[For those readers interested in this, I’ll mention that this revision, apart from the Abstract, is only slightly revised down to the addition of “The motivation for consumer goods” and so on. What has been written today is hastily done for completion so it will be extensively revised later no doubt. But I will be taking a rest from this for a few weeks and continue with normal blogging.]
The world economic system is only capable of running efficiently at one activity level depending on the size of energy inputs no matter what political leaders want or their economic advisors suggest. Whether the ultimate world economic activity will be significantly lower or higher than today’s level is impossible to say. In a way, this is a return to the classical economists’ idea of a self-correcting economy. Unfortunately, what is proposed is will not self=correct for full employment — there is too much automation yet to come — but for thermodynamic reasons.
The world-wide economic system depends on man’s chief proclivity beyond eating, sexual activity and the need to have an acceptable role within a group. This is his novelty-seeking brain which can vary between passively entertained minds and the much rarer cases of those who are constantly theorising or trying out new physical and mechanical skills. Man is not different in this instinct from thousands of other animals species, only that we have creative minds to an extreme degree. Whereas other animals’ creative activities don’t usually cause environmental destruction, many of ours do and sometimes on an epic scale.
Our economic system probably hasn’t caused too much ecological damage so far. It’s probably repairable sooner or later either by ourselves or by evolution. Although, strictly speaking, it must be regarded as part of the total world environment and depends upon it, our economic system can be regarded as a separate system apart from energy inputs from the sun. Solar radiation sustains all the environment, whereas, particularly since the industrial revolution, it is necessary for only part the modern economy — agriculture.
Our economic system, being a physical system, is subject to all the known laws of physics in that, at any given level of energy inputs to keep the system going, it seeks to shed as much energy as possible. In thermodynamics this is known as maximising Entropy, or the Principle of Least Effort to keep the system going. Excess energy, or waste heat, is shed to outer space on cloudless nights. The Principle of Least Effort means that, at any given level of energy inputs to keep it going, the world economic system always tends to one activity level no matter what policies or strategies may be applied
The accident of the Industrial Revolution
No economic historian can give an adequate answer to how the industrial Revolution (IR) actually got started with cotton spinning in Manchester at around 1780 and grew explosively in England in the early 19th century. By imitation, this was followed almost as explosively by France, Belgium and Germany in northern Europe in the mid-19th century, shortly followed by America.
The reason why IR began in Manchester and nowhere else where they were importing raw cotton (for example, Bristol, London and other ports in Europe) and exactly when it did is difficult to describe because there was a temporary confluence of many different factors which need to be given their relative balance. All the following seem to be crucially important — but there are probably more I’ve left out. :
1. A surging population of redundant people in the countryside in the latter half of the 18th century able to fill as many factories as could be built in Manchester and nearby; 2. the availability of a domestic middle-class market for cotton clothes (the woollen, silk and linen interests having persuaded the government to put a high tariff on the import of coloured cotton cloth from India in 1700);
3. the suitability for growing cotton in plantations in southern America and the West Indies and the availability of millions of slaves from Africa to do the work; 4. the availability of many water mills (to drive factory belts) in northern England (to be followed quickly by early steam engines, already being developed in the coal mines);
5. the availability of many country banks (not available in other northern European countries due to war-torn history) and the proximity of Scottish banks who advised English bankers to widen their depositor-base; 6. a veritable stream of Scottish inventors (trained scientifically in four Scottish universities) coming south to a more prosperous England. (At the time, England only had two universities, Oxford and Cambridge, and they were hardly more than theological seminaries teaching little science;
7. the availability of a large and powerful navy (the largest in the world already after recently fighting the French) used to protect foreign markets from other countries’ exports; 8. the availability of large numbers of village-based weavers in the region able to take up increasing quantities of cotton thread from the northern factories (before weaving factories started to be built in the 1830 and ’40s);
The above will do. Accidents continued to be useful in making sure that the IR explosion could be continued — examples included access to coal and iron ore from which the railways could be launched and steel ships built later in the century. Railways meant that the coal industry could be vastly extended for export sales. By mid-19th century science became intimately involved with the development of chemicals, electricity and the telephone and a vast array of consumer goods.
England was undoubtedly ready for industrialisation in the late 18th century but it didn’t have in the exponential way that it actually happened. There were already sufficient numbers of blacksmiths, engineers and carpenters in all the towns and the larger villages of England at the tail end of the 18th century to have got the ball rolling — albeit at a much slower pace. The SR might have kicked a little later but y we’d probably have developed all the consumer goods that we have now — or not far off anyway. And so would several other countries which, today, are economically advanced. A larger and more even industrial dispersion might well have meant that, financially, the City of London wouldn’t have attained the almost complete monopoly over international finance that it did by the late 19th century.
The motivation for consumer goods
For the first three decades what drove the industrial revolution initially ever faster were (a) the available open markets at home nd abroad and (b) hundreds of thousands of displaced people from the countryside with no other livelihood except the factories. But cotton spinning was mainly for women and children and they could be exploited for six days a week labour for 12 to 15 hours a day. Yes, they had relatively modern brick-built and slated houses, heating was cheap and they could afford minimum food and clothes but the main motivation was simply survival.
By the 1830s. moves were afoot by Liberal-minded aristocrats and land-owners in the House of Commons and fears of Conservative-minded MPs that they might be smothered in their beds by rioting crowds and a revolutionary situation developing here — as were occurring all over Europe — plus the colossal profits being made by cotton spinning — life began to ease slightly all round. Workers had a little more money to spend. A second set of clothing for Sunday best, and a few pennies every week for the new Monitor Schools (also known as Victorian Schools) could be afforded plus the odd trinket that served as housewives’ first status good, such as a Wedgewood pot.
Status goods and services could only be affordable by the aristocrats and rich. As far as goods were concerned they could, one by one, be substituted by mass produced equivalents, successively becoming cheaper and reaching lower social levels as production runs became larger. By the mid-19th century, the new middle-class could start to afford domestic servants. All this meant that most people could aspire to go upwards socially and did so. This would have been absolutely impossible in the previous agricultural era.
The modern status goods in advanced countries are pretty well fully comprised by a house, car, home furnishings, utility services, entertainment, personal ornaments, hobby activities and travel. These are all public manifestations of what a person considers his social status to be. There don’t seem to be any more goods or utility services that aristocrats and the rich typically possess — albeit of higher-priced brands — that the average wage- or salary-earner doesn’t possess. Furthermore, the typical aristocrat and the very rich have as busy a working week as the average person.
What puts the tin hat on it, however, is that the large consumer goods manufacturers have no more consumer goods on their drawing boards. There’s a lot of talk of domestic robots but then there has been for 50 years past/ It would be very surprising if they’ll yet be found in the home or tending the garden in 50 years’ time.
What will drive the consumer in future years and take up an increasing amount of his income is medical and educational services — existential rather than status. Demand is such already that their price is rising steeply. As industrial automation continues to make consumer goods and utility services more cheaply, post-industrial services will become more expensive for two reasons. The first is that increasingly high-level training for professional providers is necessary. The second is that higher-level services increasingly tend towards one-to-one situations for best results in both training and in delivery to customers.
Although the daily energy required by an advanced professional doesn’t compare with that of a machine-tool making goods, the many years of training necessarily means that matters of invesment are problematical. Parents will pay as much as possible for the education and health of their children and themselves. But who will pay for basic scientific research? Industries can’t afford to do so — only relatively trivial product development — and, with declining profit margins due to increasingly fierce global competition. the cost of funding research can only be left to governments, which already carry out a great deal in the advanced countries.
Advanced governments will therefore have to become increasingly efficient in order to afford funding for basic scientific research, the sine qua non of tomorrow’s world. This will mean shedding many functions that they now carry out == which will become all the more intentional as the Principle of Least Effort finally starts seeping into the consciousness of government politicians (hopefully more scientifically educated in future years). Apart from territorial security and basic scientific research, advanced governments will be wanting to leave alone anything that impinges on the economy and leave it to business.
What is also implied with this is that government that don’t fund scientific research are not going to do well at whatever optimal level the world economy settles towards in due course. The relationship between the dozen or so advanced nation-state and the 190 undeveloped countries will remain much the same as they have been since about the 1930s. Their standard of living will remain relatively low until they reduced their populations enormously unless a few of them can discover a niche in which advanced scientific research is not yet carried out and high-value innovations traded with advanced countries.
This is not to say that all those countries that presently call themselves advanced will necessarily remain so. It’s up to each of them as how much it can dispense with non-governmental activities and devote more taxation towards scientific funding. Whether world economic activity, when Least Effort, will be significantly lower or higher than today’s level is impossible to say.