[For those interested in the theory the latest revision is that of hiving off “The second stage of consumer demand” as a separate section.]
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 by way if strategies for desired economic growth. Whether the ultimate world economic activity will be significantly lower or higher than today’s level is impossible to say until we have clues as to how the present global impasse (January 2016) plays out in the coming years.
Hierarchical structure of society
Principle of Least Effort
The accident of the Industrial Revolution
The motivation for consumer goods
The second stage of consumer demand
Beyond — or possibly beneath — man’s instincts for feeding, sexual activity and membership of a social group is his propensity for novel perceptions. A constant variety is what keeps his brain active. Without it, the less curious person falls asleep, while the more curious person falls into a meditative mode. As to distribution, it is severely asymmetrical — a bell curve raked towards the less curious end of the spectrum but with a long tail towards the rarer more curious end. The rarer individuals are those who are more socially ambitious — within their own kind — and may be comprised of adventurers, sports people, artists, business entrepreneurs or scientists — the last formerly known as philosophers.
Hierarchical structure of society
The asymmetry is revealed in the hierarchical structure of all societies ranging from small groups through to major nation-states or large multinational corporations. some early anthropologists of a more romantic left-wing persuasion a century ago thought they had observed some egalitarian groups but on more extensive familiarisation, or when in emergencies, or when observed by later anthropologists such turned out to be hierarchical.
The difference between seemingly egalitarian groups and very competitive ones is only one of cultural style. The culture is usually the product of many generations and is probably — when more is known about the new scientific subject of epigenetics — built up of emotive balances of behaviours taking time to be inherited more widely in a society. Thus it is possible for two independent societies living in similar circumstance and with similar skills and mental conceptions to have very different cultures — but hierarchical withall,
In early man, an individual male had no choice but to remain in the society in which he was born whatever his skills or inclinations. Many a genius would have had an innovative idea which was not taken up by the others of his group and thus died with him. This accounts for the immensely long periods, sometimes of tens of thousands of years, between innovations, or even what seem to us to be modest improvements to existing innovations.
Man, as a social species, is ‘patrilocal’ in that it is the young females who travel out of her parental group to find a marital partner in order to avoid genetic in-breeding and thus the acquisition of serious mental and physical handicaps in the group. She will tend to choose a male in a similar culture and of a similar class within it, but given a chance to choose a male of higher social level will do so in order to maximise security for her children. This instinct is called sexual selection in distinction to, and additional to, general selection of the fittest. The upwards choice of the females tends to leave inept or handicapped males behind who tend to father no children and thus deleterious genes become extinguish when they die. This is our form of quality control.
But in today’s post-industrial society, males, born with different genetic proclivities and living in a world bathed in a vast variety of information, will also be adventurous. Every male, from puberty onwards, depending on his particular talents will tend to seek groups of like-minded males and females. Whereas philosophers in older times would frequently walk for days , perhaps for a few hundred miles to be with other philosophers he may have heard about, today, increasingly, young people will travel from one end of the earth to the other to join a particular group.
This usually takes place between the age of puberty and adulthood at around the age of 30 in males, and 25 in females. This is when the skills acquired in the rear lobes of the brain are developed further in the frontal lobes of the brain. Most individuals have usually found the sort of group they prefer to identify with — if the group accepts him or her, of course! — and most ambitions have largely been played out. In the case of exceptionally creative individuals then ideas are nowhere near as productive as those before the age of 30.
The groups chosen by individuals vary both in skilfulness and in cultural style. Groups with exactly the same objectives will still be hierarchical but might vary between those which are easy going and where the gradations in social order are thin and the signs hardly noticeable to the other extreme in which all the members of the group are fiercely competitive — and makes sure that everybody knows it! Thus we can have groups in which there are only subtle signs of social ranking — the choice of a suitable word in conversation perhaps — or highly ostentatious ones — such as commissioning a luxury yacht that is just a few inches longer that a rival’s yacht! But note, however, that such rivals will be members of their own group. If necessary, when faced with a common challenge, they will act as one.
Principle of Least Effort
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. The Principle of Least Effort has been suspected by philosophers of the 16th and 17th centuries, took shape in the laws of thermodynamics mainly by Josiah Willard Gibbs in the 19th century and dramatically demonstrated in Richard Feynman’s quantum electrodynamics where he showed that sub-atomic systems, which have many modes of proceeding, always choose the modes required the least energy. Because all larger physical systems are summations of what goes on sub-atomically then even a system as large and complex as the world economy is subject to the same principle.
The same applies in all systems where there are, apparently, different modes of proceeding. Unlike those researchers and thinkers involved in the sciences who don’t seek to ignore the principle of least effort — because its inviolable — economists since John Maynard Keynes’ time have become trapped into thinking that the ultimate size of the world’s economic system can be influenced by governmental decisions. But this cannot be just because there is wide-scale human demand for a larger economy.
Some ‘growth-economists’ are aware that economic growth cannot go on forever on a finite earth but, nevertheless, assume that the world economic system can expand a great deal yet. The fact is, we simply don’t know. At the risk of sounding insensitive, the fact that about a dozen advanced countries have arrived at a high level of economic development — as we presently define it — and that about half-a-dozen more might do so it is possible that the majority of countries in the world may not be able to proceed much, if any, further than they are today.
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 factories 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. It was due to a confluence of many different factors which happened to be at, or near, their peak of opportunity at that time. All the following seem to be crucially important:
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 little more theological seminaries 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, principally the railways. These needed enormous amounts of capital which, from about the 1820s, were being produced as profits by cotton spinning. There were other lucky accidents of access to coal and iron ore from which the railways could be launched and steel ships later in the century. Railways meant that the coal industry could be vastly extended for export sales. By mid-19th century science research was expanding rapidly with the development of electricity and the telephone among many other initiatives..
England was ready for industrialisation in the late 18th century but not necessarily in the exponential way it actually happened. There were sufficient numbers of blacksmiths, engineers and carpenters in all the towns and the larger villages of England to have got the ball rolling — albeit at a much slower pace. But, once the Scientific Revolution kicked in during the latter half of the 19th century, we’d probably have developed all the consumer goods that we have now. 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 and 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 already possess and enjoy. Furthermore, the typical aristocrat and the very rich have as busy a working week as the average person.
The second stage of consumer demand
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, mainly, 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 investment are considerable — and 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.