“It is hard to overstate the importance of free trade in the economist’s mind.
“In the beginning, there was just you, a pig, your family and your hut. Then your mother went to market and traded your pig for a cow and two chickens. All of a sudden, you could have milk and eggs. Your cow produced plentiful milk, your chickens plentiful eggs, and each week your family was able to trade these for other useful products, such as grain, cloth and soap.
“The history of humanity is the story of disparate communities getting together and increasing opportunities for trade, in turn driving increasing opportunities for consumption and rising living standards (and yes, periodically, provoking major wars).
Why Free Trade Is Good For You,
Sydney Morning Herald, 10th September, 2015
Strange that such balderdash is published in a major newspaper. The suggestion that “In the beginning”, families were living alone in a hut. Then suddenly the next step was going to a “market” where it was possible to trade a pig for a cow and two chickens. For an inexperienced trader, it seems that Mum sure managed to get the better of that deal.
I’m not just being pedantic about the absurdity of the trade that Irvine mentions, I’m more concerned about her peddling the myth that markets arose very early and that trading was the natural state. While it’s true that markets did develop over time, the early congregations of humans were tribal and the tribes were more communist in nature than traders.
When we talk about communism these days, we immediately think of those totalitarian regimes like the USSR. We rarely actually think of the meaning of the word, and how often we adopt “communistic” principles in our everyday life.
Let’s start with the meaning of the word:
- a theory or system of social organization in which all property is owned by the community and each person contributes and receives according to their ability and needs.
Tribes tended to look after one another and the spoils were shared. If you had a good hunt, you didn’t demand that your less successful neighbour traded you his bow and arrow in return for sharing in the feast. Neither did you keep a tally and suggest that he would need to pay you back with interest. And while markets developed over time, these were to enable trade to occur between people without tribal relationships. The idea that people started trading with their next door neighbour – while it sounds plausible to someone whose lived their life in a society where we’re encouraged to think of our obligations as ending at the door of our “hut” – is just a fiction that helps economists perpetuate the concept of trade as the only way that societies have functioned.
And even today, if you think of the average workplace, some things will be “traded”, but often people work of communistic models. When someone asks to borrow your stapler, you don’t check the number of staples used and demand their repayment. Neither do you suggest that because you helped out that person by holding a ladder, then they need to sign a form granting you five minutes help from them.
I would suggest that if that’s the way your workplace functions, then you’d be better off out of there.
However, it’s the bastardisation of the capitalist model that most intrigues me.
Recent years have seen a privatisation fetish from various governments. As I’ve said previously, it seems a rather strange proposition for governments to argue for the sale of assets on the grounds that someone else is much more competent at running them than they are. “Vote for us because we know that we can’t build things on time and under budget”.
Not that private firms have a great track record in that area.
So we have successive governments selling off our assets to private industry. Which, in a capitalist world, should mean that private industry is on its own and should sink or swim by its own competence.
Unfortunately, that’s not the way it works. And we can see that most clearly through the disruptive innovation which is taking place within the energy generation industry.
Disruptive innovation, in case you haven’t heard the term before, is when an innovation changes the business model of the particular industry in such a dramatic way that the big players are no longer the big players. Perhaps one of the best examples is how many of the giants in the computer industry thought of the personal computer as a toy which would have no effect on them. Another example is the streaming of movies making video stores virtually obsolete.
Usually the big players continue to service their customers, ignoring the new customers until it’s too late.
So while once going off the grid would have been prohibitively expensive, with the growing ease of installing things like solar panels and technological improvements in things like battery storage, the energy giants face enormous challenges.
What’s their solution? Well, some companies have suggested that people should be required to pay them even they’re not using their product, which is an interesting concept. But surely no government would be game to argue that one, if the assets were still in public hands.
Of course, a better solution would be to embrace the new technologies and to become a distributor and user, but that’s the thing about disruptive technology, it disrupts those who fail to see the need for change.
Yeah, those wind farms are ugly and Joe’s not Treasurer any more. I don’t know why I mentioned that.
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