We’re all going to Starve: And other Economic Myths
8/10/2005
The late eighteenth and early nineteenth centuries marked a period of heated economic debate amongst the learned elite in England. Protectionism vs. Free Trade, as argued by Thomas Malthus and David Ricardo respectively, was a point of particular contention, with both the aristocratic land owners and the toiling serfdom having significant stakes in the political outcome. Ricardo had the gall to question whether the Corn Laws, a tariff imposed by parliament on the importation of grain designed to protect domestic farmers, actually aided said land owners, and over a period of time was able to convince them of the injury they were imposing upon themselves. With the introduction of his “Labor Theory of Value” and the consequences therein, Ricardo demonstrated that by keeping grain prices artificially high, land owners were simultaneously increasing their cost of production thus offsetting any gains the protectionism might be providing.
The Labor Theory of Value contended that by penalizing, in this case, the importation of grains and thereby keeping prices artificially high, employers were forced to pay workers higher wages so that they could afford the higher prices. After all, without customers to purchase and consume said grains, prices could not be kept at inflated levels. And given that the early nineteenth century was largely an agrarian society, the primary consumers of most food stuffs were those who were employed by the landed aristocracy. However, other businesses also existed during this period and they too were forced to pay higher wages without the offsetting protection provided by the tariffs. Convinced by Ricardo that the Corn Laws were both anti-competitive and particularly injurious to non-agrarian industry, a contingent of business owners from Manchester developed the “Anti-Corn Law League” to work toward the repeal of the law. They succeeded in 1846, striking a blow for free trade and the average man while simultaneously challenging the political power and law making dynamic of the long-entrenched nepotistic establishment. Hooray, but their battle continues.
The Ricardian/Malthusian arguments still spark hot debate (though many of us continue to have trouble understanding Reverend Malthus’ conversion to protectionism after initially recognizing the value of free trade), but they also had areas of agreement; particularly on the issue of population growth. Malthus and Ricardo agreed that population growth would eventually outstrip the ability of the earth to sustain humanity; though even on this subject they separated on some minor points. Malthus argued that mass famines would come about as a result of exponential population growth coupled with merely linear agricultural growth; while Ricardo hypothesized that population growth would force farmers to plant ever less fertile fields resulting in lower yields with greater effort. (This is known in economic circles as the “Law of Diminishing Returns”)
Fortunately, they were wrong. Thanks in large part to technological advances (tacitly acknowledged as a possible counter-influence by Ricardo) agricultural yields have improved far more rapidly than the world population has grown.
Many continue to believe the “Malthusian Fallacy”. An entire department at the United Nations is dedicated to population control, and many economists and environmentalists continue to decry the horrors man sows on the environment. (Perhaps explaining the persistent reluctance of the global community to bring an end to recent genocides and crimes against humanity in places ranging from Cambodia to China to North Korea, Rwanda to Sudan, Uzbekistan to Bosnia, etc., and the continued unwillingness of many Western States to embrace genetically modified grains for sub-Saharan Africa seemingly declaring instead, “let them eat cake.”)
But now the Malthusians have entered a new fray, a new resource about which they can sit from their perch and predict, without consequence, the end of the world as we know it, a resource known as energy. It’s nonsense. Man is remarkably resourceful, and as with food, new, different, and more efficient methods of creating and utilizing energy are being developed every day. Two weeks ago a student at the University of Idaho announced he had discovered a way to make a petroleum-like product out of wood by simply speeding up the natural process of producing fossil fuel, though it would not be cost effective to do so until oil reached about $90 a barrel. More than 60 years ago Germans developed a way to liquefy coal for the purpose of burning it in diesel type engines (the U.S. is the equivalent of Saudi Arabia in coal deposits) and autos are on the road today that run exclusively on vegetable oil. Two centuries of being wrong does nothing to deter the dogmatic and there will always be those who are susceptible to their misguidance and half-truths. Be skeptical, for there are those in society who seek to improve it and those who wish to destroy it, and the latter seem evermore prevalent.
Search
