Guns or Butter?

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Posted to Subscribers on 18 June 2008
 
 
 

 

Some of you may not find this email interesting so if you delete it, my feelings won't be hurt, at least not irrevocably. There is, however, a point to the post and the best way for me to tell the story is to intrude some autobiographical material.

As many of you know, I was an East-West Center student, actually the very first one to graduate and one of only two American undergraduates in those very formative years. Most of the courses I took were in anthropology and philosophy because, I suspect, I have always been interested in what people think, how they think, what they know, and what they think they know. I had no idea how to make a living with such proclivities and I took a year off, 1962-63, to "study" in Japan and later Indonesia.

Early on in this adventure, I was living in Karuizawa, a place that had become famous because the then crown prince of Japan met his wife-to-be, a not very common commoner, while ice skating to a hauntingly beautiful romance by Mr. Anonymous, probably a Spanish composer whose name was lost but whose inspiration achieved immortality.

One Sunday, I was reading the special edition of the Japan Times and there was an article about a tribe in Africa in which everyone was blind by the age of 20. Children were used as seeing eyes, and I flew into a total rage. I thought that if I were a doctor, I could only help a small number of people. If I were a teacher, I might reach a few more people. If I were an economist, the wheels of progress would be set in motion and people would have educations, jobs, income, and health care. I had no particular academic interest in economics . . . and this would become painfully apparent in months to come, but initially, I was simply on fire. I wrote a letter to Yale University in which I detailed what I wanted to do with my life and why they had to admit me so I could learn what I needed to learn to "change the fates" of all those blind people.

Yale was convinced that I lacked the qualifications for admission but they were so disarmed by my passion that they approved my application. Before the first class, there was a party and I met someone who was to become my boyfriend and later fiancé. He was brilliant and found the curriculum so simple that he wanted to spend his time listening to music and discussing nuances of conducting Mahler, most of which sounded agonizingly similar to me. I was not just the only one in the department who had not majored in economics as an undergraduate, but I was also conspicuous since there were no other women in any of my classes. I was therefore cracking the books fairly hard and staying in the library until closing time. My boyfriend would always say, "Let's go have some coffee" and if that didn't work, he tried tempting me with Dutch apple pie. I would look at him rather pathetically and say, "nothing makes any sense." He said, "In modern economics, you assume away reality so that after that you can make whatever assumptions you want." This was not the "guns or butter" I had heard about in my one and only undergraduate course.

Economic Theories

In the guns and butter school of thought, money, being generic, can be used however one decides and who decides is a sociopolitical issue so economics can never be completely divorced from social values or political power. Most people would, however, agree that economics covers subjects like the "value of labor" and how to reward value. This is a very tricky subject and this is why we have theories as divergent as socialism and capitalism. In the guns or butter model, governments that seek power take wealth to buy weapons that allow them to maintain their power and the people go without butter. They can have margarine or peanut oil or lard or nothing at all, depending on the way money is allocated.

Within each school of thought, implicit assumptions are made that may or may not prevail if the public were allowed to understand and then weigh in on the vast ramifications of economic theory.

To make this very clear, let me digress for a moment with two little scenarios. In a monarchy, there is an implicit assumption that the king has the right to send his tax collector to every farm and shop and exact a tribute to sustain the monarchy. The king then launches wars or indulges in architectural extravagances or squanders resources on ill-conceived fiascos. Let's see if you are tracking. Alexander the Great — warriors are always "the Great" — used his resources to conquer and then died young. His last instruction was to nail the lid on the coffin with his hands sticking out so everyone would know that empty-handed did he come and empty-handed did he go. I don't know what is so "Great" about this but Hellenic culture spread — influences are however generally both directions so the West was also impacted by the East . . . as well as the grandiose concepts of expansion.

A king can also build pyramids, palaces, and botanical gardens. History is full of such examples, but in these models, labor, aka people, are exploited to fulfill the aspirations of the mogul. The most extreme examples of present-day monarchical powers can be seen in Bhutan and Brunei, maybe also Dubai. In the capital of Bhutan, everyone lives in the king's home, one huge palace-city. In theory, the citizens are his guests and this is one kind of benign dictatorship, but it's a dictatorship because "people" cannot do as they please.

In Brunei, the sultan is incredibly rich and basically everything is "free". People are his subjects but education and health care are free and generously provided. In Dubai, prosperity, thanks to the U.S. emphasis on guns, butter is bountiful, endless, and people have everything they need plus some, plus a lot, except they may not think independently nor express dissidence. These are very old and established socio-economic systems and we want to impose change, at gunpoint, of course, because we see the world differently.

Another extreme economic philosophy is that everyone is equal and everything belongs to everyone, like the precious air we breathe. Sometimes, if deprivation reaches a certain point, call it critical mass, there is a revolution and an entirely new system is brought into being, like communism in Russia and China, or some sort of communal system such as has been tried in Israel or global villages in Sri Lanka or Africa or in a country I'll wager none of you have heard about, the Regency of Lomar. Don't look for it on a map. It does not have even one square centimeter of land, but it mints it own currency. It is a kind of theocracy, headed by an abbot who is committed to global charitable endeavors. When they were developing their concepts of currency, they created a coin worth one hour of labor, calculated at roughly the equivalent of 10 euros. It is a politico-economic statement when one suggests that all labor has the same value.

In a capitalist society, such as ours purports to be, the minimum wage does not afford a subsistence standard of living in many places but the CEO can bankrupt a company through horrific management and be paid millions and millions and millions more than the lowest paid worker in his company. This is why capitalism is a bad word in communist societies. We have somehow equated capitalism with democracy and freedom and failed to see that economic domination is a kind of tyranny that is completely incompatible with true democracy. It is merely a kind of exploitation with the CEO replacing the king. Due to the incredible power of huge corporations, we need to ask whether or not capitalism can result in dictatorship. Even the pundits often miss the point that this is possible because the textbooks are full of mumbo jumbo about competition being healthy for the economy.

However, that is the department of economics. In business management, they teach how to eat up the competition. So, let's say, I decide to make some soap, really good soap and it catches the public imagination and this irritates Proctor and Gamble. They run loss leaders in my territory and if this doesn't work, they saturate the mailboxes with gifts of their soap until I can't survive on my turf any more. This is called "brilliant" and it does not result in innovation and new ideas, it leads to totalitarianism.

Wall Street

Now, let's graduate me and get me to my first real job, a research analyst at the U.S. Trust Company on Wall St. Okay, I have a history, but those were days when companies did not have to hire women. I was lucky to get a job.

I don't know if there is something written on my forehead in invisible ink, but one day, the vice president of research came to me with a representative from a camera company. He said, "Ingrid, you know a lot about cameras, what do you think this is worth?" Well, in my past lives in monasteries, I learned not to rush to conclusions, so I asked questions about the camera. The man was immensely enthusiastic about his product so I doubled the price I first had in mind and said I thought the camera could sell for $10. The salesman was very cordial. He said, "You are wonderful; actually, it's only worth $5" — which, of course, I knew. My boss came by later to thank me for being so gracious and said we would be promoting the stock of the company. I was no longer tactful, I was aghast. I blurted out, "what!" He said, yes, the camera would be marketed door-to-door for $250. I said, "that's a total rip off". He said, "yes, but the profit margin is enormous and their marketing plan is solid so our policy is 'buy' on this stock."

This is not what we learned in economics. What we learned in economics is more what Ron Paul believes. In a free market, there are leveling influences and eventually everything is priced at its true worth, not inflated, and this is as true for cameras as for stock. Of course, someone can spin a story and temporarily some fools will buy plastic cameras with plastic lens for $250, but eventually, they will figure out that they could get a Leica or Hasselblad for that kind of money and the camera company selling rubbish will go belly up.

In a free market economy, there is no government intervention to prop up companies that have bad management. No one rescues General Motors from its own failure to notice when it began losing market share to little VW bugs and then Toyotas. No one says, "we are a gas society and we want guzzlers so the feds will bail you out if you lose money." In a free market, you expect CEOs to be intelligent, at least intelligent enough to ask what the competitors are selling that people like better than the guzzlers.

The reality is that there is practically no economy in the world that is this free. All are mixtures of this and that and practically no one can get outside the box to see what the problem is . . . and this is why we have a topsy turvy state of affairs that cannot last.

. . . to be continued

 

Copyyright by Ingrid Naiman 2008





 
     

 

 
     

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