Here comes the boom
November 27, 2012 § 8 Comments
Economic pessimism is a booming business among political conservatives. The reelection of Barack Obama has reinvigorated conservative predictions of doom and gloom right around the corner; but that is just amplifying a pre-existing sentiment. Conservatives and also antifeminist “manosphere” bloggers are predicting a great collapse in the next decade or two based on their theories of economics.
I think they are wrong.
Mind you, it isn’t that the sudden collapse of civilization is not possible. It certainly is, and in my view we came precariously close to it happening in 2008. But I think the conventional reasons why conservatives think collapse is coming – too much debt, too few producers and too many consumers, etc – are wrong.
One of the reasons why so many people are wrong (in my view) about debt and economics is misunderstandings about currency. Currency has no value in itself: it merely facilitates the exchange of actually valuable things. Saving dollars is the height of folly: if you want to store up value you should store up actually valuable things, not notional exchange paper. Government does not have a monopoly on the issuance of currency: all sorts of different currencies are issued by all sorts of different public and private entities. There is plenty to critique in modern monetary theory; but one thing it gets right is that what makes government currency unique is the fact that (mandatory) taxes must be paid in it. Other than that it is just one kind of paper in a great ocean of paper. Currency stability is primarily a function of the annual tax cycle, and the fact that the government doesn’t want to rip itself off by being paid in debased dollars for year-old transactions.
Another reason why so many people are wrong (in my view) about debt and economics is misunderstandings about the relationship between labor and value. I don’t know if that relationship can in principle be adequately captured by an economic theory; but I am virtually certain that it hasn’t in fact been adequately captured by any actual economic theory. As with many aspects of the modern world, we are more comfortable with bad theories than we are conceding ignorance.
Still another reason why so many people are wrong (in my view) about debt and economics is that they have assumed that economic theory has more influence than it actually does have. It is hard to describe what I mean here abstractly, so let me make it more concrete.
Many economic conservatives assume that rising debt and an increasing ratio of consumption to production (more welfare queens, fewer productive workers) will lead to some sort of short term (next few decades) collapse. Predictions range from Greater Depression to Mad Max.
The unstated assumption here is that the great majority of real value is created primarily by labor. That is far from obvious. Some of the wealthiest-per-capita nations on earth have very unproductive labor forces. What they do have is enormous resources. Saudi Arabia has fantastic oil reserves; but the latest numbers being noodled by the oil guys show the US surpassing them in oil production and becoming a net exporter of oil in a decade or so. The US has an incredible store of natural resources. The lack hasn’t been natural resources: it has been the technological capability to exploit those resources in a way which is economically competitive with just shipping “easy” oil over from the Middle East. That is changing. We could easily see decades of solid economic growth on the back of a technologically enabled resource boom; and such a boom would be independent of welfare-state inefficiencies. That is just one of many “upside” economic scenarios I can imagine, especially keeping in mind that physical resources are not the only kind of resources.
This is a perhaps roundabout way of getting to my main point: conservative pessimism is in a sense a form of optimism, because it brings with it the expectation that liberalism’s vision for society will run into cold hard reality some time very soon, and fail. But that isn’t obvious to me. It is perfectly possible that the liberal vision of a society of unrestricted hedonistic freedom and equality supported by murder and cannibalism of the weak and unfit, financed by endless public wealth, is sustainable for centuries. Rex Mundi, and all that: evil gets far more mileage out of modern prosperity than it ever got out of material deprivation.