Mon Jul 19th, 2010 at 07:51:21 AM EST
One of the things the conventional wisdom on ET frequently lambastes orthodox economic theory for is an inattention to the question of land and (other) raw materials. These are usually rolled into the capital apparatus, despite the important difference that one can be replenished by human labour and ingenuity while the other cannot.
front-paged by afew
There was a good reason that land and raw materials fell out of economic analysis in the late 19th century - with advances in transportation, land and raw materials had become readily available to any power that had the ability to kill the people living on top of them. With the industrial powers being a comparatively small fraction of the world, and with the AK-47 still three quarters of a century from mass production, all industrial powers possessed, to a greater or lesser extent, this capacity.
Raw materials being abundantly available, the power to extract rent shifted to capital (labour, at the time, was still for the most part fairly crude, easily replaced and very abundant).
It is noteworthy that in those countries not yet industrialised, land reform (rather than tax reform or other means to redistribute capital) was and is the primary rallying cry of those who want to cut rentiers out of the economic loop. To take one example, Che Guevara's book on guerrilla strategy identifies a disenfranchised and economically desperate rural population as a cornerstone of any successful guerrilla war (as opposed to Marx who calls for mobilising the disenfranchised and economically desperate urban proletariat).
Then came the Fordist political economy in which capital became plentiful. Capital being readily available, and land and other raw materials still being available at will to any serious industrial power, control of the business enterprise shifted again. Not to labour per se, because blue-collar workers remained abundant relative to demand (partly because increasing capital commitments meant increasingly automating blue-collar functions). But to white-collar workers.
This is what Robert Reich calls "the not quite golden age," largely because the interests of the white-collar workers then in charge of the business enterprise were oriented more towards stability and security than towards rent-seeking: They were sufficiently well remunerated to become highly risk-averse, and rent-seeking increases the risk of systemic collapse (and systemic collapse would cost them not simply money but prestige and power as well, which further reduced the incentive for risk-taking). So in the Fordist political economy, the dominant factor of production was in the business of eliminating other people's rent-seeking largely without substituting their own. (Of course this was only golden for The WestTM - some of the rent seeking the white-collar technostructure eliminated with extreme brutality was the rent-seeking of developing countries seeking to regain control of the raw materials on or under their territory...)
Then you had the Raygun/Volker counter-revolution, which was basically about reasserting the primacy of capital, by creating an artificial scarcity of money to replace the scarcity of capital that had fallen by the wayside in the 1940s and by concentrating capital in fewer hands (through the establishment of pension trusts, reduction in top tax rates, etc.) so that it could create its own scarcity.
The effort to concentrate capital in fewer hands was particularly successful, and probably goes a large part of the way towards explaining the rise of modern managerial/financial capitalism (a.k.a. the Anglo Disease): When capital is made artificially scarce by restricting its large-scale, organised deployment to the members of an oligarchy, connections become more important than competence, and the power in the business enterprise switches to the members of the oligarchy (the financial sector, as opposed to the industrial sector) and the people who have regular business and social interaction with them (the executives and accountants, as opposed to the engineers and technicians). The oligarchs, as has been frequently noted on ET, did not inherit the technostructure's inhibition towards blatant and destructive rent-seeking...
The Raygun/Volker counter-reformation masks, to some extent, the increasing scarcity of a number of important raw materials - if capital is made artificially scarce compared to scarce white-collar workers, there is no reason that it cannot be made artificially scarce compared to raw materials instead, in the same way that a successful labour union can make labour artificially scarce for landlord and capitalist alike. But of course this only works up to a point - as the Americans are currently learning to their considerable discomfort, you cannot extract rents from economic activity that does not exist...
This diary started its life as a comment here.