRONG.
There is a problem in the basic economy of the country – and that will make itself felt in the “new economy” (internet companies and so on) sooner or later.
Paul Marks,
To play devil’s advocate for a moment, I presume the solutions to most of the problems you state involve ‘globalization.’ For example, one national economy’s banking profits can be realised via the success of another’s manufacturing.
Ham: I think this can only be true if there is really such thing as ‘global economy’, by which I mean there are no trade barriers, currency control or any other regulation or interference by governments. I think that Paul was discussing an ‘economy of a country’, i.e. a situation where any regulation or other interference in the market (or lack thereof) only applies locally.
Paul Marks writes, e.g., “A country with good manurfacturing is likely to have good farming also (and if it does not – something is wrong).”
But economies are more complicated than that. E.g., in the US, we have a noteworthy concentration of entertainment industry piled up around LA, and of electronics/software around SF. And agriculture really did decline strongly in the Northeast US even as other industries succeeded there: many wooded areas were under cultivation 100-150 years ago. I also dimly remember that the NYC area has so completely lost some previously important industries (e.g., sugar refining) that few remember they even existed. As far as I know, these changes aren’t dominantly due to artificial incentives (local taxes or subsidies, e.g.); to the extent that such artificial incentives are involved, they have probably reduced the specialization, not increased it. Thus these rather strong patterns of specialization look like natural outcomes of well-studied economic effects like returns to (a kind of) scale and comparative advantage.
Thus it appears that effects like returns to scale and comparative advantage really can be so large that economies specialize to such an extent that alternative sites can’t compete or that local industries other than the locally dominant one are no longer competitive: it really can be hard to make a movie without the specialists, and it really can be harder to grow grain on a hilltop in western Pennsylvania than to work as a sales rep for finite element modelling software in western Pennsylvania and use your salary to buy grain grown in Iowa.
Also, I don’t know enough about the economic history you describe to know how plausible this is, but some of your pattern of industry not happening where agriculture hadn’t happened might be a case of industry not happening where transportation was poor, and agriculture driving the construction of transportation. In the US, industry has often been concentrated in areas with transportation advantages but no particular agricultural advantages — especially around ports, but also along various sorts of land transportation corridors.
the people who attack the “Highland Clearances” should think about what would have happened in these areas of Scotland later on, in the 1840’s, had the peasant plot system of farming had been left in place there by landowners – as it was in most of IRELAND
Oh, I see. It’s okay to murder a bunch of people, and throw many more people off their ancestral land because of some evil that might befall them, right? Cool. We’re having you locked up next week. We’ve determined you might be dangerously stupid.
The people were not “murdered” – some died on the way to Canada and the United States, but that is not “murder”. As for violence during eviction – that was actually rather rare. Landowners certainly did not want violence (that cost money).
And it was not “their” land (if you mean the people who were evicted) – what is it about the word “landowner” that you do not understand?
They were tenants – and the landlords did not want them around any more.
Actually paying for their passage to Canada and the United States was more than needed to be done (legally).
They could have been just told to “get out” – “get out and go where?” “Do you think I care?”
By the way many of the the Scottish landowners went bankrupt themselves (a “detail” often overlooked) as the land really was poor (bad soil – short growing season).
Even for sheep the land did not make sense – it ended up (eventually – not at the time) as game reserves for shooting and fishing.
So it is you who are dangeriously stupid Joshua Holmes.
“But what would you have done Paul”.
Actually I would not have “cleared” the land.
I would have sold up to someone else (who, most likely, would have cleared it).
The rents these people could pay were not worth collectiing – so selling up is the only rational option.
“You should have given the land to the tenants – it should have theirs by CLAN RIGHT”
These misty clan rights that people talk about tend to turn out to be bullshit when one actually looks for legal evidence for communal land ownership.
However, O.K. I am English (and we do not undersand Clan rights) – so give the land to the tenants.
And watch them starve to death in the 1840’s (or flee to the Canada and the United States on much more crowded ships than they did travel on a few years before). The way they farmed could not work – not where they were, and not in the numbers of people they had.
That (leave them to die) is the “intelligent” and “humane” policy of Joshua – you were well named Sir (the original Joshua was a butcher as well, he used to murder the population of whole towns, down to the babies).
Ham.
Ham – yes you are right. It is possible to make a lot of money in overseas investments.
However, normally if a country is going to bits
internally that is going to start hitting every branch of the economy EVENTUALLY.
William Newman:
Yes you are right also – I do not dispute David Ricardo’s law of comparitive advantage. For example British farming had to change – the successful farming of 1914 was very different from the successful farming of 1844 (or whenever). Because cheap imports meant that British farmers had to do other things.
My point was more of historical one.
Claims that “it does not matter that this part of the economy is going downhill, because X will replace it” tend to be false.
Hollywood does not mean that the wine industry in California should go down – both can prosper.
And when area goes down it goes down.
Take the example of New Jersey.
“The Boss” (the guy who acts like a teenager and is even older than me – I bet Josh Holmes loves him) sings about the decline of manufacturing there over his life time.
Also over his life time New Jersey went from being one of the smallest government States in the Union to one of the biggest.
And the growth of government came FIRST – i.e. the high government spending, taxes and regulations (and the government supported UNIONS) drove manufacturing out of New Jersey.
“The Boss” could sing about that – but of course he does not (because he is an arsehole, he would not even turn up for the new Governor’s swearing in because he was terrified that Gov Christie might reverse some of the decline that dear Bruce makes his money crying about).
“But manufacturing was replaced by…..” well what exactly?
The same high government spending, taxes, regulations and unionization hit every other productive aspect of the economy (not just manufacturing).
That is the economic point – a good economic policy is good for all productive sectors, one should not think in terms of “services replacing manufacturing” although many people do (including many Republicans).
In case Joshua Holmes (or anyone else) wants an establishment source for the Highland Clearances, here is a short one:
The Columbia Companian to British History 1997 (Columbia university press establishment left enough for people?).
“Clearances Highland”.
“In some locations, violence did accompany the eviction of families” – which I have never denied.
However, “Much of this migration has been shown by subsequient research to have been the result of overpopulation in a marginal economy, especially when the herring fisheries failed in the 1820’s and the Potato Famine came in the 1840’s”.
And, of course, the people who were moved out early (who had their passage to the United States and Canada paid for) were a lot better off than the people who had to make their own way – when everything fell apart.
As for the old claim that the people were moved to make way for game hunting and fishing (because that is what this land is used for NOW) – I quote again from the establishment source.
What was actually tried was “large-scale sheep farming”.
However, this often failed (could not compete with England – or even with the very places, such as Canada, that the people had gone to) so the landlords (who tried sheep) tended to go bankrupt as well.
What we have here is myth making – history “coloured by descriptions of the sufferings and brutality of mass clearences of people by landowners”. It is matter of “emotive power remains dominant”.
Actually some of the activists involved with this myth making (a long time ago now) were ANGRY that most of the actual people were pleased to have gone to the United States and Canada (especially Canada in the 19th century – it was Scots dominated).
So they have carefully “educated” people to feel a hatred that MOST of their anncestors did not feel.